Guidance for Grants and Agreements, 49506-49582 [2020-17468]

Download as PDF 49506 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations OFFICE OF MANAGEMENT AND BUDGET 2 CFR Parts 25, 170, 183, and 200 Guidance for Grants and Agreements ACTION: Final guidance. The Office of Management and Budget (OMB) is revising sections of OMB Guidance for Grants and Agreements. This revision reflects the foundational shift outlined in the President’s Management Agenda (PMA) to set the stage for enhanced resultoriented accountability for grants. This guidance is reflects the Administration’s focus on improved stewardship and ensuring that the American people are receiving value for funds spent on grant programs. The 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 these sections with other authoritative source requirements; and clarifications of existing requirements in particular areas within these sections. DATES: These revisions to the guidance are effective November 12, 2020, except for the amendments to §§ 200.216 and 200.340, which are effective on August 13, 2020. FOR FURTHER INFORMATION CONTACT: Nicole Waldeck or Gil Tran at the OMB Office of Federal Financial Management at GrantsTeam@omb.eop.gov or 202– 395–3993. SUPPLEMENTARY INFORMATION: SUMMARY: 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 part 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 management community, the 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), has 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: Operationalize the Grants Management Standards 2. Strategy 2: Establish a Robust Marketplace of Modern Solutions 3. Strategy 3: Manage Risk 4. Strategy 4: Achieve Program Goals and Objectives The revisions to 2 CFR support these four strategies. In support of Strategies 1 and 2, OMB is implementing changes throughout 2 CFR to modernize reporting by recipients of Federal grants by requiring Federal agencies to adopt standard data elements for the information recipients are required to report (available at: https:// ussm.gsa.gov/fibf/). This adoption will enable technology solutions to better manage the data the recipients report to the Federal government. These changes also support implementation of the Grants Reporting Efficiency and Agreements Transparency Act of 2019 (GREAT Act). OMB is also implementing 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 nonFederal entities to improve program goals and objectives, share lessons learned, and spread the adoption of promising performance practices. OMB is also revising 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 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 amended by the Digital Accountability and Transparency Act (DATA Act). Finally, OMB is implementing revisions to 2 CFR to clarify areas of misinterpretation. The revisions are intended to reduce recipient burden by improving consistent interpretation. OMB consulted and collaborated with agency representatives identified by the Grants CAP Goal ESC to support the implementation of these revisions. OMB also solicited feedback from the broader Federal financial assistance community by publishing the proposed changes to 2 CFR in the Federal Register for a sixty (60) day public comment period (https://www.federalregister.gov/d/201928524). OMB received 215 submissions with over 1,200 comments from the public, around 1,200 comments from Federal agencies, and around 100 comments from the Council of the Inspectors General on Integrity and Efficiency (CIGIE) Grant Reform Workgroup for a total of over 2,500 comments. OMB reconvened agency representatives to review the comments and make changes to the proposed revisions as appropriate. In summary and as discussed further in the sections below, OMB is revising 2 CFR parts 25, 170, and 200. Additionally, OMB is adding part 183 to 2 CFR to implement Never Contract with the Enemy. The sections are revised within the following scope. Comments received that were out of scope for the revision were not accepted by OMB. 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. Emphasizing Stewardship and Results-Oriented Accountability for Grant Program Results 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 is publishing revisions in multiple sections of the guidance that together emphasize the importance of focusing on performance to achieve program results throughout the Federal award lifecycle. The provisions that were revised to improve the governmentwide approach to performance and risk emphasize stewardship and results-oriented grant making. Revisions to 2 CFR 200.102 Exceptions encourages Federal awarding agencies to apply a risk-based, data-driven framework to alleviate select compliance requirements for programs that demonstrate results. 2 CFR 200.202 Program planning and design highlights the importance of developing a strong plan and design to set the stage for demonstrating program results. 2 CFR 200.205 Federal awarding agency review of merit proposals strengthens the merit review process which is linked to 2 CFR 200.301 Performance measurement requiring Federal awarding agencies to measure recipient performance, which is derived from program planning and design (§ 200.202). Performance information focused on results must be made available to recipients in the solicitation and in the award, which is reflected in 2 CFR 200.211 Information contained in a Federal award. Award recipients must also be aware of termination provisions in 2 CFR 200.340 Termination and reinforced in 2 CFR 200.211 Information contained in a Federal award, which are linked to performance goals of the program (§ 200.301). Revisions to 2 CFR 200.413 Direct costs were also made to include evaluation costs as an example of a direct cost, which demonstrates program results. Revisions to 2 CFR 200.202 Program planning and design develops a new provision. This section formalizes a requirement 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. The development of 2 CFR 200.202 emphasizes the importance of sound program design as an essential component of performance management and program administration. Ideally, program design takes place before an agency drafts related projects. This enables Federal agency leadership and employees to codify program goals, VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 objectives, and intended results before specifying the goals and objectives of in a solicitation. A well-designed program has clear goals and objectives that facilitate the delivery of meaningful results, whether a new scientific discovery, positive impact on citizen’s daily life, or improvement of the Nation’s infrastructure. Well-designed programs also represent a critical component of an agency’s implementation strategies and efforts that contribute to and support the longer-term outcomes of an agency’s strategic plan. OMB encourages Federal awarding agencies to reference the ‘‘Managing for Results: The Performance Management Playbook for Federal Awarding Agencies’’ for promising performance practices throughout the Federal award lifecycle, including steps to develop a strong program plan and design (www.performance.gov/CAP/ grants/). Program design elements may include a problem or needs statement, goals and objectives; a logic model depicting the program’s structure; program activities; a theory or theories of change and the evidence supporting them; performance and other indicators to measure program accomplishments and find ways to improve, set priorities, and identify targets of opportunity. In addition, it may include use or intended use of independently available sources of data, development and support of learning communities which may benefit from a shared understanding of promising practices and collaboration on common challenges and opportunities, and a system to periodically review award selection criteria. OMB is revising to 2 CFR 200.205 Federal awarding agency review of merit proposals, 2 CFR 200.203 Requirement to provide public notice of Federal financial assistance programs and § 200.204 Notices of funding opportunities to strengthen merit review, public notice of Federal financial assistance programs, and the notices of funding opportunities to further the goals of results-oriented grantmaking. These changes require Federal awarding agencies to extend their merit review process to discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must design and execute a merit review process for applications. Additional language was included to articulate an explanation of the merit review process that Federal awarding agencies are expected to follow. Further, Federal awarding agencies are required to periodically review their Federal award merit review process. These PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 49507 changes support the Administration’s priority to ensure a fair and transparent process for the selection of award recipients and supports efforts under the President’s Management Agenda to ensure that Federal awards are designed to achieve program goals and objectives. Changes to 2 CFR 200.206 Federal awarding agency review of risk posed by applicants allow Federal awarding agencies to adjust requirements when a risk-evaluation indicates that it may be merited. Changes are included in 2 CFR 200.211 Information contained in a Federal award and 2 CFR 200.301 Performance measurement further emphasize existing requirements for requiring Federal awarding agencies to provide recipients with clear performance goals, indicators, targets, and baseline data. OMB is adding language to § 200.102 Exceptions to emphasize that Federal awarding agencies are encouraged to request exceptions to certain provisions of 2 CFR part 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. Related to the above changes that aim to strengthen program planning and Federal award terms and conditions, OMB is revising §§ 200.211 Information contained in a Federal award and 200.340 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 and unambiguously 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 change 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 E:\FR\FM\13AUR3.SGM 13AUR3 49508 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 is also eliminating 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. In addition, OMB is expanding 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 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. 200.102 Exceptions OMB received several comments on this section asking for clarification on the proposed revisions. Some commenters also noted that the addition of the ‘‘or less restrictive requirements’’ in 2 CFR 200.102(c) and 200.208 is confusing, redundant and not needed because Federal awarding agencies already have the discretion to impose conditions on the recipient. OMB deliberated upon these comments and ultimately agreed to replace the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 language ‘‘or less restrictive requirements’’ with ‘‘adjust requirements’’ within the final guidance. OMB strongly encourages Federal awarding agencies to add or remove requirements by applying a riskbased, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance. One commenter felt that the inclusion of the requirement for agencies to ‘‘apply more restrictive terms and conditions when merited as indicated by a risk evaluation’’ did not warrant an exception from OMB and thus did not belong in the exceptions section. OMB concurred with the commenter and moved this language to 2 CFR 200.206 Federal awarding agency review of risk posed by applicants. 200.202 Program Planning and Design Many commenters were supportive of this new section and the other revisions related to results-based grant making. Some commenters also thought the proposal could go further to better utilize federal grantees’ activities to build and disseminate evidence of what works. One commenter expressed concern that revisions to the performance sections would lead to the unintended consequence of making research look like a contract agreement. OMB provided explicit language to state that performance measures for each program will be different. One commenter expressed concern that this new requirement would add burden. OMB respectfully disagrees, as this requirement is not new and does not add burden. This section reflects activities that were previously implied within 2 CFR and not explicitly included in its own section. OMB appreciates the commenters who challenged OMB to go even further with the proposal with regards to evidence-building. OMB looks forward to furthering this discussion with stakeholder sessions in fall 2020 and will also consider these proposals in future revisions of 2 CFR. 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). PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 200.203 Requirement To Provide Public Notice of Federal Financial Assistance Programs There were several comments provided in response to the changes made to 2 CFR 200.203. One comment inquired as to why no similar requirements exist within the Uniform Guidance and is applicable to passthrough entities within 2 CFR 200.332. OMB notes that the Federal awarding agency does not have a direct relationship with the subaward recipient; that is the role of the passthrough entity. Mandating application of this requirement would require additional public comment as it would add burden to the process. Further, comments asked for OMB to develop guidance to help ensure that Federal awarding agencies have the appropriate controls in place with respect to their processes for making awarding decisions. OMB rejects this change for this iteration of 2 CFR as it would be a significant change that would require an opportunity for public comment based on the language and requirements imposed. Additionally, some commenters requested for language to be added regarding how often updates are expected. OMB rejects these suggestions as the language references guidance provided by General Services Administration (GSA) in consultation with OMB. That is where the requirement to update each Assistance Listing on an annual basis is specified, and it is not necessary to include this level of detail in 2 CFR 200.203. 200.204 Notice of Funding Opportunities Commenters observed that the change in terminology from ‘‘competitive’’ to ‘‘discretionary’’ appears to broaden the requirement of these notices to not just competitive announcements, but also sole source discretionary announcements. Some commenters suggested for the language to be changed back to ‘‘competitive’’ and questioned the value of this revision. One commenter requested clarification as to whether or not this new requirement is intended to apply when the discretionary award is non-competitive. Another commenter suggested that it would be burdensome and inefficient to require agencies to have notices of funding opportunities for noncompetitive awards. OMB deliberated these comments and subsequently decided to change this language to reflect discretionary awards that are competed. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 200.205 Federal Awarding Agency Review of Merit Proposals Some of the comments received were from Federal agencies who wanted to know the purpose and the benefits behind the proposed revisions to justify the added burden. There were also concerns about the efficiency of the awarding process if these changes are made. Some commenters asked for clarity on what a systematic review meant and what would classify as ‘‘effective.’’ OMB considered all comments and made further revisions to specify that the merit review process should be periodically reviewed as a point of clarity on the process review. OMB disagrees with the commenters that expressed these revisions will add burden. The purpose of these revisions is to add clarity to the merit review process which should already be occurring and is not a new requirement. 200.206 Federal Awarding Agency Review of Risk Posed by Applicants As stated in the above section describing the comments received for § 200.102, one commenter felt that the inclusion of the requirement for agencies to ‘‘apply more restrictive terms and conditions when merited as indicated by a risk evaluation’’ did not warrant an exception from OMB and thus did not belong in the exceptions section. OMB concurred with the commenter, moved this language to 2 CFR 200.206 Federal awarding agency review of risk posed by applicants, and provided revisions to the language to read ‘‘. . . adjust requirements when a risk-evaluation indicates that it may be merited either pre-award or postaward.’’ One commenter requested passthrough entities to have access to enter information into the FAPIIS system and require a pass-through entity review as part of the risk assessment process. OMB deliberated this comment and while it is an important topic for discussion, OMB feels the scope of this revision would be too substantial for finalization without receiving additional comments from the public. Thus, OMB respectfully declines this comment. Some commenters requested for OMB to include the requirement for Federal awarding agencies to leverage commercially available data management tools. OMB declines this comment and does not specify tools required for use. 200.208 Specific Conditions As stated above in 2 CFR 200.102, some commenters were not supportive of the requirement of the language ‘‘or less restrictive requirements’’ in 2 CFR VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 200.102(c) and 200.208. Some commenters described this new language as confusing, redundant and not needed because Federal awarding agencies already have the discretion to impose conditions on the recipient. One commenter applauded OMB’s decision to further emphasize the flexibilities afforded to Federal awarding agencies revise or remove certain requirements based on a risk analysis. After deliberation, OMB replaced this language with ‘‘the Federal awarding agency may adjust requirements to a class of Federal awards or non-Federal entities when approved by OMB . . . .’’ 200.211 Information Contained in a Federal Award Some comments asked for clarity on the revisions that were proposed. One clarifying question was the difference between the data point for the ‘‘Total Approved Cost Sharing or Matching, where applicable’’ and ‘‘Total Amount of the Federal Award including approved Cost Sharing or Matching.’’ These are two completely separate data points which call for the approved cost sharing or matching to be identified, and then the total amount of the Federal award that is approved cost sharing or matching. OMB did not recommend that these were removed. Further, in response to various comments, the language in (a) was streamlined and users are referred to the relevant performance sections for additional information. The data points previously proposed in paragraph (b) related to performance were already captured in paragraph (a), and thus removed from (b). The proposed language for (e) was revised and moved to § 200.105(b) within the guidance. Many comments received suggested revisions that would make the language more prescriptive. Title 2 CFR was written as guidance for a large array of users. If the language is too prescriptive, it doesn’t provide sufficient flexibility for use by the large array of users. Additional technical corrections were made for clarity throughout this provision. Revisions were made to § 200.211(c)(1)(iv) to clarify that if the underlying legal authority for a program changes, that may be a reason why there would be no future budget periods under an award. 200.301 Performance Measurement Some commenters were in support of the revisions to this section. Many commenters provided suggestions for further revisions to the guidance. Several commenters provided suggestions with regards to the use of ‘‘should’’ and ‘‘must’’ throughout this section. Some commenters wanted the PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 49509 language to be written strongly and use the word ‘‘must’’ throughout, others preferred ‘‘should’’ and many suggested the use of these words should be consistent throughout this section. Some commenters also expressed the need for OMB to include data quality within this section. OMB concurs with the comments that consistent use of ‘‘must’’ and ‘‘may’’ should be used in this section. Some commenters also pointed out discrepancies between various performance sections and a few commenters pointed out that there are discrepancies between what is required in 2 CFR 200.211 and 200.301. In response to commenters, OMB re-wrote this section for clarity and consistency. 200.340 Termination There were several comments received in response to the revisions proposed to this section. The comments can be group into the following discreet categories: • Concern over arbitrary Federal award termination; • Adding or editing language for clarity; • Concern over how Federal awarding agencies will evaluate awards with longterm outcomes; • Request further OMB guidance; and • Not relevant. The largest number of commenters expressed a concern that the proposed language will provide Federal agencies too much leverage to arbitrarily terminate awards without sufficient cause. Several commenters requested OMB reinstate the language, for cause, to address this issue. Some commenters requested additional clarity and examples. OMB deliberated upon these requests and decided as written agencies are not able to terminate grants arbitrarily and that it was not appropriate to include examples in 2 CFR for this section. OMB made a technical correction to provide additional clarity. Some commenters expressed concerns over how Federal awarding agencies will evaluate awards with long-term outcomes. One example from the commenter was an environmental program where the performance will require years to measure. The example from the commenter should be determined in coordination with the Federal awarding agency. OMB respectfully declines this comment. Title 2 CFR is intended to be written and used by a large array of stakeholders and thus the language is not intended to be prescriptive, as the commenter has requested. Some commenters requested further OMB guidance on this provision. OMB appreciates the request for additional E:\FR\FM\13AUR3.SGM 13AUR3 49510 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations guidance and notes that guidance beyond what has been provided in the proposed rule is out of scope for this revision effort. Other comments provided were not relevant to the revisions proposed and thus OMB has rejected these comments. 200.413 Direct Costs Most comments received for this 2 CFR 200.413 were in agreement of the revisions. The remaining comments were out of scope. Therefore, OMB did not make changes to the revised language. Some commenters requested OMB include additional examples for clarity that the activities are direct costs such as planning and program coordination, data technology, analytics, staff training, data collection, storage, communication of evaluation and analytics, and more. OMB appreciates the request to clarify additional examples as direct costs and would like to expand on this further in future revisions of 2 CFR. OMB does not think it is appropriate to include specific examples within the guidance because it could be unintentionally interpreted to be limited to only that list of items. However, as we think of ways to encourage promising performance practices, OMB would like to discuss this further during stakeholder sessions in the fall 2020. 200.328 Financial Reporting There were some comments received in response to the revisions made to this provision. One commenter requested that the collection of information be no more frequently than semiannually to reduce burden. OMB declines this comment and notes that it was out of scope because there were no proposed changes to the frequency of financial reporting. One commenter requested that OMB add language to discourage pass-through entities from the practice of requiring more frequent and more detailed financial reporting. After discussion, OMB declines this comment as it is out of scope for this revision but will consider the comment for a future revision of 2 CFR. Several commenters sought clarification on the use of the term ‘‘OMB-designated standards lead.’’ Pursuant to the Grant Reporting Efficiency and Agreements Transparency Act of 2019 (GREAT Act), the OMB Director is required to designate a standard-setting agency (i.e., the Executive department that administers the greatest number of programs under which Federal awards are issued in a calendar year). The Executive department designated by OMB as the standard-setting agency VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 assists OMB with execution of the requirements of the GREAT Act. In response to commenters’ requests for clarity on the performance sections of the guidance, OMB moved the financial reporting requirement noted currently in 2 CFR 200.301 Performance measurement to 2 CFR 200.328 Financial reporting. 200.329 Monitoring and Reporting Program Performance Several commenters requested clarity regarding the ‘‘OMB-designated standards lead’’ and notes that this terminology has been used throughout the guidance. As mentioned above, one commenter also suggested a technical correction to reference the Grant Reporting Efficiency and Agreements Transparency (GREAT) Act for clarity on this designation. One commenter suggested that this provision should be tied together with the closeout provision with regards to the timeframe to submission of reports. OMB concurred with this commenter and made revisions accordingly. One commenter noted concern and confusion regarding the requirement that ‘‘costs must be charged to the approved budget period in which they were incurred.’’ The commenter also suggested edits to clarify this requirement. OMB concurred with the commenter and accepted the edits for incorporation into the package. Appendix I to Part 200—Full Text of the Notice of Funding Opportunity A number of commenters suggested edits to this section. One commenter suggested including the term ‘‘outcome’’ to indicate the end result and also include terms for tracking and determining if that end result is being or has been achieved. OMB agreed with this commenter and made the revisions accordingly. Another commenter suggested that OMB include the requirement for Federal awarding agencies to ensure SAM registration is current before making any advanced payments and/or issuing any reimbursements. OMB disagrees with this recommendation, as this requirements is already stated in 2 CFR 25.205. B. Expanded Use of the De Minimis Rate The revision to 2 CFR 200.414(f) expands use of the de minimis rate of 10 percent 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 minimis rate can only PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 be used for non-Federal entities that have never received a negotiated indirect cost rate. The use of the de minimis 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 2 CFR in 2013, both Federal agencies and nonFederal entities have advocated expansion of the de minimis 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 change will further reduce the administrative burden for non-Federal entities and Federal agencies and shift more resources toward accomplishing the program mission. Another revision adds language to 2 CFR 200.414(f) to clarify that when a non-Federal entity is using the de minimis rate for its Federal grants, it is not required to provide proof of costs that are covered under that rate. The 10 percent de minimis 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 minimis rate. Lastly, for transparency purposes, another revision adds a new paragraph (h) to § 200.414 to require that negotiated agreements for indirect cost rates are collected and displayed on a public website. 200.414 Indirect (F&A) Costs 200.414(f) OMB received several comments that were concerned with awarding a de minimis rate that is higher than a Negotiated Indirect Cost Rate Agreement (NICRA). OMB concurs with the concerns regarding applying a higher de minimis rate in cases where a NICRA rate is lower than 10 percent. However, the regulation states in paragraph (c)(1) that Federal agencies must honor negotiated rates. Additionally, some commenters expressed concern that guidance will be misinterpreted to allow provisional rates to be considered as expired. OMB intends to include provisional rates and added clarifying language to the section in response to these comments. Further, commenters were concerned with a lack of required documentation. OMB concurs with concerns that the language implies source documents rather than the indirect cost rate agreement and altered the language accordingly. There were E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations several comments that suggested that the Modified Total Direct Cost (MTDC) be used as the base. However, this suggestion is out of the scope of this revision. Additionally, OMB would like to note that Federal agencies must accept the negotiated rate even if it is lower than the de minimis rate. 200.414(h) OMB appreciated the many comments that supported the proposed requirement to post NICRAs to a public website. There were several comments that cited concerns over the sharing of proprietary information through the posting of NICRA information on a public website. To address these concerns, OMB clarified that the requirement is not for the entire rate agreement and added language to specify the exact information that is requested be provided for a non-Federal entity; the indirect negotiated rate; distribution base; and the rate type. In addition, the Indian tribes or tribal organizations, as defined in the Indian Self Determination, Education and Assistance Act, 25 U.S.C. 450b(1)) are excluded. Further, there were several comments that inquired about the applicability of this section. Lastly, there were comments that inquired about who is responsible for making sure this information is publically posted. OMB recognizes this concern and notes that the responsibility of the Federal government will be communicated appropriately. C. Eliminate References to NonAuthoritative Guidance To support implementation of E.O. 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 nonauthoritative guidance in the terms and conditions of Federal awards, OMB proposed changes to § 200.105 Effect on other issuances. The proposed change was intended to reduce recipient burden and prevent Federal awarding agencies from imposing non-binding guidance as award requirements for recipients that has not gone through appropriate public notice and comment. The proposed revisions related to eliminating references to non-authoritative guidance were included in 2 CFR 200.211(e) Information contained in a Federal award. Some commenters suggested for this requirement to be moved within the guidance to 2 CFR 200.105(b) Effect on other issuances for clarity of the policy intent. OMB concurred with the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 commenter’s suggestion and moved the requirement accordingly. 200.105 Effect on Other Issuances There were several commenters in strong support of this new provision while other commenters expressed concerns regarding the implementation. One commenter mentioned that finalizing this proposal would cause significant difficulties in effective implementation and effectively overseeing programs. OMB appreciates the comments received. To address concerns, the language was re-written to better align with E.O. 13892 and provide clarity. D. Promoting Free Speech Several provisions within 2 CFR are revised to align with E.O. 13798 ‘‘Promoting Free Speech and Religious Liberty’’ and E.O. 13864 ‘‘Improving Free Inquiry, Transparency, and Accountability at Colleges and Universities.’’ These sections include 2 CFR 200.300 Statutory and national policy requirements, 200.303 Internal controls, 200.339 Remedies for noncompliance, and 200.341 Notification of termination requirement. These E.O.s advise Federal awarding agencies on the requirements of religious liberty laws, including those laws that apply to grants and provide a policy for free inquiry at institutions receiving Federal grants. The revision to 2 CFR underscores the importance of compliance with the First Amendment. 200.209 Certifications and Representations, 200.300 Statutory and National Policy Requirements, 200.303 Internal Controls, 200.339 Remedies for Noncompliance, 200.341 Notification of Termination Requirement OMB received several comments in response to this policy proposal. Some commenters supported compliance with the Constitution while other commenters questioned the need to include a reference to the Constitution. OMB appreciates all comments received and after consideration has decided to retain the proposed language within these sections. One comment suggested the removal of the word ‘‘statutory.’’ OMB concurred with this recommendation and made the change. E. Standardization of Terminology and Implementation of Standard Data Elements OMB is standardizing terms across 2 CFR part 200 to support efforts under the Grants CAP Goal to standardize the grants management business process and data. OMB is replacing the term PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 49511 ‘‘obligation’’ to either ‘‘financial obligation’’ or ‘‘responsibility’’ within the guidance as appropriate, to ensure alignment with DATA Act definitions. OMB is adding changes across the entirety of 2 CFR to ensure consistent use of terms across parts 25, 170, 183, and 200 where possible, relying on 2 CFR part 200 as the primary source. As reflected in the 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 Listings number’’ and ‘‘Assistance Listings program title’’ to reflect the change in terminology. OMB is also revising several 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 revising 2 CFR 200.207 and 200.328 to reflect that information collection requests must adhere to the standards available from the OMB-designated standards lead. This 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 is revising 2 CFR part 200 to replace the term ‘‘standard form’’ with ‘‘common form.’’ Some commenters submitted feedback with concerns that the change in terminology would allow agencies to create unique forms with a lack of standardization. OMB did not make any changes to the final language based on these comments. Existing forms widely adopted by Federal awarding agencies that are regularly referred to as standard forms are in fact common forms. For instance, the SF–424 series, SF–425, E:\FR\FM\13AUR3.SGM 13AUR3 49512 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations and research performance progress report are all common forms/formats. OMB acknowledges that this is a significant change in how the community refers to these forms and will ensure that any future guidance on the adoption of standard data elements clarifies the use of common forms. 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 is reformatting 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. Subpart A—Acronyms and Definitions New Defined Terms Several commenters sought to clarify existing parts within 2 CFR and grant processes and procedures through the addition of several defined terms under 200.1 Definitions. Examples of recommended terms to include were formula grant, program beneficiary/ recipient, procurement, administrative costs, for-profit organization, conflict of interest, covered technology, architectural/engineering professional services, Federally-owned property, and demonstration. In certain cases OMB agrees that additional terms may provide greater clarification to the regulation and the management of Federal financial assistance. OMB may consider the recommended definitions for the suggested terms in future updates to 2 CFR. In other cases, the terms are either not used in 2 CFR or are only applicable to a small number of Federal awarding agencies. OMB declined these recommendation either due to scope, or because they do not align with the intent of this regulation. Inserting Programmatic Instruction in Definitions Several commenters recommended inserting programmatic instruction for specific terms, which would provide more guidance for Federal agencies, non-Federal entities, auditors, or others. OMB considered these comments, but determined that it was inappropriate to include programmatic guidance in the definition of terms for the regulation. The purpose of 2 CFR 200.1 Definitions is to provide meaning for specified terms within the regulation; guidance and instruction is more appropriate other parts of 2 CFR. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Modification to Existing Definitions Several commenters sought to clarify existing definitions by providing technical corrections or clarification statements. In several cases, OMB agrees that technical corrections are necessary. The updates to these definitions are minor and did not affect the intent of the term. In other cases, the recommendations were either too substantive or did not align with the intent of this update to the regulation. OMB may consider these recommendations in future updates to 2 CFR. Formatting Several commenters disagreed with the removal of the numbering of the definitions. The commenters were concerned about the overall changes to the numbering of 2 CFR part 200, which would add burden to updating the nonFederal entities’ policies and procedures. OMB appreciates these concerns, but does not believe that the removal of the definition numbering will generate any significant additional burden on nonFederal entities, because these groups already should regularly review and update their policies and procedures to ensure compliance with Federal, state, and local laws and regulations. This revision is expected to limit future burden for non-Federal entities in the event of new terms are added to this section of part 200, which would change the section’s numeration. Subpart A—Specific Definitions Compliance Supplement A number of commenters recommended clarifying the definition of compliance supplement and offered revised wording for the definition. OMB concurred and adapted the definition in consultation with members of the interagency working group. One commenter recommended revising the definition to frame the compliance supplement as the sole source of information for auditors. OMB did not include this recommendation because the compliance supplement is one of the authoritative sources that auditors can use when auditing Federal programs. Other sources include Federal awarding agency and program specific documents. Contract One commenter noted that the definition of contract was confusing, while another recommended crossreferencing the Subrecipient and Contractor Determinations subsection (§ 200.331). OMB agreed with this PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 assessment and updated the definition to make it easier to read, understand, and use. Another commenter recommended the addition of mutual aid or intergovernmental agreements to the definition of contract. This change was not considered because it would substantively alter the definition without providing the public the opportunity to comment on the revision. Cooperative Agreement, Grant Agreement One commenter recommended specifically explaining ‘‘transfer anything of value’’ in the definitions of cooperative agreement and grant agreement. OMB opted to keep the existing language because both definitions cite 31 U.S.C. 6101(3), which provides the scope of the ‘‘transfer of anything of value.’’ A commenter recommended further describing substantial involvement in the definition of cooperative agreement. This change was not considered because the Federal awarding agency and the recipient are given the discretion to negotiate this relationship. Another commenter stated that there was a conflict §§ 25.306 and 200.1 associated with the transfer of land or property. OMB disagrees as the two definitions align and are also in alignment with the associated legislation. Through the review of the definitions of cooperative agreement and grant agreement, OMB and members of the working group clarified that the relationship was between the Federal awarding agency and a recipient or a pass-through entity and a subrecipient. Discretionary, Non-Discretionary Award Technical edits were made to the definitions of discretionary award and non-discretionary award to provide clarity to the intended definitions. Federal Interest Two commenters recommended correcting the formula for determining Federal interest, noting that reliance on the Federal share of the total project costs does not appropriately account for the Federal interest in real property, equipment, or supplies. OMB agreed with this recommendation and amended the definition to appropriately rely on the percentage of Federal participation in the total cost of the real property, equipment, or supplies as part of the formula. Recipient One commenter recommended amending recipient be inclusive of entities that are not necessarily nonFederal entities such as for-profit and E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations foreign entities as well as Federal agencies. OMB agreed with this assessment and updated the definition appropriately. Subsidiary One commenter recommended replacing non-Federal entity with entity, while another recommended adding ‘‘or controlled’’ after owned to be more inclusive of a diversity of organizations that may have subsidiaries. Several other commenters were confused by the reference to the FAR or found it to be redundant, recommending that it be removed from the definition. OMB agreed with these recommended changes to the definition and incorporated them, as appropriate. Period of Performance, Budget Period, and Renewal OMB also revised the proposed definitions of period of performance, budget period, and renewal in 2 CFR part 200, as there were a significant number of comments from varying stakeholders indicating that the proposed revised definitions of period of performance, budget period, and renewal created more confusion than clarity. In response, the final rule revises the definitions for these terms to clarify how period of performance, budget period, and renewal operationally relate. Additionally, the final rule revises 2 CFR 200.309 to better describe how the period of performance is modified if there is an extension or termination of a current award. Some commenters expressed concern about the removal of pass-through entities’ authority to allow pre-award costs to subrecipients. It was not OMB’s intention to remove the pass-through entities’ authority to allow pre-award costs to subrecipients. OMB recognizes these concerns and added language to 2 CFR 200.458 for clarification in response to commenters. Further, there were many comments that expressed concern about removing 2 CFR 200.309 from the guidance due to burden with other entities that reference 2 CFR within their own rules and regulations. Including 2 CFR 200.309 in the final publication will eliminate that concern from commenters. The definition of period of performance and renewal was revised to help clarify that the term period of performance reflects the total estimated time interval between the start of an initial Federal award and the planned end date, and that the period of performance may include one or more budget periods, but the identification of the period of performance does not commit funding beyond the currently VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 approved budget period. The definition of budget period was edited to clarify that recipients are authorized to expend the current funds awarded, including any funds carried forward or other revisions pursuant to 2 CFR 200.308. Further, recipients 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 definition of renewal was edited to help clarify that a renewal award begins a distinct period of performance that starts contiguous with, or closely following, the end of the expiring award. This change also ensures consistent use of the term for purposes of transparency reporting as required by FFATA. 200.403 Factors Affecting Allowability of Costs To maintain consistency within the guidance regarding the definition of Budget Period, 2 CFR 200.403(h) has been added to clarify that costs must be incurred during the approved budget period and the Federal awarding agency may waive prior written approval to carry forward unobligated balances to subsequent budget periods. Improper Payment, Questioned Costs Based on some confusion expressed in comments, the definition of improper payment was revised to accurately reflect how questioned costs, including costs questioned costs identified in audits, are not improper payments until reviewed and confirmed as such. Internal Controls Based on some confusion expressed in comments, minor modifications to the definition of internal controls were made to provide greater clarity on the internal controls requirements for nonFederal entities and Federal agencies. Oversight Agency for Audit Several commenters expressed confusion with the revision to this definition. Some commenters provided suggested edits for clarity. After deliberation and in response to the commenters, OMB made further edits to this definition for clarity. Simplified Acquisition Threshold, Micro-Purchase Multiple commenters were confused by the second paragraph proposed to be added to the definition for simplified acquisition threshold. Revisions were made to this paragraph to alleviate confusion and accurately reflect how PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 49513 the simplified acquisition may be determined. Minor technical edits were made to the definition for micropurchase, based on comments, to clarify that the cognizant agency for indirect costs may approve a higher micropurchase threshold if requested by the non-Federal entity. F. Support for Domestic Preferences for Procurement As expressed in Executive Order (E.O) 13788 of April 18, 2017 (Buy American and Hire American) and E.O. 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 is adding a new section 2 CFR 200.322 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. 200.322 Domestic Preferences for Procurement OMB appreciates the many comments were very supportive of this section. Several comments suggested including language in Appendix II because the proposed new 2 CFR 200.322 includes the requirement that such term be flowed down to all contracts and purchase orders. OMB accepts this change and has made the appropriate edits to the final language. Several comments asked for clarification regarding how preference is given. OMB rejects this change as the language gives Federal awarding agencies the flexibility to adjust their guidance accordingly. Further, another comment suggested to exempt purchases below the micropurchase threshold from requirements in this section to reduce the burden on non-Federal entities. OMB rejects this suggestion as OMB does not agree with the assessment that an additional burden is being placed. The language did not set a dollar threshold and instead states that domestic preference should be used as appropriate and to ‘‘to the maximum extent practicable.’’ One commenter suggested a reference to this section should also be included in Appendix II to Part 200—Contract Provisions for Non-Federal Entity E:\FR\FM\13AUR3.SGM 13AUR3 49514 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Contracts Under Federal Awards. OMB concurred with this commenter and made the revision accordingly. G. 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 consistent with the intent of the Grants CAP Goal, and to align with legislation related to procurement standards, OMB is revising the guidance to increase the micropurchase threshold from $3,500 to $10,000, raising the simplified acquisition threshold from $100,000 to $250,000, and allowing non-Federal entities to request a micro-purchase threshold higher than $10,000 based on certain conditions. The 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 established 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 allowed 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 for FY 2018 (NDAA 2018) increased the micro-purchase threshold to $10,000 for all recipients and also increased the simplified acquisition threshold from $100,000 to $250,000 for all recipients. The revisions to § 200.320 outline a permanent process by which nonFederal entities may establish a micropurchase level above the $10,000 threshold. 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. The FAR Rules at 48 CFR part 2, subpart 2.1, were finalized on July 2, 2020 (85 FR 40060, 85 FR 40064) with the effective date of August 31, 2020. In addition, the American Innovation and Competitiveness Act of 2017 (AICA), section 207(b) required that 2 CFR part 200 be revised to conform to 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Acquisition Thresholds for Financial Assistance (June 20, 2018) which is now incorporated in 200.320. With the final procurement guidance now implemented, OMB Memorandum M– 18–18 is rescinded. 200.320 Methods of Procurement To Be Followed There were nearly 100 comments received relating to this section. Many expressed confusion with the proposed revisions and provided recommendations for clarity. In response, the section was rewritten to incorporate many of the suggestions from commenters. The following revisions were made to 2 CFR 200.320: • The procurement types were grouped into three categories: (1) Informal (micro-purchase, small purchase); (2) formal (sealed bids, proposals) and (3) Non-Competitive (sole source) • The micro-purchase threshold was raised from $3,500 to $10,000 • All non-Federal entities are now authorized to request a micropurchase threshold higher than $10,000 based on certain conditions that include a requirement to maintain records for threshold up to $50,000 and a formal approval process by the Federal government for threshold above $50,000; and • The simplified acquisition threshold was raised from $150,000 to $250,000 200.321 Contracting With Small and Minority Businesses, Women’s Business Enterprises, and Labor Surplus Area Firms Several comments were made regarding this section that were out of scope for the current set of revisions. As such, no changes to the proposed language will be made at this time. 200.317 Procurements by States One commenter suggested that 2 CFR 200.317 should reference the procurement requirements in 2 CFR 200.322 Domestic preference for procurements, as it is applicable to all non-Federal entities. OMB concurred with the commenter and made revisions accordingly. 200.318 General Procurement Standards One commenter expressed strong support for the revisions proposed for this provision. Most commenters provided suggested edits for clarity. One commenter provided suggested edits to clarify that the ‘‘. . . non-Federal entity must use its own documented procurement procedures which must conform to applicable State, local, and PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 tribal laws and regulations; and Federal law. In addition, procurements for goods and services that are directly charged to a Federal award must conform to the standards identified in this part.’’ OMB agreed with this clarifying revision and incorporated it within 2 CFR 200.318. 200.319 Competition One commenter expressed support for the revisions to 2 CFR 200.319. Other commenters provided suggested edits for clarity. One commenter asked for clarity of the meaning ‘‘section’’ and expressed the entire subpart D should be referenced. OMB declines this comment and notes that the term ‘‘section’’ should not be interpreted to mean the entire subpart D and the proposed revisions to 2 CFR 200.319 only adds a new reference to 2 CFR 200.320. This new language in no way infers that the other procurement provisions do not apply. One commenter expressed that it is unclear what ‘‘required’’ under an award means. OMB notes that this language is used throughout the document as no such change was made. H. Emphasis on Machine-Readable Information Format OMB aims to clarify the methods for collection, transmission, and storage of data in 2 CFR 200.336 to further explain and promote the collection of data in machine-readable formats. A machinereadable 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 clarification reinforces the machine-readable requirements in the Foundations of Evidence-Based Policymaking Act of 2018 (Pub. L. 115– 435) and accompanying OMB guidance. This requirement also 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. 200.336 Methods for Collection, Transmission, and Storage of Information OMB received some comments on 2 CFR 200.336 requesting the inclusion of PDFs in the language. OMB declined this suggestion since prescribing a specific format in official guidance was deemed inappropriate. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 is revising 2 CFR 200.344 Closeout to support timely closeout of awards, improve the accuracy of final closeout reporting, and reduce recipient burden. The final language will increase the number of days for recipients to submit closeout reports and liquidate all financial obligations from 90 days to 120 days. This change takes into consideration the challenges faced by pass-through entities with respect to awards that contain a large number of subawards. These recipients must reconcile subawards and submit final reports to Federal awarding agencies within the same 90 day period. Recognizing the need for pass-through entities to receive timely reports from subrecipients to report back to Federal awarding agencies, OMB will continue to require subrecipients to submit their reports to the pass-through entity within 90 days. The intent of this 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 requiring 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 OMBdesignated integrity and performance system. Finally, OMB is publishing 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 language is intended to promote timely closeout of awards, assist with reconciling closeout activities, and hold recipients accountable for submitting required closeout reports. 200.344 Closeout Many of the comments in response to revisions to 2 CFR 200.344 were in support of the proposed revisions. The two sections listed below received the highest volume of comments. 200.344(a) OMB is appreciative of the many commenters who supported the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 proposed extension of deadlines for the submission of reports. Due to the significant amount of support for the changes, OMB is keeping the language published in the proposed version. OMB also received comments to permit pass-through entities to establish earlier dates, in accordance with existing practice. OMB accepts this recommendation. OMB also received comments relating to final indirect cost rates after the end of the period of performance. OMB rejects these suggestions, as a revised final Federal financial report can be submitted after closeout. Therefore, lengthening the deadline would not have an impact. OMB is making several small changes based on received comments, such as changing ‘‘non-Federal entity’’ to ‘‘recipient’’ and adding ‘‘or an earlier date as agreed upon by the pass-through entity and subrecipient.’’ 200.344(i) OMB received several comments that recommended making the Federal Awardee Performance and Integrity Information System (FAPIIS) entries optional. The intent of the added regulation was to hold recipients accountable and share performance across Federal agencies, which promotes results-oriented grantmaking. Therefore, OMB is finalizing the language that makes entry into FAPIIS mandatory. Further, it should be noted that entry into FAPIIS does not constitute a termination, which OMB has clarified in the final language. 200.345 Post-Closeout Adjustments and Continuing Responsibilities Some commenters expressed concerns that the language proposed for this provision was too open-ended and the period could extend beyond record retention. OMB concurred with the commenters and made revisions to address these concerns. J. Changes to Performing the Governmentwide Audit Quality Project 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. 200.513 Responsibilities Comments in response to the change regarding the assignment of the cognizant agency for audit responsibilities based on the direct PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 49515 funding and total funding were positive and thus OMB did not make changes to the language for the final publication. We clarified that the determination for funding is based the federal award expenditures as reported in the recipient’s Schedule of expenditures of Federal Awards (see § 200.510(b)). Commenters in response on the governmentwide project to determine the quality of single audits suggested a delay on such project by a few years due the changes in the 2019 Compliance Supplement regarding the maximum of review for compliance areas. Commenters also suggested the use of current and on-going quality review performed by agencies on single audits to substitute or complement the governmentwide project. We agreed on the suggested timing of the project and have removed the specific date listed in the proposal. OMB will work with the agencies and the single audit stakeholders to determine a future date for the project that is more optimal. OMB added language to address that current quality control review work performed by the agencies can be leveraged for the governmentwide project. 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 revised 2 CFR to align with section 889 of the NDAA for FY 2019 (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 is adding a new section, 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 2019, covered telecommunications equipment or services includes: E:\FR\FM\13AUR3.SGM 13AUR3 49516 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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. 200.216 Prohibition on Certain Telecommunication and Video Surveillance Services or Equipment Commenters expressed widespread concerns on the impact and implementation of the statutory requirement. OMB sought to address commenter concerns by re-writing this section to align closely with the law, add a new definition for telecommunications and video surveillance costs, and add a new section 2 CFR 200.471. The final language provides guidance describing the meaning of covered telecommunications as explained in the statute. The language also aligns with the requirements in the statute affecting the financial assistance community to include the prohibition of non-Federal entities from obligating or expending loan or grant funds to (1) procure or obtain, (2) extend or renew a contract to procure or obtain, or (3) enter into a contract (or extend or renew a contract) to procure or obtain, equipment, services, or systems that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as a critical technology as part of any system. Federal awarding agencies are also required by the law to work with OMB to prioritize available funding and technical support to assist affected businesses, institutions and organizations. In addition, the funds must be prioritized as reasonably VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 necessary for affected entities to transition from covered communications equipment and services, to procure replacement equipment and services, and to ensure that communications service to users and customers is sustained. Further, OMB added a new 2 CFR 200.471 Telecommunication and video surveillance costs to provide clarity that the telecommunications and video surveillance costs associated with 2 CFR 200.216 are unallowable. A new definition for telecommunication and video surveillance costs, which is described in 2 CFR 200.471, has also been added to 2 CFR for clarity. B. Never Contract With the Enemy To meet statutory requirements, OMB is 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 members of the Armed Forces are actively engaged in hostilities. To implement Never Contract with the Enemy and to reflect current practice, OMB requires Federal awarding agencies to utilize the System for Award Management (SAM) Exclusions and the FAPIIS to ensure compliance before awarding a grant or cooperative agreement. Federal awarding agencies are prohibited from making awards to persons or entities listed in SAM Exclusions (NDAA 2017) 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 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 (NDAA 2015). This statute applies PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 to procurement as well as to grants and cooperative agreements. OMB coordinated with the procurement community as appropriate before issuing this final guidance, including the roles and responsibilities of the covered combatant command and Federal awarding agencies. Part 183 Never Contract With the Enemy Many of the comments focused on aligning the regulation with the authorizing legislation and streamlining and using consistent terms in the regulatory language. OMB concurred with these comments and made the necessary changes to the language. OMB also agreed with several comments suggested the use of ‘‘recipient’’ rather than ‘‘non-Federal entity.’’ In addition, OMB revised part 183 to include a reference to void covered grants or cooperative agreements, and updated specific parts of the legislative authority that were set to expire by aligning with recently passed legislation for the extension of dates. A couple commenters noted the potential burden associated with checking SAM.gov on a monthly basis. OMB concurred with these comments and revised the language accordingly. C. Requirement for the FAPIIS To Include Information on a Non-Federal Entity’s Parent, Subsidiary, or Successor Entities To meet statutory requirements, OMB revised 2 CFR parts 25 and 200 to implement Sec. 852 of the NDAA for FY 2013 (NDAA 2013), which requires that the FAPIIS include information on a non-Federal entity’s parent, subsidiary, or successor entities. OMB requires 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 requires 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. Part 25 Universal Identifier and System for Award Management OMB received a significant number of comments concerning subrecipient requirements and registration with the E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations SAM database. These commenters expressed concern with requiring subrecipients to fully register with the SAM database. The commenters thought this requirement would be overly burdensome and was unnecessary. It was not OMB’s intention to require subrecipients to fully register with the SAM database. To address this concern, OMB added a new ‘‘Subpart C-Recipient requirements of subrecipients’’ and a note to the terms in appendix A to clearly state that subrecipients do not need to fully register with the SAM database. Further, several commenters thought the addition of the requirement for subrecipients to register with the SAM database, Federal agencies applying for or receiving Federal awards register in the SAM database made sections of part 25 confusing. The commenters thought that using the term ‘‘Federal agency’’ could be misunderstood. Some commenters thought this was particularly true with regard to section 100. OMB agreed that the addition of the term ‘‘Federal agency’’ in part 25 made the requirements in part 25 less clear. OMB and the interagency work group also thought that there was a need for additional clarity on who the requirements actually apply to and in what situation. As a result, OMB added definitions for ‘‘applicant’’ and ‘‘recipient’’ in part 25 and removed ‘‘non-Federal entity’’ and ‘‘Federal agency’’ where appropriate throughout part 25. 25.200 Requirements for Notice of Funding Opportunities, Regulations, and Application Instructions Several commenters stated that their organizations do not have a higher level owner or subsidiaries and they may not have predecessors. OMB recognizes that not all entities will have the same organizational structure. The purpose of providing this information is for greater transparency in the awarding of Federal financial assistance. The regulatory language requires that applicants and recipients must provide the information ‘‘if applicable.’’ If the requested information is not applicable, an applicant or recipient would not be required to report it. D. Increase Transparency Through FFATA, as Amended by the DATA Act OMB made 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- VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Federal entities. OMB has revised the reporting thresholds to further align financial assistance requirements with those of the Federal acquisition community. To increase transparency, OMB extended 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 made 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 revises the Federal awarding agency and pass-through entity reporting thresholds. For Federal awarding agencies, OMB revises 2 CFR part 170 to require agencies to report Federal awards that equal or exceed the micropurchase threshold as set by the FAR at 48 CFR part 2, subpart 2.1. Consistent with the FAR threshold for subcontract reporting, OMB will raise the reporting threshold for subawards that equal or exceed $30,000. OMB proposed to revise 2 CFR part 25 to allow agencies the flexibility to exempt a foreign entity applying for or receiving an award 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. The exemption applies to cases where the Federal agency has conducted a risk-based analysis and deems it impractical for the entity to comply with the requirements(s). OMB proposed to make 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 continue to remain responsible for reporting these awards for transparency purposes. Finally, OMB will require Federal awarding agencies to associate Federal 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 Federal Assistance PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 49517 Listings information for display on www.usaspending.gov. Part 25 Universal Identifier and System for Award Management Some commenters expressed concern regarding the proposal to expand SAM registration requirements to all type of Federal financial assistance as required by FFATA. Specifically, commenters requested clarity on who is considered the applicant or recipient in cases when the intended recipient does not have a direct relationship with the Federal awarding agency. For instance, for certain loan and loan guarantee programs, a third-party administers the program on behalf of the Federal awarding agency. One organization specifically expressed concern that these third-party administers may not participate in loan guarantee programs, if they are required to register in SAM. OMB disagrees that it is overly burdensome for third-party administrators to register in SAM, however, OMB agreed that it would be inappropriate to have the intended recipient who does not have a direct relationship with the Federal awarding agency to register in these instances. In response to these comments, OMB revised the definitions of applicant and recipient to clarify that SAM registration requirements apply to those entities that receive Federal awards directly from a Federal awarding agency and that applicants and recipients also include those entities that administer Federal awards on behalf of Federal awarding agencies. 25.110 Exceptions to This Part Some commenters supported raising the threshold for foreign organizations or foreign public entities to $100,000 in 2 CFR 25.110. Other commenters expressed concerns that a thorough preaward Federal review would not be conducted for foreign entity recipients under this higher threshold and it would be a disservice to the American taxpayer to raise the threshold. OMB also received comments that requiring Federal awarding agencies to only grant exemptions to foreign organizations or foreign public entities on a case-by-case basis to be overly burdensome. OMB does not think that requiring Federal awarding agencies to determine whether to grant exemptions to foreign organizations or foreign public entities on a case-by-case basis is overly burdensome. Considering the comments received, OMB decided to retain the current threshold of $25,000. Based on feedback provided by agencies and in light of the COVID–19 emergency and past emergency E:\FR\FM\13AUR3.SGM 13AUR3 49518 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations situations where this requirement has been waived, OMB added an exception in § 25.110 allowing agencies to waive the requirement to register in SAM when there are exigent circumstances that would prevent an applicant from registering prior to the submission of an application. Federal awarding agencies are responsible for the determination on whether there are exigent circumstances that prevent an applicant from registering in SAM and are no longer required to request a waiver from OMB in these instances. Part 170 Reporting Subaward and Executive Compensation Information 170 Definitions Several commenters mentioned the difference between the term non-Federal entity in part 170 and part 200 and requested that part 170 reference part 200 for this definition. Related comments also were provided to the definitions of foreign organizations and foreign public entity. The definition of non-Federal entity in part 170 intentionally includes foreign organizations, foreign public entities, and for-profit organizations, which is not included in the definition of nonFederal entity in part 200. Part 200 only applies to these organization types when a Federal awarding agency chooses to apply the requirements in their adoption of part 200. Part 170 applies to foreign and for-profit organizations because of the Federal Funding Accountability and Transparency Act (Pub. L. 109–282, hereafter cited as ‘‘Transparency Act’’) requirements. Thus, the definition for non-Federal entity in part 200 and part 170 will remain different. 170.110 Types of Entities to Which This Part Applies Several commenters requested clarification on the language surrounding ‘‘non-Federal’’ and ‘‘Federal agencies.’’ OMB concurred with these comments and made the corresponding changes to ensure clarity. Further, OMB also agreed with comments that suggested clarification to § 170.110(b) in relation to Title IV funds and made the subsequent edits in the final language. 170.115 Deviations OMB concurred with comments asking to define ‘‘deviation’’ to differentiate between exceptions by removing ‘‘deviation’’ and adding paragraph (c) to ‘‘Types of Exemptions.’’ VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 170.200 Federal Awarding Agency Reporting Federal financial assistance and acquisition communities. OMB received several comments suggesting that a reference to the definition for micro-purchase in § 200.1 be added to the end of the section. OMB concurred and made this change in the final language. Further, OMB received comments relating to the grammatical structuring of this section. After further review, OMB retained the existing language. 170.305 Federal Award Commenters had questions relating to how this definition differs from part 200. OMB would like to note that the definition differs because this section is discussing Federal awards in the context of ‘‘direct’’ federal awards. Federal award in part 200 includes is more expansive to include caveats depending on which section it is applied to, so the definition cannot be the same. As such, the proposed language remains. 170.210 Requirements for Notices of Funding Opportunities, Regulations, and Application Instructions OMB concurred with a comment that suggested including the information on the requirements for Notice of Funding Opportunity found in 2 CFR 200.204 and appendix I to part 200. OMB made the suggested changes to appendix I to include these references. Further, comments inquired if OMB has considered collecting the assurance from applicants when they register and renew in beta.SAM.gov. OMB would like to note that this is already part of the requirements for award terms and conditions, and the needed assurance should go into the Compliance Supplement for auditors to check that the assurance is received from the recipient. Therefore, no changes related to obtaining assurances were made to the language in this section. 170.220 Award Term Several commenters referenced the thresholds discussed in part 25. OMB would like to point out that the thresholds in part 25 are unrelated to the threshold in § 170.220. Additionally, several comments suggested changes that were outside of the scope of this revision. OMB concurred with a suggestion to remove a reference to the Recovery Act in appendix A. Further, a comment suggested the deletion of the insertion of ‘‘and Federal agency’’ in paragraph (a) of this section. OMB notes that some agencies can make awards to other agencies, dependent on the authority. Therefore, it is necessary to keep the language that was used in the proposed version. One commenter noted that raising the subaward reporting threshold from $25,000 to $30,000 is unlikely to result in greater efficiencies or ease administrative requirements and recommended for the threshold to be increased to at least $75,000 or $100,000. OMB disagrees with this commenter’s recommendation, as the purpose of this change was to further align implementation of FFATA, as amended by DATA Act, between the PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 170.315 Executive One comment suggested clarifying this definition as many recipients of Federal awards are state and local governments with elected officials. OMB rejected this change as this is already covered within the ‘‘Exceptions’’ to this section. Further, one comment requested that this definition be included in part 200. OMB aims to eliminate duplicative definitions and thus respectfully declines this comment to also include the definition in part 200. 170.320 Federal Financial Assistance Subject to the Transparency Act A commenter noted that the term Federal financial assistance subject to the Transparency Act is not defined in part 200. OMB concurred with this comment and made edits to the definition in § 170.320 to clarify that the term includes Federal financial assistance as defined in part 200, with some limited exceptions. 170.325 Subaward Commenters recommended deleting the definition for ‘‘Subaward’’ and including a reference to the definition used in part 200 to reduce duplication. OMB concurred with this recommendation and made the subsequent change. E. Aligning 2 CFR With Authoritative Sources OMB revises 2 CFR 200.431 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 has made this revision because GASB issued Statement 68, Accounting and Financial Reporting for Pensions which amends GASB Statement 27 and allows non-Federal entities (NFE) to claim only estimated pension costs in their financial E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations statements. OMB’s revision will allow non-Federal entities to continue to claim pension costs that are both actual and funded. 200.431 Compensation OMB appreciated the comments in support of the proposed changes. In response to several comments that asked for clarification, OMB is revising the final language to require state and local governments to be compliant with GASB #68 for pension costs. OMB would like to note that the cost associated with each fiscal year should be determined in accordance with GAAP. 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. See above Section I for additional information on the changes to ‘‘Improper Payment.’’ Some commenters expressed that the reference to OMB Circular A–123 for the definition of ‘‘Improper Payment’’ added confusion and suggested retaining the original language. OMB considered this request and respectfully declined the comment in keeping with the practice to align the guidance with source documents, if possible. III. Clarifying Requirements Regarding Areas of Misinterpretation Following the publication of 2 CFR part 200, 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 2 CFR part 200. In response, OMB is publishing 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 revises 2 CFR 200.332 Requirements for pass-through entities to clarify that passthrough 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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. 200.332 Requirements for PassThrough Entities OMB received substantial feedback relating to the changes made in this section. The two main changes for this section are related to the clarification of the pass-through entities responsibilities toward the establishment of the subrecipient indirect cost rates and the pass-through entities responsibilities for resolving the sub recipient’s audit findings (§ 200.332(d)). Although most commenters approved of the proposed changes regarding the pass-through entities responsibilities for the subrecipient indirect cost rates, some requested clarification on specific situations: • Where the subrecipient has a federally approved indirect cost rate • where the subrecipient receives funds from multiple pass-through entities from which it may be already established an indirect cost rate with one of the pass-through entity; or • where the subrecipient decides to use the direct allocation method instead of the use of indirect cost rate for cost reimbursement. OMB provides clarifications in the final language for all of the three situations above. Most commenters supported the proposed changes to clarify the passthrough entities responsibility in the resolution of audit findings reported by the subrecipients and the required management decision letters to address the audit findings. Some commenters questioned the use of the term ‘‘systemic findings’’ to describe the findings that impact the whole organization. This section has been revised to streamline and clarify the original intent of the revision which limits the pass-through entity to review and resolve the audit findings that are specifically related to the subaward. OMB replaced the term ‘‘systemic findings’’ with ‘‘cross-cutting findings.’’ OMB also added that written confirmation by the subrecipients for corrective actions on audit findings can be used as a means for follow-up and monitoring of the subrecipient’s performance. PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 49519 B. Reducing Burden on Universities by Clarifying Timing of the Disclosure Statement OMB is adding language to the timing of submission of the disclosure statement (DS–2), which is only required for institutions of higher education that meet certain thresholds as defined in 48 CFR 9903.202–1(f). This revision reduces burden while maintaining the requirement for institutions of higher education to implement policies that are in compliance with 2 CFR. 200.419 Cost Accounting Standards and Disclosure Statement OMB received several comments in response to 2 CFR 200.419 that focused on concerns with the legal instruments that were subject to this part. In response to these concerns, the language was revised to provide clarification. 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 is including revisions to clarify the following: The meaning of the words ‘‘must’’ and ‘‘may’’ as they pertain to requirements; applicability and documentation requirements when a non-Federal entity elects to charge the de minimis indirect cost rate of MTDC; PTE 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. The Words ‘‘must’’ and ‘‘may’’ as They Pertain to Requirements All commenters that provided feedback on this section were in favor of incorporating the meaning of ‘‘must’’ and ‘‘may’’ within the guidance. One commenter suggested that the location for this change within the guidance could be within its own section. After consideration, OMB disagrees with the commenter and has determined that this change should remain in the applicability section of the guidance under the stated sub title. E:\FR\FM\13AUR3.SGM 13AUR3 49520 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations De Minimis Indirect Cost Rate of MTDC Applicability and Documentation See Section I (K) for additional information on the comments received. PTE Responsibilities Related to Indirect Cost Rates and Audits See Section III or additional information on the comments received. Applicability of 2 CFR to FAR Based Contracts Many commenters expressed confusion regarding the changes to this section. The intent of the changes to this section are to make clear that the FAR applies to Federal contracts awarded to non-Federal entities, and that these requirements supersede the requirements of 2 CFR part 200 in a Federal contract. Clarification was requested from a commenter to confirm if an audit conducted for a Cost Accounting Standards (CAS) applicable contract will take the place of a Single Audit and how an entity with multiple grants and only one CAS-contract would meet the requirements of the Single Audit Act. The language clarified in § 200.101(c) to state that for CAS covered contracts, the CAS requirements regarding audit would supersede the audit requirements in subpart F. In addition, in the case where an entity receives many grants and one CAS covered contracts, the entity must comply to both the Single Audits for its grants and the CAS audit requirements for the CAS covered contract. D. Applicability of Guidance to Federal Agencies OMB is making changes to 2 CFR 200.101 Applicability to clarify that Federal awarding agencies may apply the requirements of 2 CFR part 200 to other Federal agencies, to the extent permitted by law. This 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 part 200 may be applied, as appropriate. This change is consistent with how for-profit entities, foreign public entities, or foreign organizations are treated in the Uniform Guidance. 200.101 Applicability Several comments expressed concerns as to whether or not it is appropriate to include awards to Federal agencies in the scope of 2 CFR. It was determined that it was appropriate to include Federal agencies in the scope of 2 CFR as some Federal agencies are authorized to receive grants or cooperative VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 agreements as direct recipients or subrecipients. This addition clarifies that subparts A through E of 2 CFR part 200 is applicable when determined by the Federal awarding agency. There will be no change from the proposed version. E. Other Clarifications Parts 25 and 170 Many commenters expressed concerns that parts 25 and 170 were confusing, inconsistent and needed to be edited for clarity. In response to these comments, parts 25 and 170 have been revised throughout with many technical corrections to add clarity and consistency. 200.110 Effective/Applicability Date A number of comments, particularly from Federal agencies, expressed concern about the effective date for negotiated indirect cost rate agreements (NICRAs) in paragraph (b). The intent of this section is to retain the existing NICRAs until they are renegotiated and incorporate the requirements from the revision to 2 CFR upon renegotiation. Non-Federal entities with a NIRCA are expected to work with their cognizant agency for indirect costs as appropriate. OMB clarified the intent for 2 CFR 200.110(b). One Federal agency commenter stated that OMB should specify if the applicability date is for the entire guidance or for the revisions. OMB accepted this comment and made revisions accordingly. 200.200 Purpose All commenters provided recommendations to revise this section to better align the terms ‘‘competitive’’ and ‘‘non-competitive’’ with the new terms ‘‘discretionary’’ and ‘‘nondiscretionary.’’ OMB concurs with the recommendation to revise this section to align with other changes within the guidance. In response to commenters, OMB has removed 2 CFR 200.200(b) and made other technical corrections accordingly. 200.207 Standard Application Requirements OMB received one comment on this section that was out of scope for the current set of revisions, and therefore the proposed language remains the same. Out of Scope Comments Many commenters submitted comments that were either not part of the scope of the effort, were not relevant to the revisions proposed, pertained to sections of the guidance that were not proposed to be revised, or would be a change too drastic that would warrant a PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 need for the public to have an opportunity to provide input before finalizing. All comments within these categories were not accepted by OMB. Changes From the Proposed Revisions Not Recommended Comments received for several provisions within 2 CFR were reviewed, deliberated, and determined that no changes were needed from the proposed revisions. Some of these provisions within 2 CFR include the following: • 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts • 200.207 Standard application requirements • 200.311 Real property • 200.312 Federally-owned and exempt property • 200.313 Equipment • 200.314 Supplies • 200.331 Subrecipient and contractor determinations • 200.430 Compensation—personal services • 400.458 Pre-award costs 200.402 Composition of Costs Some commenters requested clarity and noted that the use of ‘‘approved budget period’’ is specific to Federal financial assistance when 2 CFR 200.402 would apply to both contracts and Federal financial assistance awarded to non-Federal entities. Another commenter suggested that further clarification is needed for what ‘‘cost principle’’ and ‘‘budget period’’ mean. Based on the vast array of comments received and the revised definitions for finalization, OMB decided to remove the language proposed for 2 CFR 200.402. 200.449 Interest One comment was received for this provision. The commenter suggested that OMB provide a different example within 2 CFR 200.449 because lease contracts that transfer ownership are essentially debt financing. The commenter explains that the example is comparing debt financing to debt financing, which doesn’t work for the intent. The commenter provided a suggested edit that would enable the example to remain and retain the original intent. OMB concurred with the commenter and made the suggested edit accordingly. 200.461 Publication and Printing Costs All commenters requested clarity and suggested revisions to this provision. One commenter objected to specifying that costs must be charged to the last budget period, citing that printing costs E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations are historically charged at various stages of the award. One commenter noted that these costs have historically been allowable up until the closeout of the award. Edits were suggest to provide additional clarity in § 200.461(b)(3) to specify that The non-Federal entity may charge the Federal award during closeout. OMB concurs with this suggested revision and made the change accordingly. 200.507 Program-Specific Audits One comment was received for 2 CFR 200.507. The commenter requested a clarification on the first phase to indicate ‘‘in some cases’’ rather than ‘‘in many cases’’ because Appendix VI of the 2019 Compliance Supplement only shows two current program specific audit guides. OMB concurred with the commenter and made the revision accordingly. The commenter provided a second recommendation to remove the 2014 beginning date and instead include the current reference to the Compliance Supplement appendix. OMB also concurs with this suggestion from the commenter and made the revisions. 200.515 Audit Reporting The comments submitted for 2 CFR 200.515 provided suggestions for clarity. One commenter suggested reviewing this subsection against what the Federal Audit Clearinghouse is collecting in Part III: Information from the Schedule of Findings and Questioned Costs, Item 2. Financial Statements, to ensure an appropriate alignment between the regulation and the Form. Another commenter inquired about the intent of the revisions to this provision. OMB considered and discussed all the comments for clarity and made revisions accordingly. Executive Orders 12866 and 13563 Executive Orders 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 significant regulatory action under Executive Order 12866. Regulatory Flexibilities Act The Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires a regulatory flexibility analysis or a certification that the rule will not have a significant economic impact on a substantial number of small entities. OMB expects this guidance to have a significant VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 economic impact on a substantial number of such entities. There are some proposed revisions that may impose burden, however, there are more proposed revisions that reduce burden to small entities. When reviewing all the revisions, the burden that will be reduced for recipients is much greater than the burden imposed. The revisions to 2 CFR are not applicable to Federal financial assistance awards issued prior to the effective dates provided in the DATES section of this Notice of Final Guidance, including financial assistance awards issued prior to those dates under the Coronavirus Aid, Relief, and Economic Support (CARES) Act of 2020 (Pub. L. 116–136). OMB plans to consult with applicable agencies to provide regulatory flexibility analyses in future revisions to 2 CFR and its subcomponents. The applicability of Federal financial assistance in 2 CFR part 25 will be expanded beyond grants and cooperative agreements to include other types of financial assistance such as loans and insurance. This revision ensures compliance with FFATA, as amended by the DATA Act, and will impact small entities that voluntarily seek financial assistance. It will not have a significant impact on a substantial number of U.S. small entities as approximately 69,185 small entities who received awards for other types of financial assistance did not have a unique entity identifier in FY 2019, while the Small Business Administration’s Office of Advocacy reported 30.7 million U.S. small businesses in that same calendar year. Currently, 2 CFR part 25 requires all non-Federal entities that apply for grants and cooperative agreements to register in the SAM. In alignment with FFATA, the guidance provides that all entities that apply directly to a Federal program for financial assistance such as loans and insurance must register in SAM, which requires the establishment of a unique entity identifier. Individuals who receive Federal financial assistance as a natural person remain exempt from this requirement. In practice, some Federal awarding agencies already require SAM registration for all types of Federal financial assistance and the change would make this practice consistent among agencies. OMB recognizes that this new requirement may be burdensome to small entities and there may be instances where it is appropriate for Federal awarding agencies to request an exception or delay implementation of this requirement for their programs. In response, Federal awarding agencies PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 49521 may exercise the flexibility provided in 2 CFR 25.110 to either exempt an applicant or recipient from this requirement or request an exception from OMB on a case-by-case for a class applicants or recipients, particularly in situations of national emergency such as natural disasters and pandemics. As noted in the Paperwork Reduction Act section, as of July 1, 2020, there were 159,477 unique Federal financial assistance registrants in the SAM. According to data accessed from USASpending.gov, in FY 2018, approximately 2,952 small entities who received awards for other types of financial assistance did not have a unique entity identifier. Assuming that non-Federal entities with a unique entity identifier reported to USASpending.gov are already registered in SAM, this change will impact approximately 2,952 small entities annually. SAM registration is estimated to take 2.5 hours per response, which results in 7,380 burden hours annually. The guidance also provides consistency among definitions and terms and proposes several provisions to increase transparency regarding Federal spending. These revisions are intended to reduce recipient burden and will 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 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 will introduce burden to small entities that are prohibited from obligating or expending grant or loan 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. Since this is a new legal requirement, the burden estimate is difficult to calculate. It will impact all unique entities awarded Federal financial assistance, of which 69,185 are small entities. The 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 E:\FR\FM\13AUR3.SGM 13AUR3 49522 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations subsidiary. Further, the burden is minimal for a non-Federal entity to provide the name of its immediate owner and highest-level owner. 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 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 guidance contains information collection requirements and will impact the current Information Collection Requests approved under OMB control number 3090–0290 managed by GSA. Accordingly, GSA will submit a request for approval to amend the existing Information Collection Requests for SAM registration requirements for 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. Previously, SAM only requires that applicants and recipients of Federal financial assistance in the form of grants register in the system. However, applicants and recipients are required to maintain accurate SAM registration 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, not all registrants ultimately apply for, or receive, Federal financial assistance. OMB aggregated SAM data with Federal financial assistance recipient data from USASpending.gov, excluding grants, to determine the anticipated number of additional Federal financial assistance in SAM. OMB ran reports in USASpending.gov to identify the number of unique recipients of Federal financial assistance other than grants to isolate the total number of potential VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 registrants in SAM as a result of the updates to the proposed guidance. 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. In FY 2019 there were 1,751 loan and 8,915 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 (8,915) 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 GSA 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 guidance also requires that registrants for Federal financial assistance provide information on their owner, predecessor, and subsidiary, including the 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 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 0.1 hours per response. 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: PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 Respondents: 172,084. Responses per respondent: 1. Total annual responses: 172,084. Preparation hours per response: 0.1. Total response Burden Hours: 17,208. 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, Grant programs, Grants administration, International organizations, Reporting and recordkeeping requirements. 2 CFR Part 200 Accounting, Colleges and universities, Grant programs, Grants administration, 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 amends 2 CFR chapters I and II 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 and paragraph (a) to read as follows: ■ § 25.100 Purposes of this part. This part provides guidance to Federal awarding agencies to establish: (a) The unique entity identifier as a universal identifier for Federal financial assistance applicants, as well as recipients and their direct subrecipients, and; * * * * * ■ 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 § 25.406. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations ■ 4. Revise § 25.110 to read as follows: § 25.110 Exceptions to this part. (a) General. Through a Federal awarding agency’s implementation of the guidance in this part, this part applies to all applicants and recipients of Federal awards, other than those exempted by statute or exempted in paragraphs (b) and (c) of this section that apply for or receive agency awards. (b) Exceptions 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 nonprofit organization he or she may own or operate in his or her name). (c) Other exceptions. (1) Under a condition identified in paragraph (c)(2) of this section, a Federal awarding agency may exempt an applicant or recipient from an applicable requirement to obtain a unique entity identifier and 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 recipient 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 an applicant or recipient are— (i) For any applicant or recipient, 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 applicant or recipient’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 $25,000, 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. (iii) For an applicant, if the Federal awarding agency makes a determination VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 that there are exigent circumstances that prohibit the applicant from receiving a unique entity identifier and completing SAM registration prior to receiving a Federal award. In these instances, Federal awarding agencies must require the recipient to obtain a unique entity identifier and complete SAM registration within 30 days of the Federal award date. (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. (d) Class exceptions. OMB may allow exceptions for classes of Federal awards, applicants, and recipients subject to the requirements of this part when exceptions are not prohibited by statute. § 25.115 ■ ■ [Removed] 5. Remove § 25.115. 6. Revise § 25.200 to read as follows: 49523 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 agency’s policy is to make the Federal award to a lead entity for the consortium, the unique entity identifier of the lead applicant 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 its information in the SAM database on an annual basis from the date of initial registration or subsequent updates to ensure it is current, accurate and complete. ■ 7. Revise § 25.205 to read as follows: § 25.200 Requirements for notice of funding opportunities, regulations, and application instructions. § 25.205 Effect of noncompliance with a requirement to obtain a unique entity identifier or register in the SAM. (a) Each Federal awarding agency that awards the types of Federal financial assistance defined in § 25.406 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 on or after August 13, 2020. (b) The notice of funding opportunity, regulation, or other issuance must require each applicant 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 predecessors that have been awarded a Federal contract or grant within the last three years, if applicable, 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 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 (a) A Federal awarding agency may not make a Federal award or financial modification to an existing Federal award to an applicant or recipient until the entity 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 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. ■ 8. Revise § 25.210 to read as follows: PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 § 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. E:\FR\FM\13AUR3.SGM 13AUR3 49524 ■ Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 9. 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 § 25.406) 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 Federal financial assistance applicants and recipients. ■ 10. Revise § 25.220 to read as follows: § 25.220 Use of award term. (a) To accomplish the purposes described in § 25.100, a Federal awarding agency must include in each Federal award (as defined in § 25.405) 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. ■ 11. Revise subpart C to read as follows: Subpart C—Recipient Requirements of Subrecipients § 25.300 Requirement for recipients to ensure subrecipients have a unique entity identifier. (a) A recipient may not make a subaward to a subrecipient unless that subrecipient has obtained and provided to the recipient a unique entity identifier. Subrecipients are not required to complete full SAM registration to obtain a unique entity identifier. (b) A recipient must notify any potential subrecipients that the recipient cannot make a subaward unless the subrecipient has obtained a unique entity identifier as described in paragraph (a) of this section. ■ 12. Add subpart D to read as follows: Subpart D—Definitions Sec 25.400 Applicant. 25.401 Federal Awarding Agency. 25.405 Federal Award. 25.406 Federal financial assistance. 25.407 Recipient. 25.410 System for Award Management (SAM). 25.415 Unique entity identifier. 25.425 For-profit organization. 25.430 Foreign organization. 25.431 Foreign public entity. 25.432 Highest level owner. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 25.433 Indian Tribe (or ‘‘Federally recognized Indian Tribe’’). 25.440 Local government. 25.443 Non-Federal entity. 25.445 Nonprofit organization. 25.447 Predecessor. 25.450 State. 25.455 Subaward. 25.460 Subrecipient. 25.462 Subsidiary. 25.465 Successor. Subpart D—Definitions § 25.400 Federal Awarding Agency. Federal Awarding Agency has the meaning given in 2 CFR 200.1. § 25.405 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 received from a Federal awarding agency. § 25.406 Federal financial assistance. (a) Federal financial assistance, for the purposes of this part, means assistance that entities received or administer in the form of: (1) Grant; (2) Cooperative agreements (which does not include a cooperative research and development agreement pursuant to the Federal Technology Transfer Act of 1986, as amended (15 U.S.C. 3710a)); (3) Loans; (4) Loan guarantees; (5) Subsidies; (6) Insurance; (7) Food commodities; (8) Direct appropriations; (9) Assessed or voluntary contributions; or (10) Any other financial assistance transaction that authorizes the nonFederal entity’s expenditure of Federal funds. (b) Federal financial assistance, for the purposes of this part, does not include: (1) Technical assistance, which provides services in lieu of money; and (2) A transfer of title to federally owned property provided in lieu of money, even if the award is called a grant. § 25.407 Recipient. Recipient, for the purposes of this part, means a non-Federal entity or Federal agency that received a Federal award. This term also includes a nonFederal entity who administers Federal financial assistance awards on behalf of a Federal agency. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 System for Award Management System for Award Management (SAM) has the meaning given in paragraph C.1 of the award term in appendix A to this part. § 25.415 Unique entity identifier. Unique entity identifier has the meaning given in paragraph C.2 of the award term in appendix A to this part. § 25.425 Applicant. Applicant, for the purposes of this part, means a non-Federal entity or Federal agency that applies for Federal awards. § 25.401 § 25.410 (SAM). For-profit organization. For-profit organization means a nonFederal entity organized for profit. It includes, but is not limited to: (a) An ‘‘S corporation’’ incorporated under Subchapter S of the Internal Revenue Code; (b) A corporation incorporated under another authority; (c) A partnership; (d) A limited liability corporation or partnership; and (e) A sole proprietorship. § 25.430 Foreign organization. Foreign organization has the meaning given in 2 CFR 200.1. § 25.431 Foreign public entity. Foreign public entity has the meaning given in 2 CFR 200.1. § 25.432 Highest level owner. Highest level owner has the meaning given in 2 CFR 200.1. § 25.433 Indian Tribe (or ‘‘federally recognized Indian Tribe’’). Indian Tribe (or ‘‘federally recognized Indian Tribe’’) has the meaning given in 2 CFR 200.1. § 25.440 Local government. Local government has the meaning given in 2 CFR 200.1. § 25.443 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. § 25.445 Nonprofit organization. Non-Federal organization, has the meaning given in 2 CFR 200.1. § 25.447 Predecessor. Predecessor means a non-Federal entity that is replaced by a successor and includes any predecessors of the predecessor. § 25.450 State. State has the meaning given in 2 CFR 200.1. § 25.455 Subaward. Subaward has the meaning given in 2 CFR 200.1. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations § 25.460 Subrecipient. Subrecipient has the meaning given in 2 CR 200.1. § 25.462 Subsidiary. Subsidiary has the meaning given in 2 CFR 200.1. § 25.465 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. ■ 13. 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 Federal financial assistance within the last three years, if applicable, 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 entity (see definition in paragraph C of this award term) may receive a subaward from you until the entity has provided its Unique Entity Identifier to you. 2. May not make a subaward to an entity unless the entity has provided its Unique Entity Identifier to you. Subrecipients are not required to obtain an active SAM registration, but must obtain a Unique Entity Identifier. C. Definitions For purposes of this term: 1. System for Award Management (SAM) means the Federal repository into VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 which a recipient 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 assigned by SAM to uniquely identify business entities. 3. Entity includes non-Federal entities as defined at 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; c. A domestic for-profit organization; and d. A domestic or foreign for-profit organization; and d. A Federal agency. 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 14. The authority citation for part 170 continues to read as follows: ■ Authority: Pub. L. 109–282; 31 U.S.C. 6102. ■ 15. Revise § 170.100 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’’. ■ 16. Revise § 170.105 to read as follows: § 170.105 Types of awards to which this part applies. This part applies to 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. ■ 17. Revise § 170.110 to read as follows: § 170.110 applies. Exceptions to which this part (a) General. Through a Federal awarding agency’s implementation of the guidance in this part, this part applies to recipients, other than those PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 49525 exempted by law or excepted in accordance with paragraphs (b) and (c) of this section, that— (1) Apply for or receive Federal awards; or (2) Receive subawards under Federal awards. (b) Exceptions. (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 nonprofit 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— (i) 80 percent or more of its annual gross revenue in Federal procurement contracts (and subcontracts) and Federal financial assistance awards subject to the Transparency Act, as defined at § 170.320 (and subawards); and (ii) $25,000,000 or more in annual gross revenue from Federal procurement contracts (and subcontracts) and Federal financial assistance awards subject to the Transparency Act, as defined at § 170.320; and (3) The public does not have access to information about the compensation of senior executives, unless otherwise publicly 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. (c) Exceptions for classes of Federal awards or recipients. OMB may allow exceptions for classes of Federal awards or recipients subject to the requirements of this part when exceptions are not prohibited by statute. § 170.115 [Removed] 18. Remove § 170.115. ■ 19. Revise § 170.200 to read as follows: ■ § 170.200 Federal awarding agency reporting requirements. (a) Federal awarding agencies are required to publicly 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 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 E:\FR\FM\13AUR3.SGM 13AUR3 49526 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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. ■ 20. Add § 170.210 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 under which Federal awards may be made that are subject to Transparency Act reporting requirements, 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 for Federal financial assistance and that does not have an exception under § 170.110(b) to have the necessary processes and systems in place to comply with the reporting requirements should they receive Federal funding. ■ 21. 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 recipient 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 that 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. ■ 22. Revise § 170.300 to read as follows: § 170.300 Federal agency. 18:29 Aug 12, 2020 Jkt 250001 Federal awarding agency. Federal awarding agency has the meaning given in 2 CFR 200.1. ■ 24. 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 recipient receives directly from a Federal awarding agency. ■ 25. Add § 170.307 to read as follows: § 170.307 Foreign organization. Foreign organization has the meaning given in 2 CFR 200.1. ■ 26. Add § 170.308 to read as follows: § 170.308 Foreign public entity. Foreign public entity has the meaning given in 2 CFR 200.1. ■ 27. 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 the purposes of this part: (a) A foreign organization; (b) A foreign public entity; and (c) A domestic or foreign for-profit organization. ■ 28. Amend § 170.320 by correctly designating the paragraph (b) that follows paragraph (j) as paragraph (k) and by revising paragraphs (k) introductory text and (k)(2) to read as follows: § 170.320 Federal financial assistance subject to the Transparency Act. * * * * * (k) Federal financial assistance subject to the Transparency Act, does not include— * * * * * (2) A transfer of title to federallyowned property provided in lieu of money, even if the award is called a grant; * * * * * ■ 29. Add § 170.322 to read as follows: § 170.322 Recipient. Recipient, for the purposes of this part, means a non-Federal entity or Federal agency that received a Federal award. ■ 30. Revise § 170.325 to read as follows: § 170.325 Federal agency means a Federal agency as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f). ■ 23. Add § 170.301 to read as follows: VerDate Sep<11>2014 § 170.301 Subaward. Subaward has the meaning given in 2 CFR 200.1. ■ 31. Revise appendix A to part 170 to read as follows: PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 Appendix A to Part 170—Award Term I. Reporting Subawards and Executive Compensation a. Reporting of first-tier subawards. 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 for a subaward to a nonFederal entity or Federal agency (see definitions in paragraph e. of this award term). 2. Where and when to report. i. The non-Federal entity or Federal agency must report each obligating action described in paragraph a.1. of this award term to http://www.fsrs.gov. ii. For subaward information, report no later than the end of the month following the month in which the obligation was made. (For example, if the obligation was made on November 7, 2010, the obligation must be reported by no later than December 31, 2010.) 3. What to report. You must report the information about each obligating action that the submission instructions posted at http://www.fsrs.gov specify. b. Reporting total compensation of recipient executives for non-Federal entities. 1. Applicability and what to report. You must report total compensation for each of your five most highly compensated executives for the preceding completed fiscal year, if— i. The total Federal funding authorized to date under this Federal award equals or exceeds $30,000 as defined in 2 CFR 170.320; ii. in the preceding fiscal year, you received— (A) 80 percent or more of your annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards), and (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and, 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/execomp.htm.) E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 2. Where and when to report. You must report executive total compensation described in paragraph b.1. of this award term: i. As part of your registration profile at https://www.sam.gov. ii. By the end of the month following the month in which this award is made, and annually thereafter. c. Reporting of Total Compensation of Subrecipient Executives. 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— i. in the subrecipient’s preceding fiscal year, the subrecipient received— (A) 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards) and, (B) $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal financial assistance subject to the Transparency Act (and subawards); and 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/execomp.htm.) 2. Where and when to report. You must report subrecipient executive total compensation described in paragraph c.1. of this award term: i. To the recipient. ii. By the end of the month following the month during which you make the subaward. For example, if a subaward is obligated on any date during the month of October of a given year (i.e., between October 1 and 31), you must report any required compensation information of the subrecipient by November 30 of that year. d. Exemptions. If, in the previous tax year, you had gross income, from all sources, under $300,000, you are exempt from the requirements to report: i. Subawards, and VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 ii. The total compensation of the five most highly compensated executives of any subrecipient. e. Definitions. For purposes of this award term: 1. Federal Agency means a Federal agency as defined at 5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f). 2. Non-Federal entity means all of the following, as defined in 2 CFR part 25: i. A Governmental organization, which is a State, local government, or Indian tribe; ii. A foreign public entity; iii. A domestic or foreign nonprofit organization; and, iv. A domestic or foreign for-profit organization 3. Executive means officers, managing partners, or any other employees in management positions. 4. Subaward: i. This term means a legal instrument to provide support for the performance of any portion of the substantive project or program for which you received this award and that you as the recipient award to an eligible subrecipient. 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 200.331). iii. A subaward may be provided through any legal agreement, including an agreement that you or a subrecipient considers a contract. 5. Subrecipient means a non-Federal entity or Federal agency that: i. Receives a subaward from you (the recipient) under this award; and ii. Is accountable to you for the use of the Federal funds provided by the subaward. 6. Total compensation means the cash and noncash dollar value earned by the executive during the recipient’s or subrecipient’s preceding fiscal year and includes the following (for more information see 17 CFR 229.402(c)(2)). ■ 31a. 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 recipients. 183.30 Access to records. 183.35 Definitions. APPENDIX A TO PART 183—CLAUSES FOR AWARD AGREEMENTS Authority: Pub. L. 113–291. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 § 183.5 49527 Purpose of this part. This part provides guidance to Federal awarding agencies on the implementation of the Never Contract with the Enemy requirements applicable to certain grants and cooperative agreements, as specified in subtitle E, title VIII of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015 (Pub. L. 113–291), as amended by Sec. 822 of the National Defense Authorization Act for Fiscal Year 2020 (Pub. L. 116–92). § 183.10 Applicability. (a) This part 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 this part are applicable until the date of expiration as provided in law. § 183.15 Responsibilities of Federal awarding agencies. (a) Prior to making an award for a covered grant or cooperative agreement (see also § 183.35), the Federal awarding agency must check the current list of prohibited or restricted persons or entities in the System Award Management (SAM) Exclusions. (b) The Federal awarding agency may include the award term provided in appendix A of this part in all covered grant and cooperative agreement awards in accordance with Never Contract with the Enemy. (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 covered persons or entities; 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 covered persons or entities. (d) When a Federal awarding agency becomes aware of such a person or entity, it may do any of the following actions: (1) Restrict the future award of all Federal contracts, grants, and cooperative agreements to the person or entity based upon concerns that Federal awards to the entity would provide E:\FR\FM\13AUR3.SGM 13AUR3 49528 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations grant funds directly or indirectly to a covered person or entity. (2) Terminate any contract, grant, or cooperative agreement to a covered person or entity upon becoming aware that the 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. (3) Void in whole or in part any grant, cooperative agreement or contracts of the executive agency concerned upon a written determination by the head of contracting activity or other appropriate official that the grant or cooperative agreement provides funds directly or indirectly to a covered person or entity. (e) The Federal awarding agency must notify recipients in writing regarding its decision to restrict all future awards and/or to terminate or void a grant or cooperative agreement. The agency must also notify the recipient in writing about the recipient’s right to request an administrative review (using the agency’s procedures) of the restriction, termination, or void of the grant or cooperative agreement within 30 days of receiving notification. § 183.20 Reporting responsibilities of Federal awarding agencies. (a) If a Federal awarding agency restricts all future awards to a covered person or entity, 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 or voids 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 Office of Management and Budget (OMB)designated integrity and performance system accessible through SAM (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). (c) The Federal awarding agency shall document and report 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): (1) Any action to restrict all future awards or to terminate or void an award with a covered person or entity. (2) Any decision not to restrict all future awards, terminate, or void 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. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (d) Each report referenced in paragraph (c)(1) of this section shall include: (1) The executive agency taking such action. (2) An explanation of the basis for the action taken. (3) The value of the terminated or voided grant or cooperative agreement. (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 or voided. (e) Each report referenced in paragraph (c)(2) of this section shall include: (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 recipient and lower tier entity (e.g., subrecipient or contractor) 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: (1) An explanation of the basis for the action taken; and (2) A summary of the results of any examination of records. § 183.25 Responsibilities of recipients. (a) Recipients of covered grants or cooperative agreements must fulfill the requirements outlined in the award term provided in appendix A to this part. (b) Recipients must also flow down the provisions in award terms covered in appendix A to this part to all contracts and subawards under the award. § 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 § 183.35) 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 PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 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. (4) The United States Pacific Command. (5) The United States Southern Command. (6) The United States Transportation Command. Covered grant or 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 A to Part 183—Award Terms for Never Contract With the Enemy Federal awarding agencies may include the following award terms in all E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations awards for covered grants and cooperative agreements in accordance with Never Contract with the Enemy: Term 1 Prohibition on Providing Funds to the Enemy (a) The recipient 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, which must be completed through 2 CFR 180.300 prior to issuing a subaward or contract and; (2) Terminate or void 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. (b) The recipient may include the substance of this clause, including paragraph (a) of this clause, 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. (c) The Federal awarding agency has the authority to terminate or void this grant or cooperative agreement, in whole or in part, if the Federal awarding agency becomes aware that the recipient 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 coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. (End of term) Term 2 Additional Access to Recipient Records (a) 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 or contracts to the extent necessary to ensure that funds, including supplies and services, available under this grant or cooperative VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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. (End of term) PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS 32. The authority citation for part 200 continues to read as follows: ■ Authority: 31 U.S.C. 503 33. Amend § 200.0 by removing the acronym CFDA, revising the acronym MTDC, adding in alphabetical order the acronym NFE, and revising the acronym SAM to read as follows: ■ § 200.0 Acronyms. * * * * * MTDC Modified Total Direct Cost NFE Non-Federal Entity * * * * * SAM System for Award Management * * * * * ■ 34. 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 instructional information provided in governmentwide standard information collections. For purposes of this part, the following definitions apply: 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 PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 49529 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 publicly available listing of Federal assistance programs managed and administered by the General Services Administration, formerly known as the Catalog of Federal Domestic Assistance (CFDA). Assistance listing number means a unique number assigned to identify a Federal Assistance Listings, formerly known as the CFDA Number. Assistance listing program title means the title that corresponds to the Federal Assistance Listings Number, formerly known as the CFDA program title. Audit finding means deficiencies which the auditor is required by § 200.516(a) to report in the schedule of findings and questioned costs. Auditee means any non-Federal entity that expends Federal awards which must be audited under subpart F of this part. Auditor means an auditor who is a public accountant or a Federal, State, local government, or Indian tribe audit organization, which meets the general standards specified for external auditors in generally accepted government auditing standards (GAGAS). The term auditor does not include internal auditors of nonprofit organizations. 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 from the start date of a funded portion E:\FR\FM\13AUR3.SGM 13AUR3 49530 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations of an award to the end date of that funded portion during which recipients are authorized to expend the funds awarded, including any funds carried forward or other revisions pursuant to § 200.308. Capital assets means: (1) 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: (i) 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 Government Accounting Standards Board (GASB) standards or a finance lease under Financial Accounting Standards Board (FASB) standards; and (ii) 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). (2) For purpose of this part, capital assets do not include intangible right-touse assets (per GASB) and right-to-use operating lease assets (per FASB). For example, assets capitalized that recognize a lessee’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. 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 or local government or Indian tribe on a centralized basis to its departments and agencies. The costs of these services may be allocated or billed to users. Claim means, depending on the context, either: (1) A written demand or written assertion by one of the parties to a Federal award seeking as a matter of right: (i) The payment of money in a sum certain; (ii) The adjustment or interpretation of the terms and conditions of the Federal award; or VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (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 § 200.344. 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 § 200.332(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: (1) For Institutions of Higher Education (IHEs): Appendix III to this part, paragraph C.11. (2) For nonprofit organizations: Appendix IV to this part, paragraph C.2.a. PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 (3) For State and local governments: Appendix V to this part, paragraph F.1. (4) For Indian tribes: Appendix VII to this part, paragraph D.1. Compliance supplement means an annually updated authoritative source for auditors that serves to identify existing important compliance requirements that the Federal Government expects to be considered as part of an audit. Auditors use it to understand the Federal program’s objectives, procedures, and compliance requirements, as well as audit objectives and suggested audit procedures for determining compliance with the relevant Federal program. 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 the definitions of supplies and information technology systems in this section. Contract means, for the purpose of Federal financial assistance, a legal instrument by which a recipient or subrecipient purchases property or services needed to carry out the project or program under a Federal award. For additional information on subrecipient and contractor determinations, see § 200.331. See also the definition of subaward in this section. 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 and a recipient or a pass-through entity and a subrecipient 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 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 of the Federal awarding agency in carrying out the activity contemplated by the Federal award. (3) The term does not include: (i) A cooperative research and development agreement as defined in 15 U.S.C. 3710a; or (ii) An agreement that provides only: (A) Direct United States Government cash assistance to an individual; (B) A subsidy; (C) A loan; (D) A loan guarantee; or E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (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 the definitions of final cost objective and intermediate cost objective in this section. Cost sharing or matching means the portion of project costs not paid by Federal funds or contributions (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 all Federal awards (including Federal awards of more than one Federal VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 awarding agency or pass-through entity). 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. Discretionary award means an award in which the Federal awarding agency, in keeping with specific statutory authority that enables the agency to exercise judgment (‘‘discretion’’), selects the recipient and/or the amount of Federal funding awarded through a competitive process or based on merit of proposals. A discretionary award may be selected on a non-competitive basis, as appropriate. 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 the definitions of capital assets, computing devices, general purpose equipment, information technology systems, special purpose equipment, and supplies in this section. 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 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 49531 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 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 recipient 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 of Federal financial assistance in this section, or the costreimbursement contract awarded under the Federal Acquisition Regulations. (3) Federal award does not include other contracts that a Federal agency uses to buy goods or services from a contractor or a contract to operate Federal Government owned, contractor operated facilities (GOCOs). (4) See also definitions of Federal financial assistance, grant agreement, and cooperative agreement. Federal award date means the date when the Federal award is signed by the authorized official of the Federal awarding agency. Federal financial assistance means (1) 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); (iv) Direct appropriations; (v) Food commodities; and (vi) Other financial assistance (except assistance listed in paragraph (2) of this definition). (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; E:\FR\FM\13AUR3.SGM 13AUR3 49532 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (iii) Interest subsidies; and (iv) Insurance. (3) For § 200.216, Federal financial assistance includes assistance that nonFederal entities receive or administer in the form of: (i) Grants; (ii) Cooperative agreements; (iii) Loans; and (iv) Loan Guarantees. (4) 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 § 200.330 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) The percentage of Federal participation in the total cost of the real property, equipment, or supplies; 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 Listings Number. (2) When no Assistance Listings Number is assigned, all Federal awards 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 in this section. 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 of cost objective and intermediate cost objective in this section. Financial obligations, when referencing a recipient’s or subrecipient’s use 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 §§ 200.102(c), 200.201(b), and 200.333. Foreign organization means an entity that is: (1) A public or private organization located in a country other than the United States and its territories that is subject to the laws of the country in which it is located, irrespective of the citizenship of project staff or place of performance; (2) A private nongovernmental organization located in a country other than the United States that solicits and receives cash contributions from the general public; (3) A charitable organization located in a country other than the United States that is nonprofit and tax exempt under the laws of its country of domicile and operation, and is not a university, college, accredited degreegranting institution of education, private foundation, hospital, organization engaged exclusively in research or scientific activities, church, synagogue, mosque or other similar entities organized primarily for religious purposes; or (4) An organization located in a country other than the United States not recognized as a foreign public entity. Foreign public entity means: (1) A foreign government or foreign governmental entity; (2) A public international organization, which is an organization entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288–288f); (3) An entity owned (in whole or in part) or controlled by a foreign government; or (4) Any other entity consisting wholly or partially of one or more foreign governments or foreign governmental entities. General purpose equipment means equipment which is not limited to research, medical, scientific or other technical activities. Examples include office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles. See also the PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 definitions of equipment and special purpose equipment in this section. Generally accepted accounting principles (GAAP) has the meaning specified in accounting standards issued by the GASB and the FASB. Generally accepted government auditing standards (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 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 of the Federal awarding agency 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; (vi) 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 Federal Acquisition Regulations (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 means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. (i) Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law). Note 1 to paragraph (1)(i) of this definition. Applicable discounts are only those discounts where it is both advantageous and within the agency’s control to claim them. (ii) When an agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment should also be considered an improper payment. When establishing documentation requirements for payments, agencies should ensure that all documentation requirements are necessary and should refrain from imposing additional burdensome documentation requirements. (iii) Interest or other fees that may result from an underpayment by an agency are not considered an improper payment if the interest was paid correctly. These payments are generally separate transactions and may be necessary under certain statutory, contractual, administrative, or other legally applicable requirements. (iv) A ‘‘questioned cost’’ (as defined in this section) should not be considered an improper payment until the transaction has been completely reviewed and is confirmed to be improper. (v) The term ‘‘payment’’ in this definition means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any nonFederal person, non-Federal entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program or activity. (vi) The term ‘‘payment’’ includes disbursements made pursuant to prime contracts awarded under the Federal Acquisition Regulation and Federal awards subject to this part that are expended by recipients. (2) See definition of improper payment in OMB Circular A–123 appendix C, part I A (1) ‘‘What is an improper payment?’’ Questioned costs, including those identified in audits, are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 appendix C. Indian tribe means any Indian tribe, band, nation, or other organized group VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 appendices III through VII and appendix IX to this part. Information technology systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services (including support services), and related resources. See also the definitions of computing devices and equipment in this section. 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 the definitions of cost objective and final cost objective in this section. Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 49533 the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; and (iii) Compliance with applicable laws and regulations. (2) Federal awarding agencies are required to follow internal control compliance requirements in OMB Circular No. A–123, Management’s Responsibility for Enterprise Risk Management and Internal Control. 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 this section. (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; E:\FR\FM\13AUR3.SGM 13AUR3 49534 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (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. Micropurchases comprise a subset of a nonFederal entity’s small purchases as defined in § 200.320. Micro-purchase threshold means the dollar amount at or below which a nonFederal entity may purchase property or services using micro-purchase procedures (see § 200.320). Generally, the micro-purchase threshold for procurement activities administered under Federal awards is not to exceed the amount set by the FAR at 48 CFR part 2, subpart 2.1, unless a higher threshold is requested by the nonFederal entity and approved by the cognizant agency for indirect costs. 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 Federal awarding agency to specific recipients in accordance with statutory, eligibility and compliance requirements, such that in keeping with specific statutory authority the agency has no ability to VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 exercise judgement (‘‘discretion’’). A non-discretionary award amount could be determined specifically or by formula. Non-Federal entity (NFE) means a State, local government, Indian tribe, Institution of Higher Education (IHE), or nonprofit organization that carries out a Federal award as a recipient or subrecipient. Nonprofit organization means any corporation, trust, association, cooperative, or other organization, not including IHEs, that: (1) Is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest; (2) Is not organized primarily for profit; and (3) Uses net proceeds to maintain, improve, or expand the operations of the organization. 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 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. The 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. 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) (as listed on the schedule of expenditures of Federal awards, see § 200.510(b)) to a nonFederal entity unless OMB designates a specific cognizant agency for audit. When the direct funding represents less than 25 percent of the total Federal expenditures (as direct and sub-awards) by the non-Federal entity, then the Federal agency with the predominant amount of total funding is the designated cognizant agency for audit. When there is no direct funding, the Federal awarding agency which is the predominant source of pass-through funding must assume the oversight responsibilities. The duties of the oversight agency for audit and the process for any reassignments are described in § 200.513(b). PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 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. Pass-through entity (PTE) means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program. Performance goal means a target level of performance expressed as a tangible, measurable objective, against which actual achievement can be compared, including a goal expressed as a quantitative standard, value, or rate. In some instances (e.g., discretionary research awards), this may be limited to the requirement to submit technical performance reports (to be evaluated in accordance with agency policy). Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per § 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations performance except as provided in § 200.307(f). (See the definition of period of performance in this section.) 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 § 200.407. See also 35 U.S.C. 200–212 ‘‘Disposition of Rights in Educational Awards’’ applies to inventions made under Federal awards. 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. Property means real property or personal property. See also the definitions of real property and personal property in this section. 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 the definition of Personally Identifiable Information (PII) in this section. 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 also the definition of Improper payment in this section). Real property means land, including land improvements, structures and appurtenances thereto, but excludes moveable machinery and equipment. Recipient means an entity, usually but not limited to non-Federal entities that receives a Federal award directly from a Federal awarding agency. The term recipient does not include subrecipients or individuals that are beneficiaries of the award. Renewal award means an award made subsequent to an expiring Federal award for which the start date is contiguous with, or closely follows, the end of the expiring Federal award. A renewal award’s start date will begin a distinct period of performance. 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 § 200.320). 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 FAR at 48 CFR part 2, subpart 2.1. 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. However, in no circumstances can this threshold exceed the dollar value established in the FAR (48 CFR part 2, subpart 2.1) for the simplified acquisition threshold. Recipients should determine if local government laws on purchasing apply. Special purpose equipment means equipment which is used only for PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 49535 research, medical, scientific, or other technical activities. Examples of special purpose equipment include microscopes, x-ray machines, surgical instruments, and spectrometers. See also the definitions of equipment and general purpose equipment in this section. 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 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 entity is owned or controlled directly by a parent corporation or through another subsidiary of a parent corporation. Supplies means all tangible personal property other than those described in the definition of equipment in this section. 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 the definitions of computing devices and equipment in this section. E:\FR\FM\13AUR3.SGM 13AUR3 49536 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Telecommunications cost means the cost of using communication and telephony technologies such as mobile phones, land lines, and internet. 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. 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. ■ 35. Amend § 200.100 by revising paragraphs (a)(1), (c), (d), and (e) to read as follows: § 200.100 Purpose. § 200.101 (a) Purpose. (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. * * * * * (c) Cost principles. Subpart E of this part establishes principles for determining the allowable costs incurred by non-Federal entities under Federal awards. The principles are for the purpose of cost determination and are not intended to identify the circumstances or dictate the extent of Federal Government participation in the financing of a particular program or project. The principles are designed to provide that Federal awards bear their fair share of cost recognized under these principles except where restricted or prohibited by statute. (d) Single Audit Requirements and Audit Follow-up. Subpart F of this part is issued pursuant to the Single Audit Act Amendments of 1996, (31 U.S.C. 7501–7507). It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards. These provisions also provide the policies and procedures for Federal awarding agencies and pass-through entities when using the results of these audits. (e) Guidance on challenges and prizes. For OMB guidance to Federal awarding agencies on challenges and prizes, please see memo M–10–11 Guidance on the Use of Challenges and Prizes to Promote Open Government, issued March 8, 2010, or its successor. ■ 36. Revise § 200.101 to read as follows: 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. (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, §§ 200.331 through 200.333, 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) of this section): 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. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Are NOT applicable to the following types of Federal Awards and Fixed-Price Contracts and Subcontracts: —All. —All. —Grant Agreements and cooperative agreements. PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 —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. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 49537 TABLE 1 TO PARAGRAPH (b)—Continued Are applicable to the following types of Federal Awards and Fixed-Price Contracts and Subcontracts (except as noted in paragraphs (d) and (e) of this section): Are NOT applicable to the following types of Federal Awards and Fixed-Price Contracts and Subcontracts: Subparts C–D, except for §§ 200.203 Requirement to provide public notice of Federal financial assistance programs, 200.303 Internal controls, 200.331–333 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. —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. The following portions of this Part §§ 200.303 Internal controls, 200.331–333 Subrecipient Monitoring and Management. Subpart E—Cost Principles ................................ 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, §§ 200.331 through 200.333, and subparts E and 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 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 part 31, subpart 31.2, and 48 CFR 31.603 are always unallowable. For requirements other than those covered in subpart D, §§ 200.331 through 200.333, and subparts E and 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) Governing provisions. With the exception of subpart F of this part, VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 —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. which is required by the Single Audit Act, in any circumstances where the provisions of Federal statutes or regulations differ from the provisions of this part, the provision of the Federal statutes or regulations govern. This includes, for agreements with Indian tribes, the provisions of the Indian SelfDetermination and Education and Assistance Act (ISDEAA), as amended, 25 U.S.C 450–458ddd–2. (e) Program applicability. Except for §§ 200.203 and 200.331 through 200.333, the requirements in subparts C, D, and 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 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: PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 —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. (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) Additional program applicability. 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 for Needy Families (title IV–A of the Social Security Act, 42 U.S.C. 601–619); (ii) Child Support Enforcement and Establishment of Paternity (title IV–D of the Social Security Act, 42 U.S.C. 651– 669b); (iii) Foster Care and Adoption Assistance (title IV–E of the Act, 42 U.S.C. 670–679c); (iv) Aid to the Aged, Blind, and Disabled (titles I, X, XIV, and XVI– AABD of the Act, as amended); (v) Medical Assistance (Medicaid) (title XIX of the Act, 42 U.S.C. 1396– 1396w–5) not including the State Medicaid Fraud Control program authorized by section 1903(a)(6)(B) of the Social Security Act (42 U.S.C. 1396b(a)(6)(B)); and E:\FR\FM\13AUR3.SGM 13AUR3 49538 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (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 (f)(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. ■ 37. Revise § 200.102 to read as follows: § 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 as described in this section. (b) Exceptions on a case-by-case basis for individual non-Federal entities may be authorized by the Federal awarding agency or cognizant agency for indirect costs, except where otherwise required by law or where OMB or other approval is expressly required by this part. (c) The Federal awarding agency may apply adjust 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) Federal awarding agencies may 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. See also § 200.206. ■ 38. Revise § 200.103 to read as follows: § 200.103 Authorities. This part is issued under the following authorities. (a) Subparts B through D of this part are authorized under 31 U.S.C. 503 (the Chief Financial Officers Act, Functions of the Deputy Director for Management), 41 U.S.C. 1101–1131 (the Office of Federal Procurement Policy Act), Reorganization Plan No. 2 of 1970, and Executive Order 11541 (‘‘Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President’’), the Single Audit Act Amendments of 1996, (31 U.S.C. 7501– 7507), as well as The Federal Program Information Act (Pub. L. 95–220 and Pub. L. 98–169, as amended, codified at 31 U.S.C. 6101–6106). (b) Subpart E of this part is authorized under the Budget and Accounting Act of 1921, as amended; the Budget and Accounting Procedures Act of 1950, as amended (31 U.S.C. 1101–1125); the Chief Financial Officers Act of 1990 (31 U.S.C. 503–504); Reorganization Plan No. 2 of 1970; and Executive Order 11541, ‘‘Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President.’’ PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 (c) Subpart F of this part is authorized under the Single Audit Act Amendments of 1996, (31 U.S.C. 7501– 7507). ■ 39. Amend § 200.104 by revising the introductory text and paragraphs (g) and (h) to read as follows: § 200.104 Supersession. As described in § 200.110, this part supersedes the following OMB guidance documents and regulations under title 2 of the Code of Federal Regulations: * * * * * (g) A–133, ‘‘Audits of States, Local Governments and Non-Profit Organizations’’; and (h) Those sections of A–50 related to audits performed under subpart F of this part. ■ 40. Revise § 200.105 to read as follows: § 200.105 Effect on other issuances. (a) Superseding inconsistent requirements. For Federal awards subject to this part, all administrative requirements, program manuals, handbooks and other non-regulatory materials that are inconsistent with the requirements of this part must be superseded upon implementation of this part by the Federal agency, except to the extent they are required by statute or authorized in accordance with the provisions in § 200.102. (b) Imposition of requirements on recipients. Agencies may impose legally binding requirements on recipients only through the notice and public comment process through an approved agency process, including as authorized by this part, other statutes or regulations, or as incorporated into the terms of a Federal award. ■ 41. Revise § 200.106 to read as follows: § 200.106 Agency implementation. The specific requirements and responsibilities of Federal agencies and non-Federal entities are set forth in this part. Federal agencies making Federal awards to non-Federal entities must implement the language in subparts C through F of this part in codified regulations unless different provisions are required by Federal statute or are approved by OMB. ■ 42. Revise § 200.110 to read as follows: § 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations agencies or when any future amendment to this part becomes final. (b) Existing negotiated indirect cost rates (as of the publication date of the revisions to the guidance) will remain in place until they expire. 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, the revised Uniform Guidance (as of the publication date for revisions to the guidance) become effective in generating proposals and negotiating a new rate (when the rate is re-negotiated). ■ 43. Revise § 200.113 to read as follows: 200.214 Suspension and debarment. 200.215 Never contract with the enemy. 200.216 Prohibition on certain telecommunications and video surveillance services or equipment. § 200.113 (a) Federal award instrument. The Federal awarding agency or passthrough entity must decide on the appropriate instrument for the Federal award (i.e., grant agreement, cooperative agreement, or contract) in accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301–08). (b) Fixed amount awards. In addition to the options described in paragraph (a) of this section, Federal awarding agencies, or pass-through entities as permitted in § 200.333, 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 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, Mandatory disclosures. The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Non-Federal entities that have received a Federal award including the term and condition outlined in appendix XII to this part are required to report certain civil, criminal, or administrative proceedings to SAM (currently FAPIIS). Failure to make required disclosures can result in any of the remedies described in § 200.339. (See also 2 CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.) ■ 44. 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. 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. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards § 200.200 Purpose. Sections 200.201 through 200.216 prescribe instructions and other preaward matters to be used by Federal awarding agencies in the program planning, announcement, application and award processes. § 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 49539 (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. The Federal awarding agency must design a program and create an Assistance Listing before announcing the Notice of Funding Opportunity. The program must be designed with clear goals and objectives that facilitate the delivery of meaningful results consistent with the Federal authorizing legislation of the program. Program performance shall be measured based on the goals and objectives developed during program planning and design. See § 200.301 for more information on performance measurement. Performance measures may differ depending on the type of program. The program must align with the strategic goals and objectives within the Federal awarding agency’s performance plan and should support the Federal awarding agency’s performance measurement, management, and reporting as required by Part 6 of OMB Circular A–11 (Preparation, Submission, and Execution of the Budget). The program must also be designed to align with the Program Management Improvement Accountability Act (Pub. L. 114–264). § 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 Federal Assistance Listings maintained by the General Services Administration (GSA). (1) The Federal 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 E:\FR\FM\13AUR3.SGM 13AUR3 49540 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 Federal 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, update, and manage Assistance Listings 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. Accordingly, 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, the Program Description, Purpose, Goals, and Measurement should align with the strategic goals and objectives within the Federal awarding agency’s performance plan and should support the Federal awarding agency’s performance measurement, management, and reporting as required by Part 6 of OMB Circular A–11; (2) Identification. Identification of whether the program makes Federal awards on a discretionary basis or the Federal awards are prescribed by Federal statute, such as in the case of formula grants. (3) Projected total amount of funds available for the program. Estimates based on previous year funding are acceptable if current appropriations are not available at the time of the submission; (4) Anticipated source of available funds. The statutory authority for funding the program and, to the extent possible, agency, sub-agency, or, if known, the specific program unit that will issue the Federal awards, and associated funding identifier (e.g., Treasury Account Symbol(s)); (5) General eligibility requirements. The statutory, regulatory or other eligibility factors or considerations that determine the applicant’s qualification for Federal awards under the program (e.g., type of non-Federal entity); and VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (6) Applicability of Single Audit Requirements. Applicability of Single Audit Requirements as required by subpart F of this part. § 200.204 Notices of funding opportunities. For discretionary grants and cooperative agreements that are competed, 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 funding 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 Listings 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 this part. (1) Full programmatic description of the funding opportunity. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 (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. (7) Applicable terms and conditions for resulting awards, including any exceptions from these standard terms. § 200.205 Federal awarding agency review of merit of proposals. For discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must design and execute a merit review process for applications, with the objective of selecting recipients most likely to be successful in delivering results based on the program objectives outlined in section § 200.202. A merit review is an objective process of evaluating Federal award applications in accordance with written standards set forth by the Federal awarding agency. 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 must also periodically review its merit review process. § 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 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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. (b) Risk evaluation. (1) The Federal awarding agency must have in place a framework for evaluating the risks posed by applicants before they receive Federal awards. This evaluation may incorporate results of the evaluation of the applicant’s eligibility or the quality of its application. If the 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. (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. Financial stability; (ii) Management systems and standards. 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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) Audit reports and findings. Reports and findings from audits performed under subpart F of this part or the reports and findings of any other available audits; and (v) Ability to effectively implement requirements. The applicant’s ability to effectively implement statutory, regulatory, or other requirements imposed on non-Federal entities. (c) Risk-based requirements adjustment. The Federal awarding agency may adjust requirements when a risk-evaluation indicates that it may be merited either pre-award or post-award. (d) Suspension and debarment compliance. (1) 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. § 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 and in alignment with OMBapproved, governmentwide data elements available from the OMBdesignated standards lead. Consistent with these requirements, OMB will authorize additional information collections only on a limited basis. (b) Information collection. 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) The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, in accordance with this section, based on an analysis of the following factors: (1) Based on the criteria set forth in § 200.206; PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 49541 (2) The applicant or recipient’s history of compliance with the general or specific terms and conditions of a Federal award; (3) The applicant or recipient’s ability to meet expected performance goals as described in § 200.211; or (4) A responsibility determination of an applicant or recipient. (c) Additional Federal award conditions may include items such as the following: (1) Requiring payments as reimbursements rather than advance payments; (2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given performance period; (3) Requiring additional, more detailed financial reports; (4) Requiring additional project monitoring; (5) Requiring the non-Federal entity to obtain technical or management assistance; or (6) Establishing additional prior approvals. (d) If the Federal awarding agency or pass-through entity is imposing additional requirements, they must notify the applicant or non-Federal entity as to: (1) The nature of the additional requirements; (2) The reason why the additional requirements are being imposed; (3) The nature of the action needed to remove the additional requirement, if applicable; (4) The time allowed for completing the actions if applicable; and (5) The method for requesting reconsideration of the additional requirements imposed. (e) 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. E:\FR\FM\13AUR3.SGM 13AUR3 49542 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations § 200.211 Information contained in a Federal award. A Federal award must include the following information: (a) Federal award performance goals. Performance goals, indicators, targets, and baseline data must be included in the Federal award, where applicable. The Federal awarding agency must also specify how performance will be assessed in the terms and conditions of the Federal award, including the timing and scope of expected performance. See §§ 200.202 and 200.301 for more information on Federal award 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 § 200.201); (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; (11) Federal award description, (to comply with statutory requirements (e.g., FFATA)); (12) Name of Federal awarding agency and contact information for awarding official, (13) Assistance Listings Number and Title; (14) Identification of whether the award is R&D; and (15) Indirect cost rate for the Federal award (including if the de minimis rate is charged per § 200.414). (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. Administrative requirements implemented by the Federal awarding agency as specified in this part. (ii) National policy requirements. These include statutory, executive VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 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, program authority, satisfactory performance, and compliance with the terms and conditions of the Federal award. (v) Termination provisions. Federal awarding agencies must make recipients aware, in a clear and unambiguous manner, of the termination provisions in § 200.340, including the applicable termination provisions in the Federal awarding agency’s regulations or in each Federal award. (2) The Federal award must incorporate, by reference, all general terms and conditions of the award, which must be maintained on the agency’s website. (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. See also § 200.208. Whenever practicable, these specific terms and conditions also should be shared on the agency’s 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) Federal awarding agency requirements. Any other information required by the Federal awarding agency. PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 § 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 part 42, 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 this paragraph (a) 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 (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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 include 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; and (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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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. The regulations in 2 CFR part 180 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 recipients are subject to the regulations implementing Never Contract with the Enemy in 2 CFR part 183. The regulations in 2 CFR part 183 affect covered contracts, grants and cooperative agreements that are expected to exceed $50,000 within the period of performance, are performed outside the United States and its 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. (a) Recipients and subrecipients are prohibited from obligating or expending loan or grant funds to: (1) Procure or obtain; (2) Extend or renew a contract to procure or obtain; or (3) Enter into a contract (or extend or renew a contract) to procure or obtain equipment, services, or systems that uses covered telecommunications equipment or services as a substantial or essential component of any system, or PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 49543 as critical technology as part of any system. As described in Public Law 115–232, section 889, covered telecommunications equipment is telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities). (i) 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). (ii) Telecommunications or video surveillance services provided by such entities or using such equipment. (iii) 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. (b) In implementing the prohibition under Public Law 115–232, section 889, subsection (f), paragraph (1), heads of executive agencies administering loan, grant, or subsidy programs shall prioritize available funding and technical support to assist affected businesses, institutions and organizations as is reasonably necessary for those affected entities to transition from covered communications equipment and services, to procure replacement equipment and services, and to ensure that communications service to users and customers is sustained. (c) See Public Law 115–232, section 889 for additional information. (d) See also § 200.471. ■ 45. Revise subpart D to read as follows: Subpart D—Post Federal Award Requirements Sec. 200.300 Statutory and national policy requirements. 200.301 Performance measurement. 200.302 Financial management. 200.303 Internal controls. 200.304 Bonds. 200.305 Federal payment. 200.306 Cost sharing or matching. 200.307 Program income. 200.308 Revision of budget and program plans. E:\FR\FM\13AUR3.SGM 13AUR3 49544 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 200.309 Modifications to Period of Performance. Subpart D—Post Federal Award Requirements Property Standards § 200.300 Statutory and national policy requirements. 200.310 Insurance coverage. 200.311 Real property. 200.312 Federally-owned and exempt property. 200.313 Equipment. 200.314 Supplies. 200.315 Intangible property. 200.316 Property trust relationship. Procurement Standards 200.317 Procurements by states. 200.318 General procurement standards. 200.319 Competition. 200.320 Methods of procurement to be followed. 200.321 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms. 200.322 Domestic preferences for procurements. 200.323 Procurement of recovered materials. 200.324 Contract cost and price. 200.325 Federal awarding agency or passthrough entity review. 200.326 Bonding requirements. 200.327 Contract provisions. Performance and Financial Monitoring and Reporting 200.328 Financial reporting. 200.329 Monitoring and reporting program performance. 200. 330 Reporting on real property. Subrecipient Monitoring and Management 200.331 Subrecipient and contractor determinations. 200.332 Requirements for pass-through entities. 200.333 Fixed amount subawards. § 200.301 Record Retention and Access 200.334 Retention requirements for records. 200.335 Requests for transfer of records. 200.336 Methods for collection, transmission, and storage of information. 200.337 Access to records. 200.338 Restrictions on public access to records. Remedies for Noncompliance 200.339 Remedies for noncompliance. 200.340 Termination. 200.341 Notification of termination requirement. 200.342 Opportunities to object, hearings, and appeals. 200.343 Effects of suspension and termination. Closeout 200.344 Closeout. Post-Closeout Adjustments and Continuing Responsibilities 200.345 Post-closeout adjustments and continuing responsibilities. Collection of Amounts Due 200.346 Collection of amounts due. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (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, and public policy requirements: Including, but not limited to, those protecting free speech, religious liberty, public welfare, the environment, and prohibiting discrimination. The Federal awarding agency must communicate to the nonFederal entity all relevant public policy requirements, including those in general appropriations provisions, and incorporate them either directly or by reference in the terms and conditions of the Federal award. (b) The non-Federal entity is responsible for complying with all requirements of the Federal award. For all Federal awards, this includes the provisions of FFATA, which includes requirements on executive compensation, and also requirements implementing the Act for the nonFederal entity at 2 CFR parts 25 and 170. See also statutory requirements for whistleblower protections at 10 U.S.C. 2409, 41 U.S.C. 4712, and 10 U.S.C. 2324, 41 U.S.C. 4304 and 4310. Performance measurement. (a) The Federal awarding agency must measure the recipient’s performance to show achievement of program goals and objectives, share lessons learned, improve program outcomes, and foster adoption of promising practices. Program goals and objectives should be derived from program planning and design. See § 200.202 for more information. Where appropriate, the Federal award may include specific program goals, indicators, targets, baseline data, data collection, or expected outcomes (such as outputs, or services performance or public impacts of any of these) with an expected timeline for accomplishment. Where applicable, this should also include any performance measures or independent sources of data that may be used to measure progress. The Federal awarding agency will determine how performance progress is measured, which may differ by program. Performance measurement progress must be both measured and reported. See § 200.329 for more information on monitoring program performance. The Federal awarding agency may include program-specific requirements, as applicable. These PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 requirements must be aligned, to the extent permitted by law, with the Federal awarding agency strategic goals, strategic objectives or performance goals that are relevant to the program. See also OMB Circular A–11, Preparation, Submission, and Execution of the Budget Part 6. (b) The Federal awarding agency should provide recipients with clear performance goals, indicators, targets, and baseline data 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 progress but also to facilitate identification of promising practices among recipients and build the evidence upon which the Federal awarding agency’s program and performance decisions are made. See § 200.328 for more information on reporting program performance. (c) 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). 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 Financial management. (a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state’s own funds. In addition, the state’s and the other nonFederal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also § 200.450. (b) The financial management system of each non-Federal entity must provide for the following (see also §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Similarly, a pass-through entity must not require a subrecipient to establish an accrual accounting system and must allow the subrecipient to develop accrual data for its reports on the basis of an analysis of the documentation on hand. (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. § 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ‘‘Standards for Internal Control in the Federal Government’’ issued by the Comptroller General of the United States or the ‘‘Internal Control Integrated Framework’’, issued by the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the nonFederal entity’s compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the 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. § 200.304 Bonds. The Federal awarding agency may include a provision on bonding, insurance, or both in the following circumstances: (a) Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Federal awarding agency, at its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the nonFederal entity are not deemed adequate to protect the interest of the Federal Government. (b) The Federal awarding agency may require adequate fidelity bond coverage where the non-Federal entity lacks sufficient coverage to protect the Federal Government’s interest. (c) Where bonds are required in the situations described above, the bonds must be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223. § 200.305 Federal payment. (a) For states, payments are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (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 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 49545 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 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 E:\FR\FM\13AUR3.SGM 13AUR3 49546 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 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) To the extent available, the nonFederal 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, including § 200.339, 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 Circular 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- VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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, 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 § 200.343. (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 interestbearing 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 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 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 1: Routing Number: 021030004 Account number: 75010501 Bank Name and Location: Federal Reserve Bank Treas NYC/Funds Transfer Division New York, NY 1 Please note that the organization initiating payment is likely to incur a charge from their Financial Institution for this type of payment. E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (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 2 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 2 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 Cost sharing or matching. (a) Under Federal research proposals, voluntary committed cost sharing is not expected. It cannot be used as a factor during the merit review of applications or proposals, but may be considered if it is both in accordance with Federal awarding agency regulations and specified in a notice of funding opportunity. Criteria for considering voluntary committed cost sharing and any other program policy factors that may be used to determine who may receive a Federal award must be explicitly described in the notice of funding opportunity. See also §§ 200.414 and 200.204 and appendix I to this part. (b) For all Federal awards, any shared costs or matching funds and all contributions, including cash and thirdparty in-kind contributions, must be accepted as part of the non-Federal entity’s cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the nonFederal entity’s records; (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; (5) Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 available for such program can be applied to matching or cost sharing requirements of other Federal programs; (6) Are provided for in the approved budget when required by the Federal awarding agency; and (7) Conform to other provisions of this part, as applicable. (c) Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. Unrecovered indirect cost means the difference between the amount charged to the Federal award and the amount which could have been charged to the Federal award under the non-Federal entity’s approved negotiated indirect cost rate. (d) Values for non-Federal entity contributions of services and property must be established in accordance with the cost principles in subpart E of this part. If a Federal awarding agency authorizes the non-Federal entity to donate buildings or land for construction/facilities acquisition projects or long-term use, the value of the donated property for cost sharing or matching must be the lesser of paragraph (d)(1) or (2) of this section. (1) The value of the remaining life of the property recorded in the nonFederal entity’s accounting records at the time of donation. (2) The current fair market value. However, when there is sufficient justification, the Federal awarding agency may approve the use of the current fair market value of the donated property, even if it exceeds the value described in paragraph (d)(1) of this section at the time of donation. (e) Volunteer services furnished by third-party professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for third-party volunteer services must be consistent with those paid for similar work by the non-Federal entity. In those instances in which the required skills are not found in the non-Federal entity, rates must be consistent with those paid for similar work in the labor market in which the non-Federal entity competes for the kind of services involved. In either case, paid fringe benefits that are reasonable, necessary, allocable, and otherwise allowable may be included in the valuation. (f) When a third-party organization furnishes the services of an employee, these services must be valued at the employee’s regular rate of pay plus an amount of fringe benefits that is PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 49547 reasonable, necessary, allocable, and otherwise allowable, and indirect costs at either the third-party organization’s approved federally-negotiated indirect cost rate or, a rate in accordance with § 200.414(d) provided these services employ the same skill(s) for which the employee is normally paid. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donated services so that reimbursement for the donated services will not be made. (g) Donated property from third parties may include such items as equipment, office supplies, laboratory supplies, or workshop and classroom supplies. Value assessed to donated property included in the cost sharing or matching share must not exceed the fair market value of the property at the time of the donation. (h) The method used for determining cost sharing or matching for third-partydonated equipment, buildings and land for which title passes to the non-Federal entity may differ according to the purpose of the Federal award, if paragraph (h)(1) or (2) of this section applies. (1) If the purpose of the Federal award is to assist the non-Federal entity in the acquisition of equipment, buildings or land, the aggregate value of the donated property may be claimed as cost sharing or matching. (2) If the purpose of the Federal award is to support activities that require the use of equipment, buildings or land, normally only depreciation charges for equipment and buildings may be made. However, the fair market value of equipment or other capital assets and fair rental charges for land may be allowed, provided that the Federal awarding agency has approved the charges. See also § 200.420. (i) The value of donated property must be determined in accordance with the usual accounting policies of the non-Federal entity, with the following qualifications: (1) The value of donated land and buildings must not exceed its fair market value at the time of donation to the non-Federal entity as established by an independent appraiser (e.g., certified real property appraiser or General Services Administration representative) and certified by a responsible official of the non-Federal entity as required by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601– 4655) (Uniform Act) except as provided in the implementing regulations at 49 CFR part 24, ‘‘Uniform Relocation Assistance And Real Property E:\FR\FM\13AUR3.SGM 13AUR3 49548 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Acquisition For Federal And FederallyAssisted Programs’’. (2) The value of donated equipment must not exceed the fair market value of equipment of the same age and condition at the time of donation. (3) The value of donated space must not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately-owned building in the same locality. (4) The value of loaned equipment must not exceed its fair rental value. (j) For third-party in-kind contributions, the fair market value of goods and services must be documented and to the extent feasible supported by the same methods used internally by the non-Federal entity. (k) For IHEs, see also OMB memorandum M–01–06, dated January 5, 2001, Clarification of OMB A–21 Treatment of Voluntary Uncommitted Cost Sharing and Tuition Remission Costs. § 200.307 Program income. (a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. (b) Cost of generating program income. If authorized by Federal regulations or the Federal award, costs incidental to the generation of program income may be deducted from gross income to determine program income, provided these costs have not been charged to the Federal award. (c) Governmental revenues. Taxes, special assessments, levies, fines, and other such revenues raised by a nonFederal entity are not program income unless the revenues are specifically identified in the Federal award or Federal awarding agency regulations as 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 the Property Standards §§ 200.311, 200.313, and 200.314, or as specifically identified in Federal statutes, regulations, or the terms and conditions of the Federal award. (e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 this section must apply. In specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted from expenditures. (1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non-Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non-Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The program income must be used for the purposes and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. (f) Income after the period of performance. There are no Federal requirements governing the disposition of income earned after the end of the period of performance for the Federal award, unless the Federal awarding agency regulations or the terms and conditions of the Federal award provide otherwise. The Federal awarding agency may negotiate agreements with recipients regarding appropriate uses of income earned after the period of performance as part of the grant closeout process. See also § 200.344. (g) License fees and royalties. 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. PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 § 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 definition for Federal share in § 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. (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 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 § 200.333. 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations authorized, at its option, to waive other cost-related and administrative prior written approvals contained in subparts D and E of this part. 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 § 200.458. (2) Initiate a one-time extension of the period of performance by up to 12 months unless one or more of the conditions outlined in paragraphs (e)(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 this paragraph (e) are automatically waived (i.e., recipients need not obtain such prior approvals) unless one of the conditions included in paragraph (e)(2) of this section 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 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. (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 Modifications to Period of Performance. If a Federal awarding agency or passthrough entity approves an extension, or if a recipient extends under § 200.308(e)(2), the Period of Performance will be amended to end at the completion of the extension. If a termination occurs, the Period of Performance will be amended to end upon the effective date of termination. PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 49549 If a renewal award is issued, a distinct Period of Performance will begin. Property Standards § 200.310 Insurance coverage. The non-Federal entity must, at a minimum, provide the equivalent insurance coverage for real property and equipment acquired or improved with Federal funds as provided to property owned by the non-Federal entity. Federally-owned property need not be insured unless required by the terms and conditions of the Federal award. § 200.311 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. (b) Use. Except as otherwise provided by Federal statutes or by the Federal awarding agency, real property will be used for the originally authorized purpose as long as needed for that purpose, during which time the nonFederal entity must not dispose of or encumber its title or other interests. (c) Disposition. When real property is no longer needed for the originally authorized purpose, the non-Federal entity must obtain disposition instructions from the Federal awarding agency or pass-through entity. The instructions must provide for one of the following alternatives: (1) Retain title after compensating the Federal awarding agency. The amount paid to the Federal awarding agency will be computed by applying the Federal awarding agency’s percentage of participation in the cost of the original purchase (and costs of any improvements) to the fair market value of the property. However, in those situations where the non-Federal entity is disposing of real property acquired or improved with a Federal award and acquiring replacement real property under the same Federal award, the net proceeds from the disposition may be used as an offset to the cost of the replacement property. (2) Sell the property and compensate the Federal awarding agency. The amount due to the Federal awarding agency will be calculated by applying the Federal awarding agency’s percentage of participation in the cost of the original purchase (and cost of any improvements) to the proceeds of the sale after deduction of any actual and reasonable selling and fixing-up expenses. If the Federal award has not been closed out, the net proceeds from sale may be offset against the original cost of the property. When the non- E:\FR\FM\13AUR3.SGM 13AUR3 49550 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Federal entity is directed to sell property, sales procedures must be followed that provide for competition to the extent practicable and result in the highest possible return. (3) Transfer title to the Federal awarding agency or to a third party designated/approved by the Federal awarding agency. The non-Federal entity is entitled to be paid an amount calculated by applying the non-Federal entity’s percentage of participation in the purchase of the real property (and cost of any improvements) to the current fair market value of the property. § 200.312 property. Federally-owned and exempt (a) Title to federally-owned property remains vested in the Federal Government. The non-Federal entity must submit annually an inventory listing of federally-owned property in its custody to the Federal awarding agency. Upon completion of the Federal award or when the property is no longer needed, the non-Federal entity must report the property to the Federal awarding agency for further Federal agency utilization. (b) If the Federal awarding agency has no further need for the property, it must declare the property excess and report it for disposal to the appropriate Federal disposal authority, unless the Federal awarding agency has statutory authority to dispose of the property by alternative methods (e.g., the authority provided by the Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to donate research equipment to educational and nonprofit organizations in accordance with Executive Order 12999, ‘‘Educational Technology: Ensuring Opportunity for All Children in the Next Century.’’). The Federal awarding agency must issue appropriate instructions to the nonFederal entity. (c) Exempt property means property acquired under a Federal award where the Federal awarding agency has chosen to vest title to the property to the nonFederal entity without further responsibility to the Federal Government, based upon the explicit terms and conditions of the Federal award. The Federal awarding agency may exercise this option when statutory authority exists. Absent statutory authority and specific terms and conditions of the Federal award, title to exempt property acquired under the Federal award remains with the Federal Government. § 200.313 Equipment. See also § 200.439. (a) Title. Subject to the requirements and conditions set forth in this section, VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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: (1) Use the equipment for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. (2) Not encumber the property without approval of the Federal awarding agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Other non-Federal entities must follow paragraphs (c) through (e) of this section. (c) Use. (1) Equipment must be used by the non-Federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award, and the non-Federal entity must not encumber the property without prior approval of the 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: (i) Activities under a Federal award from the Federal awarding agency which funded the original program or project, then (ii) Activities under Federal awards from other Federal awarding agencies. This includes consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the non-Federal entity must also make equipment available for use on other projects or programs currently or previously supported by the Federal Government, provided that such use will not interfere with the work on the projects or program for which it was originally acquired. First preference for other use must be given to other programs or projects supported by Federal awarding agency that financed the equipment and PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 second preference must be given to programs or projects under Federal awards from other Federal awarding agencies. Use for non-federally-funded programs or projects is also permissible. User fees should be considered if appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the non-Federal entity must not use equipment acquired with the Federal award to provide services for a fee that is less than private companies charge for equivalent services unless specifically authorized by Federal statute for as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the non-Federal entity may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property. (d) Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. (e) Disposition. When original or replacement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Federal statutes, regulations, or Federal awarding agency disposition instructions, the non-Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal awarding agency disposition instructions: (1) Items of equipment with a current per unit fair market value of $5,000 or less may be retained, sold or otherwise disposed of with no further responsibility to the Federal awarding agency. (2) Except as provided in § 200.312(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. The Federal awarding agency is entitled to an amount calculated by multiplying the current market value or proceeds from sale by the Federal awarding agency’s percentage of participation in the cost of the original purchase. If the equipment is sold, the Federal awarding agency may permit the non-Federal entity to deduct and retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for its selling and handling expenses. (3) The non-Federal entity may transfer title to the property to the Federal Government or to an eligible third party provided that, in such cases, the non-Federal entity must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a non-Federal entity fails to take appropriate disposition actions, the Federal awarding agency may direct the nonFederal entity to take disposition actions. § 200.314 Supplies. See also § 200.453. (a) Title to supplies will vest in the non-Federal entity upon acquisition. If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other Federal award, the non-Federal entity must retain the supplies for use on other activities or sell them, but must, in either case, compensate the Federal Government for its share. The amount of compensation must be computed in the same manner as for equipment. See § 200.313 (e)(2) for the calculation methodology. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (b) As long as the Federal Government retains an interest in the supplies, the non-Federal entity must not use supplies acquired under a Federal award to provide services to other organizations for a fee that is less than private companies charge for equivalent services, unless specifically authorized by Federal statute. § 200.315 Intangible property. (a) Title to intangible property (see definition for Intangible property in § 200.1) acquired under a Federal award vests upon acquisition in the nonFederal 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 § 200.313(e). (b) The non-Federal entity may copyright any work that is subject to copyright and was developed, or for which ownership was acquired, under a Federal award. The Federal awarding agency reserves a royalty-free, nonexclusive and irrevocable right to reproduce, publish, or otherwise use the work for Federal purposes, and to authorize others to do so. (c) The non-Federal entity is subject to applicable regulations governing patents and inventions, including governmentwide regulations issued by the Department of Commerce at 37 CFR part 401, ‘‘Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Awards, Contracts and Cooperative Agreements.’’ (d) The Federal Government has the right to: (1) Obtain, reproduce, publish, or otherwise use the data produced under a Federal award; and (2) Authorize others to receive, reproduce, publish, or otherwise use such data for Federal purposes. (e)(1) In response to a Freedom of Information Act (FOIA) request for research data relating to published research findings produced under a Federal award that were used by the Federal Government in developing an agency action that has the force and effect of law, the Federal awarding agency must request, and the nonFederal entity must provide, within a reasonable time, the research data so that they can be made available to the public through the procedures established under the FOIA. If the Federal awarding agency obtains the research data solely in response to a PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 49551 FOIA request, the Federal awarding agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the research data. This fee should reflect costs incurred by the Federal agency and the non-Federal entity. This fee is in addition to any fees the Federal awarding agency may assess under the FOIA (5 U.S.C. 552(a)(4)(A)). (2) Published research findings means when: (i) Research findings are published in a peer-reviewed scientific or technical journal; or (ii) A Federal agency publicly and officially cites the research findings in support of an agency action that has the force and effect of law. ‘‘Used by the Federal Government in developing an agency action that has the force and effect of law’’ is defined as when an agency publicly and officially cites the research findings in support of an agency action that has the force and effect of law. (3) Research data means the recorded factual material commonly accepted in the scientific community as necessary to validate research findings, but not any of the following: Preliminary analyses, drafts of scientific papers, plans for future research, peer reviews, or communications with colleagues. This ‘‘recorded’’ material excludes physical objects (e.g., laboratory samples). Research data also do not include: (i) Trade secrets, commercial information, materials necessary to be held confidential by a researcher until they are published, or similar information which is protected under law; and (ii) Personnel and medical information and similar information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, such as information that could be used to identify a particular person in a research study. § 200.316 Property trust relationship. Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The Federal awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property. E:\FR\FM\13AUR3.SGM 13AUR3 49552 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (2) If the non-Federal entity has a parent, affiliate, or subsidiary § 200.317 Procurements by states. organization that is not a State, local When procuring property and services government, or Indian tribe, the nonunder a Federal award, a State must Federal entity must also maintain follow the same policies and procedures written standards of conduct covering it uses for procurements from its nonorganizational conflicts of interest. Federal funds. The State will comply Organizational conflicts of interest with §§ 200.321, 200.322, and 200.323 means that because of relationships and ensure that every purchase order or with a parent company, affiliate, or other contract includes any clauses subsidiary organization, the non-Federal required by § 200.327. All other nonentity is unable or appears to be unable Federal entities, including subrecipients to be impartial in conducting a of a State, must follow the procurement procurement action involving a related standards in §§ 200.318 through organization. 200.327. (d) The non-Federal entity’s procedures must avoid acquisition of § 200.318 General procurement standards. unnecessary or duplicative items. (a) The non-Federal entity must have Consideration should be given to and use documented procurement consolidating or breaking out procedures, consistent with State, local, procurements to obtain a more and tribal laws and regulations and the economical purchase. Where standards of this section, for the appropriate, an analysis will be made of acquisition of property or services lease versus purchase alternatives, and required under a Federal award or any other appropriate analysis to subaward. The non-Federal entity’s determine the most economical documented procurement procedures approach. must conform to the procurement (e) To foster greater economy and standards identified in §§ 200.317 efficiency, and in accordance with through 200.327. efforts to promote cost-effective use of (b) Non-Federal entities must shared services across the Federal maintain oversight to ensure that Government, the non-Federal entity is contractors perform in accordance with encouraged to enter into state and local the terms, conditions, and specifications intergovernmental agreements or interof their contracts or purchase orders. entity agreements where appropriate for (c)(1) The non-Federal entity must procurement or use of common or maintain written standards of conduct shared goods and services. Competition covering conflicts of interest and requirements will be met with applied governing the actions of its employees to documented procurement actions engaged in the selection, award and using strategic sourcing, shared services, administration of contracts. No and other similar procurement employee, officer, or agent may arrangements. participate in the selection, award, or (f) The non-Federal entity is administration of a contract supported encouraged to use Federal excess and by a Federal award if he or she has a real surplus property in lieu of purchasing or apparent conflict of interest. Such a new equipment and property whenever conflict of interest would arise when the such use is feasible and reduces project employee, officer, or agent, any member costs. of his or her immediate family, his or (g) The non-Federal entity is her partner, or an organization which encouraged to use value engineering employs or is about to employ any of clauses in contracts for construction the parties indicated herein, has a projects of sufficient size to offer financial or other interest in or a reasonable opportunities for cost tangible personal benefit from a firm reductions. Value engineering is a considered for a contract. The officers, systematic and creative analysis of each employees, and agents of the noncontract item or task to ensure that its Federal entity may neither solicit nor essential function is provided at the accept gratuities, favors, or anything of overall lower cost. (h) The non-Federal entity must monetary value from contractors or award contracts only to responsible parties to subcontracts. However, noncontractors possessing the ability to Federal entities may set standards for situations in which the financial interest perform successfully under the terms and conditions of a proposed is not substantial or the gift is an procurement. Consideration will be unsolicited item of nominal value. The given to such matters as contractor standards of conduct must provide for integrity, compliance with public disciplinary actions to be applied for violations of such standards by officers, policy, record of past performance, and employees, or agents of the non-Federal financial and technical resources. See also § 200.214. entity. Procurement Standards VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. (j)(1) The non-Federal entity may use a time-and-materials type contract only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. Timeand-materials type contract means a contract whose cost to a non-Federal entity is the sum of: (i) The actual cost of materials; and (ii) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses, and profit. (2) Since this formula generates an open-ended contract price, a time-andmaterials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its own risk. Further, the non-Federal entity awarding such a contract must assert a high degree of oversight in order to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls. (k) The non-Federal entity alone must be responsible, in accordance with good administrative practice and sound business judgment, for the settlement of all contractual and administrative issues arising out of procurements. These issues include, but are not limited to, source evaluation, protests, disputes, and claims. These standards do not relieve the non-Federal entity of any contractual responsibilities under its contracts. The Federal awarding agency will not substitute its judgment for that of the non-Federal entity unless the matter is primarily a Federal concern. Violations of law will be referred to the local, state, or Federal authority having proper jurisdiction. § 200.319 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 § 200.320. (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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (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 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 § 200.320(c). § 200.320 followed. Methods of procurement to be The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-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 (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, 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 informal methods used for procurement of property or services at or below the SAT include: (1) Micro-purchases—(i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micropurchase in § 200.1). To the maximum extent practicable, the non-Federal entity should distribute micropurchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micropurchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micro-purchases if procedures are documented and approved by the non-Federal entity. (iii) Micro-purchase thresholds. The non-Federal entity is responsible for determining and documenting an PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 49553 appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. The micropurchase threshold used by the nonFederal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. Non-Federal entities may establish a threshold higher than the Federal threshold established in the Federal Acquisition Regulations (FAR) in accordance with paragraphs (a)(1)(iv) and (v) of this section. (iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold higher than the micropurchase threshold identified in the FAR in accordance with the requirements of this section. The nonFederal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the Federal awarding agency and auditors in accordance with § 200.334. The selfcertification must include a justification, clear identification of the threshold, and supporting documentation of any of the following: (A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit; (B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or, (C) For public institutions, a higher threshold consistent with State law. (v) Non-Federal entity increase to the micro-purchase threshold over $50,000. Micro-purchase thresholds higher than $50,000 must be approved by the cognizant agency for indirect costs. The non-federal entity must submit a request with the requirements included in paragraph (a)(1)(iv) of this section. The increased threshold is valid until there is a change in status in which the justification was approved. (2) Small purchases—(i) Small purchase procedures. 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 as determined appropriate by the non-Federal entity. (ii) Simplified acquisition thresholds. 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, a lower simplified E:\FR\FM\13AUR3.SGM 13AUR3 49554 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations acquisition threshold used by the nonFederal 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 SAT, or a lower 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 noncompetitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. 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. (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 qualified sources, 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; VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (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; (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. (c) 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: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micropurchase threshold (see paragraph (a)(1) of this section); (2) The item is available only from a single source; PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) 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 (5) After solicitation of a number of sources, competition is determined inadequate. § 200.321 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms. (a) The non-Federal entity must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible. (b) Affirmative steps must include: (1) Placing qualified small and minority businesses and women’s business enterprises on solicitation lists; (2) Assuring that small and minority businesses, and women’s business enterprises are solicited whenever they are potential sources; (3) Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority businesses, and women’s business enterprises; (4) Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses, and women’s business enterprises; (5) Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and (6) Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed in paragraphs (b)(1) through (5) of this section. § 200.322 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). The requirements of this section must be included in all subawards including all contracts and purchase orders for work or products under this award. (b) For purposes of this section: (1) ‘‘Produced in the United States’’ means, for iron and steel products, that E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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. § 200.323 Procurement of recovered materials. A non-Federal entity that is a state agency or agency of a political subdivision of a state and its contractors must comply with section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act. The requirements of Section 6002 include procuring only items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR part 247 that contain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the value of the quantity acquired during the preceding fiscal year exceeded $10,000; procuring solid waste management services in a manner that maximizes energy and resource recovery; and establishing an affirmative procurement program for procurement of recovered materials identified in the EPA guidelines. § 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. (b) The non-Federal entity must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed. To establish a fair and reasonable profit, consideration must be given to the complexity of the work to be performed, the risk borne by the contractor, the contractor’s investment, the amount of subcontracting, the quality of its record of past performance, and industry profit rates in the surrounding geographical area for similar work. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (c) Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent that costs incurred or cost estimates included in negotiated prices would be allowable for the non-Federal entity under subpart E of this part. The nonFederal entity may reference its own cost principles that comply with the Federal cost principles. (d) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used. § 200.325 Federal awarding agency or pass-through entity review. (a) The non-Federal entity must make available, upon request of the Federal awarding agency or pass-through entity, technical specifications on proposed procurements where the Federal awarding agency or pass-through entity believes such review is needed to ensure that the item or service specified is the one being proposed for acquisition. This review generally will take place prior to the time the specification is incorporated into a solicitation document. However, if the non-Federal entity desires to have the review accomplished after a solicitation has been developed, the Federal awarding agency or pass-through entity may still review the specifications, with such review usually limited to the technical aspects of the proposed purchase. (b) The non-Federal entity must make available upon request, for the Federal awarding agency or pass-through entity pre-procurement review, procurement documents, such as requests for proposals or invitations for bids, or independent cost estimates, when: (1) The non-Federal entity’s procurement procedures or operation fails to comply with the procurement standards in this part; (2) The procurement is expected to exceed the Simplified Acquisition Threshold and is to be awarded without competition or only one bid or offer is received in response to a solicitation; (3) The procurement, which is expected to exceed the Simplified Acquisition Threshold, specifies a ‘‘brand name’’ product; (4) The proposed contract is more than the Simplified Acquisition Threshold and is to be awarded to other than the apparent low bidder under a sealed bid procurement; or (5) A proposed contract modification changes the scope of a contract or increases the contract amount by more than the Simplified Acquisition Threshold. PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 49555 (c) The non-Federal entity is exempt from the pre-procurement review in paragraph (b) of this section if the Federal awarding agency or passthrough entity determines that its procurement systems comply with the standards of this part. (1) The non-Federal entity may request that its procurement system be reviewed by the Federal awarding agency or pass-through entity to determine whether its system meets these standards in order for its system to be certified. Generally, these reviews must occur where there is continuous high-dollar funding, and third-party contracts are awarded on a regular basis; (2) The non-Federal entity may selfcertify its procurement system. Such self-certification must not limit the Federal awarding agency’s right to survey the system. Under a selfcertification procedure, the Federal awarding agency may rely on written assurances from the non-Federal entity that it is complying with these standards. The non-Federal entity must cite specific policies, procedures, regulations, or standards as being in compliance with these requirements and have its system available for review. § 200.326 Bonding requirements. For construction or facility improvement contracts or subcontracts exceeding the Simplified Acquisition Threshold, the Federal awarding agency or pass-through entity may accept the bonding policy and requirements of the non-Federal entity provided that the Federal awarding agency or passthrough entity has made a determination that the Federal interest is adequately protected. If such a determination has not been made, the minimum requirements must be as follows: (a) A bid guarantee from each bidder equivalent to five percent of the bid price. The ‘‘bid guarantee’’ must consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of the bid, execute such contractual documents as may be required within the time specified. (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. (c) A payment bond on the part of the contractor for 100 percent of the contract price. A ‘‘payment bond’’ is one executed in connection with a contract to assure payment as required by law of E:\FR\FM\13AUR3.SGM 13AUR3 49556 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations all persons supplying labor and material in the execution of the work provided for in the contract. § 200.327 Contract provisions. The non-Federal entity’s contracts must contain the applicable provisions described in appendix II to this part. Performance and Financial Monitoring and Reporting § 200.328 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. This information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. § 200.329 Monitoring and reporting program performance. (a) Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the nonFederal entity must cover each program, function or activity. See also § 200.332. (b) Reporting program performance. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. As appropriate and in accordance with above mentioned information collections, the Federal awarding agency must require the recipient to relate financial data and accomplishments to performance goals and objectives of the Federal award. Also, in accordance with above mentioned common information collections, and when required by the terms and conditions of the Federal VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 award, recipients must provide cost information to demonstrate cost effective practices (e.g., through unit cost data). In some instances (e.g., discretionary research awards), this will be limited to the requirement to submit technical performance reports (to be evaluated in accordance with Federal awarding agency policy). 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. (c) Non-construction performance reports. The Federal awarding agency must use standard, governmentwide OMB-approved data elements for collection of performance information including performance progress reports, Research Performance Progress Reports. (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. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 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 submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report. (2) As appropriate in accordance with above mentioned performance reporting, these reports will contain, for each Federal award, brief information on the following unless other data elements are approved by OMB in the agency information collection request: PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 (i) A comparison of actual accomplishments to the objectives of the Federal award established for the period. Where the accomplishments of the Federal award can be quantified, a computation of the cost (for example, related to units of accomplishment) may be required if that information will be useful. Where performance trend data and analysis would be informative to the Federal awarding agency program, the Federal awarding agency should include this as a performance reporting requirement. (ii) The reasons why established goals were not met, if appropriate. (iii) Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs. (d) Construction performance reports. For the most part, onsite technical inspections and certified percentage of completion data are relied on heavily by Federal awarding agencies and passthrough entities to monitor progress under Federal awards and subawards for construction. The Federal awarding agency may require additional performance reports only when considered necessary. (e) Significant developments. Events may occur between the scheduled performance reporting dates that have significant impact upon the supported activity. In such cases, the non-Federal entity must inform the Federal awarding agency or pass-through entity as soon as the following types of conditions become known: (1) Problems, delays, or adverse conditions which will materially impair the ability to meet the objective of the Federal award. This disclosure must include a statement of the action taken, or contemplated, and any assistance needed to resolve the situation. (2) Favorable developments which enable meeting time schedules and objectives sooner or at less cost than anticipated or producing more or different beneficial results than originally planned. (f) Site visits. The Federal awarding agency may make site visits as warranted by program needs. (g) Performance report requirement waiver. The Federal awarding agency may waive any performance report required by this part if not needed. § 200. 330 Reporting on real property. The Federal awarding agency or passthrough entity must require a nonFederal entity to submit reports at least annually on the status of real property in which the Federal Government retains an interest, unless the Federal interest in the real property extends 15 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations years or longer. In those instances where the Federal interest attached is for a period of 15 years or more, the Federal awarding agency or pass-through entity, at its option, may require the nonFederal entity to report at various multiyear frequencies (e.g., every two years or every three years, not to exceed a fiveyear reporting period; or a Federal awarding agency or pass-through entity may require annual reporting for the first three years of a Federal award and thereafter require reporting every five years). Subrecipient Monitoring and Management § 200.331 Subrecipient and contractor determinations. The non-Federal entity may concurrently receive Federal awards as a recipient, a subrecipient, and a contractor, depending on the substance of its agreements with Federal awarding agencies and pass-through entities. Therefore, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. The Federal awarding agency may supply and require recipients to comply with additional guidance to support these determinations provided such guidance does not conflict with this section. (a) Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See definition for Subaward in § 200.1 of this part. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the nonFederal entity: (1) Determines who is eligible to receive what Federal assistance; (2) Has its performance measured in relation to whether objectives of a Federal program were met; (3) Has responsibility for programmatic decision-making; (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and (5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity. (b) Contractors. A contract is for the purpose of obtaining goods and services for the non-Federal entity’s own use and creates a procurement relationship with VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 the contractor. See the definition of contract in § 200.1 of this part. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: (1) Provides the goods and services within normal business operations; (2) Provides similar goods or services to many different purchasers; (3) Normally operates in a competitive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons. (c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases, and the passthrough entity must use judgment in classifying each agreement as a subaward or a procurement contract. § 200.332 entities. Requirements for pass-through All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) 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; PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 49557 (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 Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings 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)(i) An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, the pass-through entity must determine the appropriate rate in collaboration with the subrecipient, which is either: (A) The negotiated indirect cost rate between the pass-through entity and the subrecipient; which can be based on a prior negotiated rate between a different PTE and the same subrecipient. If basing the rate on a previously negotiated rate, the pass-through entity is not required to collect information justifying this rate, but may elect to do so; (B) The de minimis indirect cost rate. (ii) The pass-through entity must not require use of a de minimis indirect cost rate if the subrecipient has a Federally approved rate. Subrecipients can elect to use the cost allocation method to account for indirect costs in accordance with § 200.405(d). (5) A requirement that the subrecipient permit the pass-through entity and auditors to have access to the subrecipient’s records and financial E:\FR\FM\13AUR3.SGM 13AUR3 49558 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 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. (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 written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single 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 responsible for resolving audit findings specifically related to the subaward and VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 not responsible for resolving crosscutting findings. 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 passthrough entity may rely on the subrecipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings in accordance with section § 300.513(a)(3)(vii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and awardspecific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (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. (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 that necessitate adjustments to the passthrough entity’s own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 of this part and in program regulations. § 200.333 Fixed amount subawards. With prior written approval from the Federal awarding agency, a passthrough entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in § 200.201. PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 Record Retention and Access § 200.334 records. Retention requirements for Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. The only exceptions are the following: (a) If any litigation, claim, or audit is started before the expiration of the 3year period, the records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken. (b) When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the retention period. (c) Records for real property and equipment acquired with Federal funds must be retained for 3 years after final disposition. (d) When records are transferred to or maintained by the Federal awarding agency or pass-through entity, the 3-year retention requirement is not applicable to the non-Federal entity. (e) Records for program income transactions after the period of performance. In some cases recipients must report program income after the period of performance. Where there is such a requirement, the retention period for the records pertaining to the earning of the program income starts from the end of the non-Federal entity’s fiscal year in which the program income is earned. (f) Indirect cost rate proposals and cost allocations plans. This paragraph applies to the following types of documents and their supporting records: Indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at which a particular group of costs is chargeable (such as computer usage chargeback rates or composite fringe benefit rates). (1) If submitted for negotiation. If the proposal, plan, or other computation is E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations required to be submitted to the Federal Government (or to the pass-through entity) to form the basis for negotiation of the rate, then the 3-year retention period for its supporting records starts from the date of such submission. (2) If not submitted for negotiation. If the proposal, plan, or other computation is not required to be submitted to the Federal Government (or to the passthrough entity) for negotiation purposes, then the 3-year retention period for the proposal, plan, or computation and its supporting records starts from the end of the fiscal year (or other accounting period) covered by the proposal, plan, or other computation. § 200.335 Requests for transfer of records. The Federal awarding agency must request transfer of certain records to its custody from the non-Federal entity when it determines that the records possess long-term retention value. However, in order to avoid duplicate recordkeeping, the Federal awarding agency may make arrangements for the non-Federal entity to retain any records that are continuously needed for joint use. § 200.336 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 Access to records. (a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the nonFederal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity’s personnel for the purpose of interview and discussion related to such documents. (b) Extraordinary and rare circumstances. Only under extraordinary and rare circumstances would such access include review of the true name of victims of a crime. Routine monitoring cannot be considered extraordinary and rare circumstances that would necessitate access to this information. When access to the true name of victims of a crime is necessary, appropriate steps to protect this sensitive information must be taken by both the non-Federal entity and the Federal awarding agency. Any such access, other than under a court order or subpoena pursuant to a bona fide confidential investigation, must be approved by the head of the Federal awarding agency or delegate. (c) Expiration of right of access. The rights of access in this section are not limited to the required retention period but last as long as the records are retained. Federal awarding agencies and pass-through entities must not impose any other access requirements upon non-Federal entities. § 200.338 records. Restrictions on public access to No Federal awarding agency may place restrictions on the non-Federal entity that limit public access to the records of the non-Federal entity pertinent to a Federal award, except for protected personally identifiable information (PII) or when the Federal awarding agency can demonstrate that such records will be kept confidential and would have been exempted from disclosure pursuant to the Freedom of Information Act (5 U.S.C. 552) or controlled unclassified information pursuant to Executive Order 13556 if the records had belonged to the Federal awarding agency. The Freedom of Information Act (5 U.S.C. 552) (FOIA) does not apply to those records that remain under a non-Federal entity’s control except as required under § 200.315. Unless required by Federal, state, local, and tribal statute, nonFederal entities are not required to permit public access to their records. The non-Federal entity’s records provided to a Federal agency generally PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 49559 will be subject to FOIA and applicable exemptions. Remedies for Noncompliance § 200.339 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. If the Federal awarding agency or passthrough entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or passthrough entity may take one or more of the following actions, as appropriate in the circumstances: (a) Temporarily withhold cash payments pending correction of the deficiency by the non-Federal entity or more severe enforcement action by the Federal awarding agency or passthrough entity. (b) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (c) Wholly or partly suspend or terminate the Federal award. (d) Initiate suspension or debarment proceedings as authorized under 2 CFR part 180 and Federal awarding agency regulations (or in the case of a passthrough entity, recommend such a proceeding be initiated by a Federal awarding agency). (e) Withhold further Federal awards for the project or program. (f) Take other remedies that may be legally available. § 200.340 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 E:\FR\FM\13AUR3.SGM 13AUR3 49560 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 should clearly and unambiguously specify termination provisions applicable to each Federal award, in applicable regulations or in the 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 (c) 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 § 200.342; 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 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 §§ 200.344 and 200.345. § 200.341 Notification of termination requirement. (a) The Federal agency or passthrough entity must provide to the nonFederal entity a notice of termination. (b) If the Federal award is terminated for the non-Federal entity’s 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— (1) The termination decision will be reported to the OMB-designated integrity and performance system accessible through SAM (currently FAPIIS); (2) The information will be available in the OMB-designated integrity and performance system for a period of five years from the date of the termination, then archived; (3) Federal awarding agencies that consider 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 Federal share of the Federal award is expected to exceed the simplified acquisition threshold over the period of performance; (4) The non-Federal entity may comment on any information the OMBdesignated integrity and performance system contains about the non-Federal entity for future consideration by Federal awarding agencies. The nonFederal entity may submit comments to the awardee integrity and performance portal accessible through SAM (currently (CPARS). (5) Federal awarding agencies will consider non-Federal entity comments when determining whether the nonFederal entity is qualified for a future Federal award. PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 (c) Upon termination of a Federal award, the Federal awarding agency must provide the information required under FFATA to the Federal website established to fulfill the requirements of FFATA, and update or notify any other relevant governmentwide systems or entities of any indications of poor performance as required by 41 U.S.C. 417b and 31 U.S.C. 3321 and implementing guidance at 2 CFR part 77 (forthcoming at time of publication). See also the requirements for Suspension and Debarment at 2 CFR part 180. § 200.342 Opportunities to object, hearings, and appeals. Upon taking any remedy for noncompliance, the Federal awarding agency must provide the non-Federal entity an opportunity to object and provide information and documentation challenging the suspension or termination action, in accordance with written processes and procedures published by the Federal awarding agency. The Federal awarding agency or pass-through entity must comply with any requirements for hearings, appeals or other administrative proceedings to which the non-Federal entity is entitled under any statute or regulation applicable to the action involved. § 200.343 Effects of suspension and termination. Costs to the non-Federal entity resulting from financial obligations incurred by the non-Federal entity during a suspension or after termination of a Federal award or subaward are not allowable unless the Federal awarding agency or pass-through entity expressly authorizes them in the notice of suspension or termination or subsequently. However, costs during suspension or after termination are allowable if: (a) The costs result from financial obligations which were properly incurred by the non-Federal entity before the effective date of suspension or termination, are not in anticipation of it; and (b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect. Closeout § 200.344 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 recipient 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 passthrough entity, no later than 90 calendar days (or an earlier date as agreed upon by the pass-through entity and subrecipient) 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 § 200.346, 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 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 §§ 200.310 through 200.316 and 200.330. (g) When a recipient or subrecipient completes all closeout requirements, the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 close out with the information available within one year of the period of performance end date. (i) If the non-Federal entity does not submit all reports in accordance with this section within one year of the period of performance end date, the Federal awarding agency must report the non-Federal entity’s material failure to comply with the terms and conditions of the award with the OMBdesignated integrity and performance system (currently FAPIIS). Federal awarding agencies may also pursue other enforcement actions per § 200.339. Post-Closeout Adjustments and Continuing Responsibilities § 200.345 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 such as resolving indirect cost payments and making final payments. (4) Audit requirements in subpart F of this part. (5) Property management and disposition requirements in §§ 200.310 through 200.316 of this subpart. (6) Records retention as required in §§ 200.334 through 200.337 of this subpart. (b) After closeout of the Federal award, a relationship created under the PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 49561 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. Collection of Amounts Due § 200.346 Collection of amounts due. (a) Any funds paid to the non-Federal entity in excess of the amount to which the non-Federal entity is finally determined to be entitled under the terms of the Federal award constitute a debt to the Federal Government. If not paid within 90 calendar days after demand, the Federal awarding agency may reduce the debt by: (1) Making an administrative offset against other requests for reimbursements; (2) Withholding advance payments otherwise due to the non-Federal entity; or (3) Other action permitted by Federal statute. (b) Except where otherwise provided by statutes or regulations, the Federal awarding agency will charge interest on an overdue debt in accordance with the Federal Claims Collection Standards (31 CFR parts 900 through 999). The date from which interest is computed is not extended by litigation or the filing of any form of appeal. Subpart E—Cost Principles 46. Amend § 200.400 by revising paragraph (e) and (g) to read as follows: ■ § 200.400 Policy guide. * * * * * (e) In reviewing, negotiating and approving cost allocation plans or indirect cost proposals, the cognizant agency for indirect costs should generally assure that the non-Federal entity is applying these cost accounting principles on a consistent basis during their review and negotiation of indirect cost proposals. Where wide variations exist in the treatment of a given cost item by the non-Federal entity, the reasonableness and equity of such treatments should be fully considered. See the definition of indirect (facilities & administrative (F&A)) costs in § 200.1 of this part. * * * * * (g) The non-Federal entity may not earn or keep any profit resulting from Federal financial assistance, unless E:\FR\FM\13AUR3.SGM 13AUR3 49562 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations explicitly authorized by the terms and conditions of the Federal award. See also § 200.307. ■ 48. Amend § 200.403 by revising paragraphs (f) and (g) and adding paragraph (h) to read as follows: 47. Amend § 200.401 by revising paragraphs (a)(3) and (4), (b), and (c) to read as follows: § 200.403 costs. ■ § 200.401 Application. (a) * * * (3) Fixed amount awards. See also § 200.1 Definitions and 200.201. (4) Federal awards to hospitals (see appendix IX to this part). * * * * * (b) Federal contract. Where a Federal contract awarded to a non-Federal entity is subject to the Cost Accounting Standards (CAS), it incorporates the applicable CAS clauses, Standards, and CAS administration requirements per the 48 CFR Chapter 99 and 48 CFR part 30 (FAR Part 30). CAS applies directly to the CAS-covered contract and the Cost Accounting Standards at 48 CFR parts 9904 or 9905 takes precedence over the cost principles in this subpart E with respect to the allocation of costs. When a contract with a non-Federal entity is subject to full CAS coverage, the allowability of certain costs under the cost principles will be affected by the allocation provisions of the Cost Accounting Standards (e.g., CAS 414— 48 CFR 9904.414, Cost of Money as an Element of the Cost of Facilities Capital, and CAS 417—48 CFR 9904.417, Cost of Money as an Element of the Cost of Capital Assets Under Construction), apply rather the allowability provisions of § 200.449. In complying with those requirements, the non-Federal entity’s application of cost accounting practices for estimating, accumulating, and reporting costs for other Federal awards and other cost objectives under the CAS-covered contract still must be consistent with its cost accounting practices for the CAS-covered contracts. In all cases, only one set of accounting records needs to be maintained for the allocation of costs by the non-Federal entity. (c) Exemptions. Some nonprofit organizations, because of their size and nature of operations, can be considered to be similar to for-profit entities for purpose of applicability of cost principles. Such nonprofit organizations must operate under Federal cost principles applicable to for-profit entities located at 48 CFR 31.2. A listing of these organizations is contained in appendix VIII to this part. Other organizations, as approved by the cognizant agency for indirect costs, may be added from time to time. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Factors affecting allowability of * * * * * (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. See also § 200.306(b). (g) Be adequately documented. See also §§ 200.300 through 200.309 of this part. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3). ■ 49. Amend § 200.405 by revising 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 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 §§ 200.310 through 200.316 and 200.439. * * * * * ■ 50. Amend § 200.406 by revising paragraph (b) to read as follows: § 200.406 Applicable credits. * * * * * (b) In some instances, the amounts received from the Federal Government to finance activities or service operations of the non-Federal entity should be treated as applicable credits. Specifically, the concept of netting such credit items (including any amounts used to meet cost sharing or matching requirements) must be recognized in determining the rates or amounts to be charged to the Federal award. (See §§ 200.436 and 200.468, for areas of PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 potential application in the matter of Federal financing of activities.) ■ 51. Amend § 200.407 by revising paragraphs (g) and (y) to read as follows: § 200.407 Prior written approval (prior approval). * * * * * (g) § 200.333 Fixed amount subawards; * * * * * (y) § 200.475 Travel costs. ■ 52. Revise § 200.409 to read as follows: § 200.409 Special considerations. In addition to the basic considerations regarding the allowability of costs highlighted in this subtitle, other subtitles in this part describe special considerations and requirements applicable to states, local governments, Indian tribes, and IHEs. In addition, certain provisions among the items of cost in this subpart are only applicable to certain types of non-Federal entities, as specified in the following sections: (a) Direct and Indirect (F&A) Costs (§§ 200.412–200.415) of this subpart; (b) Special Considerations for States, Local Governments and Indian Tribes (§§ 200.416 and 200.417) of this subpart; and (c) Special Considerations for Institutions of Higher Education (§§ 200.418 and 200.419) of this subpart. ■ 53. Revise § 200.410 to read as follows: § 200.410 Collection of unallowable costs. Payments made for costs determined to be unallowable by either the Federal awarding agency, cognizant agency for indirect costs, or pass-through entity, either as direct or indirect costs, must be refunded (including interest) to the Federal Government in accordance with instructions from the Federal agency that determined the costs are unallowable unless Federal statute or regulation directs otherwise. See also §§ 200.300 through 200.309 in subpart D of this part. ■ 54. Amend § 200.413 by revising paragraphs (a), (b), and (f) to read as follows: § 200.413 Direct costs. (a) General. Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a Federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy. Costs incurred for the same purpose in like circumstances must be treated consistently as either E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations direct or indirect (F&A) costs. See also § 200.405. (b) Application to Federal awards. Identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. 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. * * * * * (f) For nonprofit organizations, the costs of activities performed by the nonFederal entity primarily as a service to members, clients, or the general public when significant and necessary to the non-Federal entity’s mission must be treated as direct costs whether or not allowable, and be allocated an equitable share of indirect (F&A) costs. Some examples of these types of activities include: (1) Maintenance of membership rolls, subscriptions, publications, and related functions. See also § 200.454. (2) Providing services and information to members, legislative or administrative bodies, or the public. See also §§ 200.454 and 200.450. (3) Promotion, lobbying, and other forms of public relations. See also §§ 200.421 and 200.450. (4) Conferences except those held to conduct the general administration of the non-Federal entity. See also § 200.432. (5) Maintenance, protection, and investment of special funds not used in operation of the non-Federal entity. See also § 200.442. (6) Administration of group benefits on behalf of members or clients, including life and hospital insurance, annuity or retirement plans, and financial aid. See also § 200.431. ■ 55. Amend § 200.414 by revising paragraphs (a), (c) introductory text, (c)(3) and (4), (d), (f), and (g) and adding paragraph (h) to read as follows: § 200.414 Indirect (F&A) costs. (a) Facilities and administration classification. For major Institutions of Higher Education (IHE) and major VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 this part, 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) Federal Agency Acceptance of Negotiated Indirect Cost Rates. (See also § 200.306.) * * * * * (3) The Federal awarding agency must implement, and make publicly available, the policies, procedures and general decision-making criteria that their programs will follow to seek and justify deviations from negotiated rates. (4) As required under § 200.204, 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. (d) Pass-through entities are subject to the requirements in § 200.332(a)(4). * * * * * (f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity that does not have a current negotiated (including provisional) rate, except for those non-Federal entities described in appendix VII to this part, 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 PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 49563 required to justify the 10% de minimis indirect cost rate. As described in § 200.403, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both. If chosen, this methodology once elected must be used consistently for all Federal awards until such time as a non-Federal entity chooses to negotiate for a rate, which the non-Federal entity may apply to do at any time. (g) Any non-Federal entity that has a current federally-negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years. This extension will be subject to the review and approval of the cognizant agency for indirect costs. If an extension is granted the non-Federal entity may not request a rate review until the extension period ends. At the end of the 4-year extension, the non-Federal entity must re-apply to negotiate a rate. Subsequent one-time extensions (up to four years) are permitted if a renegotiation is completed between each extension request. (h) The federally negotiated indirect rate, distribution base, and rate type for a non-Federal entity (except for the Indian tribes or tribal organizations, as defined in the Indian Self Determination, Education and Assistance Act, 25 U.S.C. 450b(1)) must be available publicly on an OMBdesignated Federal website. ■ 56. Amend § 200.415 by revising paragraphs (b)(1) and (2), (c), and (d) to read as follows: § 200.415 Required certifications. * * * * * (b) * * * (1) A proposal to establish a cost allocation plan or an indirect (F&A) cost rate, whether submitted to a Federal cognizant agency for indirect costs or maintained on file by the non-Federal entity, must be certified by the nonFederal entity using the Certificate of Cost Allocation Plan or Certificate of Indirect Costs as set forth in appendices III through VII, and IX of this part. The certificate must be signed on behalf of the non-Federal entity by an individual at a level no lower than vice president or chief financial officer of the nonFederal entity that submits the proposal. (2) Unless the non-Federal entity has elected the option under § 200.414(f), the Federal Government may either disallow all indirect (F&A) costs or unilaterally establish such a plan or rate when the non-Federal entity fails to submit a certified proposal for establishing such a plan or rate in accordance with the requirements. Such E:\FR\FM\13AUR3.SGM 13AUR3 49564 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations a plan or rate may be based upon audited historical data or such other data that have been furnished to the cognizant agency for indirect costs and for which it can be demonstrated that all unallowable costs have been excluded. When a cost allocation plan or indirect cost rate is unilaterally established by the Federal Government because the non-Federal entity failed to submit a certified proposal, the plan or rate established will be set to ensure that potentially unallowable costs will not be reimbursed. (c) Certifications by nonprofit organizations as appropriate that they did not meet the definition of a major nonprofit organization as defined in § 200.414(a). (d) See also § 200.450 for another required certification. ■ 57. Revise § 200.417 to read as follows: § 200.417 Interagency service. The cost of services provided by one agency to another within the governmental unit may include allowable direct costs of the service plus a pro-rated share of indirect costs. A standard indirect cost allowance equal to ten percent of the direct salary and wage cost of providing the service (excluding overtime, shift premiums, and fringe benefits) may be used in lieu of determining the actual indirect costs of the service. These services do not include centralized services included in central service cost allocation plans as described in Appendix V to Part 200. ■ 58. Amend § 200.418 by revising paragraph (a) to read as follows: § 200.418 Costs incurred by states and local governments. * * * * * (a) The costs meet the requirements of § 200.402–411 of this subpart; * * * * * ■ 59. Amend § 200.419 by revising paragraphs (a), (b) introductory text, and (b)(1) and (2) to read as follows: § 200.419 Cost accounting standards and disclosure statement. (a) An IHE that receive an aggregate total $50 million or more in Federal awards and instruments subject to this subpart (as specified in § 200.101) in its most recently completed fiscal year must comply with the Cost Accounting Standards Board’s cost accounting standards located at 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506. CAScovered contracts and subcontracts awarded to the IHEs are subject to the broader range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part 30 (FAR Part 30). VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (b) Disclosure statement. An IHE that receives an aggregate total $50 million or more in Federal awards and instruments subject to this subpart (as specified in § 200.101) during its most recently completed fiscal year must disclose their cost accounting practices by filing a Disclosure Statement (DS–2), which is reproduced in Appendix III to Part 200. With the approval of the cognizant agency for indirect costs, an IHE may meet the DS–2 submission by submitting the DS–2 for each business unit that received $50 million or more in Federal awards and instruments. (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 indirect (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 CAScovered 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 part 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. * * * * * ■ 60. Revise § 200.420 to read as follows: § 200.420 Considerations for selected items of cost. This section provides principles to be applied in establishing the allowability of certain items involved in determining cost, in addition to the requirements of Subtitle II of this subpart. These principles apply whether or not a particular item of cost is properly treated as direct cost or indirect (F&A) cost. Failure to mention a particular item of cost is not intended to imply that it is either allowable or PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 unallowable; rather, determination as to allowability in each case should be based on the treatment provided for similar or related items of cost, and based on the principles described in §§ 200.402 through 200.411. In case of a discrepancy between the provisions of a specific Federal award and the provisions below, the Federal award governs. Criteria outlined in § 200.403 must be applied in determining allowability. See also § 200.102. ■ 61. Amend § 200.421 by revising paragraphs (b)(1) and (e)(2) to read as follows: § 200.421 Advertising and public relations. * * * * * (b) * * * (1) The recruitment of personnel required by the non-Federal entity for performance of a Federal award (See also § 200.463); * * * * * (e) * * * (2) Costs of meetings, conventions, convocations, or other events related to other activities of the entity (see also § 200.432), including: * * * * * ■ 62. Revise § 200.422 to read as follows: § 200.422 Advisory councils. Costs incurred by advisory councils or committees are unallowable unless authorized by statute, the Federal awarding agency or as an indirect cost where allocable to Federal awards. See § 200.444, applicable to States, local governments, and Indian tribes. ■ 63. Amend § 200.425 by revising paragraphs (a)(1) and (2) and (c) introductory text to read as follows: § 200.425 Audit services. * * * * * (a) * * * (1) Any costs when audits required by the Single Audit Act and subpart F of this part have not been conducted or have been conducted but not in accordance therewith; and (2) Any costs of auditing a nonFederal entity that is exempted from having an audit conducted under the Single Audit Act and subpart F of this part because its expenditures under Federal awards are less than $750,000 during the non-Federal entity’s fiscal year. * * * * * (c) Pass-through entities may charge Federal awards for the cost of agreedupon-procedures engagements to monitor subrecipients (in accordance with subpart D, §§ 200.331–333) who are exempted from the requirements of E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations the Single Audit Act and subpart F of this part. This cost is allowable only if the agreed-upon-procedures engagements are: * * * * * 64. Revise § 200.426 to read as follows: ■ § 200.426 Bad debts. Bad debts (debts which have been determined to be uncollectable), including losses (whether actual or estimated) arising from uncollectable accounts and other claims, are unallowable. Related collection costs, and related legal costs, arising from such debts after they have been determined to be uncollectable are also unallowable. See also § 200.428. 65. Revise § 200.428 to read as follows: ■ § 200.428 Collections of improper payments. The costs incurred by a non-Federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. Amounts collected may be used by the non-Federal entity in accordance with cash management standards set forth in § 200.305. 66. Revise § 200.429 to read as follows: ■ § 200.429 Commencement and convocation costs. For IHEs, costs incurred for commencements and convocations are unallowable, except as provided for in (B)(9) Student Administration and Services, in appendix III to this part, as activity costs. 67. Amend § 200.430 by revising paragraphs (a) introductory text and (a)(3), the paragraph (h) subject heading, and paragraphs (h)(3), (h)(8)(iv), and (h)(8)(viii)(C) to read as follows: ■ § 200.430 services. Compensation—personal (a) General. Compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award, including but not necessarily limited to wages and salaries. Compensation for personal services may also include fringe benefits which are addressed in § 200.431. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: * * * * * VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (3) Is determined and supported as provided in paragraph (i) of this section, when applicable. * * * * * (h) Institutions of Higher Education (IHEs). * * * (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. However, in unusual cases where consultation is across departmental lines or involves a separate or remote operation, and the work performed by the faculty member is in addition to his or her regular responsibilities, any charges for such work representing additional compensation above IBS are allowable provided that such consulting arrangements are specifically provided for in the Federal award or approved in writing by the Federal awarding agency. * * * * * (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy; * * * * * (viii) * * * (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. * * * * * ■ 68. Revise § 200.431 to read as follows: § 200.431 Compensation—fringe benefits. (a) General. 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, PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 49565 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) Fringe benefits. 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 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) Cost objectives. 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 § 200.447(d)(1) and (2). (1) Provisions for a reserve under a self-insurance program for unemployment compensation or E:\FR\FM\13AUR3.SGM 13AUR3 49566 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 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) Except for State and Local Governments, the cost assigned to each fiscal year should be determined in accordance with GAAP. (4) The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However, increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 calendar days after each quarter of the year to which such costs are assignable are unallowable. NonFederal entity may elect to follow the ‘‘Cost Accounting Standard for Composition and Measurement of Pension Costs’’ (48 CFR 9904.412). (5) Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 Security Act (ERISA) of 1974 (29 U.S.C. 1301–1461) are allowable. Late payment charges on such premiums are unallowable. Excise taxes on accumulated funding deficiencies and other penalties imposed under ERISA are unallowable. (6) Pension plan costs may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies of the non-Federal entity. (i) For pension plans financed on a pay-as-you-go method, allowable costs will be limited to those representing actual payments to retirees or their beneficiaries. (ii) Pension costs calculated using an actuarial cost-based method recognized by GAAP are allowable for a given fiscal year if they are funded for that year within six months after the end of that year. Costs funded after the six-month period (or a later period agreed to by the cognizant agency for indirect costs) are allowable in the year funded. The cognizant agency for indirect costs may agree to an extension of the six-month period if an appropriate adjustment is made to compensate for the timing of the charges to the Federal Government and related Federal reimbursement and the non-Federal entity’s contribution to the pension fund. Adjustments may be made by cash refund or other equitable procedures to compensate the Federal Government for the time value of Federal reimbursements in excess of contributions to the pension fund. (iii) Amounts funded by the nonFederal entity in excess of the actuarially determined amount for a fiscal year may be used as the nonFederal entity’s contribution in future periods. (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 PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 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 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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 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. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (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, for treatment of tuition remission provided to students. (k) Fringe benefit programs and other benefit costs. 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 through 200.411; (2) The costs are properly supported by approved cost allocation plans in accordance with applicable Federal cost accounting principles; and (3) The costs are not otherwise borne directly or indirectly by the Federal Government. ■ 69. Revise § 200.432 to read as follows: § 200.432 Conferences. A conference is defined as a meeting, retreat, seminar, symposium, workshop or event whose primary purpose is the dissemination of technical information beyond the non-Federal entity and is necessary and reasonable for successful performance under the Federal award. Allowable conference costs paid by the non-Federal entity as a sponsor or host of the conference may include rental of facilities, speakers’ fees, costs of meals and refreshments, local transportation, and other items incidental to such conferences unless further restricted by the terms and conditions of the Federal award. As needed, the costs of identifying, but not providing, locally PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 49567 available dependent-care resources are allowable. Conference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the Federal award. The Federal awarding agency may authorize exceptions where appropriate for programs including Indian tribes, children, and the elderly. See also §§ 200.438, 200.456, and 200.475. ■ 70. Amend § 200.433 by revising paragraphs (b) and (c) to read as follows: § 200.433 Contingency provisions. * * * * * (b) It is permissible for contingency amounts other than those excluded in paragraph (a) of this section to be explicitly included in budget estimates, to the extent they are necessary to improve the precision of those estimates. Amounts must be estimated using broadly-accepted cost estimating methodologies, specified in the budget documentation of the Federal award, and accepted by the Federal awarding agency. As such, contingency amounts are to be included in the Federal award. In order for actual costs incurred to be allowable, they must comply with the cost principles and other requirements in this part (see also §§ 200.300 and 200.403 of this part); be necessary and reasonable for proper and efficient accomplishment of project or program objectives, and be verifiable from the non-Federal entity’s records. (c) Payments made by the Federal awarding agency to the non-Federal entity’s ‘‘contingency reserve’’ or any similar payment made for events the occurrence of which cannot be foretold with certainty as to the time or intensity, or with an assurance of their happening, are unallowable, except as noted in §§ 200.431 and 200.447. ■ 71. Amend § 200.434 by revising paragraphs (b), (c), (f), and (g)(2) to read as follows: § 200.434 Contributions and donations. * * * * * (b) The value of services and property donated to the non-Federal entity may not be charged to the Federal award either as a direct or indirect (F&A) cost. The value of donated services and property may be used to meet cost sharing or matching requirements (see § 200.306). Depreciation on donated assets is permitted in accordance with § 200.436, as long as the donated property is not counted towards cost sharing or matching requirements. (c) Services donated or volunteered to the non-Federal entity may be furnished to a non-Federal entity by professional E:\FR\FM\13AUR3.SGM 13AUR3 49568 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations and technical personnel, consultants, and other skilled and unskilled labor. The value of these services may not be charged to the Federal award either as a direct or indirect cost. However, the value of donated services may be used to meet cost sharing or matching requirements in accordance with the provisions of § 200.306. * * * * * (f) Fair market value of donated services must be computed as described in § 200.306. * * * * * (g) * * * (2) The value of the donations may be used to meet cost sharing or matching share requirements under the conditions described in § 200.300 of this part. The value of the donations must be determined in accordance with § 200.300. Where donations are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. ■ 72. Amend § 200.436 by revising paragraphs (c) introductory text, (c)(3) and (4), and (e) to read as follows: § 200.439 Equipment and other capital expenditures. § 200.436 Costs resulting from non-Federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written approval of the Federal awarding agency. See also § 200.435. ■ 75. Revise § 200.442 to read as follows: 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 * * * * * (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. ■ 73. Amend § 200.439 by revising paragraphs (a) and (b)(3) and (7) to read as follows: VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (a) See § 200.1 for the definitions of capital expenditures, equipment, special purpose equipment, general purpose equipment, acquisition cost, and capital assets. * * * * * (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, 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. ■ 74. Revise § 200.441 to read as follows: § 200.441 Fines, penalties, damages and other settlements. § 200.442 Fund raising and investment management costs. (a) Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with prior written approval from the Federal awarding agency. Proposal costs are covered in § 200.460. (b) Costs of investment counsel and staff and similar expenses incurred to enhance income from investments are unallowable except when associated with investments covering pension, selfinsurance, or other funds which include Federal participation allowed by this part. (c) Costs related to the physical custody and control of monies and securities are allowable. (d) Both allowable and unallowable fund-raising and investment activities PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 must be allocated as an appropriate share of indirect costs under the conditions described in § 200.413. ■ 76. Amend § 200.443 by revising paragraphs (b)(1) and (3) and (d) to read as follows: § 200.443 Gains and losses on disposition of depreciable assets. * * * * * (b) * * * (1) The gain or loss is processed through a depreciation account and is reflected in the depreciation allowable under §§ 200.436 and 200.439. * * * * * (3) A loss results from the failure to maintain permissible insurance, except as otherwise provided in § 200.447. * * * * * (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 §§ 200.310 through 200.316 of this part. ■ 77. Amend § 200.444 by revising paragraphs (a) introductory text, (a)(4), and (b) to read as follows: § 200.444 General costs of government. (a) For states, local governments, and Indian Tribes, the general costs of government are unallowable (except as provided in § 200.475). Unallowable costs include: * * * * * (4) Costs of prosecutorial activities unless treated as a direct cost to a specific program if authorized by statute or regulation (however, this does not preclude the allowability of other legal activities of the Attorney General as described in § 200.435); and * * * * * (b) For Indian tribes and Councils of Governments (COGs) (see definition for Local government in § 200.1 of this part), 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. ■ 78. Amend § 200.447 by revising paragraph (a)(4) to read as follows: § 200.447 Insurance and indemnification. (a) * * * (4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibilities are allowable only to the extent that the insurance represents additional compensation (see § 200.431). The cost of such insurance when the non-Federal entity is E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations identified as the beneficiary is unallowable. * * * * * ■ 79. Amend § 200.448 by revising paragraph (a)(1)(iii) to read as follows: § 200.448 Intellectual property. (a) * * * (1) * * * (iii) General counseling services relating to patent and copyright matters, such as advice on patent and copyright laws, regulations, clauses, and employee intellectual property agreements (See also § 200.459). * * * * * ■ 80. Amend § 200.449 by revising paragraphs (b)(1) and (c)(4) to read as follows: § 200.449 Interest. * * * * * (b) Capital assets. (1) Capital assets is defined as noted in § 200.1 of this part. 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 other types of debt financing, in which case reimbursement must be limited to the amount of interest determined if leasing had been used. * * * * * ■ 81. Amend § 200.450 by revising paragraphs (a), (c)(2)(v) and (vi), (c)(2)(vii)(A) introductory text to read as follows: § 200.450 Lobbying. (a) The cost of certain influencing activities associated with obtaining grants, contracts, or cooperative agreements, or loans is an unallowable cost. Lobbying with respect to certain grants, contracts, cooperative agreements, and loans is governed by relevant statutes, including among others, the provisions of 31 U.S.C. 1352, as well as the common rule, ‘‘New Restrictions on Lobbying’’ published on February 26, 1990, including definitions, and the Office of Management and Budget ‘‘Governmentwide Guidance for New Restrictions on Lobbying’’ and notices published on December 20, 1989, June 15, 1990, January 15, 1992, and January 19, 1996. * * * * * VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (c) * * * (2) * * * (v) When a non-Federal entity seeks reimbursement for indirect (F&A) costs, total lobbying costs must be separately identified in the indirect (F&A) cost rate proposal, and thereafter treated as other unallowable activity costs in accordance with the procedures of § 200.413. (vi) The non-Federal entity must submit as part of its annual indirect (F&A) cost rate proposal a certification that the requirements and standards of this section have been complied with. (See also § 200.415.) (vii)(A) Time logs, calendars, or similar records are not required to be created for purposes of complying with the record keeping requirements in § 200.302 with respect to lobbying costs during any particular calendar month when: * * * * * ■ 82. Revise § 200.452 to read as follows: § 200.452 Maintenance and repair costs. Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair, or upkeep of buildings and equipment (including Federal property unless otherwise provided for) which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life must be treated as capital expenditures (see § 200.439). These costs are only allowable to the extent not paid through rental or other agreements. ■ 83. Amend § 200.454 by revising paragraph (e) to read as follows: § 200.454 Memberships, subscriptions, and professional activity costs. * * * * * (e) Costs of membership in organizations whose primary purpose is lobbying are unallowable. See also § 200.450. ■ 84. Revise § 200.456 to read as follows: § 200.456 Participant support costs. Participant support costs as defined in § 200.1 are allowable with the prior approval of the Federal awarding agency. ■ 85. Revise § 200.457 to read as follows: § 200.457 Plant and security costs. Necessary and reasonable expenses incurred for protection and security of PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 49569 facilities, personnel, and work products are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security activities; equipment; barriers; protective (non-military) gear, devices, and equipment; contractual security services; and consultants. Capital expenditures for plant security purposes are subject to § 200.439. ■ 86. Revise § 200.458 to read as follows: § 200.458 Pre-award costs. Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. 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 or pass-through entity. ■ 87. Amend § 200.459 by revising paragraph (a) to read as follows: § 200.459 Professional service costs. (a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 200.435. * * * * * ■ 88. 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 during 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. ■ 89. Amend § 200.463 by revising paragraph (c) to read as follows: E:\FR\FM\13AUR3.SGM 13AUR3 49570 § 200.463 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Recruiting costs. * * * * * (c) Where relocation costs incurred incident to recruitment of a new employee have been funded in whole or in part to a Federal award, and the newly hired employee resigns for reasons within the employee’s control within 12 months after hire, the nonFederal entity will be required to refund or credit the Federal share of such relocation costs to the Federal Government. See also § 200.464. * * * * * ■ 90. Amend § 200.464 by revising paragraph (c) to read as follows: § 200.464 Relocation costs of employees. * * * * * (c) Allowable relocation costs for new employees are limited to those described in paragraphs (b)(1) and (2) of this section. When relocation costs incurred incident to the recruitment of new employees have been charged to a Federal award and the employee resigns for reasons within the employee’s control within 12 months after hire, the non-Federal entity must refund or credit the Federal Government for its share of the cost. If dependents are not permitted at the location for any reason and the costs do not include costs of transporting household goods, the costs of travel to an overseas location must be considered travel costs in accordance with § 200.474 Travel costs, and not this relocations costs of employees (See also § 200.464). * * * * * ■ 91. Amend § 200.465 by adding paragraphs (d) through (f) to read as follows: § 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 § 200.449. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the nonFederal 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 lease asset (per GASB) or right of use operating lease asset (per FASB) for purposes of financial reporting in accordance with GAAP. (f) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable. §§ 200.471 through 200.475 [Redesignated as §§ 200.472 through 200.476] 95. Redesignate §§ 200.471 through 200.475 as §§ 200.472 through 200.476. ■ 96. Add new § 200.471 to read as follows: ■ § 200.471 Telecommunication costs and video surveillance costs 93. Revise § 200.467 to read as follows: (a) Costs incurred for telecommunications and video surveillance services or equipment such as phones, internet, video surveillance, cloud servers are allowable except for the following circumstances: (b) Obligating or expending covered telecommunications and video surveillance services or equipment or services as described in § 200.216 to: (1) Procure or obtain, extend or renew a contract to procure or obtain; (2) Enter into a contract (or extend or renew a contract) to procure; or (3) Obtain the equipment, services, or systems. ■ 97. Amend newly redesignated § 200.472 by revising paragraphs (c)(2), (e)(1)(i), and (f) to read as follows: § 200.467 § 200.472 92. Amend § 200.466 by revising paragraph (b) to read as follows: ■ § 200.466 costs. Scholarships and student aid * * * * * (b) Charges for tuition remission and other forms of compensation paid to students as, or in lieu of, salaries and wages must be subject to the reporting requirements in § 200.430, and must be treated as direct or indirect cost in accordance with the actual work being performed. Tuition remission may be charged on an average rate basis. See also § 200.431. ■ Selling and marketing costs. Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 200.421) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. 94. Amend § 200.468 by revising paragraph (a) and (b)(2) to read as follows: ■ § 200.468 Specialized service facilities. (a) The costs of services provided by highly complex or specialized facilities operated by the non-Federal entity, such as computing facilities, wind tunnels, and reactors are allowable, provided the charges for the services meet the conditions of either paragraph (b) or (c) of this section, and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under § 200.406. * * * * * (b) * * * (2) Is designed to recover only the aggregate costs of the services. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/ under-applied costs of the previous period(s). * * * * * PO 00000 Frm 00066 Fmt 4701 Sfmt 4700 Termination costs. * * * * * (c) * * * (2) The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the Federal awarding agency (see also § 200.313 (d)), and * * * * * (e) * * * (1) * * * (i) The preparation and presentation to the Federal awarding agency of settlement claims and supporting data with respect to the terminated portion of the Federal award, unless the termination is for cause (see subpart D, including §§ 200.339–200.343); and * * * * * (f) Claims under subawards, including the allocable portion of claims which are common to the Federal award and to other work of the non-Federal entity, are generally allowable. An appropriate share of the non-Federal entity’s indirect costs may be allocated to the amount of settlements with contractors and/or subrecipients, provided that the amount allocated is otherwise consistent with the basic guidelines contained in § 200.414. The indirect costs so allocated must exclude the same and similar costs claimed directly or indirectly as settlement expenses. ■ 98. Amend newly redesignated § 200.475 by revising paragraphs (a) and (c)(2) to read as follows: E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations § 200.475 Travel costs. (a) General. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the non-Federal entity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the non-Federal entity’s non-federallyfunded activities and in accordance with non-Federal entity’s written travel reimbursement policies. Notwithstanding the provisions of § 200.444, travel costs of officials covered by that section are allowable with the prior written approval of the Federal awarding agency or passthrough entity when they are specifically related to the Federal award. * * * * * (c) * * * (2) Travel costs for dependents are unallowable, except for travel of duration of six months or more with prior approval of the Federal awarding agency. See also § 200.432. * * * * * ■ 99. Revise newly redesignated § 200.476 to read as follows: § 200.476 Trustees. Travel and subsistence costs of trustees (or directors) at IHEs and nonprofit organizations are allowable. See also § 200.475. Subpart F—Audit Requirements 100. Amend § 200.501 by revising paragraphs (b), (c), (d), (f), and (h) to read as follows: ■ § 200.501 Audit requirements. * * * * * (b) Single audit. A non-Federal entity that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 200.514 except when it elects to have a programspecific audit conducted in accordance with paragraph (c) of this section. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal program (excluding R&D) and the Federal program’s statutes, regulations, or the terms and conditions of the Federal award do not require a financial statement audit of the auditee, the auditee may elect to have a program- VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 specific audit conducted in accordance with § 200.507. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in advance a program-specific audit. (d) Exemption when Federal awards expended are less than $750,000. A non-Federal entity that expends less than $750,000 during the non-Federal entity’s fiscal year in Federal awards is exempt from Federal audit requirements for that year, except as noted in § 200.503, but records must be available for review or audit by appropriate officials of the Federal agency, passthrough entity, and Government Accountability Office (GAO). * * * * * (f) Subrecipients and contractors. An auditee may simultaneously be a recipient, a subrecipient, and a contractor. Federal awards expended as a recipient or a subrecipient are subject to audit under this part. The payments received for goods or services provided as a contractor are not Federal awards. Section § 200.331 sets forth the considerations in determining whether payments constitute a Federal award or a payment for goods or services provided as a contractor. * * * * * (h) For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass-through entity is responsible for establishing requirements, as necessary, to ensure compliance by for-profit subrecipients. The agreement with the for-profit subrecipient must describe applicable compliance requirements and the forprofit subrecipient’s compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring during the agreement, and post-award audits. See also § 200.332. ■ 101. Amend § 200.503 by revising paragraph (e) to read as follows: § 200.503 Relation to other audit requirements. * * * * * (e) Request for a program to be audited as a major program. A Federal awarding agency may request that an auditee have a particular Federal program audited as a major program in lieu of the Federal awarding agency conducting or arranging for the additional audits. To allow for planning, such requests should be made at least PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 49571 180 calendar days prior to the end of the fiscal year to be audited. The auditee, after consultation with its auditor, should promptly respond to such a request by informing the Federal awarding agency whether the program would otherwise be audited as a major program using the risk-based audit approach described in § 200.518 and, if not, the estimated incremental cost. The Federal awarding agency must then promptly confirm to the auditee whether it wants the program audited as a major program. If the program is to be audited as a major program based upon this Federal awarding agency request, and the Federal awarding agency agrees to pay the full incremental costs, then the auditee must have the program audited as a major program. A passthrough entity may use the provisions of this paragraph for a subrecipient. ■ 102. Revise § 200.505 to read as follows: § 200.505 Sanctions. In cases of continued inability or unwillingness to have an audit conducted in accordance with this part, Federal agencies and pass-through entities must take appropriate action as provided in § 200.339. ■ 103. Revise § 200.506 to read as follows: § 200.506 Audit costs. See § 200.425. ■ 104. Amend § 200.507 by revising paragraphs (a), (b)(2), (b)(3)(ii) through (v), (b)(4)(iv), (c)(2) and (3), and (d)(8) to read as follows: § 200.507 Program-specific audits. (a) Program-specific audit guide available. In some cases, a programspecific audit guide will be available to provide specific guidance to the auditor with respect to internal controls, compliance requirements, suggested audit procedures, and audit reporting requirements. A listing of current program-specific audit guides can be found in the compliance supplement, Part 8, Appendix VI, Program-Specific Audit Guides, which includes a website where a copy of the guide can be obtained. When a current programspecific audit guide is available, the auditor must follow GAGAS and the guide when performing a programspecific audit. * * * * * (b) * * * (2) The auditee must prepare the financial statement(s) for the Federal program that includes, at a minimum, a schedule of expenditures of Federal awards for the program and notes that E:\FR\FM\13AUR3.SGM 13AUR3 49572 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations describe the significant accounting policies used in preparing the schedule, a summary schedule of prior audit findings consistent with the requirements of § 200.511(b), and a corrective action plan consistent with the requirements of § 200.511(c). (3) * * * (ii) Obtain an understanding of internal controls and perform tests of internal controls over the Federal program consistent with the requirements of § 200.514(c) for a major program; (iii) Perform procedures to determine whether the auditee has complied with Federal statutes, regulations, and the terms and conditions of Federal awards that could have a direct and material effect on the Federal program consistent with the requirements of § 200.514(d) for a major program; (iv) Follow up on prior audit findings, perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with the requirements of § 200.511, and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding; and (v) Report any audit findings consistent with the requirements of § 200.516. (4) * * * (iv) A schedule of findings and questioned costs for the Federal program that includes a summary of the auditor’s results relative to the Federal program in a format consistent with § 200.515(d)(1) and findings and questioned costs consistent with the requirements of § 200.515(d)(3). (c) * * * (2) When a program-specific audit guide is available, the auditee must electronically submit to the FAC the data collection form prepared in accordance with § 200.512(b), as applicable to a program-specific audit, and the reporting required by the program-specific audit guide. (3) When a program-specific audit guide is not available, the reporting package for a program-specific audit must consist of the financial statement(s) of the Federal program, a summary schedule of prior audit findings, and a corrective action plan as described in paragraph (b)(2) of this section, and the auditor’s report(s) described in paragraph (b)(4) of this section. The data collection form prepared in accordance with § 200.512(b), as applicable to a programspecific audit, and one copy of this VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 reporting package must be electronically submitted to the FAC. (d) * * * (8) 200.521 Management decision; and * * * * * ■ 105. Amend § 200.508 by revising paragraphs (a), (b), and (c) to read as follows: § 200.508 Auditee responsibilities. * * * * * (a) Procure or otherwise arrange for the audit required by this part in accordance with § 200.509, and ensure it is properly performed and submitted when due in accordance with § 200.512. (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with § 200.510. (c) Promptly follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with § 200.511(b) and (c), respectively. * * * * * ■ 106. 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 §§ 200.317 through 200.326 of subpart D of this part or the FAR (48 CFR part 42), as applicable. When procuring audit services, the objective is to obtain highquality audits. In requesting proposals for audit services, the objectives and scope of the audit must be made clear and the non-Federal entity must request a copy of the audit organization’s peer review report which the auditor is required to provide under GAGAS. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant experience, availability of staff with professional qualifications and technical abilities, the results of peer and external quality control reviews, and price. Whenever possible, the auditee must make positive efforts to utilize small businesses, minority-owned firms, and women’s business enterprises, in procuring audit services as stated in § 200.321, or the FAR (48 CFR part 42), as applicable. * * * * * ■ 107. Amend § 200.510 by revising paragraphs (a), (b) introductory text, and (b)(3), (5), and (6) to read as follows: § 200.510 Financial statements. (a) Financial statements. The auditee must prepare financial statements that PO 00000 Frm 00068 Fmt 4701 Sfmt 4700 reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entitywide financial statements may also include departments, agencies, and other organizational units that have separate audits in accordance with § 200.514(a) and prepare separate financial statements. (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with § 200.502. While not required, the auditee may choose to provide information requested by Federal awarding agencies and passthrough entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: * * * * * (3) Provide total Federal awards expended for each individual Federal program and the Assistance Listings 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. * * * * * (5) For loan or loan guarantee programs described in § 200.502(b), identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. (6) Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the auditee elected to use the 10% de minimis cost rate as covered in § 200.414. ■ 108. Amend § 200.511 by revising paragraphs (a) and (c) to read as follows: § 200.511 Audit findings follow-up. (a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee must prepare a summary schedule of prior audit findings. The auditee must also prepare a corrective action plan for current year audit findings. The summary schedule E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations of prior audit findings and the corrective action plan must include the reference numbers the auditor assigns to audit findings under § 200.516(c). Since the summary schedule may include audit findings from multiple years, it must include the fiscal year in which the finding initially occurred. The corrective action plan and summary schedule of prior audit findings must include findings relating to the financial statements which are required to be reported in accordance with GAGAS. * * * * * (c) Corrective action plan. At the completion of the audit, the auditee must prepare, in a document separate from the auditor’s findings described in § 200.516, a corrective action plan to address each audit finding included in the current year auditor’s reports. The corrective action plan must provide the name(s) of the contact person(s) responsible for corrective action, the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan must include an explanation and specific reasons. ■ 109. Amend § 200.512 by revising paragraphs (b) introductory text, (b)(1), (c)(1) through (4), and (g) to read as follows: § 200.512 Report submission. * * * * * (b) Data collection. The FAC is the repository of record for subpart F of this part reporting packages and the data collection form. All Federal agencies, pass-through entities and others interested in a reporting package and data collection form must obtain it by accessing the FAC. (1) The auditee must submit required data elements described in Appendix X to Part 200, which state whether the audit was completed in accordance with this part and provides information about the auditee, its Federal programs, and the results of the audit. The data must include information available from the audit required by this part that is necessary for Federal agencies to use the audit to ensure integrity for Federal programs. The data elements and format must be approved by OMB, available from the FAC, and include collections of information from the reporting package described in paragraph (c) of this section. A senior level representative of the auditee (e.g., state controller, director of finance, chief executive officer, or chief financial officer) must sign a statement to be included as part of the data collection VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 that says that the auditee complied with the requirements of this part, the data were prepared in accordance with this part (and the instructions accompanying the form), the reporting package does not include protected personally identifiable information, the information included in its entirety is accurate and complete, and that the FAC is authorized to make the reporting package and the form publicly available on a website. * * * * * (c) * * * (1) Financial statements and schedule of expenditures of Federal awards discussed in § 200.510(a) and (b), respectively; (2) Summary schedule of prior audit findings discussed in § 200.511(b); (3) Auditor’s report(s) discussed in § 200.515; and (4) Corrective action plan discussed in § 200.511(c). * * * * * (g) FAC responsibilities. The FAC must make available the reporting packages received in accordance with paragraph (c) of this section and § 200.507(c) to the public, except for Indian tribes exercising the option in (b)(2) of this section, and maintain a data base of completed audits, provide appropriate information to Federal agencies, and follow up with known auditees that have not submitted the required data collection forms and reporting packages. * * * * * ■ 110. Amend § 200.513 by revising paragraphs (a)(1) and (2), (a)(3)(ii) and (vii), (b) introductory text, (c) introductory text, and (c)(3)(i) and (iii) to read as follows: § 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) (as listed on the Schedule of expenditures of Federal awards, see § 200.510(b)) 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 expenditures (as direct and subawards) by the non-Federal entity, then the Federal agency with the predominant amount of total funding is the designated cognizant agency for audit. PO 00000 Frm 00069 Fmt 4701 Sfmt 4700 49573 (2) To provide for continuity of cognizance, the determination of the predominant amount of direct funding must be based upon direct Federal awards expended in the non-Federal entity’s fiscal years ending in 2019, and every fifth year thereafter. (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 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 agencies, State auditors, and professional audit associations. This governmentwide audit quality project must be performed once every 6 years (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 (see in § 200.1 of this part) 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 § 200.1 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 § 200.211): E:\FR\FM\13AUR3.SGM 13AUR3 49574 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations (3) * * * (i) Issue a management decision as prescribed in § 200.521; * * * * * (iii) Use cooperative audit resolution mechanisms (see the definition of cooperative audit resolution in § 200.1 of this part) to improve Federal program outcomes through better audit resolution, follow-up, and corrective action; and * * * * * ■ 111. Amend § 200.514 by revising paragraphs (d)(4), (e), and (f) to read as follows: § 200.514 Scope of audit. * * * * * (d) * * * (4) When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing or detecting noncompliance, the planning and performing of testing described in paragraph (c)(3) of this section are not required for those compliance requirements. However, the auditor must report a significant deficiency or material weakness in accordance with § 200.516, assess the related control risk at the (e) Audit follow-up. The auditor must follow-up on prior audit findings, perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with § 200.511(b), and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding. The auditor must perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current year. (f) Data collection form. As required in § 200.512(b)(3), the auditor must complete and sign specified sections of the data collection form. ■ 112. Amend § 200.515 by revising paragraphs (a), (d)(1)(vi) through (ix), (d)(3), and (e) to read as follows: § 200.515 Audit reporting. * * * * * (a) Financial statements. The auditor must determine and provide an opinion (or disclaimer of opinion) whether the financial statements of the auditee are presented fairly in all materials respects in accordance with generally accepted accounting principles (or a special purpose framework such as cash, modified cash, or regulatory as required by state law). The auditor must also VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 decide whether the schedule of expenditures of Federal awards is stated fairly in all material respects in relation to the auditee’s financial statements as a whole. * * * * * (d) * * * (1) * * * (vi) A statement as to whether the audit disclosed any audit findings that the auditor is required to report under § 200.516(a); (vii) An identification of major programs by listing each individual major program; however, in the case of a cluster of programs, only the cluster name as shown on the Schedule of Expenditures of Federal Awards is required; (viii) The dollar threshold used to distinguish between Type A and Type B programs, as described in § 200.518(b)(1) or (3) when a recalculation of the Type A threshold is required for large loan or loan guarantees; and (ix) A statement as to whether the auditee qualified as a low-risk auditee under § 200.520. * * * * * (3) Findings and questioned costs for Federal awards which must include audit findings as defined in § 200.516(a). * * * * * (e) Nothing in this part precludes combining of the audit reporting required by this section with the reporting required by § 200.512(b) when allowed by GAGAS and appendix X to this part. ■ 113. Amend § 200.516 by revising paragraphs (a)(1) and (7), (b)(1) and (6), and (c) to read as follows: § 200.516 Audit findings. (a) * * * (1) Significant deficiencies and material weaknesses in internal control over major programs and significant instances of abuse relating to major programs. The auditor’s determination of whether a deficiency in internal control is a significant deficiency or a material weakness for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program identified in the Compliance Supplement. * * * * * (7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with § 200.511(b) materially misrepresents the status of any prior audit finding. (b) * * * PO 00000 Frm 00070 Fmt 4701 Sfmt 4700 (1) Federal program and specific Federal award identification including the Assistance Listings title and number, Federal award identification number and year, name of Federal agency, and name of the applicable pass-through entity. When information, such as the Assistance Listings title and number or Federal award identification number, is not available, the auditor must provide the best information available to describe the Federal award. * * * * * (6) Identification of questioned costs and how they were computed. Known questioned costs must be identified by applicable Assistance Listings number(s) and applicable Federal award identification number(s). * * * * * (c) Reference numbers. Each audit finding in the schedule of findings and questioned costs must include a reference number in the format meeting the requirements of the data collection form submission required by § 200.512(b) to allow for easy referencing of the audit findings during follow-up. ■ 114. Amend § 200.518 by revising paragraphs (b)(3) and (4), (c)(1) introductory text, (c)(1)(i) and (ii), (d)(1), and (f) to read as follows: § 200.518 Major program determination. * * * * * (b) * * * (3) The inclusion of large loan and loan guarantees (loans) must not result in the exclusion of other programs as Type A programs. When a Federal program providing loans exceeds four times the largest non-loan program it is considered a large loan program, and the auditor must consider this Federal program as a Type A program and exclude its values in determining other Type A programs. This recalculation of the Type A program is performed after removing the total of all large loan programs. For the purposes of this paragraph a program is only considered to be a Federal program providing loans if the value of Federal awards expended for loans within the program comprises fifty percent or more of the total Federal awards expended for the program. A cluster of programs is treated as one program and the value of Federal awards expended under a loan program is determined as described in § 200.502. (4) For biennial audits permitted under § 200.504, the determination of Type A and Type B programs must be based upon the Federal awards expended during the two-year period. (c) * * * (1) The auditor must identify Type A programs which are low-risk. In making E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations this determination, the auditor must consider whether the requirements in § 200.519(c), the results of audit followup, or any changes in personnel or systems affecting the program indicate significantly increased risk and preclude the program from being low risk. For a Type A program to be considered low-risk, it must have been audited as a major program in at least one of the two most recent audit periods (in the most recent audit period in the case of a biennial audit), and, in the most recent audit period, the program must have not had: (i) Internal control deficiencies which were identified as material weaknesses in the auditor’s report on internal control for major programs as required under § 200.515(c); (ii) A modified opinion on the program in the auditor’s report on major programs as required under § 200.515(c); or * * * * * (d) * * * (1) The auditor must identify Type B programs which are high-risk using professional judgment and the criteria in § 200.519. However, the auditor is not required to identify more high-risk Type B programs than at least one fourth the number of low-risk Type A programs identified as low-risk under Step 2 (paragraph (c) of this section). Except for known material weakness in internal control or compliance problems as discussed in § 200.519(b)(1) and (2) and (c)(1), a single criterion in risk would seldom cause a Type B program to be considered high-risk. When identifying which Type B programs to risk assess, the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B programs to be audited as major over a period of time. * * * * * (f) Percentage of coverage rule. If the auditee meets the criteria in § 200.520, the auditor need only audit the major programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal programs with Federal awards expended that, in aggregate, all major programs encompass at least 20 percent (0.20) of total Federal awards expended. Otherwise, the auditor must audit the major programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such additional Federal programs with Federal awards expended that, in aggregate, all major programs encompass at least 40 percent (0.40) of total Federal awards expended. * * * * * VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 115. Amend § 200.519 by revising paragraph (d)(1) to read as follows: ■ § 200.519 Criteria for Federal program risk. * * * * * (d) * * * (1) The nature of a Federal program may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts for goods and services. For example, Federal programs that disburse funds through third-party contracts or have eligibility criteria may be of higher risk. Federal programs primarily involving staff payroll costs may have high risk for noncompliance with requirements of § 200.430, but otherwise be at low risk. * * * * * ■ 116. Amend § 200.520 by revising the introductory text and paragraphs (a) and (e)(1) and (2) to read as follows: § 200.520 Criteria for a low-risk auditee. An auditee that meets all of the following conditions for each of the preceding two audit periods must qualify as a low-risk auditee and be eligible for reduced audit coverage in accordance with § 200.518. (a) Single audits were performed on an annual basis in accordance with the provisions of this Subpart, including submitting the data collection form and the reporting package to the FAC within the timeframe specified in § 200.512. A non-Federal entity that has biennial audits does not qualify as a low-risk auditee. * * * * * (e) * * * (1) Internal control deficiencies that were identified as material weaknesses in the auditor’s report on internal control for major programs as required under § 200.515(c); (2) A modified opinion on a major program in the auditor’s report on major programs as required under § 200.515(c); or * * * * * ■ 117. Amend § 200.521 by revising paragraph (b), (c), and (e) to read as follows: § 200.521 Management decision. * * * * * (b) Federal agency. As provided in § 200.513(a)(3)(vii), the cognizant agency for audit must be responsible for coordinating a management decision for audit findings that affect the programs of more than one Federal agency. As provided in § 200.513(c)(3)(i), a Federal awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to non-Federal entities. PO 00000 Frm 00071 Fmt 4701 Sfmt 4700 49575 (c) Pass-through entity. As provided in § 200.332(d), the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. * * * * * (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit finding in accordance with § 200.516(c). ■ 118. Amend appendix I to part 200 by revising sections A, B, C paragraph 2, D paragraphs 3 through 5, E paragraph 3 introductory text, E paragraph 3.iii, and F paragraphs 1 and 3 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 section must include program goals and objectives, a reference to the relevant Assistance Listings, a description of how the award will contribute to the achievement of the program’s goals and objectives, and the expected performance goals, indicators, targets, baseline data, data collection, and other outcomes such Federal awarding agency expects to achieve, 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; E:\FR\FM\13AUR3.SGM 13AUR3 49576 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations the expected amounts of individual Federal awards (which may be a range); the amount of funding per Federal award, on average, experienced in previous years; and the anticipated start dates and periods of performance for new Federal awards. This section also should address whether applications for renewal or supplementation of existing projects are eligible to compete with applications for new Federal awards. This section also must indicate the type(s) of assistance instrument (e.g., grant, cooperative agreement) that may be awarded if applications are successful. If cooperative agreements may be awarded, this section either should describe the ‘‘substantial involvement’’ that the Federal awarding agency expects to have or should reference where the potential applicant can find that information (e.g., in the funding opportunity description in Section A. or Federal award administration information in Section D. If procurement contracts also may be awarded, this must be stated. C. Eligibility Information * * * * * 2. Cost Sharing or Matching— Required. Announcements must state whether there is required cost sharing, matching, or cost participation without which an application would be ineligible (if cost sharing is not required, the announcement must explicitly say so). Required cost sharing may be a certain percentage or amount, or may be in the form of contributions of specified items or activities (e.g., provision of equipment). It is important that the announcement be clear about any restrictions on the types of cost (e.g., inkind contributions) that are acceptable as cost sharing. Cost sharing as an eligibility criterion includes requirements based in statute or regulation, as described in § 200.306 of this Part. This section should refer to the appropriate portion(s) of section D. stating any pre-award requirements for submission of letters or other documentation to verify commitments to meet cost-sharing requirements if a Federal award is made. * * * * * D. Application and Submission Information * * * * * 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 VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 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 preapplications). 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 § 200.204 of this part). 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. Application Review Information * * * * * 3. For any Federal award under a notice of funding opportunity, if the Federal awarding agency anticipates that the total Federal share will be PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 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 § 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 § 200.211. * * * * * 3. Reporting—Required. This section must include general information about the type (e.g., financial or performance), frequency, and means of submission (paper or electronic) of post-Federal award reporting requirements. Highlight any special reporting requirements for Federal awards under this funding opportunity that differ (e.g., by report type, frequency, form/format, or circumstances for use) from what the Federal awarding agency’s Federal awards usually require. Federal awarding agencies must also describe in this section all relevant requirements such as those at 2 CFR 180.335 and 180.350. If the Federal share of any Federal award may include more than $500,000 over the period of performance, this section must inform potential applicants about the post award reporting E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations requirements reflected in appendix XII to this part. * * * * * ■ 119. Amend appendix II to part 200 by revising paragraphs (A) and (J) and adding paragraphs (K) and (L) 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. * * * * * (J) See § 200.323. (K) See § 200.216. (L) See § 200.322. ■ 120. Amend appendix III to part 200: ■ a. Under section A by revising the introductory text and paragraphs 1.d introductory text, 2.b, 2.d(4) introductory text, 2.d.(4)(b), 2.d.(5), and 2.e.(1); and ■ b. Under section B by revising paragraphs 1, 2.a and b introductory text, 3, 4.c.(2)(ii)B, 5.a, 6.a.(2)(a), 6.b.(1), 8.a., and 9.a; ■ c. Under section C by revising paragraphs 1.a.(1) and (3), 2., 7, 8.a., 9.a., 11.a. introductory text, 11.a.(1), 11.a.(2)b; ■ d. By revising section E; ■ e. Under section F by revising paragraph 2.c. 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) A. General This appendix provides criteria for identifying and computing indirect (or indirect (F&A)) rates at IHEs (institutions). Indirect (F&A) costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an instructional activity, or any other institutional activity. See subsection B.1 for a discussion of the components of indirect (F&A) costs. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 1. Major Functions of an Institution * * * * * d. Other institutional activities means all activities of an institution except for instruction, departmental research, organized research, and other sponsored activities, as defined in this section; indirect (F&A) cost activities identified in this Appendix paragraph B, Identification and assignment of indirect (F&A) costs; and specialized services facilities described in § 200.468 of this part. * * * * * 2. Criteria for Distribution * * * * * b. Need for cost groupings. The overall objective of the indirect (F&A) cost allocation process is to distribute the indirect (F&A) costs described in Section B, Identification and assignment of indirect (F&A) costs, to the major functions of the institution in proportions reasonably consistent with the nature and extent of their use of the institution’s resources. In order to achieve this objective, it may be necessary to provide for selective distribution by establishing separate groupings of cost within one or more of the indirect (F&A) cost categories referred to in subsection B.1. In general, the cost groupings established within a category should constitute, in each case, a pool of those items of expense that are considered to be of like nature in terms of their relative contribution to (or degree of remoteness from) the particular cost objectives to which distribution is appropriate. Cost groupings should be established considering the general guides provided in subsection c of this section. Each such pool or cost grouping should then be distributed individually to the related cost objectives, using the distribution base or method most appropriate in light of the guidelines set forth in subsection d of this section. * * * * * d. * * * (4) If a cost analysis study is not performed, or if the study does not result in an equitable distribution of the costs, the distribution must be made in accordance with the appropriate base cited in Section B, unless one of the following conditions is met: * * * * * (b) The institution qualifies for, and elects to use, the simplified method for computing indirect (F&A) cost rates described in Section D. (5) Notwithstanding subsection (3), effective July 1, 1998, a cost analysis or base other than that in Section B must not be used to distribute utility or PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 49577 student services costs. Instead, subsection B.4.c, may be used in the recovery of utility costs. e. * * * (1) Indirect (F&A) costs are the broad categories of costs discussed in Section B.1. * * * * * B. Identification and Assignment of Indirect (F&A) Costs 1. Definition of Facilities and Administration See § 200.414 which provides the basis for these indirect cost requirements. 2. Depreciation a. The expenses under this heading are the portion of the costs of the institution’s buildings, capital improvements to land and buildings, and equipment which are computed in accordance with § 200.436. b. In the absence of the alternatives provided for in Section A.2.d, the expenses included in this category must be allocated in the following manner: 3. Interest Interest on debt associated with certain buildings, equipment and capital improvements, as defined in § 200.449, must be classified as an expenditure under the category Facilities. These costs must be allocated in the same manner as the depreciation on the buildings, equipment and capital improvements to which the interest relates. 4. Operation and Maintenance Expenses * * * * * 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. 5. General Administration and General Expenses a. The expenses under this heading are those that have been incurred for the general executive and administrative E:\FR\FM\13AUR3.SGM 13AUR3 49578 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations offices of educational institutions and other expenses of a general character which do not relate solely to any major function of the institution; i.e., solely to (1) instruction, (2) organized research, (3) other sponsored activities, or (4) other institutional activities. The general administration and general expense category should also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation, and interest costs. Examples of general administration and general expenses include: Those expenses incurred by administrative offices that serve the entire university system of which the institution is a part; central offices of the institution such as the President’s or Chancellor’s office, the offices for institution-wide financial management, business services, budget and planning, personnel management, and safety and risk management; the office of the General Counsel; and the operations of the central administrative management information systems. General administration and general expenses must not include expenses incurred within non-university-wide deans’ offices, academic departments, organized research units, or similar organizational units. (See subsection 6.) * * * * * 6. Departmental Administration Expenses a. * * * (2) * * * (a) Salaries and fringe benefits attributable to the administrative work (including bid and proposal preparation) of faculty (including department heads) and other professional personnel conducting research and/or instruction, must be allowed at a rate of 3.6 percent of modified total direct costs. This category does not include professional business or professional administrative officers. This allowance must be added to the computation of the indirect (F&A) cost rate for major functions in Section C; the expenses covered by the allowance must be excluded from the departmental administration cost pool. No documentation is required to support this allowance. * * * * * b. The following guidelines apply to the determination of departmental administrative costs as direct or indirect (F&A) costs. (1) In developing the departmental administration cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect (F&A) costs. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 For example, salaries of technical staff, laboratory supplies (e.g., chemicals), telephone toll charges, animals, animal care costs, computer costs, travel costs, and specialized shop costs must be treated as direct costs wherever identifiable to a particular cost objective. Direct charging of these costs may be accomplished through specific identification of individual costs to benefitting cost objectives, or through recharge centers or specialized service facilities, as appropriate under the circumstances. See §§ 200.413(c) and 200.468. * * * * * 8. Library Expenses a. The expenses under this heading are those that have been incurred for the operation of the library, including the cost of books and library materials purchased for the library, less any items of library income that qualify as applicable credits under § 200.406. The library expense category should also include the fringe benefits applicable to the salaries and wages included therein, an appropriate share of general administration and general expense, operation and maintenance expense, and depreciation. Costs incurred in the purchases of rare books (museum-type books) with no value to Federal awards should not be allocated to them. * * * * * 9. Student Administration and Services a. The expenses under this heading are those that have been incurred for the administration of student affairs and for services to students, including expenses of such activities as deans of students, admissions, registrar, counseling and placement services, student advisers, student health and infirmary services, catalogs, and commencements and convocations. The salaries of members of the academic staff whose responsibilities to the institution require administrative work that benefits sponsored projects may also be included to the extent that the portion charged to student administration is determined in accordance with subpart E of this Part. This expense category also includes the fringe benefit costs applicable to the salaries and wages included therein, an appropriate share of general administration and general expenses, operation and maintenance, interest expense, and depreciation. * * * * * PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 C. Determination and Application of Indirect (F&A) Cost Rate or Rates 1. Indirect (F&A) Cost Pools a. (1) Subject to subsection b, the separate categories of indirect (F&A) costs allocated to each major function of the institution as prescribed in Section B, must be aggregated and treated as a common pool for that function. The amount in each pool must be divided by the distribution base described in subsection 2 to arrive at a single indirect (F&A) cost rate for each function. * * * * * (3) Each institution’s indirect (F&A) cost rate process must be appropriately designed to ensure that Federal sponsors do not in any way subsidize the indirect (F&A) costs of other sponsors, specifically activities sponsored by industry and foreign governments. Accordingly, each allocation method used to identify and allocate the indirect (F&A) cost pools, as described in Sections A.2 and B.2 through B.9, must contain the full amount of the institution’s modified total costs or other appropriate units of measurement used to make the computations. In addition, the final rate distribution base (as defined in subsection 2) for each major function (organized research, instruction, etc., as described in Section A.1 functions of an institution) must contain all the programs or activities which utilize the indirect (F&A) costs allocated to that major function. At the time an indirect (F&A) cost proposal is submitted to a cognizant agency for indirect costs, each institution must describe the process it uses to ensure that Federal funds are not used to subsidize industry and foreign government funded programs. 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) 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. For this purpose, an indirect (F&A) cost rate should be determined for each of the separate indirect (F&A) cost pools developed pursuant to subsection 1. The rate in each case should be stated as the percentage which the amount of the particular indirect (F&A) cost pool is of the modified total direct costs identified with such pool. * * * * * E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 7. Fixed Rates for the Life of the Sponsored Agreement a. Except as provided in paragraph (c)(1) of § 200.414, Federal agencies must use the negotiated rates in effect at the time of the initial award throughout the life of the Federal award. Award levels for Federal awards may not be adjusted in future years as a result of changes in negotiated rates. ‘‘Negotiated rates’’ per the rate agreement include final, fixed, and predetermined rates and exclude provisional rates. ‘‘Life’’ for the purpose of this subsection means each competitive segment of a project. A competitive segment is a period of years approved by the Federal awarding agency at the time of the Federal award. If negotiated rate agreements do not extend through the life of the Federal award at the time of the initial award, then the negotiated rate for the last year of the Federal award must be extended through the end of the life of the Federal award. b. Except as provided in § 200.414, when an educational institution does not have a negotiated rate with the Federal Government at the time of an award (because the educational institution is a new recipient or the parties cannot reach agreement on a rate), the provisional rate used at the time of the award must be adjusted once a rate is negotiated and approved by the cognizant agency for indirect costs. 8. Limitation on Reimbursement of Administrative Costs a. Notwithstanding the provisions of subsection C.1.a, the administrative costs charged to Federal awards awarded or amended (including continuation and renewal awards) with effective dates beginning on or after the start of the institution’s first fiscal year which begins on or after October 1, 1991, must be limited to 26% of modified total direct costs (as defined in subsection 2) for the total of General Administration and General Expenses, Departmental Administration, Sponsored Projects Administration, and Student Administration and Services (including their allocable share of depreciation, interest costs, operation and maintenance expenses, and fringe benefits costs, as provided by Section B, and all other types of expenditures not listed specifically under one of the subcategories of facilities in Section B. * * * * * 9. Alternative Method for Administrative Costs a. Notwithstanding the provisions of subsection C.1.a, an institution may elect to claim a fixed allowance for the VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 ‘‘Administration’’ portion of indirect (F&A) costs. The allowance could be either 24% of modified total direct costs or a percentage equal to 95% of the most recently negotiated fixed or predetermined rate for the cost pools included under ‘‘Administration’’ as defined in Section B.1, whichever is less. Under this alternative, no cost proposal need be prepared for the ‘‘Administration’’ portion of the indirect (F&A) cost rate nor is further identification or documentation of these costs required (see subsection c). Where a negotiated indirect (F&A) cost agreement includes this alternative, an institution must make no further charges for the expenditure categories described in Section B.5, Section B.6, Section B.7, and Section B.9. * * * * * 11. Negotiation and Approval of Indirect (F&A) Rate a. Cognizant agency for indirect costs is defined in Subpart 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 nonFederal entity only receives funds as a subrecipient, see § 200.332. (2) * * * b. Acceptance of rates. See § 200.414. * * * * * 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. F. Certification * * * 2. * * * PO 00000 Frm 00075 * Fmt 4701 * Sfmt 4700 49579 c. Certificate. The certificate required by this section must be in the following form: Certificate of Indirect (F&A) Costs This is to certify that to the best of my knowledge and belief: (1) I have reviewed the indirect (F&A) cost proposal submitted herewith; (2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate for [identify period covered by rate] are allowable in accordance with the requirements of the Federal agreement(s) to which they apply and with the cost principles applicable to those agreements. (3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation): Public relations costs, contributions and donations, entertainment costs, fines and penalties, lobbying costs, and defense of fraud proceedings; and (4) All costs included in this proposal are properly allocable to Federal agreements on the basis of a beneficial or causal relationship between the expenses incurred and the agreements to which they are allocated in accordance with applicable requirements. I declare that the foregoing is true and correct. Institution of Higher Education: Signature: lllllllllllll Name of Official: llllllllll Title: lllllllllllllll Date of Execution: llllllllll 121. Amend appendix IV to part 200: a. By revising section A; b. Under section B by revising paragraphs 2.b through e, 3.b(1), (2), and (4), 3.c.(4), 3.f and g, and 4.b and c; ■ c. Under section C by revising paragraphs 2.a through c; and ■ d. Under section D by revising (D)(1), and under the center heading ‘‘Certificate of Indirect (F&A) Costs’’, paragraphs (2) and (3). The revisions read as follows: ■ ■ ■ Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations A. General 1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in § 200.413(d). After direct costs have been determined and assigned directly E:\FR\FM\13AUR3.SGM 13AUR3 49580 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations to awards or other work as appropriate, indirect costs are those remaining to be allocated to benefitting cost objectives. A cost may not be allocated to a Federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to a Federal award as a direct cost. 2. ‘‘Major nonprofit organizations’’ are defined in paragraph (a) of § 200.414. See indirect cost rate reporting requirements in sections B.2.e and B.3.g of this Appendix. B. Allocation of Indirect Costs and Determination of Indirect Cost Rates * * * * * 2. Simplified Allocation Method * * * * * b. Both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs. However, unallowable costs which represent activities must be included in the direct costs under the conditions described in § 200.413(e). 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. d. Except where a special rate(s) is required in accordance with section B.5 of this Appendix, the indirect cost rate developed under the above principles is applicable to all Federal awards of the organization. If a special rate(s) is required, appropriate modifications must be made in order to develop the special rate(s). e. For an organization that receives more than $10 million in direct Federal funding in a fiscal year, a breakout of the indirect cost component into two broad categories, Facilities and Administration as defined in paragraph (a) of § 200.414, is required. The rate in each case must be stated as the percentage which the amount of the particular indirect cost category (i.e., Facilities or Administration) is of the distribution base identified with that category. 3. Multiple Allocation Base Method * * * * * (b) * * * (1) Depreciation. The expenses under this heading are the portion of the costs of the organization’s buildings, capital improvements to land and buildings, and equipment which are computed in accordance with § 200.436. VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 (2) Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in accordance with § 200.449. * * * * * (4) General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category must also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation, and interest costs. Examples of this category include central offices, such as the director’s office, the office of finance, business services, budget and planning, personnel, safety and risk management, general counsel, management information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff, project supplies, project publication, telephone toll charges, computer costs, travel costs, and specialized services costs must be treated as direct costs wherever identifiable to a particular program. The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate as described in § 200.413. Items such as office supplies, postage, local telephone costs, periodicals and memberships should normally be treated as indirect costs. (c) * * * (4) General administration and general expenses. General administration and general expenses must be allocated to benefitting functions based on modified total costs (MTC). The MTC is the modified total direct costs (MTDC), as described in § 200.1, plus the allocated indirect cost proportion. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group must then be allocated to benefitting functions based on MTC. * * * * * f. Distribution basis. Indirect costs must be distributed to applicable Federal awards and other benefitting activities within each major function on PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 the basis of MTDC (see definition in § 200.1). g. Individual Rate Components. An indirect cost rate must be determined for each separate indirect cost pool developed. The rate in each case must be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement must include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools must be classified within two broad categories: ‘‘Facilities’’ and ‘‘Administration,’’ as described in § 200.414(a). 4. Direct Allocation Method * * * * * b. This method is acceptable, provided each joint cost is prorated using a base which accurately measures the benefits provided to each Federal award or other activity. The bases must be established in accordance with reasonable criteria and be supported by current data. This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations issued jointly by the National Health Council, Inc., the National Assembly of Voluntary Health and Social Welfare Organizations, and the United Way of America. c. Under this method, indirect costs consist exclusively of general administration and general expenses. In all other respects, the organization’s indirect cost rates must be computed in the same manner as that described in section B.2 of this Appendix. * * * * * C. Negotiation and Approval of Indirect Cost Rates * * * * * 2. Negotiation and Approval of Rates a. Unless different arrangements are agreed to by the Federal agencies concerned, the Federal agency with the largest dollar value of Federal awards 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 E:\FR\FM\13AUR3.SGM 13AUR3 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations 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.) 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 § 200.332(a)(4). b. Except as otherwise provided in § 200.414(f), a nonprofit organization which has not previously established an indirect cost rate with a Federal agency must submit its initial indirect cost proposal immediately after the organization is advised that a Federal award will be made and, in no event, later than three months after the effective date of the Federal award. c. Unless approved by the cognizant agency for indirect costs in accordance with § 200.414(g), organizations that have previously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency for indirect costs within six months after the close of each fiscal year. * * * * * D. Certification of Indirect (F&A) Costs (1) Required Certification. No proposal to establish indirect (F&A) cost rates must be acceptable unless such costs have been certified by the nonprofit organization using the Certificate of Indirect (F&A) Costs set forth in section j. of this appendix. The certificate must be signed on behalf of the organization by an individual at a level no lower than vice president or chief financial officer for the organization. * * * * * Certificate of Indirect (F&A) Costs * * * * * (2) All costs included in this proposal [identify date] to establish billing or final indirect (F&A) costs rate for [identify period covered by rate] are allowable in accordance with the requirements of the Federal awards to which they apply and with subpart E of this part. (3) This proposal does not include any costs which are unallowable under subpart E of this part such as (without limitation): Public relations costs, contributions and donations, entertainment costs, fines and penalties, VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 lobbying costs, and defense of fraud proceedings; and * * * * * ■ 122. Amend appendix V to part 200 by revising: ■ a. Section A, paragraph 2; ■ b. Section B, paragraph 4; ■ c. Section C ■ d. Section E, paragraph 3.b.(1); and ■ e. Section G, paragraph 5. The revisions read as follows: Appendix V to Part 200—State/Local Governmentwide Central Service Cost Allocation Plans * * * * * 2. Guidelines and illustrations of central service cost allocation plans are provided in a brochure published by the Department of Health and Human Services entitled ‘‘A Guide for State, Local and Indian Tribal Governments: Cost Principles and Procedures for Developing Cost Allocation Plans and Indirect Cost Rates for Agreements with the Federal Government.’’ A copy of this brochure may be obtained from the HHS Cost Allocation Services or at their website. B. Definitions * * * * * 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. * * * * * C. Scope of the Central Service Cost Allocation Plans The central service cost allocation plan will include all central service costs that will be claimed (either as a billed or an allocated cost) under Federal awards and will be documented as described in section E. omitted from the plan will not be reimbursed. E. Documentation Requirements for Submitted Plans * * * * 3. Billed Services * * * * * b. * * * (1) For each internal service fund or similar activity with an operating budget of $5 million or more, the plan must include: A brief description of each service; a balance sheet for each fund based on individual accounts contained in the governmental unit’s accounting system; a revenue/expenses statement, with revenues broken out by source, e.g., regular billings, interest earned, etc.; a listing of all non- PO 00000 operating transfers (as defined by GAAP) into and out of the fund; a description of the procedures (methodology) used to charge the costs of each service to users, including how billing rates are determined; a schedule of current rates; and, a schedule comparing total revenues (including imputed revenues) generated by the service to the allowable costs of the service, as determined under this part, with an explanation of how variances will be handled. * * * * * G. Other Polices A. General * 49581 Frm 00077 Fmt 4701 Sfmt 4700 * * * * * 5. Records Retention All central service cost allocation plans and related documentation used as a basis for claiming costs under Federal awards must be retained for audit in accordance with the records retention requirements contained in subpart D of this part. * * * * * 123. Amend appendix VI to part 200 by revising paragraph 2 in section D to read as follows: ■ Appendix VI to Part 200—Public Assistance Cost Allocation Plans * * * * * D. Submission, Documentation, and Approval of Public Assistance Cost Allocation Plans * * * * * 2. Under the coordination process outlined in section E, affected Federal agencies will review all new plans and plan amendments and provide comments, as appropriate, to HHS. The effective date of the plan or plan amendment will be the first day of the calendar quarter following the event that required the amendment, unless another date is specifically approved by HHS. HHS, as the cognizant agency for indirect costs acting on behalf of all affected Federal agencies, will, as necessary, conduct negotiations with the state public assistance agency and will inform the state agency of the action taken on the plan or plan amendment. * * * * * 124. Amend appendix VII to part 200 by revising: ■ a. Section A, paragraphs 2, 3, 4, and 5; ■ b. Section B, paragraph 3; ■ c. Section D, paragraph 1a.; and ■ d. Section E, paragraph 4. The revisions read as follows: ■ E:\FR\FM\13AUR3.SGM 13AUR3 49582 Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / Rules and Regulations Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals A. General * * * * * 2. Indirect costs include (a) the indirect costs originating in each department or agency of the governmental unit carrying out Federal awards and (b) the costs of central governmental services distributed through the central service cost allocation plan (as described in Appendix V to this part) and not otherwise treated as direct costs. 3. Indirect costs are normally charged to Federal awards by the use of an indirect cost rate. A separate indirect cost rate(s) is usually necessary for each department or agency of the governmental unit claiming indirect costs under Federal awards. Guidelines and illustrations of indirect cost proposals are provided in a brochure published by the Department of Health and Human Services entitled ‘‘A Guide for States and Local Government Agencies: Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts with the Federal Government.’’ A copy of this brochure may be obtained from HHS Cost Allocation Services or at their website. 4. Because of the diverse characteristics and accounting practices of governmental units, the types of costs which may be classified as indirect costs cannot be specified in all situations. However, typical examples of indirect costs may include certain state/ local-wide central service costs, general administration of the non-Federal entity accounting and personnel services performed within the non-Federal VerDate Sep<11>2014 18:29 Aug 12, 2020 Jkt 250001 entity, depreciation on buildings and equipment, the costs of operating and maintaining facilities. 5. This Appendix does not apply to state public assistance agencies. These agencies should refer instead to Appendix VI to this part. B. Definitions * * * * * 3. Cognizant agency for indirect costs means the Federal agency responsible for reviewing and approving the governmental unit’s indirect cost rate(s) on the behalf of the Federal Government. The cognizant agency for indirect costs assignment is described in Appendix V, section F. * * * * * D. Submission and Documentation of Proposals 1. Submission of Indirect Cost Rate Proposals a. All departments or agencies of the governmental unit desiring to claim indirect costs under Federal awards must prepare an indirect cost rate proposal and related documentation to support those costs. The proposal and related documentation must be retained for audit in accordance with the records retention requirements contained in § 200.334. * * * * * adjustments or refunds will be made regardless of the type of rate negotiated (predetermined, final, fixed, or provisional). * * * * * ■ 125. Amend appendix VIII to part 200 by revising the heading and paragraphs 32 and 33 to read as follows: Appendix VIII to Part 200—Nonprofit Organizations Exempted From Subpart E of Part 200 * * * * * 32. Nonprofit insurance companies, such as Blue Cross and Blue Shield Organizations 33. Other nonprofit organizations as negotiated with Federal awarding agencies ■ 126. Appendix XI to part 200 is revised to read as follows: Appendix XI to Part 200—Compliance Supplement The compliance supplement is available on the OMB website. ■ 127. Amend appendix XII to part 200 by revising section A, paragraph 2.b to read as follows: Appendix XII to Part 200—Award Term and Condition for Recipient Integrity and Performance Matters A. Reporting of Matters Related to Recipient Integrity and Performance E. Negotiation and Approval of Rates * * 2. Proceedings About Which You Must Report * * * * 4. Refunds must be made if proposals are later found to have included costs that (a) are unallowable (i) as specified by law or regulation, (ii) as identified in § 200.420, or (iii) by the terms and conditions of Federal awards, or (b) are unallowable because they are clearly not allocable to Federal awards. These PO 00000 Frm 00078 Fmt 4701 Sfmt 9990 * * * * * * * * * b. Reached its final disposition during the most recent five-year period; and * * * * * [FR Doc. 2020–17468 Filed 8–11–20; 8:45 am] BILLING CODE 3110–01–P E:\FR\FM\13AUR3.SGM 13AUR3

Agencies

[Federal Register Volume 85, Number 157 (Thursday, August 13, 2020)]
[Rules and Regulations]
[Pages 49506-49582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17468]



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Vol. 85

Thursday,

No. 157

August 13, 2020

Part IV





Office of Management and Budget





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2 CFR Parts 25, 170, 183, et al.





Guidance for Grants and Agreements; Final Rule

Federal Register / Vol. 85, No. 157 / Thursday, August 13, 2020 / 
Rules and Regulations

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OFFICE OF MANAGEMENT AND BUDGET

2 CFR Parts 25, 170, 183, and 200


Guidance for Grants and Agreements

ACTION: Final guidance.

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SUMMARY: The Office of Management and Budget (OMB) is revising sections 
of OMB Guidance for Grants and Agreements. This revision reflects the 
foundational shift outlined in the President's Management Agenda (PMA) 
to set the stage for enhanced result-oriented accountability for 
grants. This guidance is reflects the Administration's focus on 
improved stewardship and ensuring that the American people are 
receiving value for funds spent on grant programs. The 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 
these sections with other authoritative source requirements; and 
clarifications of existing requirements in particular areas within 
these sections.

DATES: These revisions to the guidance are effective November 12, 2020, 
except for the amendments to Sec. Sec.  200.216 and 200.340, which are 
effective on August 13, 2020.

FOR FURTHER INFORMATION CONTACT: Nicole Waldeck or Gil Tran at the OMB 
Office of Federal Financial Management at [email protected] or 
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 part 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 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), has 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: Operationalize the Grants Management Standards
2. Strategy 2: Establish a Robust Marketplace of Modern Solutions
3. Strategy 3: Manage Risk
4. Strategy 4: Achieve Program Goals and Objectives

    The revisions to 2 CFR support these four strategies. In support of 
Strategies 1 and 2, OMB is implementing changes throughout 2 CFR to 
modernize reporting by recipients of Federal grants by requiring 
Federal agencies to adopt standard data elements for the information 
recipients are required to report (available at: https://ussm.gsa.gov/fibf/). This adoption will enable technology solutions to better manage 
the data the recipients report to the Federal government. These changes 
also support implementation of the Grants Reporting Efficiency and 
Agreements Transparency Act of 2019 (GREAT Act). OMB is also 
implementing 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 revising 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 implementing revisions to 2 CFR to clarify areas of 
misinterpretation. The revisions are intended to reduce recipient 
burden by improving consistent interpretation. OMB consulted and 
collaborated with agency representatives identified by the Grants CAP 
Goal ESC to support the implementation of these revisions. OMB also 
solicited feedback from the broader Federal financial assistance 
community by publishing the proposed changes to 2 CFR in the Federal 
Register for a sixty (60) day public comment period (https://www.federalregister.gov/d/2019-28524). OMB received 215 submissions 
with over 1,200 comments from the public, around 1,200 comments from 
Federal agencies, and around 100 comments from the Council of the 
Inspectors General on Integrity and Efficiency (CIGIE) Grant Reform 
Workgroup for a total of over 2,500 comments. OMB reconvened agency 
representatives to review the comments and make changes to the proposed 
revisions as appropriate.
    In summary and as discussed further in the sections below, OMB is 
revising 2 CFR parts 25, 170, and 200. Additionally, OMB is adding part 
183 to 2 CFR to implement Never Contract with the Enemy. The sections 
are revised within the following scope. Comments received that were out 
of scope for the revision were not accepted by OMB.
    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. Emphasizing Stewardship and Results-Oriented Accountability for 
Grant Program Results

    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

[[Page 49507]]

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 is 
publishing revisions in multiple sections of the guidance that together 
emphasize the importance of focusing on performance to achieve program 
results throughout the Federal award lifecycle.
    The provisions that were revised to improve the governmentwide 
approach to performance and risk emphasize stewardship and results-
oriented grant making. Revisions to 2 CFR 200.102 Exceptions encourages 
Federal awarding agencies to apply a risk-based, data-driven framework 
to alleviate select compliance requirements for programs that 
demonstrate results. 2 CFR 200.202 Program planning and design 
highlights the importance of developing a strong plan and design to set 
the stage for demonstrating program results. 2 CFR 200.205 Federal 
awarding agency review of merit proposals strengthens the merit review 
process which is linked to 2 CFR 200.301 Performance measurement 
requiring Federal awarding agencies to measure recipient performance, 
which is derived from program planning and design (Sec.  200.202). 
Performance information focused on results must be made available to 
recipients in the solicitation and in the award, which is reflected in 
2 CFR 200.211 Information contained in a Federal award. Award 
recipients must also be aware of termination provisions in 2 CFR 
200.340 Termination and reinforced in 2 CFR 200.211 Information 
contained in a Federal award, which are linked to performance goals of 
the program (Sec.  200.301). Revisions to 2 CFR 200.413 Direct costs 
were also made to include evaluation costs as an example of a direct 
cost, which demonstrates program results.
    Revisions to 2 CFR 200.202 Program planning and design develops a 
new provision. This section formalizes a requirement 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. The 
development of 2 CFR 200.202 emphasizes the importance of sound program 
design as an essential component of performance management and program 
administration. Ideally, program design takes place before an agency 
drafts related projects. This enables Federal agency leadership and 
employees to codify program goals, objectives, and intended results 
before specifying the goals and objectives of in a solicitation. A 
well-designed program has clear goals and objectives that facilitate 
the delivery of meaningful results, whether a new scientific discovery, 
positive impact on citizen's daily life, or improvement of the Nation's 
infrastructure. Well-designed programs also represent a critical 
component of an agency's implementation strategies and efforts that 
contribute to and support the longer-term outcomes of an agency's 
strategic plan. OMB encourages Federal awarding agencies to reference 
the ``Managing for Results: The Performance Management Playbook for 
Federal Awarding Agencies'' for promising performance practices 
throughout the Federal award lifecycle, including steps to develop a 
strong program plan and design (www.performance.gov/CAP/grants/).
    Program design elements may include a problem or needs statement, 
goals and objectives; a logic model depicting the program's structure; 
program activities; a theory or theories of change and the evidence 
supporting them; performance and other indicators to measure program 
accomplishments and find ways to improve, set priorities, and identify 
targets of opportunity. In addition, it may include use or intended use 
of independently available sources of data, development and support of 
learning communities which may benefit from a shared understanding of 
promising practices and collaboration on common challenges and 
opportunities, and a system to periodically review award selection 
criteria.
    OMB is revising to 2 CFR 200.205 Federal awarding agency review of 
merit proposals, 2 CFR 200.203 Requirement to provide public notice of 
Federal financial assistance programs and Sec.  200.204 Notices of 
funding opportunities to strengthen merit review, public notice of 
Federal financial assistance programs, and the notices of funding 
opportunities to further the goals of results-oriented grantmaking. 
These changes require Federal awarding agencies to extend their merit 
review process to discretionary Federal awards, unless prohibited by 
Federal statute, the Federal awarding agency must design and execute a 
merit review process for applications.
    Additional language was included to articulate an explanation of 
the merit review process that Federal awarding agencies are expected to 
follow. Further, Federal awarding agencies are required to periodically 
review their Federal award merit review process. These changes support 
the Administration's priority to ensure a fair and transparent process 
for the selection of award recipients and supports efforts under the 
President's Management Agenda to ensure that Federal awards are 
designed to achieve program goals and objectives.
    Changes to 2 CFR 200.206 Federal awarding agency review of risk 
posed by applicants allow Federal awarding agencies to adjust 
requirements when a risk-evaluation indicates that it may be merited. 
Changes are included in 2 CFR 200.211 Information contained in a 
Federal award and 2 CFR 200.301 Performance measurement further 
emphasize existing requirements for requiring Federal awarding agencies 
to provide recipients with clear performance goals, indicators, 
targets, and baseline data. OMB is adding language to Sec.  200.102 
Exceptions to emphasize that Federal awarding agencies are encouraged 
to request exceptions to certain provisions of 2 CFR part 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.
    Related to the above changes that aim to strengthen program 
planning and Federal award terms and conditions, OMB is revising 
Sec. Sec.  200.211 Information contained in a Federal award and 200.340 
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 and unambiguously 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 change 
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

[[Page 49508]]

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 is also eliminating 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.
    In addition, OMB is expanding the definition of fixed amount awards 
in Sec.  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 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.
200.102 Exceptions
    OMB received several comments on this section asking for 
clarification on the proposed revisions. Some commenters also noted 
that the addition of the ``or less restrictive requirements'' in 2 CFR 
200.102(c) and 200.208 is confusing, redundant and not needed because 
Federal awarding agencies already have the discretion to impose 
conditions on the recipient. OMB deliberated upon these comments and 
ultimately agreed to replace the language ``or less restrictive 
requirements'' with ``adjust requirements'' within the final guidance. 
OMB strongly encourages Federal awarding agencies to add or remove 
requirements by applying a risk-based, data-driven framework to 
alleviate select compliance requirements and hold recipients 
accountable for good performance. One commenter felt that the inclusion 
of the requirement for agencies to ``apply more restrictive terms and 
conditions when merited as indicated by a risk evaluation'' did not 
warrant an exception from OMB and thus did not belong in the exceptions 
section. OMB concurred with the commenter and moved this language to 2 
CFR 200.206 Federal awarding agency review of risk posed by applicants.
200.202 Program Planning and Design
    Many commenters were supportive of this new section and the other 
revisions related to results-based grant making. Some commenters also 
thought the proposal could go further to better utilize federal 
grantees' activities to build and disseminate evidence of what works. 
One commenter expressed concern that revisions to the performance 
sections would lead to the unintended consequence of making research 
look like a contract agreement. OMB provided explicit language to state 
that performance measures for each program will be different. One 
commenter expressed concern that this new requirement would add burden. 
OMB respectfully disagrees, as this requirement is not new and does not 
add burden. This section reflects activities that were previously 
implied within 2 CFR and not explicitly included in its own section.
    OMB appreciates the commenters who challenged OMB to go even 
further with the proposal with regards to evidence-building. OMB looks 
forward to furthering this discussion with stakeholder sessions in fall 
2020 and will also consider these proposals in future revisions of 2 
CFR. 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).
200.203 Requirement To Provide Public Notice of Federal Financial 
Assistance Programs
    There were several comments provided in response to the changes 
made to 2 CFR 200.203. One comment inquired as to why no similar 
requirements exist within the Uniform Guidance and is applicable to 
pass-through entities within 2 CFR 200.332. OMB notes that the Federal 
awarding agency does not have a direct relationship with the subaward 
recipient; that is the role of the pass-through entity. Mandating 
application of this requirement would require additional public comment 
as it would add burden to the process. Further, comments asked for OMB 
to develop guidance to help ensure that Federal awarding agencies have 
the appropriate controls in place with respect to their processes for 
making awarding decisions. OMB rejects this change for this iteration 
of 2 CFR as it would be a significant change that would require an 
opportunity for public comment based on the language and requirements 
imposed. Additionally, some commenters requested for language to be 
added regarding how often updates are expected. OMB rejects these 
suggestions as the language references guidance provided by General 
Services Administration (GSA) in consultation with OMB. That is where 
the requirement to update each Assistance Listing on an annual basis is 
specified, and it is not necessary to include this level of detail in 2 
CFR 200.203.
200.204 Notice of Funding Opportunities
    Commenters observed that the change in terminology from 
``competitive'' to ``discretionary'' appears to broaden the requirement 
of these notices to not just competitive announcements, but also sole 
source discretionary announcements. Some commenters suggested for the 
language to be changed back to ``competitive'' and questioned the value 
of this revision. One commenter requested clarification as to whether 
or not this new requirement is intended to apply when the discretionary 
award is non-competitive. Another commenter suggested that it would be 
burdensome and inefficient to require agencies to have notices of 
funding opportunities for noncompetitive awards. OMB deliberated these 
comments and subsequently decided to change this language to reflect 
discretionary awards that are competed.

[[Page 49509]]

200.205 Federal Awarding Agency Review of Merit Proposals
    Some of the comments received were from Federal agencies who wanted 
to know the purpose and the benefits behind the proposed revisions to 
justify the added burden. There were also concerns about the efficiency 
of the awarding process if these changes are made. Some commenters 
asked for clarity on what a systematic review meant and what would 
classify as ``effective.'' OMB considered all comments and made further 
revisions to specify that the merit review process should be 
periodically reviewed as a point of clarity on the process review.
    OMB disagrees with the commenters that expressed these revisions 
will add burden. The purpose of these revisions is to add clarity to 
the merit review process which should already be occurring and is not a 
new requirement.
200.206 Federal Awarding Agency Review of Risk Posed by Applicants
    As stated in the above section describing the comments received for 
Sec.  200.102, one commenter felt that the inclusion of the requirement 
for agencies to ``apply more restrictive terms and conditions when 
merited as indicated by a risk evaluation'' did not warrant an 
exception from OMB and thus did not belong in the exceptions section. 
OMB concurred with the commenter, moved this language to 2 CFR 200.206 
Federal awarding agency review of risk posed by applicants, and 
provided revisions to the language to read ``. . . adjust requirements 
when a risk-evaluation indicates that it may be merited either pre-
award or post-award.'' One commenter requested pass-through entities to 
have access to enter information into the FAPIIS system and require a 
pass-through entity review as part of the risk assessment process. OMB 
deliberated this comment and while it is an important topic for 
discussion, OMB feels the scope of this revision would be too 
substantial for finalization without receiving additional comments from 
the public. Thus, OMB respectfully declines this comment. Some 
commenters requested for OMB to include the requirement for Federal 
awarding agencies to leverage commercially available data management 
tools. OMB declines this comment and does not specify tools required 
for use.
200.208 Specific Conditions
    As stated above in 2 CFR 200.102, some commenters were not 
supportive of the requirement of the language ``or less restrictive 
requirements'' in 2 CFR 200.102(c) and 200.208. Some commenters 
described this new language as confusing, redundant and not needed 
because Federal awarding agencies already have the discretion to impose 
conditions on the recipient. One commenter applauded OMB's decision to 
further emphasize the flexibilities afforded to Federal awarding 
agencies revise or remove certain requirements based on a risk 
analysis. After deliberation, OMB replaced this language with ``the 
Federal awarding agency may adjust requirements to a class of Federal 
awards or non-Federal entities when approved by OMB . . . .''
200.211 Information Contained in a Federal Award
    Some comments asked for clarity on the revisions that were 
proposed. One clarifying question was the difference between the data 
point for the ``Total Approved Cost Sharing or Matching, where 
applicable'' and ``Total Amount of the Federal Award including approved 
Cost Sharing or Matching.'' These are two completely separate data 
points which call for the approved cost sharing or matching to be 
identified, and then the total amount of the Federal award that is 
approved cost sharing or matching. OMB did not recommend that these 
were removed. Further, in response to various comments, the language in 
(a) was streamlined and users are referred to the relevant performance 
sections for additional information. The data points previously 
proposed in paragraph (b) related to performance were already captured 
in paragraph (a), and thus removed from (b). The proposed language for 
(e) was revised and moved to Sec.  200.105(b) within the guidance. Many 
comments received suggested revisions that would make the language more 
prescriptive. Title 2 CFR was written as guidance for a large array of 
users. If the language is too prescriptive, it doesn't provide 
sufficient flexibility for use by the large array of users. Additional 
technical corrections were made for clarity throughout this provision. 
Revisions were made to Sec.  200.211(c)(1)(iv) to clarify that if the 
underlying legal authority for a program changes, that may be a reason 
why there would be no future budget periods under an award.
200.301 Performance Measurement
    Some commenters were in support of the revisions to this section. 
Many commenters provided suggestions for further revisions to the 
guidance. Several commenters provided suggestions with regards to the 
use of ``should'' and ``must'' throughout this section. Some commenters 
wanted the language to be written strongly and use the word ``must'' 
throughout, others preferred ``should'' and many suggested the use of 
these words should be consistent throughout this section. Some 
commenters also expressed the need for OMB to include data quality 
within this section. OMB concurs with the comments that consistent use 
of ``must'' and ``may'' should be used in this section. Some commenters 
also pointed out discrepancies between various performance sections and 
a few commenters pointed out that there are discrepancies between what 
is required in 2 CFR 200.211 and 200.301. In response to commenters, 
OMB re-wrote this section for clarity and consistency.
200.340 Termination
    There were several comments received in response to the revisions 
proposed to this section. The comments can be group into the following 
discreet categories:
     Concern over arbitrary Federal award termination;
     Adding or editing language for clarity;
     Concern over how Federal awarding agencies will evaluate 
awards with long-term outcomes;
     Request further OMB guidance; and
     Not relevant.
    The largest number of commenters expressed a concern that the 
proposed language will provide Federal agencies too much leverage to 
arbitrarily terminate awards without sufficient cause. Several 
commenters requested OMB reinstate the language, for cause, to address 
this issue. Some commenters requested additional clarity and examples. 
OMB deliberated upon these requests and decided as written agencies are 
not able to terminate grants arbitrarily and that it was not 
appropriate to include examples in 2 CFR for this section. OMB made a 
technical correction to provide additional clarity. Some commenters 
expressed concerns over how Federal awarding agencies will evaluate 
awards with long-term outcomes. One example from the commenter was an 
environmental program where the performance will require years to 
measure. The example from the commenter should be determined in 
coordination with the Federal awarding agency. OMB respectfully 
declines this comment. Title 2 CFR is intended to be written and used 
by a large array of stakeholders and thus the language is not intended 
to be prescriptive, as the commenter has requested. Some commenters 
requested further OMB guidance on this provision. OMB appreciates the 
request for additional

[[Page 49510]]

guidance and notes that guidance beyond what has been provided in the 
proposed rule is out of scope for this revision effort. Other comments 
provided were not relevant to the revisions proposed and thus OMB has 
rejected these comments.
200.413 Direct Costs
    Most comments received for this 2 CFR 200.413 were in agreement of 
the revisions. The remaining comments were out of scope. Therefore, OMB 
did not make changes to the revised language. Some commenters requested 
OMB include additional examples for clarity that the activities are 
direct costs such as planning and program coordination, data 
technology, analytics, staff training, data collection, storage, 
communication of evaluation and analytics, and more. OMB appreciates 
the request to clarify additional examples as direct costs and would 
like to expand on this further in future revisions of 2 CFR. OMB does 
not think it is appropriate to include specific examples within the 
guidance because it could be unintentionally interpreted to be limited 
to only that list of items. However, as we think of ways to encourage 
promising performance practices, OMB would like to discuss this further 
during stakeholder sessions in the fall 2020.
200.328 Financial Reporting
    There were some comments received in response to the revisions made 
to this provision. One commenter requested that the collection of 
information be no more frequently than semiannually to reduce burden. 
OMB declines this comment and notes that it was out of scope because 
there were no proposed changes to the frequency of financial reporting. 
One commenter requested that OMB add language to discourage pass-
through entities from the practice of requiring more frequent and more 
detailed financial reporting. After discussion, OMB declines this 
comment as it is out of scope for this revision but will consider the 
comment for a future revision of 2 CFR. Several commenters sought 
clarification on the use of the term ``OMB-designated standards lead.'' 
Pursuant to the Grant Reporting Efficiency and Agreements Transparency 
Act of 2019 (GREAT Act), the OMB Director is required to designate a 
standard-setting agency (i.e., the Executive department that 
administers the greatest number of programs under which Federal awards 
are issued in a calendar year). The Executive department designated by 
OMB as the standard-setting agency assists OMB with execution of the 
requirements of the GREAT Act.
    In response to commenters' requests for clarity on the performance 
sections of the guidance, OMB moved the financial reporting requirement 
noted currently in 2 CFR 200.301 Performance measurement to 2 CFR 
200.328 Financial reporting.
200.329 Monitoring and Reporting Program Performance
    Several commenters requested clarity regarding the ``OMB-designated 
standards lead'' and notes that this terminology has been used 
throughout the guidance. As mentioned above, one commenter also 
suggested a technical correction to reference the Grant Reporting 
Efficiency and Agreements Transparency (GREAT) Act for clarity on this 
designation. One commenter suggested that this provision should be tied 
together with the closeout provision with regards to the timeframe to 
submission of reports. OMB concurred with this commenter and made 
revisions accordingly. One commenter noted concern and confusion 
regarding the requirement that ``costs must be charged to the approved 
budget period in which they were incurred.'' The commenter also 
suggested edits to clarify this requirement. OMB concurred with the 
commenter and accepted the edits for incorporation into the package.
Appendix I to Part 200--Full Text of the Notice of Funding Opportunity
    A number of commenters suggested edits to this section. One 
commenter suggested including the term ``outcome'' to indicate the end 
result and also include terms for tracking and determining if that end 
result is being or has been achieved. OMB agreed with this commenter 
and made the revisions accordingly. Another commenter suggested that 
OMB include the requirement for Federal awarding agencies to ensure SAM 
registration is current before making any advanced payments and/or 
issuing any reimbursements. OMB disagrees with this recommendation, as 
this requirements is already stated in 2 CFR 25.205.

B. Expanded Use of the De Minimis Rate

    The revision to 2 CFR 200.414(f) expands use of the de minimis rate 
of 10 percent 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 minimis rate can only be used for 
non-Federal entities that have never received a negotiated indirect 
cost rate. The use of the de minimis 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 2 CFR in 2013, both Federal agencies and non-Federal entities have 
advocated expansion of the de minimis 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 change will 
further reduce the administrative burden for non-Federal entities and 
Federal agencies and shift more resources toward accomplishing the 
program mission.
    Another revision adds language to 2 CFR 200.414(f) to clarify that 
when a non-Federal entity is using the de minimis rate for its Federal 
grants, it is not required to provide proof of costs that are covered 
under that rate. The 10 percent de minimis 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 
minimis rate. Lastly, for transparency purposes, another revision adds 
a new paragraph (h) to Sec.  200.414 to require that negotiated 
agreements for indirect cost rates are collected and displayed on a 
public website.
200.414 Indirect (F&A) Costs
200.414(f)
    OMB received several comments that were concerned with awarding a 
de minimis rate that is higher than a Negotiated Indirect Cost Rate 
Agreement (NICRA). OMB concurs with the concerns regarding applying a 
higher de minimis rate in cases where a NICRA rate is lower than 10 
percent. However, the regulation states in paragraph (c)(1) that 
Federal agencies must honor negotiated rates. Additionally, some 
commenters expressed concern that guidance will be misinterpreted to 
allow provisional rates to be considered as expired. OMB intends to 
include provisional rates and added clarifying language to the section 
in response to these comments. Further, commenters were concerned with 
a lack of required documentation. OMB concurs with concerns that the 
language implies source documents rather than the indirect cost rate 
agreement and altered the language accordingly. There were

[[Page 49511]]

several comments that suggested that the Modified Total Direct Cost 
(MTDC) be used as the base. However, this suggestion is out of the 
scope of this revision. Additionally, OMB would like to note that 
Federal agencies must accept the negotiated rate even if it is lower 
than the de minimis rate.
200.414(h)
    OMB appreciated the many comments that supported the proposed 
requirement to post NICRAs to a public website. There were several 
comments that cited concerns over the sharing of proprietary 
information through the posting of NICRA information on a public 
website. To address these concerns, OMB clarified that the requirement 
is not for the entire rate agreement and added language to specify the 
exact information that is requested be provided for a non-Federal 
entity; the indirect negotiated rate; distribution base; and the rate 
type. In addition, the Indian tribes or tribal organizations, as 
defined in the Indian Self Determination, Education and Assistance Act, 
25 U.S.C. 450b(1)) are excluded. Further, there were several comments 
that inquired about the applicability of this section. Lastly, there 
were comments that inquired about who is responsible for making sure 
this information is publically posted. OMB recognizes this concern and 
notes that the responsibility of the Federal government will be 
communicated appropriately.

C. Eliminate References to Non-Authoritative Guidance

    To support implementation of E.O. 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 proposed 
changes to Sec.  200.105 Effect on other issuances. The proposed change 
was intended to reduce recipient burden and prevent Federal awarding 
agencies from imposing non-binding guidance as award requirements for 
recipients that has not gone through appropriate public notice and 
comment. The proposed revisions related to eliminating references to 
non-authoritative guidance were included in 2 CFR 200.211(e) 
Information contained in a Federal award. Some commenters suggested for 
this requirement to be moved within the guidance to 2 CFR 200.105(b) 
Effect on other issuances for clarity of the policy intent. OMB 
concurred with the commenter's suggestion and moved the requirement 
accordingly.
200.105 Effect on Other Issuances
    There were several commenters in strong support of this new 
provision while other commenters expressed concerns regarding the 
implementation. One commenter mentioned that finalizing this proposal 
would cause significant difficulties in effective implementation and 
effectively overseeing programs. OMB appreciates the comments received. 
To address concerns, the language was re-written to better align with 
E.O. 13892 and provide clarity.

D. Promoting Free Speech

    Several provisions within 2 CFR are revised to align with E.O. 
13798 ``Promoting Free Speech and Religious Liberty'' and E.O. 13864 
``Improving Free Inquiry, Transparency, and Accountability at Colleges 
and Universities.'' These sections include 2 CFR 200.300 Statutory and 
national policy requirements, 200.303 Internal controls, 200.339 
Remedies for noncompliance, and 200.341 Notification of termination 
requirement. These E.O.s advise Federal awarding agencies on the 
requirements of religious liberty laws, including those laws that apply 
to grants and provide a policy for free inquiry at institutions 
receiving Federal grants. The revision to 2 CFR underscores the 
importance of compliance with the First Amendment.
200.209 Certifications and Representations, 200.300 Statutory and 
National Policy Requirements, 200.303 Internal Controls, 200.339 
Remedies for Noncompliance, 200.341 Notification of Termination 
Requirement
    OMB received several comments in response to this policy proposal. 
Some commenters supported compliance with the Constitution while other 
commenters questioned the need to include a reference to the 
Constitution. OMB appreciates all comments received and after 
consideration has decided to retain the proposed language within these 
sections. One comment suggested the removal of the word ``statutory.'' 
OMB concurred with this recommendation and made the change.

E. Standardization of Terminology and Implementation of Standard Data 
Elements

    OMB is standardizing terms across 2 CFR part 200 to support efforts 
under the Grants CAP Goal to standardize the grants management business 
process and data. OMB is replacing the term ``obligation'' to either 
``financial obligation'' or ``responsibility'' within the guidance as 
appropriate, to ensure alignment with DATA Act definitions. OMB is 
adding changes across the entirety of 2 CFR to ensure consistent use of 
terms across parts 25, 170, 183, and 200 where possible, relying on 2 
CFR part 200 as the primary source. As reflected in the 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 Listings number'' and ``Assistance Listings program 
title'' to reflect the change in terminology.
    OMB is also revising several 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 revising 2 CFR 200.207 and 
200.328 to reflect that information collection requests must adhere to 
the standards available from the OMB-designated standards lead. This 
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 is revising 2 CFR part 200 to replace the term 
``standard form'' with ``common form.'' Some commenters submitted 
feedback with concerns that the change in terminology would allow 
agencies to create unique forms with a lack of standardization. OMB did 
not make any changes to the final language based on these comments. 
Existing forms widely adopted by Federal awarding agencies that are 
regularly referred to as standard forms are in fact common forms. For 
instance, the SF-424 series, SF-425,

[[Page 49512]]

and research performance progress report are all common forms/formats. 
OMB acknowledges that this is a significant change in how the community 
refers to these forms and will ensure that any future guidance on the 
adoption of standard data elements clarifies the use of common forms. 
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 is reformatting 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.
Subpart A--Acronyms and Definitions
New Defined Terms
    Several commenters sought to clarify existing parts within 2 CFR 
and grant processes and procedures through the addition of several 
defined terms under 200.1 Definitions. Examples of recommended terms to 
include were formula grant, program beneficiary/recipient, procurement, 
administrative costs, for-profit organization, conflict of interest, 
covered technology, architectural/engineering professional services, 
Federally-owned property, and demonstration.
    In certain cases OMB agrees that additional terms may provide 
greater clarification to the regulation and the management of Federal 
financial assistance. OMB may consider the recommended definitions for 
the suggested terms in future updates to 2 CFR. In other cases, the 
terms are either not used in 2 CFR or are only applicable to a small 
number of Federal awarding agencies. OMB declined these recommendation 
either due to scope, or because they do not align with the intent of 
this regulation.
Inserting Programmatic Instruction in Definitions
    Several commenters recommended inserting programmatic instruction 
for specific terms, which would provide more guidance for Federal 
agencies, non-Federal entities, auditors, or others.
    OMB considered these comments, but determined that it was 
inappropriate to include programmatic guidance in the definition of 
terms for the regulation. The purpose of 2 CFR 200.1 Definitions is to 
provide meaning for specified terms within the regulation; guidance and 
instruction is more appropriate other parts of 2 CFR.
Modification to Existing Definitions
    Several commenters sought to clarify existing definitions by 
providing technical corrections or clarification statements.
    In several cases, OMB agrees that technical corrections are 
necessary. The updates to these definitions are minor and did not 
affect the intent of the term. In other cases, the recommendations were 
either too substantive or did not align with the intent of this update 
to the regulation. OMB may consider these recommendations in future 
updates to 2 CFR.
Formatting
    Several commenters disagreed with the removal of the numbering of 
the definitions. The commenters were concerned about the overall 
changes to the numbering of 2 CFR part 200, which would add burden to 
updating the non-Federal entities' policies and procedures.
    OMB appreciates these concerns, but does not believe that the 
removal of the definition numbering will generate any significant 
additional burden on non-Federal entities, because these groups already 
should regularly review and update their policies and procedures to 
ensure compliance with Federal, state, and local laws and regulations. 
This revision is expected to limit future burden for non-Federal 
entities in the event of new terms are added to this section of part 
200, which would change the section's numeration.
Subpart A--Specific Definitions
Compliance Supplement
    A number of commenters recommended clarifying the definition of 
compliance supplement and offered revised wording for the definition. 
OMB concurred and adapted the definition in consultation with members 
of the interagency working group. One commenter recommended revising 
the definition to frame the compliance supplement as the sole source of 
information for auditors. OMB did not include this recommendation 
because the compliance supplement is one of the authoritative sources 
that auditors can use when auditing Federal programs. Other sources 
include Federal awarding agency and program specific documents.
Contract
    One commenter noted that the definition of contract was confusing, 
while another recommended cross-referencing the Subrecipient and 
Contractor Determinations subsection (Sec.  200.331). OMB agreed with 
this assessment and updated the definition to make it easier to read, 
understand, and use. Another commenter recommended the addition of 
mutual aid or intergovernmental agreements to the definition of 
contract. This change was not considered because it would substantively 
alter the definition without providing the public the opportunity to 
comment on the revision.
Cooperative Agreement, Grant Agreement
    One commenter recommended specifically explaining ``transfer 
anything of value'' in the definitions of cooperative agreement and 
grant agreement. OMB opted to keep the existing language because both 
definitions cite 31 U.S.C. 6101(3), which provides the scope of the 
``transfer of anything of value.'' A commenter recommended further 
describing substantial involvement in the definition of cooperative 
agreement. This change was not considered because the Federal awarding 
agency and the recipient are given the discretion to negotiate this 
relationship. Another commenter stated that there was a conflict 
Sec. Sec.  25.306 and 200.1 associated with the transfer of land or 
property. OMB disagrees as the two definitions align and are also in 
alignment with the associated legislation. Through the review of the 
definitions of cooperative agreement and grant agreement, OMB and 
members of the working group clarified that the relationship was 
between the Federal awarding agency and a recipient or a pass-through 
entity and a subrecipient.
Discretionary, Non-Discretionary Award
    Technical edits were made to the definitions of discretionary award 
and non-discretionary award to provide clarity to the intended 
definitions.
Federal Interest
    Two commenters recommended correcting the formula for determining 
Federal interest, noting that reliance on the Federal share of the 
total project costs does not appropriately account for the Federal 
interest in real property, equipment, or supplies. OMB agreed with this 
recommendation and amended the definition to appropriately rely on the 
percentage of Federal participation in the total cost of the real 
property, equipment, or supplies as part of the formula.
Recipient
    One commenter recommended amending recipient be inclusive of 
entities that are not necessarily non-Federal entities such as for-
profit and

[[Page 49513]]

foreign entities as well as Federal agencies. OMB agreed with this 
assessment and updated the definition appropriately.
Subsidiary
    One commenter recommended replacing non-Federal entity with entity, 
while another recommended adding ``or controlled'' after owned to be 
more inclusive of a diversity of organizations that may have 
subsidiaries. Several other commenters were confused by the reference 
to the FAR or found it to be redundant, recommending that it be removed 
from the definition. OMB agreed with these recommended changes to the 
definition and incorporated them, as appropriate.
Period of Performance, Budget Period, and Renewal
    OMB also revised the proposed definitions of period of performance, 
budget period, and renewal in 2 CFR part 200, as there were a 
significant number of comments from varying stakeholders indicating 
that the proposed revised definitions of period of performance, budget 
period, and renewal created more confusion than clarity. In response, 
the final rule revises the definitions for these terms to clarify how 
period of performance, budget period, and renewal operationally relate. 
Additionally, the final rule revises 2 CFR 200.309 to better describe 
how the period of performance is modified if there is an extension or 
termination of a current award. Some commenters expressed concern about 
the removal of pass-through entities' authority to allow pre-award 
costs to subrecipients. It was not OMB's intention to remove the pass-
through entities' authority to allow pre-award costs to subrecipients. 
OMB recognizes these concerns and added language to 2 CFR 200.458 for 
clarification in response to commenters. Further, there were many 
comments that expressed concern about removing 2 CFR 200.309 from the 
guidance due to burden with other entities that reference 2 CFR within 
their own rules and regulations. Including 2 CFR 200.309 in the final 
publication will eliminate that concern from commenters.
    The definition of period of performance and renewal was revised to 
help clarify that the term period of performance reflects the total 
estimated time interval between the start of an initial Federal award 
and the planned end date, and that the period of performance may 
include one or more budget periods, but the identification of the 
period of performance does not commit funding beyond the currently 
approved budget period. The definition of budget period was edited to 
clarify that recipients are authorized to expend the current funds 
awarded, including any funds carried forward or other revisions 
pursuant to 2 CFR 200.308. Further, recipients 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 definition of renewal was edited to help clarify that a renewal 
award begins a distinct period of performance that starts contiguous 
with, or closely following, the end of the expiring award. This change 
also ensures consistent use of the term for purposes of transparency 
reporting as required by FFATA.
200.403 Factors Affecting Allowability of Costs
    To maintain consistency within the guidance regarding the 
definition of Budget Period, 2 CFR 200.403(h) has been added to clarify 
that costs must be incurred during the approved budget period and the 
Federal awarding agency may waive prior written approval to carry 
forward unobligated balances to subsequent budget periods.
Improper Payment, Questioned Costs
    Based on some confusion expressed in comments, the definition of 
improper payment was revised to accurately reflect how questioned 
costs, including costs questioned costs identified in audits, are not 
improper payments until reviewed and confirmed as such.
Internal Controls
    Based on some confusion expressed in comments, minor modifications 
to the definition of internal controls were made to provide greater 
clarity on the internal controls requirements for non-Federal entities 
and Federal agencies.
Oversight Agency for Audit
    Several commenters expressed confusion with the revision to this 
definition. Some commenters provided suggested edits for clarity. After 
deliberation and in response to the commenters, OMB made further edits 
to this definition for clarity.
Simplified Acquisition Threshold, Micro-Purchase
    Multiple commenters were confused by the second paragraph proposed 
to be added to the definition for simplified acquisition threshold. 
Revisions were made to this paragraph to alleviate confusion and 
accurately reflect how the simplified acquisition may be determined. 
Minor technical edits were made to the definition for micro-purchase, 
based on comments, to clarify that the cognizant agency for indirect 
costs may approve a higher micro-purchase threshold if requested by the 
non-Federal entity.

F. Support for Domestic Preferences for Procurement

    As expressed in Executive Order (E.O) 13788 of April 18, 2017 (Buy 
American and Hire American) and E.O. 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 is adding a new section 2 CFR 
200.322 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.
200.322 Domestic Preferences for Procurement
    OMB appreciates the many comments were very supportive of this 
section. Several comments suggested including language in Appendix II 
because the proposed new 2 CFR 200.322 includes the requirement that 
such term be flowed down to all contracts and purchase orders. OMB 
accepts this change and has made the appropriate edits to the final 
language. Several comments asked for clarification regarding how 
preference is given. OMB rejects this change as the language gives 
Federal awarding agencies the flexibility to adjust their guidance 
accordingly. Further, another comment suggested to exempt purchases 
below the micro-purchase threshold from requirements in this section to 
reduce the burden on non-Federal entities. OMB rejects this suggestion 
as OMB does not agree with the assessment that an additional burden is 
being placed. The language did not set a dollar threshold and instead 
states that domestic preference should be used as appropriate and to 
``to the maximum extent practicable.'' One commenter suggested a 
reference to this section should also be included in Appendix II to 
Part 200--Contract Provisions for Non-Federal Entity

[[Page 49514]]

Contracts Under Federal Awards. OMB concurred with this commenter and 
made the revision accordingly.

G. 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 
consistent with the intent of the Grants CAP Goal, and to align with 
legislation related to procurement standards, OMB is revising the 
guidance to increase the micro-purchase threshold from $3,500 to 
$10,000, raising the simplified acquisition threshold from $100,000 to 
$250,000, and allowing non-Federal entities to request a micro-purchase 
threshold higher than $10,000 based on certain conditions. The 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 established 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 allowed 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 for FY 2018 (NDAA 2018) increased the micro-
purchase threshold to $10,000 for all recipients and also increased the 
simplified acquisition threshold from $100,000 to $250,000 for all 
recipients. The revisions to Sec.  200.320 outline a permanent process 
by which non-Federal entities may establish a micro-purchase level 
above the $10,000 threshold.
    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. The FAR Rules at 48 CFR part 2, subpart 2.1, were 
finalized on July 2, 2020 (85 FR 40060, 85 FR 40064) with the effective 
date of August 31, 2020. In addition, the American Innovation and 
Competitiveness Act of 2017 (AICA), section 207(b) required that 2 CFR 
part 200 be revised to conform to 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) which is now incorporated in 200.320. With the final procurement 
guidance now implemented, OMB Memorandum M-18-18 is rescinded.
200.320 Methods of Procurement To Be Followed
    There were nearly 100 comments received relating to this section. 
Many expressed confusion with the proposed revisions and provided 
recommendations for clarity. In response, the section was rewritten to 
incorporate many of the suggestions from commenters.
    The following revisions were made to 2 CFR 200.320:

 The procurement types were grouped into three categories: (1) 
Informal (micro-purchase, small purchase); (2) formal (sealed bids, 
proposals) and (3) Non-Competitive (sole source)
 The micro-purchase threshold was raised from $3,500 to $10,000
 All non-Federal entities are now authorized to request a 
micro-purchase threshold higher than $10,000 based on certain 
conditions that include a requirement to maintain records for threshold 
up to $50,000 and a formal approval process by the Federal government 
for threshold above $50,000; and
 The simplified acquisition threshold was raised from $150,000 
to $250,000
200.321 Contracting With Small and Minority Businesses, Women's 
Business Enterprises, and Labor Surplus Area Firms
    Several comments were made regarding this section that were out of 
scope for the current set of revisions. As such, no changes to the 
proposed language will be made at this time.
200.317 Procurements by States
    One commenter suggested that 2 CFR 200.317 should reference the 
procurement requirements in 2 CFR 200.322 Domestic preference for 
procurements, as it is applicable to all non-Federal entities. OMB 
concurred with the commenter and made revisions accordingly.
200.318 General Procurement Standards
    One commenter expressed strong support for the revisions proposed 
for this provision. Most commenters provided suggested edits for 
clarity. One commenter provided suggested edits to clarify that the ``. 
. . non-Federal entity must use its own documented procurement 
procedures which must conform to applicable State, local, and tribal 
laws and regulations; and Federal law. In addition, procurements for 
goods and services that are directly charged to a Federal award must 
conform to the standards identified in this part.'' OMB agreed with 
this clarifying revision and incorporated it within 2 CFR 200.318.
200.319 Competition
    One commenter expressed support for the revisions to 2 CFR 200.319. 
Other commenters provided suggested edits for clarity. One commenter 
asked for clarity of the meaning ``section'' and expressed the entire 
subpart D should be referenced. OMB declines this comment and notes 
that the term ``section'' should not be interpreted to mean the entire 
subpart D and the proposed revisions to 2 CFR 200.319 only adds a new 
reference to 2 CFR 200.320. This new language in no way infers that the 
other procurement provisions do not apply. One commenter expressed that 
it is unclear what ``required'' under an award means. OMB notes that 
this language is used throughout the document as no such change was 
made.

H. Emphasis on Machine-Readable Information Format

    OMB aims to clarify the methods for collection, transmission, and 
storage of data in 2 CFR 200.336 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 clarification reinforces the machine-readable 
requirements in the Foundations of Evidence-Based Policymaking Act of 
2018 (Pub. L. 115-435) and accompanying OMB guidance. This requirement 
also 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.
200.336 Methods for Collection, Transmission, and Storage of 
Information
    OMB received some comments on 2 CFR 200.336 requesting the 
inclusion of PDFs in the language. OMB declined this suggestion since 
prescribing a specific format in official guidance was deemed 
inappropriate.

[[Page 49515]]

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 is 
revising 2 CFR 200.344 Closeout to support timely closeout of awards, 
improve the accuracy of final closeout reporting, and reduce recipient 
burden.
    The final language will increase the number of days for recipients 
to submit closeout reports and liquidate all financial obligations from 
90 days to 120 days. This change takes into consideration the 
challenges faced by pass-through entities with respect to awards that 
contain a large number of subawards. These recipients must reconcile 
subawards and submit final reports to Federal awarding agencies within 
the same 90 day period. Recognizing the need for pass-through entities 
to receive timely reports from subrecipients to report back to Federal 
awarding agencies, OMB will continue to require subrecipients to submit 
their reports to the pass-through entity within 90 days. The intent of 
this 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 
requiring 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 is publishing 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 language is 
intended to promote timely closeout of awards, assist with reconciling 
closeout activities, and hold recipients accountable for submitting 
required closeout reports.
200.344 Closeout
    Many of the comments in response to revisions to 2 CFR 200.344 were 
in support of the proposed revisions. The two sections listed below 
received the highest volume of comments.
200.344(a)
    OMB is appreciative of the many commenters who supported the 
proposed extension of deadlines for the submission of reports. Due to 
the significant amount of support for the changes, OMB is keeping the 
language published in the proposed version. OMB also received comments 
to permit pass-through entities to establish earlier dates, in 
accordance with existing practice. OMB accepts this recommendation. OMB 
also received comments relating to final indirect cost rates after the 
end of the period of performance. OMB rejects these suggestions, as a 
revised final Federal financial report can be submitted after closeout. 
Therefore, lengthening the deadline would not have an impact. OMB is 
making several small changes based on received comments, such as 
changing ``non-Federal entity'' to ``recipient'' and adding ``or an 
earlier date as agreed upon by the pass-through entity and 
subrecipient.''
200.344(i)
    OMB received several comments that recommended making the Federal 
Awardee Performance and Integrity Information System (FAPIIS) entries 
optional. The intent of the added regulation was to hold recipients 
accountable and share performance across Federal agencies, which 
promotes results-oriented grantmaking. Therefore, OMB is finalizing the 
language that makes entry into FAPIIS mandatory. Further, it should be 
noted that entry into FAPIIS does not constitute a termination, which 
OMB has clarified in the final language.
200.345 Post-Closeout Adjustments and Continuing Responsibilities
    Some commenters expressed concerns that the language proposed for 
this provision was too open-ended and the period could extend beyond 
record retention. OMB concurred with the commenters and made revisions 
to address these concerns.

J. Changes to Performing the Governmentwide Audit Quality Project

    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.
200.513 Responsibilities
    Comments in response to the change regarding the assignment of the 
cognizant agency for audit responsibilities based on the direct funding 
and total funding were positive and thus OMB did not make changes to 
the language for the final publication. We clarified that the 
determination for funding is based the federal award expenditures as 
reported in the recipient's Schedule of expenditures of Federal Awards 
(see Sec.  200.510(b)). Commenters in response on the governmentwide 
project to determine the quality of single audits suggested a delay on 
such project by a few years due the changes in the 2019 Compliance 
Supplement regarding the maximum of review for compliance areas. 
Commenters also suggested the use of current and on-going quality 
review performed by agencies on single audits to substitute or 
complement the governmentwide project. We agreed on the suggested 
timing of the project and have removed the specific date listed in the 
proposal. OMB will work with the agencies and the single audit 
stakeholders to determine a future date for the project that is more 
optimal. OMB added language to address that current quality control 
review work performed by the agencies can be leveraged for the 
governmentwide project.

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 revised 2 CFR to align with section 889 of the NDAA for FY 2019 
(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 is adding a new section, 
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 2019, covered 
telecommunications equipment or services includes:

[[Page 49516]]

    [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.
200.216 Prohibition on Certain Telecommunication and Video Surveillance 
Services or Equipment
    Commenters expressed widespread concerns on the impact and 
implementation of the statutory requirement. OMB sought to address 
commenter concerns by re-writing this section to align closely with the 
law, add a new definition for telecommunications and video surveillance 
costs, and add a new section 2 CFR 200.471. The final language provides 
guidance describing the meaning of covered telecommunications as 
explained in the statute. The language also aligns with the 
requirements in the statute affecting the financial assistance 
community to include the prohibition of non-Federal entities from 
obligating or expending loan or grant funds to (1) procure or obtain, 
(2) extend or renew a contract to procure or obtain, or (3) enter into 
a contract (or extend or renew a contract) to procure or obtain, 
equipment, services, or systems that uses covered telecommunications 
equipment or services as a substantial or essential component of any 
system, or as a critical technology as part of any system.
    Federal awarding agencies are also required by the law to work with 
OMB to prioritize available funding and technical support to assist 
affected businesses, institutions and organizations. In addition, the 
funds must be prioritized as reasonably necessary for affected entities 
to transition from covered communications equipment and services, to 
procure replacement equipment and services, and to ensure that 
communications service to users and customers is sustained. Further, 
OMB added a new 2 CFR 200.471 Telecommunication and video surveillance 
costs to provide clarity that the telecommunications and video 
surveillance costs associated with 2 CFR 200.216 are unallowable. A new 
definition for telecommunication and video surveillance costs, which is 
described in 2 CFR 200.471, has also been added to 2 CFR for clarity.

B. Never Contract With the Enemy

    To meet statutory requirements, OMB is 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 members of the Armed Forces are actively 
engaged in hostilities.
    To implement Never Contract with the Enemy and to reflect current 
practice, OMB requires Federal awarding agencies to utilize the System 
for Award Management (SAM) Exclusions and the FAPIIS to ensure 
compliance before awarding a grant or cooperative agreement. Federal 
awarding agencies are prohibited from making awards to persons or 
entities listed in SAM Exclusions (NDAA 2017) 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 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 (NDAA 2015). 
This statute applies to procurement as well as to grants and 
cooperative agreements. OMB coordinated with the procurement community 
as appropriate before issuing this final guidance, including the roles 
and responsibilities of the covered combatant command and Federal 
awarding agencies.
Part 183 Never Contract With the Enemy
    Many of the comments focused on aligning the regulation with the 
authorizing legislation and streamlining and using consistent terms in 
the regulatory language. OMB concurred with these comments and made the 
necessary changes to the language. OMB also agreed with several 
comments suggested the use of ``recipient'' rather than ``non-Federal 
entity.'' In addition, OMB revised part 183 to include a reference to 
void covered grants or cooperative agreements, and updated specific 
parts of the legislative authority that were set to expire by aligning 
with recently passed legislation for the extension of dates.
    A couple commenters noted the potential burden associated with 
checking SAM.gov on a monthly basis. OMB concurred with these comments 
and revised the language accordingly.

C. Requirement for the FAPIIS To Include Information on a Non-Federal 
Entity's Parent, Subsidiary, or Successor Entities

    To meet statutory requirements, OMB revised 2 CFR parts 25 and 200 
to implement Sec. 852 of the NDAA for FY 2013 (NDAA 2013), which 
requires that the FAPIIS include information on a non-Federal entity's 
parent, subsidiary, or successor entities. OMB requires 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 
requires 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.
Part 25 Universal Identifier and System for Award Management
    OMB received a significant number of comments concerning 
subrecipient requirements and registration with the

[[Page 49517]]

SAM database. These commenters expressed concern with requiring 
subrecipients to fully register with the SAM database. The commenters 
thought this requirement would be overly burdensome and was 
unnecessary.
    It was not OMB's intention to require subrecipients to fully 
register with the SAM database. To address this concern, OMB added a 
new ``Subpart C-Recipient requirements of subrecipients'' and a note to 
the terms in appendix A to clearly state that subrecipients do not need 
to fully register with the SAM database.
    Further, several commenters thought the addition of the requirement 
for subrecipients to register with the SAM database, Federal agencies 
applying for or receiving Federal awards register in the SAM database 
made sections of part 25 confusing. The commenters thought that using 
the term ``Federal agency'' could be misunderstood. Some commenters 
thought this was particularly true with regard to section 100.
    OMB agreed that the addition of the term ``Federal agency'' in part 
25 made the requirements in part 25 less clear. OMB and the interagency 
work group also thought that there was a need for additional clarity on 
who the requirements actually apply to and in what situation. As a 
result, OMB added definitions for ``applicant'' and ``recipient'' in 
part 25 and removed ``non-Federal entity'' and ``Federal agency'' where 
appropriate throughout part 25.
25.200 Requirements for Notice of Funding Opportunities, Regulations, 
and Application Instructions
    Several commenters stated that their organizations do not have a 
higher level owner or subsidiaries and they may not have predecessors. 
OMB recognizes that not all entities will have the same organizational 
structure. The purpose of providing this information is for greater 
transparency in the awarding of Federal financial assistance. The 
regulatory language requires that applicants and recipients must 
provide the information ``if applicable.'' If the requested information 
is not applicable, an applicant or recipient would not be required to 
report it.

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

    OMB made 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 
has revised the reporting thresholds to further align financial 
assistance requirements with those of the Federal acquisition 
community.
    To increase transparency, OMB extended 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 made 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 revises the Federal awarding agency and pass-through entity 
reporting thresholds. For Federal awarding agencies, OMB revises 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 part 2, 
subpart 2.1. Consistent with the FAR threshold for subcontract 
reporting, OMB will raise the reporting threshold for subawards that 
equal or exceed $30,000.
    OMB proposed to revise 2 CFR part 25 to allow agencies the 
flexibility to exempt a foreign entity applying for or receiving an 
award 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. The exemption applies to cases where the Federal agency 
has conducted a risk-based analysis and deems it impractical for the 
entity to comply with the requirements(s). OMB proposed to make 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 continue to remain responsible 
for reporting these awards for transparency purposes.
    Finally, OMB will require Federal awarding agencies to associate 
Federal 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 Federal Assistance 
Listings information for display on www.usaspending.gov.
Part 25 Universal Identifier and System for Award Management
    Some commenters expressed concern regarding the proposal to expand 
SAM registration requirements to all type of Federal financial 
assistance as required by FFATA. Specifically, commenters requested 
clarity on who is considered the applicant or recipient in cases when 
the intended recipient does not have a direct relationship with the 
Federal awarding agency. For instance, for certain loan and loan 
guarantee programs, a third-party administers the program on behalf of 
the Federal awarding agency. One organization specifically expressed 
concern that these third-party administers may not participate in loan 
guarantee programs, if they are required to register in SAM. OMB 
disagrees that it is overly burdensome for third-party administrators 
to register in SAM, however, OMB agreed that it would be inappropriate 
to have the intended recipient who does not have a direct relationship 
with the Federal awarding agency to register in these instances. In 
response to these comments, OMB revised the definitions of applicant 
and recipient to clarify that SAM registration requirements apply to 
those entities that receive Federal awards directly from a Federal 
awarding agency and that applicants and recipients also include those 
entities that administer Federal awards on behalf of Federal awarding 
agencies.
25.110 Exceptions to This Part
    Some commenters supported raising the threshold for foreign 
organizations or foreign public entities to $100,000 in 2 CFR 25.110. 
Other commenters expressed concerns that a thorough pre-award Federal 
review would not be conducted for foreign entity recipients under this 
higher threshold and it would be a disservice to the American taxpayer 
to raise the threshold. OMB also received comments that requiring 
Federal awarding agencies to only grant exemptions to foreign 
organizations or foreign public entities on a case-by-case basis to be 
overly burdensome.
    OMB does not think that requiring Federal awarding agencies to 
determine whether to grant exemptions to foreign organizations or 
foreign public entities on a case-by-case basis is overly burdensome. 
Considering the comments received, OMB decided to retain the current 
threshold of $25,000.
    Based on feedback provided by agencies and in light of the COVID-19 
emergency and past emergency

[[Page 49518]]

situations where this requirement has been waived, OMB added an 
exception in Sec.  25.110 allowing agencies to waive the requirement to 
register in SAM when there are exigent circumstances that would prevent 
an applicant from registering prior to the submission of an 
application. Federal awarding agencies are responsible for the 
determination on whether there are exigent circumstances that prevent 
an applicant from registering in SAM and are no longer required to 
request a waiver from OMB in these instances.
Part 170 Reporting Subaward and Executive Compensation Information
170 Definitions
    Several commenters mentioned the difference between the term non-
Federal entity in part 170 and part 200 and requested that part 170 
reference part 200 for this definition. Related comments also were 
provided to the definitions of foreign organizations and foreign public 
entity. The definition of non-Federal entity in part 170 intentionally 
includes foreign organizations, foreign public entities, and for-profit 
organizations, which is not included in the definition of non-Federal 
entity in part 200. Part 200 only applies to these organization types 
when a Federal awarding agency chooses to apply the requirements in 
their adoption of part 200. Part 170 applies to foreign and for-profit 
organizations because of the Federal Funding Accountability and 
Transparency Act (Pub. L. 109-282, hereafter cited as ``Transparency 
Act'') requirements. Thus, the definition for non-Federal entity in 
part 200 and part 170 will remain different.
170.110 Types of Entities to Which This Part Applies
    Several commenters requested clarification on the language 
surrounding ``non-Federal'' and ``Federal agencies.'' OMB concurred 
with these comments and made the corresponding changes to ensure 
clarity. Further, OMB also agreed with comments that suggested 
clarification to Sec.  170.110(b) in relation to Title IV funds and 
made the subsequent edits in the final language.
170.115 Deviations
    OMB concurred with comments asking to define ``deviation'' to 
differentiate between exceptions by removing ``deviation'' and adding 
paragraph (c) to ``Types of Exemptions.''
170.200 Federal Awarding Agency Reporting
    OMB received several comments suggesting that a reference to the 
definition for micro-purchase in Sec.  200.1 be added to the end of the 
section. OMB concurred and made this change in the final language. 
Further, OMB received comments relating to the grammatical structuring 
of this section. After further review, OMB retained the existing 
language.
170.210 Requirements for Notices of Funding Opportunities, Regulations, 
and Application Instructions
    OMB concurred with a comment that suggested including the 
information on the requirements for Notice of Funding Opportunity found 
in 2 CFR 200.204 and appendix I to part 200. OMB made the suggested 
changes to appendix I to include these references. Further, comments 
inquired if OMB has considered collecting the assurance from applicants 
when they register and renew in beta.SAM.gov. OMB would like to note 
that this is already part of the requirements for award terms and 
conditions, and the needed assurance should go into the Compliance 
Supplement for auditors to check that the assurance is received from 
the recipient. Therefore, no changes related to obtaining assurances 
were made to the language in this section.
170.220 Award Term
    Several commenters referenced the thresholds discussed in part 25. 
OMB would like to point out that the thresholds in part 25 are 
unrelated to the threshold in Sec.  170.220. Additionally, several 
comments suggested changes that were outside of the scope of this 
revision. OMB concurred with a suggestion to remove a reference to the 
Recovery Act in appendix A. Further, a comment suggested the deletion 
of the insertion of ``and Federal agency'' in paragraph (a) of this 
section. OMB notes that some agencies can make awards to other 
agencies, dependent on the authority. Therefore, it is necessary to 
keep the language that was used in the proposed version. One commenter 
noted that raising the subaward reporting threshold from $25,000 to 
$30,000 is unlikely to result in greater efficiencies or ease 
administrative requirements and recommended for the threshold to be 
increased to at least $75,000 or $100,000. OMB disagrees with this 
commenter's recommendation, as the purpose of this change was to 
further align implementation of FFATA, as amended by DATA Act, between 
the Federal financial assistance and acquisition communities.
170.305 Federal Award
    Commenters had questions relating to how this definition differs 
from part 200. OMB would like to note that the definition differs 
because this section is discussing Federal awards in the context of 
``direct'' federal awards. Federal award in part 200 includes is more 
expansive to include caveats depending on which section it is applied 
to, so the definition cannot be the same. As such, the proposed 
language remains.
170.315 Executive
    One comment suggested clarifying this definition as many recipients 
of Federal awards are state and local governments with elected 
officials. OMB rejected this change as this is already covered within 
the ``Exceptions'' to this section. Further, one comment requested that 
this definition be included in part 200. OMB aims to eliminate 
duplicative definitions and thus respectfully declines this comment to 
also include the definition in part 200.
170.320 Federal Financial Assistance Subject to the Transparency Act
    A commenter noted that the term Federal financial assistance 
subject to the Transparency Act is not defined in part 200. OMB 
concurred with this comment and made edits to the definition in Sec.  
170.320 to clarify that the term includes Federal financial assistance 
as defined in part 200, with some limited exceptions.
170.325 Subaward
    Commenters recommended deleting the definition for ``Subaward'' and 
including a reference to the definition used in part 200 to reduce 
duplication. OMB concurred with this recommendation and made the 
subsequent change.

E. Aligning 2 CFR With Authoritative Sources

    OMB revises 2 CFR 200.431 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 has made this 
revision because GASB issued Statement 68, Accounting and Financial 
Reporting for Pensions which amends GASB Statement 27 and allows non-
Federal entities (NFE) to claim only estimated pension costs in their 
financial

[[Page 49519]]

statements. OMB's revision will allow non-Federal entities to continue 
to claim pension costs that are both actual and funded.
200.431 Compensation
    OMB appreciated the comments in support of the proposed changes. In 
response to several comments that asked for clarification, OMB is 
revising the final language to require state and local governments to 
be compliant with GASB #68 for pension costs. OMB would like to note 
that the cost associated with each fiscal year should be determined in 
accordance with GAAP.
    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. See above 
Section I for additional information on the changes to ``Improper 
Payment.''
    Some commenters expressed that the reference to OMB Circular A-123 
for the definition of ``Improper Payment'' added confusion and 
suggested retaining the original language. OMB considered this request 
and respectfully declined the comment in keeping with the practice to 
align the guidance with source documents, if possible.

III. Clarifying Requirements Regarding Areas of Misinterpretation

    Following the publication of 2 CFR part 200, 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 2 CFR part 200. In 
response, OMB is publishing 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 revises 2 CFR 200.332 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.
200.332 Requirements for Pass-Through Entities
    OMB received substantial feedback relating to the changes made in 
this section. The two main changes for this section are related to the 
clarification of the pass-through entities responsibilities toward the 
establishment of the subrecipient indirect cost rates and the pass-
through entities responsibilities for resolving the sub recipient's 
audit findings (Sec.  200.332(d)).
    Although most commenters approved of the proposed changes regarding 
the pass-through entities responsibilities for the subrecipient 
indirect cost rates, some requested clarification on specific 
situations:

 Where the subrecipient has a federally approved indirect cost 
rate
 where the subrecipient receives funds from multiple pass-
through entities from which it may be already established an indirect 
cost rate with one of the pass-through entity; or
 where the subrecipient decides to use the direct allocation 
method instead of the use of indirect cost rate for cost reimbursement.

OMB provides clarifications in the final language for all of the three 
situations above.

    Most commenters supported the proposed changes to clarify the pass-
through entities responsibility in the resolution of audit findings 
reported by the subrecipients and the required management decision 
letters to address the audit findings. Some commenters questioned the 
use of the term ``systemic findings'' to describe the findings that 
impact the whole organization. This section has been revised to 
streamline and clarify the original intent of the revision which limits 
the pass-through entity to review and resolve the audit findings that 
are specifically related to the subaward. OMB replaced the term 
``systemic findings'' with ``cross-cutting findings.'' OMB also added 
that written confirmation by the subrecipients for corrective actions 
on audit findings can be used as a means for follow-up and monitoring 
of the subrecipient's performance.

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

    OMB is adding language to the timing of submission of the 
disclosure statement (DS-2), which is only required for institutions of 
higher education that meet certain thresholds as defined in 48 CFR 
9903.202-1(f). This revision reduces burden while maintaining the 
requirement for institutions of higher education to implement policies 
that are in compliance with 2 CFR.
200.419 Cost Accounting Standards and Disclosure Statement
    OMB received several comments in response to 2 CFR 200.419 that 
focused on concerns with the legal instruments that were subject to 
this part. In response to these concerns, the language was revised to 
provide clarification.

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 is including revisions to 
clarify the following: The meaning of the words ``must'' and ``may'' as 
they pertain to requirements; applicability and documentation 
requirements when a non-Federal entity elects to charge the de minimis 
indirect cost rate of MTDC; PTE 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.
The Words ``must'' and ``may'' as They Pertain to Requirements
    All commenters that provided feedback on this section were in favor 
of incorporating the meaning of ``must'' and ``may'' within the 
guidance. One commenter suggested that the location for this change 
within the guidance could be within its own section. After 
consideration, OMB disagrees with the commenter and has determined that 
this change should remain in the applicability section of the guidance 
under the stated sub title.

[[Page 49520]]

De Minimis Indirect Cost Rate of MTDC Applicability and Documentation
    See Section I (K) for additional information on the comments 
received.
PTE Responsibilities Related to Indirect Cost Rates and Audits
    See Section III or additional information on the comments received.
Applicability of 2 CFR to FAR Based Contracts
    Many commenters expressed confusion regarding the changes to this 
section. The intent of the changes to this section are to make clear 
that the FAR applies to Federal contracts awarded to non-Federal 
entities, and that these requirements supersede the requirements of 2 
CFR part 200 in a Federal contract. Clarification was requested from a 
commenter to confirm if an audit conducted for a Cost Accounting 
Standards (CAS) applicable contract will take the place of a Single 
Audit and how an entity with multiple grants and only one CAS-contract 
would meet the requirements of the Single Audit Act.
    The language clarified in Sec.  200.101(c) to state that for CAS 
covered contracts, the CAS requirements regarding audit would supersede 
the audit requirements in subpart F. In addition, in the case where an 
entity receives many grants and one CAS covered contracts, the entity 
must comply to both the Single Audits for its grants and the CAS audit 
requirements for the CAS covered contract.

D. Applicability of Guidance to Federal Agencies

    OMB is making changes to 2 CFR 200.101 Applicability to clarify 
that Federal awarding agencies may apply the requirements of 2 CFR part 
200 to other Federal agencies, to the extent permitted by law. This 
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 part 200 may be applied, as appropriate. This change is consistent 
with how for-profit entities, foreign public entities, or foreign 
organizations are treated in the Uniform Guidance.
200.101 Applicability
    Several comments expressed concerns as to whether or not it is 
appropriate to include awards to Federal agencies in the scope of 2 
CFR. It was determined that it was appropriate to include Federal 
agencies in the scope of 2 CFR as some Federal agencies are authorized 
to receive grants or cooperative agreements as direct recipients or 
subrecipients. This addition clarifies that subparts A through E of 2 
CFR part 200 is applicable when determined by the Federal awarding 
agency. There will be no change from the proposed version.

E. Other Clarifications

Parts 25 and 170
    Many commenters expressed concerns that parts 25 and 170 were 
confusing, inconsistent and needed to be edited for clarity. In 
response to these comments, parts 25 and 170 have been revised 
throughout with many technical corrections to add clarity and 
consistency.
200.110 Effective/Applicability Date
    A number of comments, particularly from Federal agencies, expressed 
concern about the effective date for negotiated indirect cost rate 
agreements (NICRAs) in paragraph (b). The intent of this section is to 
retain the existing NICRAs until they are renegotiated and incorporate 
the requirements from the revision to 2 CFR upon renegotiation. Non-
Federal entities with a NIRCA are expected to work with their cognizant 
agency for indirect costs as appropriate. OMB clarified the intent for 
2 CFR 200.110(b). One Federal agency commenter stated that OMB should 
specify if the applicability date is for the entire guidance or for the 
revisions. OMB accepted this comment and made revisions accordingly.
200.200 Purpose
    All commenters provided recommendations to revise this section to 
better align the terms ``competitive'' and ``non-competitive'' with the 
new terms ``discretionary'' and ``non-discretionary.'' OMB concurs with 
the recommendation to revise this section to align with other changes 
within the guidance. In response to commenters, OMB has removed 2 CFR 
200.200(b) and made other technical corrections accordingly.
200.207 Standard Application Requirements
    OMB received one comment on this section that was out of scope for 
the current set of revisions, and therefore the proposed language 
remains the same.
Out of Scope Comments
    Many commenters submitted comments that were either not part of the 
scope of the effort, were not relevant to the revisions proposed, 
pertained to sections of the guidance that were not proposed to be 
revised, or would be a change too drastic that would warrant a need for 
the public to have an opportunity to provide input before finalizing. 
All comments within these categories were not accepted by OMB.
Changes From the Proposed Revisions Not Recommended
    Comments received for several provisions within 2 CFR were 
reviewed, deliberated, and determined that no changes were needed from 
the proposed revisions. Some of these provisions within 2 CFR include 
the following:

 200.201 Use of grant agreements (including fixed amount 
awards), cooperative agreements, and contracts
 200.207 Standard application requirements
 200.311 Real property
 200.312 Federally-owned and exempt property
 200.313 Equipment
 200.314 Supplies
 200.331 Subrecipient and contractor determinations
 200.430 Compensation--personal services
 400.458 Pre-award costs
200.402 Composition of Costs
    Some commenters requested clarity and noted that the use of 
``approved budget period'' is specific to Federal financial assistance 
when 2 CFR 200.402 would apply to both contracts and Federal financial 
assistance awarded to non-Federal entities. Another commenter suggested 
that further clarification is needed for what ``cost principle'' and 
``budget period'' mean. Based on the vast array of comments received 
and the revised definitions for finalization, OMB decided to remove the 
language proposed for 2 CFR 200.402.
200.449 Interest
    One comment was received for this provision. The commenter 
suggested that OMB provide a different example within 2 CFR 200.449 
because lease contracts that transfer ownership are essentially debt 
financing. The commenter explains that the example is comparing debt 
financing to debt financing, which doesn't work for the intent. The 
commenter provided a suggested edit that would enable the example to 
remain and retain the original intent. OMB concurred with the commenter 
and made the suggested edit accordingly.
200.461 Publication and Printing Costs
    All commenters requested clarity and suggested revisions to this 
provision. One commenter objected to specifying that costs must be 
charged to the last budget period, citing that printing costs

[[Page 49521]]

are historically charged at various stages of the award. One commenter 
noted that these costs have historically been allowable up until the 
closeout of the award. Edits were suggest to provide additional clarity 
in Sec.  200.461(b)(3) to specify that The non-Federal entity may 
charge the Federal award during closeout. OMB concurs with this 
suggested revision and made the change accordingly.
200.507 Program-Specific Audits
    One comment was received for 2 CFR 200.507. The commenter requested 
a clarification on the first phase to indicate ``in some cases'' rather 
than ``in many cases'' because Appendix VI of the 2019 Compliance 
Supplement only shows two current program specific audit guides. OMB 
concurred with the commenter and made the revision accordingly. The 
commenter provided a second recommendation to remove the 2014 beginning 
date and instead include the current reference to the Compliance 
Supplement appendix. OMB also concurs with this suggestion from the 
commenter and made the revisions.
200.515 Audit Reporting
    The comments submitted for 2 CFR 200.515 provided suggestions for 
clarity. One commenter suggested reviewing this subsection against what 
the Federal Audit Clearinghouse is collecting in Part III: Information 
from the Schedule of Findings and Questioned Costs, Item 2. Financial 
Statements, to ensure an appropriate alignment between the regulation 
and the Form. Another commenter inquired about the intent of the 
revisions to this provision. OMB considered and discussed all the 
comments for clarity and made revisions accordingly.
Executive Orders 12866 and 13563
    Executive Orders 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 significant regulatory action under 
Executive Order 12866.
Regulatory Flexibilities Act
    The Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires a 
regulatory flexibility analysis or a certification that the rule will 
not have a significant economic impact on a substantial number of small 
entities. OMB expects this guidance to have a significant economic 
impact on a substantial number of such entities. There are some 
proposed revisions that may impose burden, however, there are more 
proposed revisions that reduce burden to small entities. When reviewing 
all the revisions, the burden that will be reduced for recipients is 
much greater than the burden imposed.
    The revisions to 2 CFR are not applicable to Federal financial 
assistance awards issued prior to the effective dates provided in the 
Dates section of this Notice of Final Guidance, including financial 
assistance awards issued prior to those dates under the Coronavirus 
Aid, Relief, and Economic Support (CARES) Act of 2020 (Pub. L. 116-
136). OMB plans to consult with applicable agencies to provide 
regulatory flexibility analyses in future revisions to 2 CFR and its 
subcomponents.
    The applicability of Federal financial assistance in 2 CFR part 25 
will be expanded beyond grants and cooperative agreements to include 
other types of financial assistance such as loans and insurance. This 
revision ensures compliance with FFATA, as amended by the DATA Act, and 
will impact small entities that voluntarily seek financial assistance. 
It will not have a significant impact on a substantial number of U.S. 
small entities as approximately 69,185 small entities who received 
awards for other types of financial assistance did not have a unique 
entity identifier in FY 2019, while the Small Business Administration's 
Office of Advocacy reported 30.7 million U.S. small businesses in that 
same calendar year. Currently, 2 CFR part 25 requires all non-Federal 
entities that apply for grants and cooperative agreements to register 
in the SAM. In alignment with FFATA, the guidance provides that all 
entities that apply directly to a Federal program for financial 
assistance such as loans and insurance must register in SAM, which 
requires the establishment of a unique entity identifier. Individuals 
who receive Federal financial assistance as a natural person remain 
exempt from this requirement. In practice, some Federal awarding 
agencies already require SAM registration for all types of Federal 
financial assistance and the change would make this practice consistent 
among agencies. OMB recognizes that this new requirement may be 
burdensome to small entities and there may be instances where it is 
appropriate for Federal awarding agencies to request an exception or 
delay implementation of this requirement for their programs. In 
response, Federal awarding agencies may exercise the flexibility 
provided in 2 CFR 25.110 to either exempt an applicant or recipient 
from this requirement or request an exception from OMB on a case-by-
case for a class applicants or recipients, particularly in situations 
of national emergency such as natural disasters and pandemics.
    As noted in the Paperwork Reduction Act section, as of July 1, 
2020, there were 159,477 unique Federal financial assistance 
registrants in the SAM. According to data accessed from 
USASpending.gov, in FY 2018, approximately 2,952 small entities who 
received awards for other types of financial assistance did not have a 
unique entity identifier. Assuming that non-Federal entities with a 
unique entity identifier reported to USASpending.gov are already 
registered in SAM, this change will impact approximately 2,952 small 
entities annually. SAM registration is estimated to take 2.5 hours per 
response, which results in 7,380 burden hours annually.
    The guidance also provides consistency among definitions and terms 
and proposes several provisions to increase transparency regarding 
Federal spending. These revisions are intended to reduce recipient 
burden and will 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 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 will 
introduce burden to small entities that are prohibited from obligating 
or expending grant or loan 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. Since this is a new legal requirement, the 
burden estimate is difficult to calculate. It will impact all unique 
entities awarded Federal financial assistance, of which 69,185 are 
small entities.
    The 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

[[Page 49522]]

subsidiary. Further, the burden is minimal for a non-Federal entity to 
provide the name of its immediate owner and highest-level owner.
    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 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 
guidance contains information collection requirements and will impact 
the current Information Collection Requests approved under OMB control 
number 3090-0290 managed by GSA. Accordingly, GSA will submit a request 
for approval to amend the existing Information Collection Requests for 
SAM registration requirements for 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.
    Previously, SAM only requires that applicants and recipients of 
Federal financial assistance in the form of grants register in the 
system. However, applicants and recipients are required to maintain 
accurate SAM registration 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, not all registrants ultimately 
apply for, or receive, Federal financial assistance. OMB aggregated SAM 
data with Federal financial assistance recipient data from 
USASpending.gov, excluding grants, to determine the anticipated number 
of additional Federal financial assistance in SAM. OMB ran reports in 
USASpending.gov to identify the number of unique recipients of Federal 
financial assistance other than grants to isolate the total number of 
potential registrants in SAM as a result of the updates to the proposed 
guidance.
    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.
    In FY 2019 there were 1,751 loan and 8,915 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 (8,915) 
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 GSA 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 guidance also requires that registrants for Federal financial 
assistance provide information on their owner, predecessor, and 
subsidiary, including the 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 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 0.1 hours per 
response. 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: 0.1.
    Total response Burden Hours: 17,208.

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, Grant programs, Grants administration, International 
organizations, Reporting and recordkeeping requirements.

2 CFR Part 200

    Accounting, Colleges and universities, Grant programs, Grants 
administration, 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 amends 2 CFR chapters I and II 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 and paragraph 
(a) to read as follows:


Sec.  25.100   Purposes of this part.

    This part provides guidance to Federal awarding agencies to 
establish:
    (a) The unique entity identifier as a universal identifier for 
Federal financial assistance applicants, as well as recipients and 
their direct subrecipients, and;
* * * * *

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.  25.406.

[[Page 49523]]


0
4. Revise Sec.  25.110 to read as follows:


Sec.  25.110  Exceptions to this part.

    (a) General. Through a Federal awarding agency's implementation of 
the guidance in this part, this part applies to all applicants and 
recipients of Federal awards, other than those exempted by statute or 
exempted in paragraphs (b) and (c) of this section that apply for or 
receive agency awards.
    (b) Exceptions 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 nonprofit organization he or she may own or operate in his 
or her name).
    (c) Other exceptions. (1) Under a condition identified in paragraph 
(c)(2) of this section, a Federal awarding agency may exempt an 
applicant or recipient from an applicable requirement to obtain a 
unique entity identifier and 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 recipient 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 
an applicant or recipient are--
    (i) For any applicant or recipient, 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 applicant or recipient'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 $25,000, 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.
    (iii) For an applicant, if the Federal awarding agency makes a 
determination that there are exigent circumstances that prohibit the 
applicant from receiving a unique entity identifier and completing SAM 
registration prior to receiving a Federal award. In these instances, 
Federal awarding agencies must require the recipient to obtain a unique 
entity identifier and complete SAM registration within 30 days of the 
Federal award date.
    (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.
    (d) Class exceptions. OMB may allow exceptions for classes of 
Federal awards, applicants, and recipients subject to the requirements 
of this part when exceptions are not prohibited by statute.


Sec.  25.115   [Removed]

0
5. Remove Sec.  25.115.

0
6. 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.  25.406 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 on or after August 13, 2020.
    (b) The notice of funding opportunity, regulation, or other 
issuance must require each applicant 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, 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 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 agency's policy 
is to make the Federal award to a lead entity for the consortium, the 
unique entity identifier of the lead applicant 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 its 
information in the SAM database on an annual basis from the date of 
initial registration or subsequent updates to ensure it is current, 
accurate and complete.

0
7. 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 an applicant or 
recipient until the entity 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 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
8. 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.

[[Page 49524]]


0
9. 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.  25.406) 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 Federal financial assistance applicants 
and recipients.

0
10. 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 
awarding agency must include in each Federal award (as defined in Sec.  
25.405) 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
11. Revise subpart C to read as follows:

Subpart C--Recipient Requirements of Subrecipients


Sec.  25.300   Requirement for recipients to ensure subrecipients have 
a unique entity identifier.

    (a) A recipient may not make a subaward to a subrecipient unless 
that subrecipient has obtained and provided to the recipient a unique 
entity identifier. Subrecipients are not required to complete full SAM 
registration to obtain a unique entity identifier.
    (b) A recipient must notify any potential subrecipients that the 
recipient cannot make a subaward unless the subrecipient has obtained a 
unique entity identifier as described in paragraph (a) of this section.

0
12. Add subpart D to read as follows:
Subpart D--Definitions
Sec
25.400 Applicant.
25.401 Federal Awarding Agency.
25.405 Federal Award.
25.406 Federal financial assistance.
25.407 Recipient.
25.410 System for Award Management (SAM).
25.415 Unique entity identifier.
25.425 For-profit organization.
25.430 Foreign organization.
25.431 Foreign public entity.
25.432 Highest level owner.
25.433 Indian Tribe (or ``Federally recognized Indian Tribe'').
25.440 Local government.
25.443 Non-Federal entity.
25.445 Nonprofit organization.
25.447 Predecessor.
25.450 State.
25.455 Subaward.
25.460 Subrecipient.
25.462 Subsidiary.
25.465 Successor.

Subpart D--Definitions


Sec.  25.400   Applicant.

    Applicant, for the purposes of this part, means a non-Federal 
entity or Federal agency that applies for Federal awards.


Sec.  25.401   Federal Awarding Agency.

    Federal Awarding Agency has the meaning given in 2 CFR 200.1.


Sec.  25.405   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 received from a Federal awarding agency.


Sec.  25.406   Federal financial assistance.

    (a) Federal financial assistance, for the purposes of this part, 
means assistance that entities received or administer in the form of:
    (1) Grant;
    (2) Cooperative agreements (which does not include a cooperative 
research and development agreement pursuant to the Federal Technology 
Transfer Act of 1986, as amended (15 U.S.C. 3710a));
    (3) Loans;
    (4) Loan guarantees;
    (5) Subsidies;
    (6) Insurance;
    (7) Food commodities;
    (8) Direct appropriations;
    (9) Assessed or voluntary contributions; or
    (10) Any other financial assistance transaction that authorizes the 
non-Federal entity's expenditure of Federal funds.
    (b) Federal financial assistance, for the purposes of this part, 
does not include:
    (1) Technical assistance, which provides services in lieu of money; 
and
    (2) A transfer of title to federally owned property provided in 
lieu of money, even if the award is called a grant.


Sec.  25.407   Recipient.

    Recipient, for the purposes of this part, means a non-Federal 
entity or Federal agency that received a Federal award. This term also 
includes a non-Federal entity who administers Federal financial 
assistance awards on behalf of a Federal agency.


Sec.  25.410  System for Award Management (SAM).

    System for Award Management (SAM) has the meaning given in 
paragraph C.1 of the award term in appendix A to this part.


Sec.  25.415   Unique entity identifier.

    Unique entity identifier has the meaning given in paragraph C.2 of 
the award term in appendix A to this part.


Sec.  25.425  For-profit organization.

    For-profit organization means a non-Federal entity organized for 
profit. It includes, but is not limited to:
    (a) An ``S corporation'' incorporated under Subchapter S of the 
Internal Revenue Code;
    (b) A corporation incorporated under another authority;
    (c) A partnership;
    (d) A limited liability corporation or partnership; and
    (e) A sole proprietorship.


Sec.  25.430  Foreign organization.

    Foreign organization has the meaning given in 2 CFR 200.1.


Sec.  25.431  Foreign public entity.

    Foreign public entity has the meaning given in 2 CFR 200.1.


Sec.  25.432  Highest level owner.

    Highest level owner has the meaning given in 2 CFR 200.1.


Sec.  25.433  Indian Tribe (or ``federally recognized Indian Tribe'').

    Indian Tribe (or ``federally recognized Indian Tribe'') has the 
meaning given in 2 CFR 200.1.


Sec.  25.440   Local government.

    Local government has the meaning given in 2 CFR 200.1.


Sec.  25.443   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.


Sec.  25.445   Nonprofit organization.

    Non-Federal organization, has the meaning given in 2 CFR 200.1.


Sec.  25.447  Predecessor.

    Predecessor means a non-Federal entity that is replaced by a 
successor and includes any predecessors of the predecessor.


Sec.  25.450   State.

    State has the meaning given in 2 CFR 200.1.


Sec.  25.455  Subaward.

    Subaward has the meaning given in 2 CFR 200.1.

[[Page 49525]]

Sec.  25.460   Subrecipient.

    Subrecipient has the meaning given in 2 CR 200.1.


Sec.  25.462   Subsidiary.

    Subsidiary has the meaning given in 2 CFR 200.1.


Sec.  25.465  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
13. 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 Federal financial assistance within the 
last three years, if applicable, 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 entity (see 
definition in paragraph C of this award term) may receive a subaward 
from you until the entity has provided its Unique Entity Identifier to 
you.
    2. May not make a subaward to an entity unless the entity has 
provided its Unique Entity Identifier to you. Subrecipients are not 
required to obtain an active SAM registration, but must obtain a Unique 
Entity Identifier.

C. Definitions

    For purposes of this term:
    1. System for Award Management (SAM) means the Federal repository 
into which a recipient 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 assigned by SAM to 
uniquely identify business entities.
    3. Entity includes non-Federal entities as defined at 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;
    c. A domestic for-profit organization; and
    d. A domestic or foreign for-profit organization; and
    d. A Federal agency.
    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
14. The authority citation for part 170 continues to read as follows:

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

0
15. Revise Sec.  170.100 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
16. Revise Sec.  170.105 to read as follows:


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

    This part applies to 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
17. Revise Sec.  170.110 to read as follows:


Sec.  170.110   Exceptions to which this part applies.

    (a) General. Through a Federal awarding agency's implementation of 
the guidance in this part, this part applies to recipients, other than 
those exempted by law or excepted in accordance with paragraphs (b) and 
(c) of this section, that--
    (1) Apply for or receive Federal awards; or
    (2) Receive subawards under Federal awards.
    (b) Exceptions. (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 nonprofit 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--
    (i) 80 percent or more of its annual gross revenue in Federal 
procurement contracts (and subcontracts) and Federal financial 
assistance awards subject to the Transparency Act, as defined at Sec.  
170.320 (and subawards); and
    (ii) $25,000,000 or more in annual gross revenue from Federal 
procurement contracts (and subcontracts) and Federal financial 
assistance awards subject to the Transparency Act, as defined at Sec.  
170.320; and
    (3) The public does not have access to information about the 
compensation of senior executives, unless otherwise publicly 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.
    (c) Exceptions for classes of Federal awards or recipients. OMB may 
allow exceptions for classes of Federal awards or recipients subject to 
the requirements of this part when exceptions are not prohibited by 
statute.


Sec.  170.115   [Removed]

0
18. Remove Sec.  170.115.

0
19. Revise Sec.  170.200 to read as follows:


Sec.  170.200   Federal awarding agency reporting requirements.

    (a) Federal awarding agencies are required to publicly 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 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

[[Page 49526]]

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
20. Add Sec.  170.210 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 under which Federal awards may be made that 
are subject to Transparency Act reporting requirements, 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 for Federal 
financial assistance and that does not have an exception under Sec.  
170.110(b) to have the necessary processes and systems in place to 
comply with the reporting requirements should they receive Federal 
funding.

0
21. 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 recipient 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 that 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
22. Revise Sec.  170.300 to read as follows:


Sec.  170.300   Federal agency.

    Federal agency means a Federal agency as defined at 5 U.S.C. 551(1) 
and further clarified by 5 U.S.C. 552(f).

0
23. Add Sec.  170.301 to read as follows:


Sec.  170.301   Federal awarding agency.

    Federal awarding agency has the meaning given in 2 CFR 200.1.

0
24. 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 recipient receives directly from a 
Federal awarding agency.

0
25. Add Sec.  170.307 to read as follows:


Sec.  170.307  Foreign organization.

    Foreign organization has the meaning given in 2 CFR 200.1.

0
26. Add Sec.  170.308 to read as follows:


Sec.  170.308  Foreign public entity.

    Foreign public entity has the meaning given in 2 CFR 200.1.

0
27. 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 the purposes of this part:
    (a) A foreign organization;
    (b) A foreign public entity; and
    (c) A domestic or foreign for-profit organization.

0
28. Amend Sec.  170.320 by correctly designating the paragraph (b) that 
follows paragraph (j) as paragraph (k) and by revising paragraphs (k) 
introductory text and (k)(2) to read as follows:


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

* * * * *
    (k) Federal financial assistance subject to the Transparency Act, 
does not include--
* * * * *
    (2) A transfer of title to federally-owned property provided in 
lieu of money, even if the award is called a grant;
* * * * *

0
29. Add Sec.  170.322 to read as follows:


Sec.  170.322  Recipient.

    Recipient, for the purposes of this part, means a non-Federal 
entity or Federal agency that received a Federal award.

0
30. Revise Sec.  170.325 to read as follows:


Sec.  170.325  Subaward.

    Subaward has the meaning given in 2 CFR 200.1.

0
31. Revise appendix A to part 170 to read as follows:

Appendix A to Part 170--Award Term

I. Reporting Subawards and Executive Compensation

    a. Reporting of first-tier subawards.
    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 for a subaward to a non-Federal entity or 
Federal agency (see definitions in paragraph e. of this award term).
    2. Where and when to report.
    i. The non-Federal entity or Federal agency must report each 
obligating action described in paragraph a.1. of this award term to 
http://www.fsrs.gov.
    ii. For subaward information, report no later than the end of the 
month following the month in which the obligation was made. (For 
example, if the obligation was made on November 7, 2010, the obligation 
must be reported by no later than December 31, 2010.)
    3. What to report. You must report the information about each 
obligating action that the submission instructions posted at http://www.fsrs.gov specify.
    b. Reporting total compensation of recipient executives for non-
Federal entities.
    1. Applicability and what to report. You must report total 
compensation for each of your five most highly compensated executives 
for the preceding completed fiscal year, if--
    i. The total Federal funding authorized to date under this Federal 
award equals or exceeds $30,000 as defined in 2 CFR 170.320;
    ii. in the preceding fiscal year, you received--
    (A) 80 percent or more of your annual gross revenues from Federal 
procurement contracts (and subcontracts) and Federal financial 
assistance subject to the Transparency Act, as defined at 2 CFR 170.320 
(and subawards), and
    (B) $25,000,000 or more in annual gross revenues from Federal 
procurement contracts (and subcontracts) and Federal financial 
assistance subject to the Transparency Act, as defined at 2 CFR 170.320 
(and subawards); and,
    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/execomp.htm.)

[[Page 49527]]

    2. Where and when to report. You must report executive total 
compensation described in paragraph b.1. of this award term:
    i. As part of your registration profile at https://www.sam.gov.
    ii. By the end of the month following the month in which this award 
is made, and annually thereafter.
    c. Reporting of Total Compensation of Subrecipient Executives.
    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--
    i. in the subrecipient's preceding fiscal year, the subrecipient 
received--
    (A) 80 percent or more of its annual gross revenues from Federal 
procurement contracts (and subcontracts) and Federal financial 
assistance subject to the Transparency Act, as defined at 2 CFR 170.320 
(and subawards) and,
    (B) $25,000,000 or more in annual gross revenues from Federal 
procurement contracts (and subcontracts), and Federal financial 
assistance subject to the Transparency Act (and subawards); and
    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/execomp.htm.)
    2. Where and when to report. You must report subrecipient executive 
total compensation described in paragraph c.1. of this award term:
    i. To the recipient.
    ii. By the end of the month following the month during which you 
make the subaward. For example, if a subaward is obligated on any date 
during the month of October of a given year (i.e., between October 1 
and 31), you must report any required compensation information of the 
subrecipient by November 30 of that year.
    d. Exemptions.
    If, in the previous tax year, you had gross income, from all 
sources, under $300,000, you are exempt from the requirements to 
report:
    i. Subawards, and
    ii. The total compensation of the five most highly compensated 
executives of any subrecipient.
    e. Definitions. For purposes of this award term:
    1. Federal Agency means a Federal agency as defined at 5 U.S.C. 
551(1) and further clarified by 5 U.S.C. 552(f).
    2. Non-Federal entity means all of the following, as defined in 2 
CFR part 25:
    i. A Governmental organization, which is a State, local government, 
or Indian tribe;
    ii. A foreign public entity;
    iii. A domestic or foreign nonprofit organization; and,
    iv. A domestic or foreign for-profit organization
    3. Executive means officers, managing partners, or any other 
employees in management positions.
    4. Subaward:
    i. This term means a legal instrument to provide support for the 
performance of any portion of the substantive project or program for 
which you received this award and that you as the recipient award to an 
eligible subrecipient.
    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 200.331).
    iii. A subaward may be provided through any legal agreement, 
including an agreement that you or a subrecipient considers a contract.
    5. Subrecipient means a non-Federal entity or Federal agency that:
    i. Receives a subaward from you (the recipient) under this award; 
and
    ii. Is accountable to you for the use of the Federal funds provided 
by the subaward.
    6. Total compensation means the cash and noncash dollar value 
earned by the executive during the recipient's or subrecipient's 
preceding fiscal year and includes the following (for more information 
see 17 CFR 229.402(c)(2)).

0
31a. 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 recipients.
183.30 Access to records.
183.35 Definitions.

APPENDIX A TO PART 183--CLAUSES FOR AWARD AGREEMENTS

    Authority: Pub. L. 113-291.


Sec.  183.5  Purpose of this part.

    This part provides guidance to Federal awarding agencies on the 
implementation of the Never Contract with the Enemy requirements 
applicable to certain grants and cooperative agreements, as specified 
in subtitle E, title VIII of the National Defense Authorization Act 
(NDAA) for Fiscal Year (FY) 2015 (Pub. L. 113-291), as amended by Sec. 
822 of the National Defense Authorization Act for Fiscal Year 2020 
(Pub. L. 116-92).


Sec.  183.10   Applicability.

    (a) This part 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 this part are applicable until the date of 
expiration as provided in law.


Sec.  183.15  Responsibilities of Federal awarding agencies.

    (a) Prior to making an award for a covered grant or cooperative 
agreement (see also Sec.  183.35), the Federal awarding agency must 
check the current list of prohibited or restricted persons or entities 
in the System Award Management (SAM) Exclusions.
    (b) The Federal awarding agency may include the award term provided 
in appendix A of this part in all covered grant and cooperative 
agreement awards in accordance with Never Contract with the Enemy.
    (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 covered persons or entities; 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 covered persons or entities.
    (d) When a Federal awarding agency becomes aware of such a person 
or entity, it may do any of the following actions:
    (1) Restrict the future award of all Federal contracts, grants, and 
cooperative agreements to the person or entity based upon concerns that 
Federal awards to the entity would provide

[[Page 49528]]

grant funds directly or indirectly to a covered person or entity.
    (2) Terminate any contract, grant, or cooperative agreement to a 
covered person or entity upon becoming aware that the 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.
    (3) Void in whole or in part any grant, cooperative agreement or 
contracts of the executive agency concerned upon a written 
determination by the head of contracting activity or other appropriate 
official that the grant or cooperative agreement provides funds 
directly or indirectly to a covered person or entity.
    (e) The Federal awarding agency must notify recipients in writing 
regarding its decision to restrict all future awards and/or to 
terminate or void a grant or cooperative agreement. The agency must 
also notify the recipient in writing about the recipient's right to 
request an administrative review (using the agency's procedures) of the 
restriction, termination, or void 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, 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 or voids 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 Office of Management and Budget (OMB)-designated integrity and 
performance system accessible through SAM (currently the Federal 
Awardee Performance and Integrity Information System (FAPIIS)).
    (c) The Federal awarding agency shall document and report 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):
    (1) Any action to restrict all future awards or to terminate or 
void an award with a covered person or entity.
    (2) Any decision not to restrict all future awards, terminate, or 
void 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.
    (d) Each report referenced in paragraph (c)(1) of this section 
shall include:
    (1) The executive agency taking such action.
    (2) An explanation of the basis for the action taken.
    (3) The value of the terminated or voided grant or cooperative 
agreement.
    (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 or voided.
    (e) Each report referenced in paragraph (c)(2) of this section 
shall include:
    (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 recipient and lower tier entity (e.g., 
subrecipient or contractor) 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:
    (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 recipients.

    (a) Recipients of covered grants or cooperative agreements must 
fulfill the requirements outlined in the award term provided in 
appendix A to this part.
    (b) Recipients must also flow down the provisions in award terms 
covered in appendix A to this part to all contracts and subawards under 
the award.


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.  183.35) 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.
    (4) The United States Pacific Command.
    (5) The United States Southern Command.
    (6) The United States Transportation Command.
    Covered grant or 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 A to Part 183--Award Terms for Never Contract With the Enemy

    Federal awarding agencies may include the following award terms in 
all

[[Page 49529]]

awards for covered grants and cooperative agreements in accordance with 
Never Contract with the Enemy:

Term 1

Prohibition on Providing Funds to the Enemy

    (a) The recipient 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, which must be completed through 2 CFR 180.300 
prior to issuing a subaward or contract and;
    (2) Terminate or void 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.
    (b) The recipient may include the substance of this clause, 
including paragraph (a) of this clause, 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.
    (c) The Federal awarding agency has the authority to terminate or 
void this grant or cooperative agreement, in whole or in part, if the 
Federal awarding agency becomes aware that the recipient 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 coalition 
forces involved in a contingency operation in which members of the 
Armed Forces are actively engaged in hostilities.


(End of term)

Term 2

Additional Access to Recipient Records

    (a) 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 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.


(End of term)

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

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

    Authority: 31 U.S.C. 503


0
33. Amend Sec.  200.0 by removing the acronym CFDA, revising the 
acronym MTDC, adding in alphabetical order the acronym NFE, and 
revising the acronym SAM to read as follows:


Sec.  200.0  Acronyms.

* * * * *
MTDC Modified Total Direct Cost
NFE Non-Federal Entity
* * * * *
SAM System for Award Management
* * * * *

0
34. 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. For purposes of this part, the following definitions 
apply:
    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 publicly available listing of 
Federal assistance programs managed and administered by the General 
Services Administration, formerly known as the Catalog of Federal 
Domestic Assistance (CFDA).
    Assistance listing number means a unique number assigned to 
identify a Federal Assistance Listings, formerly known as the CFDA 
Number.
    Assistance listing program title means the title that corresponds 
to the Federal Assistance Listings Number, formerly known as the CFDA 
program title.
    Audit finding means deficiencies which the auditor is required by 
Sec.  200.516(a) to report in the schedule of findings and questioned 
costs.
    Auditee means any non-Federal entity that expends Federal awards 
which must be audited under subpart F of this part.
    Auditor means an auditor who is a public accountant or a Federal, 
State, local government, or Indian tribe audit organization, which 
meets the general standards specified for external auditors in 
generally accepted government auditing standards (GAGAS). The term 
auditor does not include internal auditors of nonprofit organizations.
    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 from the start date of a 
funded portion

[[Page 49530]]

of an award to the end date of that funded portion during which 
recipients are authorized to expend the funds awarded, including any 
funds carried forward or other revisions pursuant to Sec.  200.308.
    Capital assets means:
    (1) 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:
    (i) 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 Government Accounting Standards Board (GASB) 
standards or a finance lease under Financial Accounting Standards Board 
(FASB) standards; and
    (ii) 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).
    (2) 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 lessee'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.
    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 or local 
government or Indian tribe on a centralized basis to its departments 
and agencies. The costs of these services may be allocated or billed to 
users.
    Claim means, depending on the context, either:
    (1) A written demand or written assertion by one of the parties to 
a Federal award seeking as a matter of right:
    (i) The payment of money in a sum certain;
    (ii) The adjustment or interpretation of the terms and conditions 
of the Federal award; or
    (iii) Other relief arising under or relating to a Federal award.
    (2) A request for payment that is not in dispute when submitted.
    Class of Federal awards means a group of Federal awards either 
awarded under a specific program or group of programs or to a specific 
type of 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.  200.344.
    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.  200.332(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 Institutions of Higher Education (IHEs): Appendix III to 
this part, paragraph C.11.
    (2) For nonprofit organizations: Appendix IV to this part, 
paragraph C.2.a.
    (3) For State and local governments: Appendix V to this part, 
paragraph F.1.
    (4) For Indian tribes: Appendix VII to this part, paragraph D.1.
    Compliance supplement means an annually updated authoritative 
source for auditors that serves to identify existing important 
compliance requirements that the Federal Government expects to be 
considered as part of an audit. Auditors use it to understand the 
Federal program's objectives, procedures, and compliance requirements, 
as well as audit objectives and suggested audit procedures for 
determining compliance with the relevant Federal program.
    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 the 
definitions of supplies and information technology systems in this 
section.
    Contract means, for the purpose of Federal financial assistance, a 
legal instrument by which a recipient or subrecipient purchases 
property or services needed to carry out the project or program under a 
Federal award. For additional information on subrecipient and 
contractor determinations, see Sec.  200.331. See also the definition 
of subaward in this section.
    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 and a recipient or a pass-
through entity and a subrecipient 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 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 of the Federal awarding agency in carrying out 
the activity contemplated by the Federal award.
    (3) The term does not include:
    (i) A cooperative research and development agreement as defined in 
15 U.S.C. 3710a; or
    (ii) An agreement that provides only:
    (A) Direct United States Government cash assistance to an 
individual;
    (B) A subsidy;
    (C) A loan;
    (D) A loan guarantee; or

[[Page 49531]]

    (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 the definitions of final cost 
objective and intermediate cost objective in this section.
    Cost sharing or matching means the portion of project costs not 
paid by Federal funds or contributions (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 all Federal awards (including 
Federal awards of more than one Federal awarding agency or pass-through 
entity).
    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.
    Discretionary award means an award in which the Federal awarding 
agency, in keeping with specific statutory authority that enables the 
agency to exercise judgment (``discretion''), selects the recipient 
and/or the amount of Federal funding awarded through a competitive 
process or based on merit of proposals. A discretionary award may be 
selected on a non-competitive basis, as appropriate.
    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 the definitions of 
capital assets, computing devices, general purpose equipment, 
information technology systems, special purpose equipment, and supplies 
in this section.
    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 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 recipient 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 of 
Federal financial assistance in this section, 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.
    Federal financial assistance means
    (1) 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);
    (iv) Direct appropriations;
    (v) Food commodities; and
    (vi) Other financial assistance (except assistance listed in 
paragraph (2) of this definition).
    (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;

[[Page 49532]]

    (iii) Interest subsidies; and
    (iv) Insurance.
    (3) For Sec.  200.216, Federal financial assistance includes 
assistance that non-Federal entities receive or administer in the form 
of:
    (i) Grants;
    (ii) Cooperative agreements;
    (iii) Loans; and
    (iv) Loan Guarantees.
    (4) 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.  200.330 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) The percentage of Federal participation in the total cost of 
the real property, equipment, or supplies; 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 
Listings Number.
    (2) When no Assistance Listings Number is assigned, all Federal 
awards 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 in this section.
    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 of cost objective and 
intermediate cost objective in this section.
    Financial obligations, when referencing a recipient's or 
subrecipient's use 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.  200.102(c), 200.201(b), and 200.333.
    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.
    Foreign public entity means:
    (1) A foreign government or foreign governmental entity;
    (2) A public international organization, which is an organization 
entitled to enjoy privileges, exemptions, and immunities as an 
international organization under the International Organizations 
Immunities Act (22 U.S.C. 288-288f);
    (3) An entity owned (in whole or in part) or controlled by a 
foreign government; or
    (4) Any other entity consisting wholly or partially of one or more 
foreign governments or foreign governmental entities.
    General purpose equipment means equipment which is not limited to 
research, medical, scientific or other technical activities. Examples 
include office equipment and furnishings, modular offices, telephone 
networks, information technology equipment and systems, air 
conditioning equipment, reproduction and printing equipment, and motor 
vehicles. See also the definitions of equipment and special purpose 
equipment in this section.
    Generally accepted accounting principles (GAAP) has the meaning 
specified in accounting standards issued by the GASB and the FASB.
    Generally accepted government auditing standards (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 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 of the Federal awarding agency 
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;
    (vi) 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 
Federal Acquisition Regulations (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 means:
    (1) Any payment that should not have been made or that was made in 
an incorrect amount under statutory, contractual, administrative, or 
other legally applicable requirements.
    (i) Incorrect amounts are overpayments or underpayments that are 
made to eligible recipients (including inappropriate denials of payment 
or service, any payment that does not account for credit for applicable 
discounts, payments that are

[[Page 49533]]

for an incorrect amount, and duplicate payments). An improper payment 
also includes any payment that was made to an ineligible recipient or 
for an ineligible good or service, or payments for goods or services 
not received (except for such payments authorized by law).
    Note 1 to paragraph (1)(i) of this definition. Applicable discounts 
are only those discounts where it is both advantageous and within the 
agency's control to claim them.
    (ii) When an agency's review is unable to discern whether a payment 
was proper as a result of insufficient or lack of documentation, this 
payment should also be considered an improper payment. When 
establishing documentation requirements for payments, agencies should 
ensure that all documentation requirements are necessary and should 
refrain from imposing additional burdensome documentation requirements.
    (iii) Interest or other fees that may result from an underpayment 
by an agency are not considered an improper payment if the interest was 
paid correctly. These payments are generally separate transactions and 
may be necessary under certain statutory, contractual, administrative, 
or other legally applicable requirements.
    (iv) A ``questioned cost'' (as defined in this section) should not 
be considered an improper payment until the transaction has been 
completely reviewed and is confirmed to be improper.
    (v) The term ``payment'' in this definition means any disbursement 
or transfer of Federal funds (including a commitment for future 
payment, such as cash, securities, loans, loan guarantees, and 
insurance subsidies) to any non-Federal person, non-Federal entity, or 
Federal employee, that is made by a Federal agency, a Federal 
contractor, a Federal grantee, or a governmental or other organization 
administering a Federal program or activity.
    (vi) The term ``payment'' includes disbursements made pursuant to 
prime contracts awarded under the Federal Acquisition Regulation and 
Federal awards subject to this part that are expended by recipients.
    (2) See definition of improper payment in OMB Circular A-123 
appendix C, part I A (1) ``What is an improper payment?'' Questioned 
costs, including those identified in audits, are not an improper 
payment until reviewed and confirmed to be improper as defined in OMB 
Circular A-123 appendix C.
    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 appendices III through VII and 
appendix IX to this part.
    Information technology systems means computing devices, ancillary 
equipment, software, firmware, and similar procedures, services 
(including support services), and related resources. See also the 
definitions of computing devices and equipment in this section.
    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 the definitions of cost objective and final cost objective in 
this section.
    Internal controls for non-Federal entities means:
    (1) Processes designed and implemented by non-Federal entities to 
provide reasonable assurance regarding the achievement of objectives in 
the following categories:
    (i) Effectiveness and efficiency of operations;
    (ii) Reliability of reporting for internal and external use; and
    (iii) Compliance with applicable laws and regulations.
    (2) Federal awarding agencies are required to follow internal 
control compliance requirements in OMB Circular No. A-123, Management's 
Responsibility for Enterprise Risk Management and Internal Control.
    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 this section.
    (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;

[[Page 49534]]

    (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-purchases comprise a subset of a non-Federal entity's small 
purchases as defined in Sec.  200.320.
    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.  200.320). Generally, the micro-purchase 
threshold for procurement activities administered under Federal awards 
is not to exceed the amount set by the FAR at 48 CFR part 2, subpart 
2.1, unless a higher threshold is requested by the non-Federal entity 
and approved by the cognizant agency for indirect costs.
    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 Federal awarding 
agency to specific recipients in accordance with statutory, eligibility 
and compliance requirements, such that in keeping with specific 
statutory authority the agency has no ability to exercise judgement 
(``discretion''). A non-discretionary award amount could be determined 
specifically or by formula.
    Non-Federal entity (NFE) means a State, local government, Indian 
tribe, Institution of Higher Education (IHE), or nonprofit organization 
that carries out a Federal award as a recipient or subrecipient.
    Nonprofit organization means any corporation, trust, association, 
cooperative, or other organization, not including IHEs, that:
    (1) Is operated primarily for scientific, educational, service, 
charitable, or similar purposes in the public interest;
    (2) Is not organized primarily for profit; and
    (3) Uses net proceeds to maintain, improve, or expand the 
operations of the organization.
    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 
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. The 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.
    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) 
(as listed on the schedule of expenditures of Federal awards, see Sec.  
200.510(b)) 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 Federal expenditures (as direct and sub-
awards) by the non-Federal entity, then the Federal agency with the 
predominant amount of total funding is the designated cognizant agency 
for audit. When there is no direct funding, the Federal awarding agency 
which is the predominant source of pass-through funding must assume the 
oversight responsibilities. The duties of the oversight agency for 
audit and the process for any reassignments are described in Sec.  
200.513(b).
    Participant support costs means direct costs for items such as 
stipends or subsistence allowances, travel allowances, and registration 
fees paid to or on behalf of participants or trainees (but not 
employees) in connection with conferences, or training projects.
    Pass-through entity (PTE) means a non-Federal entity that provides 
a subaward to a subrecipient to carry out part of a Federal program.
    Performance goal means a target level of performance expressed as a 
tangible, measurable objective, against which actual achievement can be 
compared, including a goal expressed as a quantitative standard, value, 
or rate. In some instances (e.g., discretionary research awards), this 
may be limited to the requirement to submit technical performance 
reports (to be evaluated in accordance with agency policy).
    Period of performance means the total estimated time interval 
between the start of an initial Federal award and the planned end date, 
which may include one or more funded portions, or budget periods. 
Identification of the period of performance in the Federal award per 
Sec.  200.211(b)(5) does not commit the awarding agency to fund the 
award beyond the currently approved budget period.
    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

[[Page 49535]]

performance except as provided in Sec.  200.307(f). (See the definition 
of period of performance in this section.) 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. 
See also 35 U.S.C. 200-212 ``Disposition of Rights in Educational 
Awards'' applies to inventions made under Federal awards.
    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.
    Property means real property or personal property. See also the 
definitions of real property and personal property in this section.
    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 the definition of Personally Identifiable 
Information (PII) in this section.
    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 the definition of Improper payment in this section).
    Real property means land, including land improvements, structures 
and appurtenances thereto, but excludes moveable machinery and 
equipment.
    Recipient means an entity, usually but not limited to non-Federal 
entities that receives a Federal award directly from a Federal awarding 
agency. The term recipient does not include subrecipients or 
individuals that are beneficiaries of the award.
    Renewal award means an award made subsequent to an expiring Federal 
award for which the start date is contiguous with, or closely follows, 
the end of the expiring Federal award. A renewal award's start date 
will begin a distinct period of performance.
    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.  200.320). 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 FAR at 48 CFR part 2, subpart 2.1. 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. However, 
in no circumstances can this threshold exceed the dollar value 
established in the FAR (48 CFR part 2, subpart 2.1) for the simplified 
acquisition threshold. Recipients 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 the definitions of 
equipment and general purpose equipment in this section.
    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 
entity is owned or controlled directly by a parent corporation or 
through another subsidiary of a parent corporation.
    Supplies means all tangible personal property other than those 
described in the definition of equipment in this section. 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 the definitions of computing devices and 
equipment in this section.

[[Page 49536]]

    Telecommunications cost means the cost of using communication and 
telephony technologies such as mobile phones, land lines, and internet.
    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.

0
35. Amend Sec.  200.100 by revising paragraphs (a)(1), (c), (d), and 
(e) to read as follows:


Sec.  200.100  Purpose.

    (a) Purpose. (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.
* * * * *
    (c) Cost principles. Subpart E of this part establishes principles 
for determining the allowable costs incurred by non-Federal entities 
under Federal awards. The principles are for the purpose of cost 
determination and are not intended to identify the circumstances or 
dictate the extent of Federal Government participation in the financing 
of a particular program or project. The principles are designed to 
provide that Federal awards bear their fair share of cost recognized 
under these principles except where restricted or prohibited by 
statute.
    (d) Single Audit Requirements and Audit Follow-up. Subpart F of 
this part is issued pursuant to the Single Audit Act Amendments of 
1996, (31 U.S.C. 7501-7507). It sets forth standards for obtaining 
consistency and uniformity among Federal agencies for the audit of non-
Federal entities expending Federal awards. These provisions also 
provide the policies and procedures for Federal awarding agencies and 
pass-through entities when using the results of these audits.
    (e) Guidance on challenges and prizes. For OMB guidance to Federal 
awarding agencies on challenges and prizes, please see memo M-10-11 
Guidance on the Use of Challenges and Prizes to Promote Open 
Government, issued March 8, 2010, or its successor.

0
36. 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.
    (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.  200.331 through 
200.333, 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) of this
                                    section):
------------------------------------------------------------------------
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.

[[Page 49537]]

 
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, 200.331-333                               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, 200.331-
 333 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, Sec. Sec.  200.331 through 
200.333, and subparts E and 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 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 part 31, subpart 31.2, 
and 48 CFR 31.603 are always unallowable. For requirements other than 
those covered in subpart D, Sec. Sec.  200.331 through 200.333, and 
subparts E and 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) Governing provisions. With the exception of subpart F of this 
part, which is required by the Single Audit Act, in any circumstances 
where the provisions of Federal statutes or regulations differ from the 
provisions of this part, the provision of the Federal statutes or 
regulations govern. This includes, for agreements with Indian tribes, 
the provisions of the Indian Self-Determination and Education and 
Assistance Act (ISDEAA), as amended, 25 U.S.C 450-458ddd-2.
    (e) Program applicability. Except for Sec. Sec.  200.203 and 
200.331 through 200.333, the requirements in subparts C, D, and 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 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) Additional program applicability. 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 for Needy Families (title IV-A of the 
Social Security Act, 42 U.S.C. 601-619);
    (ii) Child Support Enforcement and Establishment of Paternity 
(title IV-D of the Social Security Act, 42 U.S.C. 651-669b);
    (iii) Foster Care and Adoption Assistance (title IV-E of the Act, 
42 U.S.C. 670-679c);
    (iv) Aid to the Aged, Blind, and Disabled (titles I, X, XIV, and 
XVI-AABD of the Act, as amended);
    (v) Medical Assistance (Medicaid) (title XIX of the Act, 42 U.S.C. 
1396-1396w-5) not including the State Medicaid Fraud Control program 
authorized by section 1903(a)(6)(B) of the Social Security Act (42 
U.S.C. 1396b(a)(6)(B)); and

[[Page 49538]]

    (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 
(f)(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
37. Revise Sec.  200.102 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 as 
described in this section.
    (b) Exceptions on a case-by-case basis for individual non-Federal 
entities may be authorized by the Federal awarding agency or cognizant 
agency for indirect costs, except where otherwise required by law or 
where OMB or other approval is expressly required by this part.
    (c) The Federal awarding agency may apply adjust 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) Federal awarding agencies may 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. See also Sec.  200.206.

0
38. Revise Sec.  200.103 to read as follows:


Sec.  200.103   Authorities.

    This part is issued under the following authorities.
    (a) Subparts B through D of this part are authorized under 31 
U.S.C. 503 (the Chief Financial Officers Act, Functions of the Deputy 
Director for Management), 41 U.S.C. 1101-1131 (the Office of Federal 
Procurement Policy Act), Reorganization Plan No. 2 of 1970, and 
Executive Order 11541 (``Prescribing the Duties of the Office of 
Management and Budget and the Domestic Policy Council in the Executive 
Office of the President''), the Single Audit Act Amendments of 1996, 
(31 U.S.C. 7501-7507), as well as The Federal Program Information Act 
(Pub. L. 95-220 and Pub. L. 98-169, as amended, codified at 31 U.S.C. 
6101-6106).
    (b) Subpart E of this part is authorized under the Budget and 
Accounting Act of 1921, as amended; the Budget and Accounting 
Procedures Act of 1950, as amended (31 U.S.C. 1101-1125); the Chief 
Financial Officers Act of 1990 (31 U.S.C. 503-504); Reorganization Plan 
No. 2 of 1970; and Executive Order 11541, ``Prescribing the Duties of 
the Office of Management and Budget and the Domestic Policy Council in 
the Executive Office of the President.''
    (c) Subpart F of this part is authorized under the Single Audit Act 
Amendments of 1996, (31 U.S.C. 7501-7507).

0
39. Amend Sec.  200.104 by revising the introductory text and 
paragraphs (g) and (h) to read as follows:


Sec.  200.104   Supersession.

    As described in Sec.  200.110, this part supersedes the following 
OMB guidance documents and regulations under title 2 of the Code of 
Federal Regulations:
* * * * *
    (g) A-133, ``Audits of States, Local Governments and Non-Profit 
Organizations''; and
    (h) Those sections of A-50 related to audits performed under 
subpart F of this part.

0
40. Revise Sec.  200.105 to read as follows:


Sec.  200.105   Effect on other issuances.

    (a) Superseding inconsistent requirements. For Federal awards 
subject to this part, all administrative requirements, program manuals, 
handbooks and other non-regulatory materials that are inconsistent with 
the requirements of this part must be superseded upon implementation of 
this part by the Federal agency, except to the extent they are required 
by statute or authorized in accordance with the provisions in Sec.  
200.102.
    (b) Imposition of requirements on recipients. Agencies may impose 
legally binding requirements on recipients only through the notice and 
public comment process through an approved agency process, including as 
authorized by this part, other statutes or regulations, or as 
incorporated into the terms of a Federal award.

0
41. Revise Sec.  200.106 to read as follows:


Sec.  200.106   Agency implementation.

    The specific requirements and responsibilities of Federal agencies 
and non-Federal entities are set forth in this part. Federal agencies 
making Federal awards to non-Federal entities must implement the 
language in subparts C through F of this part in codified regulations 
unless different provisions are required by Federal statute or are 
approved by OMB.

0
42. 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

[[Page 49539]]

agencies or when any future amendment to this part becomes final.
    (b) Existing negotiated indirect cost rates (as of the publication 
date of the revisions to the guidance) will remain in place until they 
expire. 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, the revised Uniform 
Guidance (as of the publication date for revisions to the guidance) 
become effective in generating proposals and negotiating a new rate 
(when the rate is re-negotiated).

0
43. Revise Sec.  200.113 to read as follows:


Sec.  200.113   Mandatory disclosures.

    The non-Federal entity or applicant for a Federal award must 
disclose, in a timely manner, in writing to the Federal awarding agency 
or pass-through entity all violations of Federal criminal law involving 
fraud, bribery, or gratuity violations potentially affecting the 
Federal award. Non-Federal entities that have received a Federal award 
including the term and condition outlined in appendix XII to this part 
are required to report certain civil, criminal, or administrative 
proceedings to SAM (currently FAPIIS). Failure to make required 
disclosures can result in any of the remedies described in Sec.  
200.339. (See also 2 CFR part 180, 31 U.S.C. 3321, and 41 U.S.C. 2313.)

0
44. 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.
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.

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


Sec.  200.200   Purpose.

    Sections 200.201 through 200.216 prescribe instructions and other 
pre-award matters to be used by Federal awarding agencies in the 
program planning, announcement, application and award processes.


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

    (a) Federal award instrument. 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.  200.333, 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.

    The Federal awarding agency must design a program and create an 
Assistance Listing before announcing the Notice of Funding Opportunity. 
The program must be designed with clear goals and objectives that 
facilitate the delivery of meaningful results consistent with the 
Federal authorizing legislation of the program. Program performance 
shall be measured based on the goals and objectives developed during 
program planning and design. See Sec.  200.301 for more information on 
performance measurement. Performance measures may differ depending on 
the type of program. The program must align with the strategic goals 
and objectives within the Federal awarding agency's performance plan 
and should support the Federal awarding agency's performance 
measurement, management, and reporting as required by Part 6 of OMB 
Circular A-11 (Preparation, Submission, and Execution of the Budget). 
The program must also be designed to align with the Program Management 
Improvement Accountability Act (Pub. L. 114-264).


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 Federal Assistance Listings maintained by the General 
Services Administration (GSA).
    (1) The Federal 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

[[Page 49540]]

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 Federal 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, update, and manage Assistance Listings 
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. Accordingly, 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, the Program Description, 
Purpose, Goals, and Measurement should align with the strategic goals 
and objectives within the Federal awarding agency's performance plan 
and should support the Federal awarding agency's performance 
measurement, management, and reporting as required by Part 6 of OMB 
Circular A-11;
    (2) Identification. Identification of whether the program makes 
Federal awards on a discretionary basis or the Federal awards are 
prescribed by Federal statute, such as in the case of formula grants.
    (3) Projected total amount of funds available for the program. 
Estimates based on previous year funding are acceptable if current 
appropriations are not available at the time of the submission;
    (4) Anticipated source of available funds. The statutory authority 
for funding the program and, to the extent possible, agency, sub-
agency, or, if known, the specific program unit that will issue the 
Federal awards, and associated funding identifier (e.g., Treasury 
Account Symbol(s));
    (5) General eligibility requirements. The statutory, regulatory or 
other eligibility factors or considerations that determine the 
applicant's qualification for Federal awards under the program (e.g., 
type of non-Federal entity); and
    (6) Applicability of Single Audit Requirements. 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 that are 
competed, 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 funding 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 Listings 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 this part.
    (1) Full programmatic description of the funding opportunity.
    (2) Federal award information, including sufficient information to 
help an applicant make an informed decision about whether to submit an 
application. (See also 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.
    (7) Applicable terms and conditions for resulting awards, including 
any exceptions from these standard terms.


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

    For discretionary Federal awards, unless prohibited by Federal 
statute, the Federal awarding agency must design and execute a merit 
review process for applications, with the objective of selecting 
recipients most likely to be successful in delivering results based on 
the program objectives outlined in section Sec.  200.202. A merit 
review is an objective process of evaluating Federal award applications 
in accordance with written standards set forth by the Federal awarding 
agency. 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 periodically 
review its merit review process.


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 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

[[Page 49541]]

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.
    (b) Risk evaluation. (1) The Federal awarding agency must have in 
place a framework for evaluating the risks posed by applicants before 
they receive Federal awards. This evaluation may incorporate results of 
the evaluation of the applicant's eligibility or the quality of its 
application. If the 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.
    (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. Financial stability;
    (ii) Management systems and standards. 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) Audit reports and findings. Reports and findings from audits 
performed under subpart F of this part or the reports and findings of 
any other available audits; and
    (v) Ability to effectively implement requirements. The applicant's 
ability to effectively implement statutory, regulatory, or other 
requirements imposed on non-Federal entities.
    (c) Risk-based requirements adjustment. The Federal awarding agency 
may adjust requirements when a risk-evaluation indicates that it may be 
merited either pre-award or post-award.
    (d) Suspension and debarment compliance. (1) 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 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) Information collection. 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) The Federal awarding agency or pass-through entity may adjust 
specific Federal award conditions as needed, in accordance with this 
section, based on an analysis of the following factors:
    (1) Based on the criteria set forth in Sec.  200.206;
    (2) The applicant or recipient's history of compliance with the 
general or specific terms and conditions of a Federal award;
    (3) The applicant or recipient's ability to meet expected 
performance goals as described in Sec.  200.211; or
    (4) A responsibility determination of an applicant or recipient.
    (c) Additional Federal award conditions may include items such as 
the following:
    (1) Requiring payments as reimbursements rather than advance 
payments;
    (2) Withholding authority to proceed to the next phase until 
receipt of evidence of acceptable performance within a given 
performance period;
    (3) Requiring additional, more detailed financial reports;
    (4) Requiring additional project monitoring;
    (5) Requiring the non-Federal entity to obtain technical or 
management assistance; or
    (6) Establishing additional prior approvals.
    (d) If the Federal awarding agency or pass-through entity is 
imposing additional requirements, they must notify the applicant or 
non-Federal entity as to:
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;
    (3) The nature of the action needed to remove the additional 
requirement, if applicable;
    (4) The time allowed for completing the actions if applicable; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (e) 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.

[[Page 49542]]

Sec.  200.211   Information contained in a Federal award.

    A Federal award must include the following information:
    (a) Federal award performance goals. Performance goals, indicators, 
targets, and baseline data must be included in the Federal award, where 
applicable. The Federal awarding agency must also specify how 
performance will be assessed in the terms and conditions of the Federal 
award, including the timing and scope of expected performance. See 
Sec. Sec.  200.202 and 200.301 for more information on Federal award 
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.  200.201);
    (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;
    (11) Federal award description, (to comply with statutory 
requirements (e.g., FFATA));
    (12) Name of Federal awarding agency and contact information for 
awarding official,
    (13) Assistance Listings Number and Title;
    (14) Identification of whether the award is R&D; and
    (15) Indirect cost rate for the Federal award (including if the de 
minimis rate is charged per Sec.  200.414).
    (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. Administrative requirements 
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, program authority, satisfactory performance, and 
compliance with the terms and conditions of the Federal award.
    (v) Termination provisions. Federal awarding agencies must make 
recipients aware, in a clear and unambiguous manner, of the termination 
provisions in Sec.  200.340, including the applicable termination 
provisions in the Federal awarding agency's regulations or in each 
Federal award.
    (2) The Federal award must incorporate, by reference, all general 
terms and conditions of the award, which must be maintained on the 
agency's website.
    (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. See also Sec.  
200.208. Whenever practicable, these specific terms and conditions also 
should be shared on the agency's 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) 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 part 42, 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 this 
paragraph (a) 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
    (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

[[Page 49543]]

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 
include 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; and
    (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. The regulations in 2 CFR part 180 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 recipients are subject to the 
regulations implementing Never Contract with the Enemy in 2 CFR part 
183. The regulations in 2 CFR part 183 affect covered contracts, grants 
and cooperative agreements that are expected to exceed $50,000 within 
the period of performance, are performed outside the United States and 
its 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.

    (a) Recipients and subrecipients are prohibited from obligating or 
expending loan or grant funds to:
    (1) Procure or obtain;
    (2) Extend or renew a contract to procure or obtain; or
    (3) Enter into a contract (or extend or renew a contract) to 
procure or obtain equipment, services, or systems that uses covered 
telecommunications equipment or services as a substantial or essential 
component of any system, or as critical technology as part of any 
system. As described in Public Law 115-232, section 889, covered 
telecommunications equipment is telecommunications equipment produced 
by Huawei Technologies Company or ZTE Corporation (or any subsidiary or 
affiliate of such entities).
    (i) 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).
    (ii) Telecommunications or video surveillance services provided by 
such entities or using such equipment.
    (iii) 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.
    (b) In implementing the prohibition under Public Law 115-232, 
section 889, subsection (f), paragraph (1), heads of executive agencies 
administering loan, grant, or subsidy programs shall prioritize 
available funding and technical support to assist affected businesses, 
institutions and organizations as is reasonably necessary for those 
affected entities to transition from covered communications equipment 
and services, to procure replacement equipment and services, and to 
ensure that communications service to users and customers is sustained.
    (c) See Public Law 115-232, section 889 for additional information.
    (d) See also Sec.  200.471.

0
45. Revise subpart D to read as follows:

Subpart D--Post Federal Award Requirements

Sec.
200.300 Statutory and national policy requirements.
200.301 Performance measurement.
200.302 Financial management.
200.303 Internal controls.
200.304 Bonds.
200.305 Federal payment.
200.306 Cost sharing or matching.
200.307 Program income.
200.308 Revision of budget and program plans.

[[Page 49544]]

200.309 Modifications to Period of Performance.

Property Standards

200.310 Insurance coverage.
200.311 Real property.
200.312 Federally-owned and exempt property.
200.313 Equipment.
200.314 Supplies.
200.315 Intangible property.
200.316 Property trust relationship.

Procurement Standards

200.317 Procurements by states.
200.318 General procurement standards.
200.319 Competition.
200.320 Methods of procurement to be followed.
200.321 Contracting with small and minority businesses, women's 
business enterprises, and labor surplus area firms.
200.322 Domestic preferences for procurements.
200.323 Procurement of recovered materials.
200.324 Contract cost and price.
200.325 Federal awarding agency or pass-through entity review.
200.326 Bonding requirements.
200.327 Contract provisions.

Performance and Financial Monitoring and Reporting

200.328 Financial reporting.
200.329 Monitoring and reporting program performance.
200. 330 Reporting on real property.

Subrecipient Monitoring and Management

200.331 Subrecipient and contractor determinations.
200.332 Requirements for pass-through entities.
200.333 Fixed amount subawards.

Record Retention and Access

200.334 Retention requirements for records.
200.335 Requests for transfer of records.
200.336 Methods for collection, transmission, and storage of 
information.
200.337 Access to records.
200.338 Restrictions on public access to records.

Remedies for Noncompliance

200.339 Remedies for noncompliance.
200.340 Termination.
200.341 Notification of termination requirement.
200.342 Opportunities to object, hearings, and appeals.
200.343 Effects of suspension and termination.

Closeout

200.344 Closeout.

Post-Closeout Adjustments and Continuing Responsibilities

200.345 Post-closeout adjustments and continuing responsibilities.

Collection of Amounts Due

200.346 Collection of amounts due.

Subpart D--Post Federal Award Requirements


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, and public policy 
requirements: Including, but not limited to, those protecting free 
speech, religious liberty, public welfare, the environment, and 
prohibiting discrimination. The Federal awarding agency must 
communicate to the non-Federal entity all relevant public policy 
requirements, including those in general appropriations provisions, and 
incorporate them either directly or by reference in the terms and 
conditions of the Federal award.
    (b) The non-Federal entity is responsible for complying with all 
requirements of the Federal award. For all Federal awards, this 
includes the provisions of FFATA, which includes requirements on 
executive compensation, and also requirements implementing the Act for 
the non-Federal entity at 2 CFR parts 25 and 170. See also statutory 
requirements for whistleblower protections at 10 U.S.C. 2409, 41 U.S.C. 
4712, and 10 U.S.C. 2324, 41 U.S.C. 4304 and 4310.


Sec.  200.301   Performance measurement.

    (a) The Federal awarding agency must measure the recipient's 
performance to show achievement of program goals and objectives, share 
lessons learned, improve program outcomes, and foster adoption of 
promising practices. Program goals and objectives should be derived 
from program planning and design. See Sec.  200.202 for more 
information. Where appropriate, the Federal award may include specific 
program goals, indicators, targets, baseline data, data collection, or 
expected outcomes (such as outputs, or services performance or public 
impacts of any of these) with an expected timeline for accomplishment. 
Where applicable, this should also include any performance measures or 
independent sources of data that may be used to measure progress. The 
Federal awarding agency will determine how performance progress is 
measured, which may differ by program. Performance measurement progress 
must be both measured and reported. See Sec.  200.329 for more 
information on monitoring program performance. The Federal awarding 
agency may include program-specific requirements, as applicable. These 
requirements must be aligned, to the extent permitted by law, with the 
Federal awarding agency strategic goals, strategic objectives or 
performance goals that are relevant to the program. See also OMB 
Circular A-11, Preparation, Submission, and Execution of the Budget 
Part 6.
    (b) The Federal awarding agency should provide recipients with 
clear performance goals, indicators, targets, and baseline data 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 progress but also to facilitate identification 
of promising practices among recipients and build the evidence upon 
which the Federal awarding agency's program and performance decisions 
are made. See Sec.  200.328 for more information on reporting program 
performance.
    (c) 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). 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  Financial management.

    (a) Each state must expend and account for the Federal award in 
accordance with state laws and procedures for expending and accounting 
for the state's own funds. In addition, the state's and the other non-
Federal entity's financial management systems, including records 
documenting compliance with Federal statutes, regulations, and the 
terms and conditions of the Federal award, must be sufficient to permit 
the preparation of reports required by general and program-specific 
terms and conditions; and the tracing of funds to a level of 
expenditures adequate to establish that such funds have been used 
according to the Federal statutes, regulations, and the terms and 
conditions of the Federal award. See also Sec.  200.450.
    (b) The financial management system of each non-Federal entity must 
provide for the following (see also Sec. Sec.  200.334, 200.335, 
200.336, and 200.337):
    (1) Identification, in its accounts, of all Federal awards received 
and expended and the Federal programs under which they were received. 
Federal program and Federal award

[[Page 49545]]

identification must include, as applicable, the Assistance Listings 
title and number, Federal award identification number and year, name of 
the Federal agency, and name of the pass-through entity, if any.
    (2) Accurate, current, and complete disclosure of the financial 
results of each Federal award or program in accordance with the 
reporting requirements set forth in Sec. Sec.  200.328 and 200.329. If 
a Federal awarding agency requires reporting on an accrual basis from a 
recipient that maintains its records on other than an accrual basis, 
the recipient must not be required to establish an accrual accounting 
system. This recipient may develop accrual data for its reports on the 
basis of an analysis of the documentation on hand. Similarly, a pass-
through entity must not require a subrecipient to establish an accrual 
accounting system and must allow the subrecipient to develop accrual 
data for its reports on the basis of an analysis of the documentation 
on hand.
    (3) Records that identify adequately the source and application of 
funds for federally-funded activities. These records must contain 
information pertaining to Federal awards, authorizations, financial 
obligations, unobligated balances, assets, expenditures, income and 
interest and be supported by source documentation.
    (4) Effective control over, and accountability for, all funds, 
property, and other assets. The non-Federal entity must adequately 
safeguard all assets and assure that they are used solely for 
authorized purposes. See Sec.  200.303.
    (5) Comparison of expenditures with budget amounts for each Federal 
award.
    (6) Written procedures to implement the requirements of Sec.  
200.305.
    (7) Written procedures for determining the allowability of costs in 
accordance with subpart E of this part and the terms and conditions of 
the Federal award.


Sec.  200.303   Internal controls.

    The non-Federal entity must:
    (a) Establish and maintain effective internal control over the 
Federal award that provides reasonable assurance that the non-Federal 
entity is managing the Federal award in compliance with Federal 
statutes, regulations, and the terms and conditions of the Federal 
award. These internal controls should be in compliance with guidance in 
``Standards for Internal Control in the Federal Government'' issued by 
the Comptroller General of the United States or the ``Internal Control 
Integrated Framework'', issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (COSO).
    (b) Comply with the U.S. Constitution, Federal statutes, 
regulations, and the terms and conditions of the Federal awards.
    (c) Evaluate and monitor the non-Federal entity's compliance with 
statutes, regulations and the terms and conditions of Federal awards.
    (d) Take prompt action when instances of noncompliance are 
identified including noncompliance identified in audit findings.
    (e) Take reasonable measures to safeguard protected personally 
identifiable information and other information the 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.


Sec.  200.304   Bonds.

    The Federal awarding agency may include a provision on bonding, 
insurance, or both in the following circumstances:
    (a) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, the Federal awarding 
agency, at its discretion, may require adequate bonding and insurance 
if the bonding and insurance requirements of the non-Federal entity are 
not deemed adequate to protect the interest of the Federal Government.
    (b) The Federal awarding agency may require adequate fidelity bond 
coverage where the non-Federal entity lacks sufficient coverage to 
protect the Federal Government's interest.
    (c) Where bonds are required in the situations described above, the 
bonds must be obtained from companies holding certificates of authority 
as acceptable sureties, as prescribed in 31 CFR part 223.


Sec.  200.305   Federal payment.

    (a) For states, payments are governed by Treasury-State Cash 
Management Improvement Act (CMIA) agreements and default procedures 
codified at 31 CFR part 205 and Treasury Financial Manual (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

[[Page 49546]]

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) 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, including Sec.  200.339, 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 Circular 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, 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.  200.343.
    (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 \1\:

Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal Reserve Bank Treas NYC/Funds Transfer 
Division New York, NY

    \1\ Please note that the organization initiating payment is likely 
to incur a charge from their Financial Institution for this type of 
payment.

[[Page 49547]]

    (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 \2\ 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

    \2\ 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   Cost sharing or matching.

    (a) Under Federal research proposals, voluntary committed cost 
sharing is not expected. It cannot be used as a factor during the merit 
review of applications or proposals, but may be considered if it is 
both in accordance with Federal awarding agency regulations and 
specified in a notice of funding opportunity. Criteria for considering 
voluntary committed cost sharing and any other program policy factors 
that may be used to determine who may receive a Federal award must be 
explicitly described in the notice of funding opportunity. See also 
Sec. Sec.  200.414 and 200.204 and appendix I to this part.
    (b) For all Federal awards, any shared costs or matching funds and 
all contributions, including cash and third-party in-kind 
contributions, must be accepted as part of the non-Federal entity's 
cost sharing or matching when such contributions meet all of the 
following criteria:
    (1) Are verifiable from the non-Federal entity's records;
    (2) Are not included as contributions for any other Federal award;
    (3) Are necessary and reasonable for accomplishment of project or 
program objectives;
    (4) Are allowable under subpart E of this part;
    (5) Are not paid by the Federal Government under another Federal 
award, except where the Federal statute authorizing a program 
specifically provides that Federal funds made available for such 
program can be applied to matching or cost sharing requirements of 
other Federal programs;
    (6) Are provided for in the approved budget when required by the 
Federal awarding agency; and
    (7) Conform to other provisions of this part, as applicable.
    (c) Unrecovered indirect costs, including indirect costs on cost 
sharing or matching may be included as part of cost sharing or matching 
only with the prior approval of the Federal awarding agency. 
Unrecovered indirect cost means the difference between the amount 
charged to the Federal award and the amount which could have been 
charged to the Federal award under the non-Federal entity's approved 
negotiated indirect cost rate.
    (d) Values for non-Federal entity contributions of services and 
property must be established in accordance with the cost principles in 
subpart E of this part. If a Federal awarding agency authorizes the 
non-Federal entity to donate buildings or land for construction/
facilities acquisition projects or long-term use, the value of the 
donated property for cost sharing or matching must be the lesser of 
paragraph (d)(1) or (2) of this section.
    (1) The value of the remaining life of the property recorded in the 
non-Federal entity's accounting records at the time of donation.
    (2) The current fair market value. However, when there is 
sufficient justification, the Federal awarding agency may approve the 
use of the current fair market value of the donated property, even if 
it exceeds the value described in paragraph (d)(1) of this section at 
the time of donation.
    (e) Volunteer services furnished by third-party professional and 
technical personnel, consultants, and other skilled and unskilled labor 
may be counted as cost sharing or matching if the service is an 
integral and necessary part of an approved project or program. Rates 
for third-party volunteer services must be consistent with those paid 
for similar work by the non-Federal entity. In those instances in which 
the required skills are not found in the non-Federal entity, rates must 
be consistent with those paid for similar work in the labor market in 
which the non-Federal entity competes for the kind of services 
involved. In either case, paid fringe benefits that are reasonable, 
necessary, allocable, and otherwise allowable may be included in the 
valuation.
    (f) When a third-party organization furnishes the services of an 
employee, these services must be valued at the employee's regular rate 
of pay plus an amount of fringe benefits that is reasonable, necessary, 
allocable, and otherwise allowable, and indirect costs at either the 
third-party organization's approved federally-negotiated indirect cost 
rate or, a rate in accordance with Sec.  200.414(d) provided these 
services employ the same skill(s) for which the employee is normally 
paid. Where donated services are treated as indirect costs, indirect 
cost rates will separate the value of the donated services so that 
reimbursement for the donated services will not be made.
    (g) Donated property from third parties may include such items as 
equipment, office supplies, laboratory supplies, or workshop and 
classroom supplies. Value assessed to donated property included in the 
cost sharing or matching share must not exceed the fair market value of 
the property at the time of the donation.
    (h) The method used for determining cost sharing or matching for 
third-party-donated equipment, buildings and land for which title 
passes to the non-Federal entity may differ according to the purpose of 
the Federal award, if paragraph (h)(1) or (2) of this section applies.
    (1) If the purpose of the Federal award is to assist the non-
Federal entity in the acquisition of equipment, buildings or land, the 
aggregate value of the donated property may be claimed as cost sharing 
or matching.
    (2) If the purpose of the Federal award is to support activities 
that require the use of equipment, buildings or land, normally only 
depreciation charges for equipment and buildings may be made. However, 
the fair market value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the Federal 
awarding agency has approved the charges. See also Sec.  200.420.
    (i) The value of donated property must be determined in accordance 
with the usual accounting policies of the non-Federal entity, with the 
following qualifications:
    (1) The value of donated land and buildings must not exceed its 
fair market value at the time of donation to the non-Federal entity as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the non-Federal entity as 
required by the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601-4655) 
(Uniform Act) except as provided in the implementing regulations at 49 
CFR part 24, ``Uniform Relocation Assistance And Real Property

[[Page 49548]]

Acquisition For Federal And Federally-Assisted Programs''.
    (2) The value of donated equipment must not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space must not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment must not exceed its fair rental 
value.
    (j) For third-party in-kind contributions, the fair market value of 
goods and services must be documented and to the extent feasible 
supported by the same methods used internally by the non-Federal 
entity.
    (k) For IHEs, see also OMB memorandum M-01-06, dated January 5, 
2001, Clarification of OMB A-21 Treatment of Voluntary Uncommitted Cost 
Sharing and Tuition Remission Costs.


Sec.  200.307   Program income.

    (a) General. Non-Federal entities are encouraged to earn income to 
defray program costs where appropriate.
    (b) Cost of generating program income. If authorized by Federal 
regulations or the Federal award, costs incidental to the generation of 
program income may be deducted from gross income to determine program 
income, provided these costs have not been charged to the Federal 
award.
    (c) Governmental revenues. Taxes, special assessments, levies, 
fines, and other such revenues raised by a non-Federal entity are not 
program income unless the revenues are specifically identified in the 
Federal award or Federal awarding agency regulations as 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 the Property Standards Sec. Sec.  
200.311, 200.313, and 200.314, or as specifically identified in Federal 
statutes, regulations, or the terms and conditions of the Federal 
award.
    (e) Use of program income. If the Federal awarding agency does not 
specify in its regulations or the terms and conditions of the Federal 
award, or give prior approval for how program income is to be used, 
paragraph (e)(1) of this section must apply. For Federal awards made to 
IHEs and nonprofit research institutions, if the Federal awarding 
agency does not specify in its regulations or the terms and conditions 
of the Federal award how program income is to be used, paragraph (e)(2) 
of this section must apply. In specifying alternatives to paragraphs 
(e)(1) and (2) of this section, the Federal awarding agency may 
distinguish between income earned by the recipient and income earned by 
subrecipients and between the sources, kinds, or amounts of income. 
When the Federal awarding agency authorizes the approaches in 
paragraphs (e)(2) and (3) of this section, program income in excess of 
any amounts specified must also be deducted from expenditures.
    (1) Deduction. Ordinarily program income must be deducted from 
total allowable costs to determine the net allowable costs. Program 
income must be used for current costs unless the Federal awarding 
agency authorizes otherwise. Program income that the non-Federal entity 
did not anticipate at the time of the Federal award must be used to 
reduce the Federal award and non-Federal entity contributions rather 
than to increase the funds committed to the project.
    (2) Addition. With prior approval of the Federal awarding agency 
(except for IHEs and nonprofit research institutions, as described in 
this paragraph (e)) program income may be added to the Federal award by 
the Federal agency and the non-Federal entity. The program income must 
be used for the purposes and under the conditions of the Federal award.
    (3) Cost sharing or matching. With prior approval of the Federal 
awarding agency, program income may be used to meet the cost sharing or 
matching requirement of the Federal award. The amount of the Federal 
award remains the same.
    (f) Income after the period of performance. There are no Federal 
requirements governing the disposition of income earned after the end 
of the period of performance for the Federal award, unless the Federal 
awarding agency regulations or the terms and conditions of the Federal 
award provide otherwise. The Federal awarding agency may negotiate 
agreements with recipients regarding appropriate uses of income earned 
after the period of performance as part of the grant closeout process. 
See also Sec.  200.344.
    (g) License fees and royalties. 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.


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 definition for Federal share in Sec.  200.1) or only 
the Federal share, depending upon Federal awarding agency requirements. 
The budget and program plans include considerations for performance and 
program evaluation purposes whenever required in accordance with the 
terms and conditions of the award.
    (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 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.  200.333. 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

[[Page 49549]]

authorized, at its option, to waive other cost-related and 
administrative prior written approvals contained in subparts D and E of 
this part. 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.
    (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 (e)(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 this paragraph (e) are automatically waived (i.e., 
recipients need not obtain such prior approvals) unless one of the 
conditions included in paragraph (e)(2) of this section 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.
    (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   Modifications to Period of Performance.

    If a Federal awarding agency or pass-through entity approves an 
extension, or if a recipient extends under Sec.  200.308(e)(2), the 
Period of Performance will be amended to end at the completion of the 
extension. If a termination occurs, the Period of Performance will be 
amended to end upon the effective date of termination. If a renewal 
award is issued, a distinct Period of Performance will begin.

Property Standards


Sec.  200.310  Insurance coverage.

    The non-Federal entity must, at a minimum, provide the equivalent 
insurance coverage for real property and equipment acquired or improved 
with Federal funds as provided to property owned by the non-Federal 
entity. Federally-owned property need not be insured unless required by 
the terms and conditions of the Federal award.


Sec.  200.311   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.
    (b) Use. Except as otherwise provided by Federal statutes or by the 
Federal awarding agency, real property will be used for the originally 
authorized purpose as long as needed for that purpose, during which 
time the non-Federal entity must not dispose of or encumber its title 
or other interests.
    (c) Disposition. When real property is no longer needed for the 
originally authorized purpose, the non-Federal entity must obtain 
disposition instructions from the Federal awarding agency or pass-
through entity. The instructions must provide for one of the following 
alternatives:
    (1) Retain title after compensating the Federal awarding agency. 
The amount paid to the Federal awarding agency will be computed by 
applying the Federal awarding agency's percentage of participation in 
the cost of the original purchase (and costs of any improvements) to 
the fair market value of the property. However, in those situations 
where the non-Federal entity is disposing of real property acquired or 
improved with a Federal award and acquiring replacement real property 
under the same Federal award, the net proceeds from the disposition may 
be used as an offset to the cost of the replacement property.
    (2) Sell the property and compensate the Federal awarding agency. 
The amount due to the Federal awarding agency will be calculated by 
applying the Federal awarding agency's percentage of participation in 
the cost of the original purchase (and cost of any improvements) to the 
proceeds of the sale after deduction of any actual and reasonable 
selling and fixing-up expenses. If the Federal award has not been 
closed out, the net proceeds from sale may be offset against the 
original cost of the property. When the non-

[[Page 49550]]

Federal entity is directed to sell property, sales procedures must be 
followed that provide for competition to the extent practicable and 
result in the highest possible return.
    (3) Transfer title to the Federal awarding agency or to a third 
party designated/approved by the Federal awarding agency. The non-
Federal entity is entitled to be paid an amount calculated by applying 
the non-Federal entity's percentage of participation in the purchase of 
the real property (and cost of any improvements) to the current fair 
market value of the property.


Sec.  200.312   Federally-owned and exempt property.

    (a) Title to federally-owned property remains vested in the Federal 
Government. The non-Federal entity must submit annually an inventory 
listing of federally-owned property in its custody to the Federal 
awarding agency. Upon completion of the Federal award or when the 
property is no longer needed, the non-Federal entity must report the 
property to the Federal awarding agency for further Federal agency 
utilization.
    (b) If the Federal awarding agency has no further need for the 
property, it must declare the property excess and report it for 
disposal to the appropriate Federal disposal authority, unless the 
Federal awarding agency has statutory authority to dispose of the 
property by alternative methods (e.g., the authority provided by the 
Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to donate research 
equipment to educational and nonprofit organizations in accordance with 
Executive Order 12999, ``Educational Technology: Ensuring Opportunity 
for All Children in the Next Century.''). The Federal awarding agency 
must issue appropriate instructions to the non-Federal entity.
    (c) Exempt 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. The Federal awarding agency may exercise this option 
when statutory authority exists. Absent statutory authority and 
specific terms and conditions of the Federal award, title to exempt 
property acquired under the Federal award remains with the Federal 
Government.


Sec.  200.313   Equipment.

    See also Sec.  200.439.
    (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:
    (1) Use the equipment for the authorized purposes of the project 
during the period of performance, or until the property is no longer 
needed for the purposes of the project.
    (2) Not encumber the property without approval of the Federal 
awarding agency or pass-through entity.
    (3) Use and dispose of the property in accordance with paragraphs 
(b), (c), and (e) of this section.
    (b) General. A state must use, manage and dispose of equipment 
acquired under a Federal award by the state in accordance with state 
laws and procedures. Other non-Federal entities must follow paragraphs 
(c) through (e) of this section.
    (c) Use. (1) Equipment must be used by the non-Federal entity in 
the program or project for which it was acquired as long as needed, 
whether or not the project or program continues to be supported by the 
Federal award, and the non-Federal entity must not encumber the 
property without prior approval of the 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:
    (i) Activities under a Federal award from the Federal awarding 
agency which funded the original program or project, then
    (ii) Activities under Federal awards from other Federal awarding 
agencies. This includes consolidated equipment for information 
technology systems.
    (2) During the time that equipment is used on the project or 
program for which it was acquired, the non-Federal entity must also 
make equipment available for use on other projects or programs 
currently or previously supported by the Federal Government, provided 
that such use will not interfere with the work on the projects or 
program for which it was originally acquired. First preference for 
other use must be given to other programs or projects supported by 
Federal awarding agency that financed the equipment and second 
preference must be given to programs or projects under Federal awards 
from other Federal awarding agencies. Use for non-federally-funded 
programs or projects is also permissible. User fees should be 
considered if appropriate.
    (3) Notwithstanding the encouragement in Sec.  200.307 to earn 
program income, the non-Federal entity must not use equipment acquired 
with the Federal award to provide services for a fee that is less than 
private companies charge for equivalent services unless specifically 
authorized by Federal statute for as long as the Federal Government 
retains an interest in the equipment.
    (4) When acquiring replacement equipment, the non-Federal entity 
may use the equipment to be replaced as a trade-in or sell the property 
and use the proceeds to offset the cost of the replacement property.
    (d) Management requirements. Procedures for managing equipment 
(including replacement equipment), whether acquired in whole or in part 
under a Federal award, until disposition takes place will, as a 
minimum, meet the following requirements:
    (1) Property records must be maintained that include a description 
of the property, a serial number or other identification number, the 
source of funding for the property (including the FAIN), who holds 
title, the acquisition date, and cost of the property, percentage of 
Federal participation in the project costs for the Federal award under 
which the property was acquired, the location, use and condition of the 
property, and any ultimate disposition data including the date of 
disposal and sale price of the property.
    (2) A physical inventory of the property must be taken and the 
results reconciled with the property records at least once every two 
years.
    (3) A control system must be developed to ensure adequate 
safeguards to prevent loss, damage, or theft of the property. Any loss, 
damage, or theft must be investigated.
    (4) Adequate maintenance procedures must be developed to keep the 
property in good condition.
    (5) If the non-Federal entity is authorized or required to sell the 
property, proper sales procedures must be established to ensure the 
highest possible return.
    (e) Disposition. When original or replacement equipment acquired 
under a Federal award is no longer needed for the original project or 
program or for other activities currently or previously supported by a 
Federal awarding agency, except as otherwise provided in

[[Page 49551]]

Federal statutes, regulations, or Federal awarding agency disposition 
instructions, the non-Federal entity must request disposition 
instructions from the Federal awarding agency if required by the terms 
and conditions of the Federal award. Disposition of the equipment will 
be made as follows, in accordance with Federal awarding agency 
disposition instructions:
    (1) Items of equipment with a current per unit fair market value of 
$5,000 or less may be retained, sold or otherwise disposed of with no 
further responsibility to the Federal awarding agency.
    (2) Except as provided in Sec.  200.312(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. The Federal awarding agency is entitled to an amount calculated 
by multiplying the current market value or proceeds from sale by the 
Federal awarding agency's percentage of participation in the cost of 
the original purchase. If the equipment is sold, the Federal awarding 
agency may permit the non-Federal entity to deduct and retain from the 
Federal share $500 or ten percent of the proceeds, whichever is less, 
for its selling and handling expenses.
    (3) The non-Federal entity may transfer title to the property to 
the Federal Government or to an eligible third party provided that, in 
such cases, the non-Federal entity must be entitled to compensation for 
its attributable percentage of the current fair market value of the 
property.
    (4) In cases where a non-Federal entity fails to take appropriate 
disposition actions, the Federal awarding agency may direct the non-
Federal entity to take disposition actions.


Sec.  200.314   Supplies.

    See also Sec.  200.453.
    (a) Title to supplies will vest in the non-Federal entity upon 
acquisition. If there is a residual inventory of unused supplies 
exceeding $5,000 in total aggregate value upon termination or 
completion of the project or program and the supplies are not needed 
for any other Federal award, the non-Federal entity must retain the 
supplies for use on other activities or sell them, but must, in either 
case, compensate the Federal Government for its share. The amount of 
compensation must be computed in the same manner as for equipment. See 
Sec.  200.313 (e)(2) for the calculation methodology.
    (b) As long as the Federal Government retains an interest in the 
supplies, the non-Federal entity must not use supplies acquired under a 
Federal award to provide services to other organizations for a fee that 
is less than private companies charge for equivalent services, unless 
specifically authorized by Federal statute.


Sec.  200.315   Intangible property.

    (a) Title to intangible property (see definition for 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.  200.313(e).
    (b) The non-Federal entity may copyright any work that is subject 
to copyright and was developed, or for which ownership was acquired, 
under a Federal award. The Federal awarding agency reserves a royalty-
free, nonexclusive and irrevocable right to reproduce, publish, or 
otherwise use the work for Federal purposes, and to authorize others to 
do so.
    (c) The non-Federal entity is subject to applicable regulations 
governing patents and inventions, including governmentwide regulations 
issued by the Department of Commerce at 37 CFR part 401, ``Rights to 
Inventions Made by Nonprofit Organizations and Small Business Firms 
Under Government Awards, Contracts and Cooperative Agreements.''
    (d) The Federal Government has the right to:
    (1) Obtain, reproduce, publish, or otherwise use the data produced 
under a Federal award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (e)(1) In response to a Freedom of Information Act (FOIA) request 
for research data relating to published research findings produced 
under a Federal award that were used by the Federal Government in 
developing an agency action that has the force and effect of law, the 
Federal awarding agency must request, and the non-Federal entity must 
provide, within a reasonable time, the research data so that they can 
be made available to the public through the procedures established 
under the FOIA. If the Federal awarding agency obtains the research 
data solely in response to a FOIA request, the Federal awarding agency 
may charge the requester a reasonable fee equaling the full incremental 
cost of obtaining the research data. This fee should reflect costs 
incurred by the Federal agency and the non-Federal entity. This fee is 
in addition to any fees the Federal awarding agency may assess under 
the FOIA (5 U.S.C. 552(a)(4)(A)).
    (2) Published research findings means when:
    (i) Research findings are published in a peer-reviewed scientific 
or technical journal; or
    (ii) A Federal agency publicly and officially cites the research 
findings in support of an agency action that has the force and effect 
of law. ``Used by the Federal Government in developing an agency action 
that has the force and effect of law'' is defined as when an agency 
publicly and officially cites the research findings in support of an 
agency action that has the force and effect of law.
    (3) Research data means the recorded factual material commonly 
accepted in the scientific community as necessary to validate research 
findings, but not any of the following: Preliminary analyses, drafts of 
scientific papers, plans for future research, peer reviews, or 
communications with colleagues. This ``recorded'' material excludes 
physical objects (e.g., laboratory samples). Research data also do not 
include:
    (i) Trade secrets, commercial information, materials necessary to 
be held confidential by a researcher until they are published, or 
similar information which is protected under law; and
    (ii) Personnel and medical information and similar information the 
disclosure of which would constitute a clearly unwarranted invasion of 
personal privacy, such as information that could be used to identify a 
particular person in a research study.


Sec.  200.316   Property trust relationship.

    Real property, equipment, and intangible property, that are 
acquired or improved with a Federal award must be held in trust by the 
non-Federal entity as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. The Federal 
awarding agency may require the non-Federal entity to record liens or 
other appropriate notices of record to indicate that personal or real 
property has been acquired or improved with a Federal award and that 
use and disposition conditions apply to the property.

[[Page 49552]]

Procurement Standards


Sec.  200.317   Procurements by states.

    When procuring property and services under a Federal award, a State 
must follow the same policies and procedures it uses for procurements 
from its non-Federal funds. The State will comply with Sec. Sec.  
200.321, 200.322, and 200.323 and ensure that every purchase order or 
other contract includes any clauses required by Sec.  200.327. All 
other non-Federal entities, including subrecipients of a State, must 
follow the procurement standards in Sec. Sec.  200.318 through 200.327.


Sec.  200.318  General procurement standards.

    (a) The non-Federal entity must have and use documented procurement 
procedures, consistent with State, local, and tribal laws and 
regulations and the standards of this section, for the acquisition of 
property or services required under a Federal award or subaward. The 
non-Federal entity's documented procurement procedures must conform to 
the procurement standards identified in Sec. Sec.  200.317 through 
200.327.
    (b) Non-Federal entities must maintain oversight to ensure that 
contractors perform in accordance with the terms, conditions, and 
specifications of their contracts or purchase orders.
    (c)(1) The non-Federal entity must maintain written standards of 
conduct covering conflicts of interest and governing the actions of its 
employees engaged in the selection, award and administration of 
contracts. No employee, officer, or agent may participate in the 
selection, award, or administration of a contract supported by a 
Federal award if he or she has a real or apparent conflict of interest. 
Such a conflict of interest would arise when the employee, officer, or 
agent, any member of his or her immediate family, his or her partner, 
or an organization which employs or is about to employ any of the 
parties indicated herein, has a financial or other interest in or a 
tangible personal benefit from a firm considered for a contract. The 
officers, employees, and agents of the non-Federal entity may neither 
solicit nor accept gratuities, favors, or anything of monetary value 
from contractors or parties to subcontracts. However, non-Federal 
entities may set standards for situations in which the financial 
interest is not substantial or the gift is an unsolicited item of 
nominal value. The standards of conduct must provide for disciplinary 
actions to be applied for violations of such standards by officers, 
employees, or agents of the non-Federal entity.
    (2) If the non-Federal entity has a parent, affiliate, or 
subsidiary organization that is not a State, local government, or 
Indian tribe, the non-Federal entity must also maintain written 
standards of conduct covering organizational conflicts of interest. 
Organizational conflicts of interest means that because of 
relationships with a parent company, affiliate, or subsidiary 
organization, the non-Federal entity is unable or appears to be unable 
to be impartial in conducting a procurement action involving a related 
organization.
    (d) The non-Federal entity's procedures must avoid acquisition of 
unnecessary or duplicative items. Consideration should be given to 
consolidating or breaking out procurements to obtain a more economical 
purchase. Where appropriate, an analysis will be made of lease versus 
purchase alternatives, and any other appropriate analysis to determine 
the most economical approach.
    (e) To foster greater economy and efficiency, and in accordance 
with efforts to promote cost-effective use of shared services across 
the Federal Government, the non-Federal entity is encouraged to enter 
into state and local intergovernmental agreements or inter-entity 
agreements where appropriate for procurement or use of common or shared 
goods and services. Competition requirements will be met with applied 
to documented procurement actions using strategic sourcing, shared 
services, and other similar procurement arrangements.
    (f) The non-Federal entity is encouraged to use Federal excess and 
surplus property in lieu of purchasing new equipment and property 
whenever such use is feasible and reduces project costs.
    (g) The non-Federal entity is encouraged to use value engineering 
clauses in contracts for construction projects of sufficient size to 
offer reasonable opportunities for cost reductions. Value engineering 
is a systematic and creative analysis of each contract item or task to 
ensure that its essential function is provided at the overall lower 
cost.
    (h) The non-Federal entity must award contracts only to responsible 
contractors possessing the ability to perform successfully under the 
terms and conditions of a proposed procurement. Consideration will be 
given to such matters as contractor integrity, compliance with public 
policy, record of past performance, and financial and technical 
resources. See also Sec.  200.214.
    (i) The non-Federal entity must maintain records sufficient to 
detail the history of procurement. These records will include, but are 
not necessarily limited to, the following: Rationale for the method of 
procurement, selection of contract type, contractor selection or 
rejection, and the basis for the contract price.
    (j)(1) The non-Federal entity may use a time-and-materials type 
contract only after a determination that no other contract is suitable 
and if the contract includes a ceiling price that the contractor 
exceeds at its own risk. Time-and-materials type contract means a 
contract whose cost to a non-Federal entity is the sum of:
    (i) The actual cost of materials; and
    (ii) Direct labor hours charged at fixed hourly rates that reflect 
wages, general and administrative expenses, and profit.
    (2) Since this formula generates an open-ended contract price, a 
time-and-materials contract provides no positive profit incentive to 
the contractor for cost control or labor efficiency. Therefore, each 
contract must set a ceiling price that the contractor exceeds at its 
own risk. Further, the non-Federal entity awarding such a contract must 
assert a high degree of oversight in order to obtain reasonable 
assurance that the contractor is using efficient methods and effective 
cost controls.
    (k) The non-Federal entity alone must be responsible, in accordance 
with good administrative practice and sound business judgment, for the 
settlement of all contractual and administrative issues arising out of 
procurements. These issues include, but are not limited to, source 
evaluation, protests, disputes, and claims. These standards do not 
relieve the non-Federal entity of any contractual responsibilities 
under its contracts. The Federal awarding agency will not substitute 
its judgment for that of the non-Federal entity unless the matter is 
primarily a Federal concern. Violations of law will be referred to the 
local, state, or Federal authority having proper jurisdiction.


Sec.  200.319   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.  200.320.
    (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

[[Page 49553]]

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 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.  200.320(c).


Sec.  200.320   Methods of procurement to be followed.

    The non-Federal entity must have and use documented procurement 
procedures, consistent with the standards of this section and 
Sec. Sec.  200.317, 200.318, and 200.319 for any of the following 
methods of procurement used for the acquisition of property or services 
required under a Federal award or sub-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 (SAT), as defined in Sec.  200.1, or a 
lower threshold established by a non-Federal entity, 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 informal 
methods used for procurement of property or services at or below the 
SAT include:
    (1) Micro-purchases--(i) Distribution. The acquisition of supplies 
or services, the aggregate dollar amount of which does not exceed the 
micro-purchase threshold (See the definition of micro-purchase in Sec.  
200.1). To the maximum extent practicable, the non-Federal entity 
should distribute micro-purchases equitably among qualified suppliers.
    (ii) Micro-purchase awards. Micro-purchases may be awarded without 
soliciting competitive price or rate quotations if the non-Federal 
entity considers the price to be reasonable based on research, 
experience, purchase history or other information and documents it 
files accordingly. Purchase cards can be used for micro-purchases if 
procedures are documented and approved by the non-Federal entity.
    (iii) Micro-purchase thresholds. The non-Federal entity is 
responsible for determining and documenting an appropriate micro-
purchase threshold based on internal controls, an evaluation of risk, 
and its documented procurement procedures. The micro-purchase threshold 
used by the non-Federal entity must be authorized or not prohibited 
under State, local, or tribal laws or regulations. Non-Federal entities 
may establish a threshold higher than the Federal threshold established 
in the Federal Acquisition Regulations (FAR) in accordance with 
paragraphs (a)(1)(iv) and (v) of this section.
    (iv) Non-Federal entity increase to the micro-purchase threshold up 
to $50,000. Non-Federal entities may establish a threshold higher than 
the micro-purchase threshold identified in the FAR in accordance with 
the requirements of this section. The non-Federal entity may self-
certify a threshold up to $50,000 on an annual basis and must maintain 
documentation to be made available to the Federal awarding agency and 
auditors in accordance with Sec.  200.334. The self-certification must 
include a justification, clear identification of the threshold, and 
supporting documentation of any of the following:
    (A) A qualification as a low-risk auditee, in accordance with the 
criteria in Sec.  200.520 for the most recent audit;
    (B) An annual internal institutional risk assessment to identify, 
mitigate, and manage financial risks; or,
    (C) For public institutions, a higher threshold consistent with 
State law.
    (v) Non-Federal entity increase to the micro-purchase threshold 
over $50,000. Micro-purchase thresholds higher than $50,000 must be 
approved by the cognizant agency for indirect costs. The non-federal 
entity must submit a request with the requirements included in 
paragraph (a)(1)(iv) of this section. The increased threshold is valid 
until there is a change in status in which the justification was 
approved.
    (2) Small purchases--(i) Small purchase procedures. 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 as determined appropriate by the non-Federal entity.
    (ii) Simplified acquisition thresholds. 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, a lower simplified

[[Page 49554]]

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 SAT, or a lower 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.  200.319 or paragraph 
(c) of this section. 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.
    (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 qualified 
sources, 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;
    (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.
    (c) 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:
    (1) The acquisition of property or services, the aggregate dollar 
amount of which does not exceed the micro-purchase threshold (see 
paragraph (a)(1) of this section);
    (2) The item is available only from a single source;
    (3) The public exigency or emergency for the requirement will not 
permit a delay resulting from publicizing a competitive solicitation;
    (4) 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
    (5) After solicitation of a number of sources, competition is 
determined inadequate.


Sec.  200.321   Contracting with small and minority businesses, women's 
business enterprises, and labor surplus area firms.

    (a) The non-Federal entity must take all necessary affirmative 
steps to assure that minority businesses, women's business enterprises, 
and labor surplus area firms are used when possible.
    (b) Affirmative steps must include:
    (1) Placing qualified small and minority businesses and women's 
business enterprises on solicitation lists;
    (2) Assuring that small and minority businesses, and women's 
business enterprises are solicited whenever they are potential sources;
    (3) Dividing total requirements, when economically feasible, into 
smaller tasks or quantities to permit maximum participation by small 
and minority businesses, and women's business enterprises;
    (4) Establishing delivery schedules, where the requirement permits, 
which encourage participation by small and minority businesses, and 
women's business enterprises;
    (5) Using the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Minority 
Business Development Agency of the Department of Commerce; and
    (6) Requiring the prime contractor, if subcontracts are to be let, 
to take the affirmative steps listed in paragraphs (b)(1) through (5) 
of this section.


Sec.  200.322   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). The requirements of this section must be 
included in all subawards including all contracts and purchase orders 
for work or products under this award.
    (b) For purposes of this section:
    (1) ``Produced in the United States'' means, for iron and steel 
products, that

[[Page 49555]]

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.


Sec.  200.323   Procurement of recovered materials.

    A non-Federal entity that is a state agency or agency of a 
political subdivision of a state and its contractors must comply with 
section 6002 of the Solid Waste Disposal Act, as amended by the 
Resource Conservation and Recovery Act. The requirements of Section 
6002 include procuring only items designated in guidelines of the 
Environmental Protection Agency (EPA) at 40 CFR part 247 that contain 
the highest percentage of recovered materials practicable, consistent 
with maintaining a satisfactory level of competition, where the 
purchase price of the item exceeds $10,000 or the value of the quantity 
acquired during the preceding fiscal year exceeded $10,000; procuring 
solid waste management services in a manner that maximizes energy and 
resource recovery; and establishing an affirmative procurement program 
for procurement of recovered materials identified in the EPA 
guidelines.


Sec.  200.324   Contract cost and price.

    (a) The non-Federal entity must perform a cost or price analysis in 
connection with every procurement action in excess of the Simplified 
Acquisition Threshold including contract modifications. The method and 
degree of analysis is dependent on the facts surrounding the particular 
procurement situation, but as a starting point, the non-Federal entity 
must make independent estimates before receiving bids or proposals.
    (b) The non-Federal entity must negotiate profit as a separate 
element of the price for each contract in which there is no price 
competition and in all cases where cost analysis is performed. To 
establish a fair and reasonable profit, consideration must be given to 
the complexity of the work to be performed, the risk borne by the 
contractor, the contractor's investment, the amount of subcontracting, 
the quality of its record of past performance, and industry profit 
rates in the surrounding geographical area for similar work.
    (c) Costs or prices based on estimated costs for contracts under 
the Federal award are allowable only to the extent that costs incurred 
or cost estimates included in negotiated prices would be allowable for 
the non-Federal entity under subpart E of this part. The non-Federal 
entity may reference its own cost principles that comply with the 
Federal cost principles.
    (d) The cost plus a percentage of cost and percentage of 
construction cost methods of contracting must not be used.


Sec.  200.325   Federal awarding agency or pass-through entity review.

    (a) The non-Federal entity must make available, upon request of the 
Federal awarding agency or pass-through entity, technical 
specifications on proposed procurements where the Federal awarding 
agency or pass-through entity believes such review is needed to ensure 
that the item or service specified is the one being proposed for 
acquisition. This review generally will take place prior to the time 
the specification is incorporated into a solicitation document. 
However, if the non-Federal entity desires to have the review 
accomplished after a solicitation has been developed, the Federal 
awarding agency or pass-through entity may still review the 
specifications, with such review usually limited to the technical 
aspects of the proposed purchase.
    (b) The non-Federal entity must make available upon request, for 
the Federal awarding agency or pass-through entity pre-procurement 
review, procurement documents, such as requests for proposals or 
invitations for bids, or independent cost estimates, when:
    (1) The non-Federal entity's procurement procedures or operation 
fails to comply with the procurement standards in this part;
    (2) The procurement is expected to exceed the Simplified 
Acquisition Threshold and is to be awarded without competition or only 
one bid or offer is received in response to a solicitation;
    (3) The procurement, which is expected to exceed the Simplified 
Acquisition Threshold, specifies a ``brand name'' product;
    (4) The proposed contract is more than the Simplified Acquisition 
Threshold and is to be awarded to other than the apparent low bidder 
under a sealed bid procurement; or
    (5) A proposed contract modification changes the scope of a 
contract or increases the contract amount by more than the Simplified 
Acquisition Threshold.
    (c) The non-Federal entity is exempt from the pre-procurement 
review in paragraph (b) of this section if the Federal awarding agency 
or pass-through entity determines that its procurement systems comply 
with the standards of this part.
    (1) The non-Federal entity may request that its procurement system 
be reviewed by the Federal awarding agency or pass-through entity to 
determine whether its system meets these standards in order for its 
system to be certified. Generally, these reviews must occur where there 
is continuous high-dollar funding, and third-party contracts are 
awarded on a regular basis;
    (2) The non-Federal entity may self-certify its procurement system. 
Such self-certification must not limit the Federal awarding agency's 
right to survey the system. Under a self-certification procedure, the 
Federal awarding agency may rely on written assurances from the non-
Federal entity that it is complying with these standards. The non-
Federal entity must cite specific policies, procedures, regulations, or 
standards as being in compliance with these requirements and have its 
system available for review.


Sec.  200.326   Bonding requirements.

    For construction or facility improvement contracts or subcontracts 
exceeding the Simplified Acquisition Threshold, the Federal awarding 
agency or pass-through entity may accept the bonding policy and 
requirements of the non-Federal entity provided that the Federal 
awarding agency or pass-through entity has made a determination that 
the Federal interest is adequately protected. If such a determination 
has not been made, the minimum requirements must be as follows:
    (a) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' must consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder will, upon acceptance 
of the bid, execute such contractual documents as may be required 
within the time specified.
    (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.
    (c) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by law of

[[Page 49556]]

all persons supplying labor and material in the execution of the work 
provided for in the contract.


Sec.  200.327   Contract provisions.

    The non-Federal entity's contracts must contain the applicable 
provisions described in appendix II to this part.

Performance and Financial Monitoring and Reporting


Sec.  200.328  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. This 
information must be collected with the frequency required by the terms 
and conditions of the Federal award, but no less frequently than 
annually nor more frequently than quarterly except in unusual 
circumstances, for example where more frequent reporting is necessary 
for the effective monitoring of the Federal award or could 
significantly affect program outcomes, and preferably in coordination 
with performance reporting. The Federal awarding agency must use OMB-
approved common information collections, as applicable, when providing 
financial and performance reporting information.


Sec.  200.329   Monitoring and reporting program performance.

    (a) Monitoring by the non-Federal entity. The non-Federal entity is 
responsible for oversight of the operations of the Federal award 
supported activities. The non-Federal entity must monitor its 
activities under Federal awards to assure compliance with applicable 
Federal requirements and performance expectations are being achieved. 
Monitoring by the non-Federal entity must cover each program, function 
or activity. See also Sec.  200.332.
    (b) Reporting program performance. The Federal awarding agency must 
use OMB-approved common information collections, as applicable, when 
providing financial and performance reporting information. As 
appropriate and in accordance with above mentioned information 
collections, the Federal awarding agency must require the recipient to 
relate financial data and accomplishments to performance goals and 
objectives of the Federal award. Also, in accordance with above 
mentioned common information collections, and when required by the 
terms and conditions of the Federal award, recipients must provide cost 
information to demonstrate cost effective practices (e.g., through unit 
cost data). In some instances (e.g., discretionary research awards), 
this will be limited to the requirement to submit technical performance 
reports (to be evaluated in accordance with Federal awarding agency 
policy). 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.
    (c) Non-construction performance reports. The Federal awarding 
agency must use standard, governmentwide OMB-approved data elements for 
collection of performance information including performance progress 
reports, Research Performance Progress Reports.
    (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. Reports 
submitted annually by the non-Federal entity and/or pass-through entity 
must be due no later than 90 calendar days after the reporting period. 
Reports submitted quarterly or semiannually must be due no later than 
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 submitted by the non-Federal entity and/or pass-
through entity must be due no later than 120 calendar days after the 
period of performance end date. A subrecipient must submit to the pass-
through entity, no later than 90 calendar days after the period of 
performance end date, all final performance reports as required by the 
terms and conditions of the Federal award. See also Sec.  200.344. If a 
justified request is submitted by a non-Federal entity, the Federal 
agency may extend the due date for any performance report.
    (2) As appropriate in accordance with above mentioned performance 
reporting, these reports will contain, for each Federal award, brief 
information on the following unless other data elements are approved by 
OMB in the agency information collection request:
    (i) A comparison of actual accomplishments to the objectives of the 
Federal award established for the period. Where the accomplishments of 
the Federal award can be quantified, a computation of the cost (for 
example, related to units of accomplishment) may be required if that 
information will be useful. Where performance trend data and analysis 
would be informative to the Federal awarding agency program, the 
Federal awarding agency should include this as a performance reporting 
requirement.
    (ii) The reasons why established goals were not met, if 
appropriate.
    (iii) Additional pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (d) Construction performance reports. For the most part, onsite 
technical inspections and certified percentage of completion data are 
relied on heavily by Federal awarding agencies and pass-through 
entities to monitor progress under Federal awards and subawards for 
construction. The Federal awarding agency may require additional 
performance reports only when considered necessary.
    (e) Significant developments. Events may occur between the 
scheduled performance reporting dates that have significant impact upon 
the supported activity. In such cases, the non-Federal entity must 
inform the Federal awarding agency or pass-through entity as soon as 
the following types of conditions become known:
    (1) Problems, delays, or adverse conditions which will materially 
impair the ability to meet the objective of the Federal award. This 
disclosure must include a statement of the action taken, or 
contemplated, and any assistance needed to resolve the situation.
    (2) Favorable developments which enable meeting time schedules and 
objectives sooner or at less cost than anticipated or producing more or 
different beneficial results than originally planned.
    (f) Site visits. The Federal awarding agency may make site visits 
as warranted by program needs.
    (g) Performance report requirement waiver. The Federal awarding 
agency may waive any performance report required by this part if not 
needed.


Sec.  200. 330   Reporting on real property.

    The Federal awarding agency or pass-through entity must require a 
non-Federal entity to submit reports at least annually on the status of 
real property in which the Federal Government retains an interest, 
unless the Federal interest in the real property extends 15

[[Page 49557]]

years or longer. In those instances where the Federal interest attached 
is for a period of 15 years or more, the Federal awarding agency or 
pass-through entity, at its option, may require the non-Federal entity 
to report at various multi-year frequencies (e.g., every two years or 
every three years, not to exceed a five-year reporting period; or a 
Federal awarding agency or pass-through entity may require annual 
reporting for the first three years of a Federal award and thereafter 
require reporting every five years).

Subrecipient Monitoring and Management


Sec.  200.331   Subrecipient and contractor determinations.

    The non-Federal entity may concurrently receive Federal awards as a 
recipient, a subrecipient, and a contractor, depending on the substance 
of its agreements with Federal awarding agencies and pass-through 
entities. Therefore, a pass-through entity must make case-by-case 
determinations whether each agreement it makes for the disbursement of 
Federal program funds casts the party receiving the funds in the role 
of a subrecipient or a contractor. The Federal awarding agency may 
supply and require recipients to comply with additional guidance to 
support these determinations provided such guidance does not conflict 
with this section.
    (a) Subrecipients. A subaward is for the purpose of carrying out a 
portion of a Federal award and creates a Federal assistance 
relationship with the subrecipient. See definition for Subaward in 
Sec.  200.1 of this part. Characteristics which support the 
classification of the non-Federal entity as a subrecipient include when 
the non-Federal entity:
    (1) Determines who is eligible to receive what Federal assistance;
    (2) Has its performance measured in relation to whether objectives 
of a Federal program were met;
    (3) Has responsibility for programmatic decision-making;
    (4) Is responsible for adherence to applicable Federal program 
requirements specified in the Federal award; and
    (5) In accordance with its agreement, uses the Federal funds to 
carry out a program for a public purpose specified in authorizing 
statute, as opposed to providing goods or services for the benefit of 
the pass-through entity.
    (b) Contractors. A contract is for the purpose of obtaining goods 
and services for the non-Federal entity's own use and creates a 
procurement relationship with the contractor. See the definition of 
contract in Sec.  200.1 of this part. Characteristics indicative of a 
procurement relationship between the non-Federal entity and a 
contractor are when the contractor:
    (1) Provides the goods and services within normal business 
operations;
    (2) Provides similar goods or services to many different 
purchasers;
    (3) Normally operates in a competitive environment;
    (4) Provides goods or services that are ancillary to the operation 
of the Federal program; and
    (5) Is not subject to compliance requirements of the Federal 
program as a result of the agreement, though similar requirements may 
apply for other reasons.
    (c) Use of judgment in making determination. In determining whether 
an agreement between a pass-through entity and another non-Federal 
entity casts the latter as a subrecipient or a contractor, the 
substance of the relationship is more important than the form of the 
agreement. All of the characteristics listed above may not be present 
in all cases, and the pass-through entity must use judgment in 
classifying each agreement as a subaward or a procurement contract.


Sec.  200.332   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 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 the definition of Federal award date 
in Sec.  200.1 of this part) 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 Listings number and Title; the pass-through entity 
must identify the dollar amount made available under each Federal award 
and the Assistance Listings 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)(i) An approved federally recognized indirect cost rate 
negotiated between the subrecipient and the Federal Government. If no 
approved rate exists, the pass-through entity must determine the 
appropriate rate in collaboration with the subrecipient, which is 
either:
    (A) The negotiated indirect cost rate between the pass-through 
entity and the subrecipient; which can be based on a prior negotiated 
rate between a different PTE and the same subrecipient. If basing the 
rate on a previously negotiated rate, the pass-through entity is not 
required to collect information justifying this rate, but may elect to 
do so;
    (B) The de minimis indirect cost rate.
    (ii) The pass-through entity must not require use of a de minimis 
indirect cost rate if the subrecipient has a Federally approved rate. 
Subrecipients can elect to use the cost allocation method to account 
for indirect costs in accordance with Sec.  200.405(d).
    (5) A requirement that the subrecipient permit the pass-through 
entity and auditors to have access to the subrecipient's records and 
financial

[[Page 49558]]

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 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 written confirmation from 
the subrecipient, highlighting the status of actions planned or taken 
to address Single 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 responsible for resolving audit 
findings specifically related to the subaward and not responsible for 
resolving cross-cutting findings. 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 cognizant audit agency or cognizant oversight agency to 
perform audit follow-up and make management decisions related to cross-
cutting findings in accordance with section Sec.  300.513(a)(3)(vii). 
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.
    (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.
    (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 that necessitate 
adjustments to the pass-through entity's own records.
    (h) Consider taking enforcement action against noncompliant 
subrecipients as described in Sec.  200.339 of this part and in program 
regulations.


Sec.  200.333  Fixed amount subawards.

    With prior written approval from the Federal awarding agency, a 
pass-through entity may provide subawards based on fixed amounts up to 
the Simplified Acquisition Threshold, provided that the subawards meet 
the requirements for fixed amount awards in Sec.  200.201.

Record Retention and Access


Sec.  200.334   Retention requirements for records.

    Financial records, supporting documents, statistical records, and 
all other non-Federal entity records pertinent to a Federal award must 
be retained for a period of three years from the date of submission of 
the final expenditure report or, for Federal awards that are renewed 
quarterly or annually, from the date of the submission of the quarterly 
or annual financial report, respectively, as reported to the Federal 
awarding agency or pass-through entity in the case of a subrecipient. 
Federal awarding agencies and pass-through entities must not impose any 
other record retention requirements upon non-Federal entities. The only 
exceptions are the following:
    (a) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records must be retained until all 
litigation, claims, or audit findings involving the records have been 
resolved and final action taken.
    (b) When the non-Federal entity is notified in writing by the 
Federal awarding agency, cognizant agency for audit, oversight agency 
for audit, cognizant agency for indirect costs, or pass-through entity 
to extend the retention period.
    (c) Records for real property and equipment acquired with Federal 
funds must be retained for 3 years after final disposition.
    (d) When records are transferred to or maintained by the Federal 
awarding agency or pass-through entity, the 3-year retention 
requirement is not applicable to the non-Federal entity.
    (e) Records for program income transactions after the period of 
performance. In some cases recipients must report program income after 
the period of performance. Where there is such a requirement, the 
retention period for the records pertaining to the earning of the 
program income starts from the end of the non-Federal entity's fiscal 
year in which the program income is earned.
    (f) Indirect cost rate proposals and cost allocations plans. This 
paragraph applies to the following types of documents and their 
supporting records: Indirect cost rate computations or proposals, cost 
allocation plans, and any similar accounting computations of the rate 
at which a particular group of costs is chargeable (such as computer 
usage chargeback rates or composite fringe benefit rates).
    (1) If submitted for negotiation. If the proposal, plan, or other 
computation is

[[Page 49559]]

required to be submitted to the Federal Government (or to the pass-
through entity) to form the basis for negotiation of the rate, then the 
3-year retention period for its supporting records starts from the date 
of such submission.
    (2) If not submitted for negotiation. If the proposal, plan, or 
other computation is not required to be submitted to the Federal 
Government (or to the pass-through entity) for negotiation purposes, 
then the 3-year retention period for the proposal, plan, or computation 
and its supporting records starts from the end of the fiscal year (or 
other accounting period) covered by the proposal, plan, or other 
computation.


Sec.  200.335   Requests for transfer of records.

    The Federal awarding agency must request transfer of certain 
records to its custody from the non-Federal entity when it determines 
that the records possess long-term retention value. However, in order 
to avoid duplicate recordkeeping, the Federal awarding agency may make 
arrangements for the non-Federal entity to retain any records that are 
continuously needed for joint use.


Sec.  200.336   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   Access to records.

    (a) Records of non-Federal entities. The Federal awarding agency, 
Inspectors General, the Comptroller General of the United States, and 
the pass-through entity, or any of their authorized representatives, 
must have the right of access to any documents, papers, or other 
records of the non-Federal entity which are pertinent to the Federal 
award, in order to make audits, examinations, excerpts, and 
transcripts. The right also includes timely and reasonable access to 
the non-Federal entity's personnel for the purpose of interview and 
discussion related to such documents.
    (b) Extraordinary and rare circumstances. Only under extraordinary 
and rare circumstances would such access include review of the true 
name of victims of a crime. Routine monitoring cannot be considered 
extraordinary and rare circumstances that would necessitate access to 
this information. When access to the true name of victims of a crime is 
necessary, appropriate steps to protect this sensitive information must 
be taken by both the non-Federal entity and the Federal awarding 
agency. Any such access, other than under a court order or subpoena 
pursuant to a bona fide confidential investigation, must be approved by 
the head of the Federal awarding agency or delegate.
    (c) Expiration of right of access. The rights of access in this 
section are not limited to the required retention period but last as 
long as the records are retained. Federal awarding agencies and pass-
through entities must not impose any other access requirements upon 
non-Federal entities.


Sec.  200.338   Restrictions on public access to records.

    No Federal awarding agency may place restrictions on the non-
Federal entity that limit public access to the records of the non-
Federal entity pertinent to a Federal award, except for protected 
personally identifiable information (PII) or when the Federal awarding 
agency can demonstrate that such records will be kept confidential and 
would have been exempted from disclosure pursuant to the Freedom of 
Information Act (5 U.S.C. 552) or controlled unclassified information 
pursuant to Executive Order 13556 if the records had belonged to the 
Federal awarding agency. The Freedom of Information Act (5 U.S.C. 552) 
(FOIA) does not apply to those records that remain under a non-Federal 
entity's control except as required under Sec.  200.315. Unless 
required by Federal, state, local, and tribal statute, non-Federal 
entities are not required to permit public access to their records. The 
non-Federal entity's records provided to a Federal agency generally 
will be subject to FOIA and applicable exemptions.

Remedies for Noncompliance


Sec.  200.339   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. 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:
    (a) Temporarily withhold cash payments pending correction of the 
deficiency by the non-Federal entity or more severe enforcement action 
by the Federal awarding agency or pass-through entity.
    (b) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (c) Wholly or partly suspend or terminate the Federal award.
    (d) Initiate suspension or debarment proceedings as authorized 
under 2 CFR part 180 and Federal awarding agency regulations (or in the 
case of a pass-through entity, recommend such a proceeding be initiated 
by a Federal awarding agency).
    (e) Withhold further Federal awards for the project or program.
    (f) Take other remedies that may be legally available.


Sec.  200.340   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

[[Page 49560]]

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 should clearly and unambiguously 
specify termination provisions applicable to each Federal award, in 
applicable regulations or in the 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 (c) 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.  200.342; 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.  200.344 and 200.345.


Sec.  200.341   Notification of termination requirement.

    (a) The Federal agency or pass-through entity must provide to the 
non-Federal entity a notice of termination.
    (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--
    (1) The termination decision will be reported to the OMB-designated 
integrity and performance system accessible through SAM (currently 
FAPIIS);
    (2) The information will be available in the OMB-designated 
integrity and performance system for a period of five years from the 
date of the termination, then archived;
    (3) Federal awarding agencies that consider 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 Federal share of the Federal 
award is expected to exceed the simplified acquisition threshold over 
the period of performance;
    (4) The non-Federal entity may comment on any information the OMB-
designated integrity and performance system contains about the non-
Federal entity for future consideration by Federal awarding agencies. 
The non-Federal entity may submit comments to the awardee integrity and 
performance portal accessible through SAM (currently (CPARS).
    (5) Federal awarding agencies will consider non-Federal entity 
comments when determining whether the non-Federal entity is qualified 
for a future Federal award.
    (c) Upon termination of a Federal award, the Federal awarding 
agency must provide the information required under FFATA to the Federal 
website established to fulfill the requirements of FFATA, and update or 
notify any other relevant governmentwide systems or entities of any 
indications of poor performance as required by 41 U.S.C. 417b and 31 
U.S.C. 3321 and implementing guidance at 2 CFR part 77 (forthcoming at 
time of publication). See also the requirements for Suspension and 
Debarment at 2 CFR part 180.


Sec.  200.342   Opportunities to object, hearings, and appeals.

    Upon taking any remedy for non-compliance, the Federal awarding 
agency must provide the non-Federal entity an opportunity to object and 
provide information and documentation challenging the suspension or 
termination action, in accordance with written processes and procedures 
published by the Federal awarding agency. The Federal awarding agency 
or pass-through entity must comply with any requirements for hearings, 
appeals or other administrative proceedings to which the non-Federal 
entity is entitled under any statute or regulation applicable to the 
action involved.


Sec.  200.343  Effects of suspension and termination.

    Costs to the non-Federal entity resulting from financial 
obligations incurred by the non-Federal entity during a suspension or 
after termination of a Federal award or subaward are not allowable 
unless the Federal awarding agency or pass-through entity expressly 
authorizes them in the notice of suspension or termination or 
subsequently. However, costs during suspension or after termination are 
allowable if:
    (a) The costs result from financial obligations which were properly 
incurred by the non-Federal entity before the effective date of 
suspension or termination, are not in anticipation of it; and
    (b) The costs would be allowable if the Federal award was not 
suspended or expired normally at the end of the period of performance 
in which the termination takes effect.

Closeout


Sec.  200.344   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

[[Page 49561]]

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 recipient 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 (or an earlier date as agreed 
upon by the pass-through entity and subrecipient) 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.  200.346, 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.  200.310 through 200.316 and 
200.330.
    (g) When a recipient or subrecipient completes all closeout 
requirements, 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 close out 
with the information available within one year of the period of 
performance end date.
    (i) If the non-Federal entity does not submit all reports in 
accordance with this section within one year of the period of 
performance end date, the Federal awarding agency must report the non-
Federal entity's material failure to comply with the terms and 
conditions of the award with the OMB-designated integrity and 
performance system (currently FAPIIS). Federal awarding agencies may 
also pursue other enforcement actions per Sec.  200.339.

Post-Closeout Adjustments and Continuing Responsibilities


Sec.  200.345   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 such as resolving indirect 
cost payments and making final payments.
    (4) Audit requirements in subpart F of this part.
    (5) Property management and disposition requirements in Sec. Sec.  
200.310 through 200.316 of this subpart.
    (6) Records retention as required in Sec. Sec.  200.334 through 
200.337 of this subpart.
    (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.

Collection of Amounts Due


Sec.  200.346   Collection of amounts due.

    (a) Any funds paid to the non-Federal entity in excess of the 
amount to which the non-Federal entity is finally determined to be 
entitled under the terms of the Federal award constitute a debt to the 
Federal Government. If not paid within 90 calendar days after demand, 
the Federal awarding agency may reduce the debt by:
    (1) Making an administrative offset against other requests for 
reimbursements;
    (2) Withholding advance payments otherwise due to the non-Federal 
entity; or
    (3) Other action permitted by Federal statute.
    (b) Except where otherwise provided by statutes or regulations, the 
Federal awarding agency will charge interest on an overdue debt in 
accordance with the Federal Claims Collection Standards (31 CFR parts 
900 through 999). The date from which interest is computed is not 
extended by litigation or the filing of any form of appeal.

Subpart E--Cost Principles

0
46. Amend Sec.  200.400 by revising paragraph (e) and (g) to read as 
follows:


Sec.  200.400   Policy guide.

* * * * *
    (e) In reviewing, negotiating and approving cost allocation plans 
or indirect cost proposals, the cognizant agency for indirect costs 
should generally assure that the non-Federal entity is applying these 
cost accounting principles on a consistent basis during their review 
and negotiation of indirect cost proposals. Where wide variations exist 
in the treatment of a given cost item by the non-Federal entity, the 
reasonableness and equity of such treatments should be fully 
considered. See the definition of indirect (facilities & administrative 
(F&A)) costs in Sec.  200.1 of this part.
* * * * *
    (g) The non-Federal entity may not earn or keep any profit 
resulting from Federal financial assistance, unless

[[Page 49562]]

explicitly authorized by the terms and conditions of the Federal award. 
See also Sec.  200.307.

0
47. Amend Sec.  200.401 by revising paragraphs (a)(3) and (4), (b), and 
(c) to read as follows:


Sec.  200.401   Application.

    (a) * * *
    (3) Fixed amount awards. See also Sec.  200.1 Definitions and 
200.201.
    (4) Federal awards to hospitals (see appendix IX to this part).
* * * * *
    (b) Federal contract. Where a Federal contract awarded to a non-
Federal entity is subject to the Cost Accounting Standards (CAS), it 
incorporates the applicable CAS clauses, Standards, and CAS 
administration requirements per the 48 CFR Chapter 99 and 48 CFR part 
30 (FAR Part 30). CAS applies directly to the CAS-covered contract and 
the Cost Accounting Standards at 48 CFR parts 9904 or 9905 takes 
precedence over the cost principles in this subpart E with respect to 
the allocation of costs. When a contract with a non-Federal entity is 
subject to full CAS coverage, the allowability of certain costs under 
the cost principles will be affected by the allocation provisions of 
the Cost Accounting Standards (e.g., CAS 414--48 CFR 9904.414, Cost of 
Money as an Element of the Cost of Facilities Capital, and CAS 417--48 
CFR 9904.417, Cost of Money as an Element of the Cost of Capital Assets 
Under Construction), apply rather the allowability provisions of Sec.  
200.449. In complying with those requirements, the non-Federal entity's 
application of cost accounting practices for estimating, accumulating, 
and reporting costs for other Federal awards and other cost objectives 
under the CAS-covered contract still must be consistent with its cost 
accounting practices for the CAS-covered contracts. In all cases, only 
one set of accounting records needs to be maintained for the allocation 
of costs by the non-Federal entity.
    (c) Exemptions. Some nonprofit organizations, because of their size 
and nature of operations, can be considered to be similar to for-profit 
entities for purpose of applicability of cost principles. Such 
nonprofit organizations must operate under Federal cost principles 
applicable to for-profit entities located at 48 CFR 31.2. A listing of 
these organizations is contained in appendix VIII to this part. Other 
organizations, as approved by the cognizant agency for indirect costs, 
may be added from time to time.

0
48. Amend Sec.  200.403 by revising paragraphs (f) and (g) and adding 
paragraph (h) to read as follows:


Sec.  200.403  Factors affecting allowability of costs.

* * * * *
    (f) Not be included as a cost or used to meet cost sharing or 
matching requirements of any other federally-financed program in either 
the current or a prior period. See also Sec.  200.306(b).
    (g) Be adequately documented. See also Sec. Sec.  200.300 through 
200.309 of this part.
    (h) Cost must be incurred during the approved budget period. The 
Federal awarding agency is authorized, at its discretion, to waive 
prior written approvals to carry forward unobligated balances to 
subsequent budget periods pursuant to Sec.  200.308(e)(3).

0
49. Amend Sec.  200.405 by revising 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 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.  200.310 through 200.316 and 200.439.
* * * * *

0
50. Amend Sec.  200.406 by revising paragraph (b) to read as follows:


Sec.  200.406   Applicable credits.

* * * * *
    (b) In some instances, the amounts received from the Federal 
Government to finance activities or service operations of the non-
Federal entity should be treated as applicable credits. Specifically, 
the concept of netting such credit items (including any amounts used to 
meet cost sharing or matching requirements) must be recognized in 
determining the rates or amounts to be charged to the Federal award. 
(See Sec. Sec.  200.436 and 200.468, for areas of potential application 
in the matter of Federal financing of activities.)

0
51. Amend Sec.  200.407 by revising paragraphs (g) and (y) to read as 
follows:


Sec.  200.407  Prior written approval (prior approval).

* * * * *
    (g) Sec.  200.333 Fixed amount subawards;
* * * * *
    (y) Sec.  200.475 Travel costs.

0
52. Revise Sec.  200.409 to read as follows:


Sec.  200.409   Special considerations.

    In addition to the basic considerations regarding the allowability 
of costs highlighted in this subtitle, other subtitles in this part 
describe special considerations and requirements applicable to states, 
local governments, Indian tribes, and IHEs. In addition, certain 
provisions among the items of cost in this subpart are only applicable 
to certain types of non-Federal entities, as specified in the following 
sections:
    (a) Direct and Indirect (F&A) Costs (Sec. Sec.  200.412-200.415) of 
this subpart;
    (b) Special Considerations for States, Local Governments and Indian 
Tribes (Sec. Sec.  200.416 and 200.417) of this subpart; and
    (c) Special Considerations for Institutions of Higher Education 
(Sec. Sec.  200.418 and 200.419) of this subpart.

0
53. Revise Sec.  200.410 to read as follows:


Sec.  200.410   Collection of unallowable costs.

    Payments made for costs determined to be unallowable by either the 
Federal awarding agency, cognizant agency for indirect costs, or pass-
through entity, either as direct or indirect costs, must be refunded 
(including interest) to the Federal Government in accordance with 
instructions from the Federal agency that determined the costs are 
unallowable unless Federal statute or regulation directs otherwise. See 
also Sec. Sec.  200.300 through 200.309 in subpart D of this part.

0
54. Amend Sec.  200.413 by revising paragraphs (a), (b), and (f) to 
read as follows:


Sec.  200.413   Direct costs.

    (a) General. Direct costs are those costs that can be identified 
specifically with a particular final cost objective, such as a Federal 
award, or other internally or externally funded activity, or that can 
be directly assigned to such activities relatively easily with a high 
degree of accuracy. Costs incurred for the same purpose in like 
circumstances must be treated consistently as either

[[Page 49563]]

direct or indirect (F&A) costs. See also Sec.  200.405.
    (b) Application to Federal awards. Identification with the Federal 
award rather than the nature of the goods and services involved is the 
determining factor in distinguishing direct from indirect (F&A) costs 
of Federal awards. Typical costs charged directly to a Federal award 
are the compensation of employees who work on that award, their related 
fringe benefit costs, the costs of materials and other items of expense 
incurred for the Federal award. If directly related to a specific 
award, certain costs that otherwise would be treated as indirect costs 
may also be considered direct costs. 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.
* * * * *
    (f) For nonprofit organizations, the costs of activities performed 
by the non-Federal entity primarily as a service to members, clients, 
or the general public when significant and necessary to the non-Federal 
entity's mission must be treated as direct costs whether or not 
allowable, and be allocated an equitable share of indirect (F&A) costs. 
Some examples of these types of activities include:
    (1) Maintenance of membership rolls, subscriptions, publications, 
and related functions. See also Sec.  200.454.
    (2) Providing services and information to members, legislative or 
administrative bodies, or the public. See also Sec. Sec.  200.454 and 
200.450.
    (3) Promotion, lobbying, and other forms of public relations. See 
also Sec. Sec.  200.421 and 200.450.
    (4) Conferences except those held to conduct the general 
administration of the non-Federal entity. See also Sec.  200.432.
    (5) Maintenance, protection, and investment of special funds not 
used in operation of the non-Federal entity. See also Sec.  200.442.
    (6) Administration of group benefits on behalf of members or 
clients, including life and hospital insurance, annuity or retirement 
plans, and financial aid. See also Sec.  200.431.

0
55. Amend Sec.  200.414 by revising paragraphs (a), (c) introductory 
text, (c)(3) and (4), (d), (f), and (g) 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 this part, 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) Federal Agency Acceptance of Negotiated Indirect Cost Rates. 
(See also Sec.  200.306.)
* * * * *
    (3) The Federal awarding agency must implement, and make publicly 
available, the policies, procedures and general decision-making 
criteria that their programs will follow to seek and justify deviations 
from negotiated rates.
    (4) As required under Sec.  200.204, 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.
    (d) Pass-through entities are subject to the requirements in Sec.  
200.332(a)(4).
* * * * *
    (f) In addition to the procedures outlined in the appendices in 
paragraph (e) of this section, any non-Federal entity that does not 
have a current negotiated (including provisional) rate, except for 
those non-Federal entities described in appendix VII to this part, 
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 justify the 10% de minimis indirect cost 
rate. As described in Sec.  200.403, costs must be consistently charged 
as either indirect or direct costs, but may not be double charged or 
inconsistently charged as both. If chosen, this methodology once 
elected must be used consistently for all Federal awards until such 
time as a non-Federal entity chooses to negotiate for a rate, which the 
non-Federal entity may apply to do at any time.
    (g) Any non-Federal entity that has a current federally-negotiated 
indirect cost rate may apply for a one-time extension of the rates in 
that agreement for a period of up to four years. This extension will be 
subject to the review and approval of the cognizant agency for indirect 
costs. If an extension is granted the non-Federal entity may not 
request a rate review until the extension period ends. At the end of 
the 4-year extension, the non-Federal entity must re-apply to negotiate 
a rate. Subsequent one-time extensions (up to four years) are permitted 
if a renegotiation is completed between each extension request.
    (h) The federally negotiated indirect rate, distribution base, and 
rate type for a non-Federal entity (except for the Indian tribes or 
tribal organizations, as defined in the Indian Self Determination, 
Education and Assistance Act, 25 U.S.C. 450b(1)) must be available 
publicly on an OMB-designated Federal website.

0
56. Amend Sec.  200.415 by revising paragraphs (b)(1) and (2), (c), and 
(d) to read as follows:


Sec.  200.415   Required certifications.

* * * * *
    (b) * * *
    (1) A proposal to establish a cost allocation plan or an indirect 
(F&A) cost rate, whether submitted to a Federal cognizant agency for 
indirect costs or maintained on file by the non-Federal entity, must be 
certified by the non-Federal entity using the Certificate of Cost 
Allocation Plan or Certificate of Indirect Costs as set forth in 
appendices III through VII, and IX of this part. The certificate must 
be signed on behalf of the non-Federal entity by an individual at a 
level no lower than vice president or chief financial officer of the 
non-Federal entity that submits the proposal.
    (2) Unless the non-Federal entity has elected the option under 
Sec.  200.414(f), the Federal Government may either disallow all 
indirect (F&A) costs or unilaterally establish such a plan or rate when 
the non-Federal entity fails to submit a certified proposal for 
establishing such a plan or rate in accordance with the requirements. 
Such

[[Page 49564]]

a plan or rate may be based upon audited historical data or such other 
data that have been furnished to the cognizant agency for indirect 
costs and for which it can be demonstrated that all unallowable costs 
have been excluded. When a cost allocation plan or indirect cost rate 
is unilaterally established by the Federal Government because the non-
Federal entity failed to submit a certified proposal, the plan or rate 
established will be set to ensure that potentially unallowable costs 
will not be reimbursed.
    (c) Certifications by nonprofit organizations as appropriate that 
they did not meet the definition of a major nonprofit organization as 
defined in Sec.  200.414(a).
    (d) See also Sec.  200.450 for another required certification.

0
57. Revise Sec.  200.417 to read as follows:


Sec.  200.417   Interagency service.

    The cost of services provided by one agency to another within the 
governmental unit may include allowable direct costs of the service 
plus a pro-rated share of indirect costs. A standard indirect cost 
allowance equal to ten percent of the direct salary and wage cost of 
providing the service (excluding overtime, shift premiums, and fringe 
benefits) may be used in lieu of determining the actual indirect costs 
of the service. These services do not include centralized services 
included in central service cost allocation plans as described in 
Appendix V to Part 200.

0
58. Amend Sec.  200.418 by revising paragraph (a) to read as follows:


Sec.  200.418   Costs incurred by states and local governments.

* * * * *
    (a) The costs meet the requirements of Sec.  200.402-411 of this 
subpart;
* * * * *

0
59. Amend Sec.  200.419 by revising paragraphs (a), (b) introductory 
text, and (b)(1) and (2) to read as follows:


Sec.  200.419   Cost accounting standards and disclosure statement.

    (a) An IHE that receive an aggregate total $50 million or more in 
Federal awards and instruments subject to this subpart (as specified in 
Sec.  200.101) in its most recently completed fiscal year must comply 
with the Cost Accounting Standards Board's cost accounting standards 
located at 48 CFR 9905.501, 9905.502, 9905.505, and 9905.506. CAS-
covered contracts and subcontracts awarded to the IHEs are subject to 
the broader range of CAS requirements at 48 CFR 9900 through 9999 and 
48 CFR part 30 (FAR Part 30).
    (b) Disclosure statement. An IHE that receives an aggregate total 
$50 million or more in Federal awards and instruments subject to this 
subpart (as specified in Sec.  200.101) during its most recently 
completed fiscal year must disclose their cost accounting practices by 
filing a Disclosure Statement (DS-2), which is reproduced in Appendix 
III to Part 200. With the approval of the cognizant agency for indirect 
costs, an IHE may meet the DS-2 submission by submitting the DS-2 for 
each business unit that received $50 million or more in Federal awards 
and instruments.
    (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 indirect (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 part 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
60. Revise Sec.  200.420 to read as follows:


Sec.  200.420   Considerations for selected items of cost.

    This section provides principles to be applied in establishing the 
allowability of certain items involved in determining cost, in addition 
to the requirements of Subtitle II of this subpart. These principles 
apply whether or not a particular item of cost is properly treated as 
direct cost or indirect (F&A) cost. Failure to mention a particular 
item of cost is not intended to imply that it is either allowable or 
unallowable; rather, determination as to allowability in each case 
should be based on the treatment provided for similar or related items 
of cost, and based on the principles described in Sec. Sec.  200.402 
through 200.411. In case of a discrepancy between the provisions of a 
specific Federal award and the provisions below, the Federal award 
governs. Criteria outlined in Sec.  200.403 must be applied in 
determining allowability. See also Sec.  200.102.

0
61. Amend Sec.  200.421 by revising paragraphs (b)(1) and (e)(2) to 
read as follows:


Sec.  200.421   Advertising and public relations.

* * * * *
    (b) * * *
    (1) The recruitment of personnel required by the non-Federal entity 
for performance of a Federal award (See also Sec.  200.463);
* * * * *
    (e) * * *
    (2) Costs of meetings, conventions, convocations, or other events 
related to other activities of the entity (see also Sec.  200.432), 
including:
* * * * *

0
62. Revise Sec.  200.422 to read as follows:


Sec.  200.422  Advisory councils.

    Costs incurred by advisory councils or committees are unallowable 
unless authorized by statute, the Federal awarding agency or as an 
indirect cost where allocable to Federal awards. See Sec.  200.444, 
applicable to States, local governments, and Indian tribes.

0
63. Amend Sec.  200.425 by revising paragraphs (a)(1) and (2) and (c) 
introductory text to read as follows:


Sec.  200.425   Audit services.

* * * * *
    (a) * * *
    (1) Any costs when audits required by the Single Audit Act and 
subpart F of this part have not been conducted or have been conducted 
but not in accordance therewith; and
    (2) Any costs of auditing a non-Federal entity that is exempted 
from having an audit conducted under the Single Audit Act and subpart F 
of this part because its expenditures under Federal awards are less 
than $750,000 during the non-Federal entity's fiscal year.
* * * * *
    (c) Pass-through entities may charge Federal awards for the cost of 
agreed-upon-procedures engagements to monitor subrecipients (in 
accordance with subpart D, Sec. Sec.  200.331-333) who are exempted 
from the requirements of

[[Page 49565]]

the Single Audit Act and subpart F of this part. This cost is allowable 
only if the agreed-upon-procedures engagements are:
* * * * *

0
64. Revise Sec.  200.426 to read as follows:


Sec.  200.426   Bad debts.

    Bad debts (debts which have been determined to be uncollectable), 
including losses (whether actual or estimated) arising from 
uncollectable accounts and other claims, are unallowable. Related 
collection costs, and related legal costs, arising from such debts 
after they have been determined to be uncollectable are also 
unallowable. See also Sec.  200.428.

0
65. Revise Sec.  200.428 to read as follows:


Sec.  200.428   Collections of improper payments.

    The costs incurred by a non-Federal entity to recover improper 
payments are allowable as either direct or indirect costs, as 
appropriate. Amounts collected may be used by the non-Federal entity in 
accordance with cash management standards set forth in Sec.  200.305.

0
66. Revise Sec.  200.429 to read as follows:


Sec.  200.429  Commencement and convocation costs.

    For IHEs, costs incurred for commencements and convocations are 
unallowable, except as provided for in (B)(9) Student Administration 
and Services, in appendix III to this part, as activity costs.

0
67. Amend Sec.  200.430 by revising paragraphs (a) introductory text 
and (a)(3), the paragraph (h) subject heading, and paragraphs (h)(3), 
(h)(8)(iv), and (h)(8)(viii)(C) to read as follows:


Sec.  200.430   Compensation--personal services.

    (a) General. Compensation for personal services includes all 
remuneration, paid currently or accrued, for services of employees 
rendered during the period of performance under the Federal award, 
including but not necessarily limited to wages and salaries. 
Compensation for personal services may also include fringe benefits 
which are addressed in Sec.  200.431. Costs of compensation are 
allowable to the extent that they satisfy the specific requirements of 
this part, and that the total compensation for individual employees:
* * * * *
    (3) Is determined and supported as provided in paragraph (i) of 
this section, when applicable.
* * * * *
    (h) Institutions of Higher Education (IHEs). * * *
    (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. However, in unusual cases 
where consultation is across departmental lines or involves a separate 
or remote operation, and the work performed by the faculty member is in 
addition to his or her regular responsibilities, any charges for such 
work representing additional compensation above IBS are allowable 
provided that such consulting arrangements are specifically provided 
for in the Federal award or approved in writing by the Federal awarding 
agency.
* * * * *
    (iv) Encompass federally-assisted and all other activities 
compensated by the non-Federal entity on an integrated basis, but may 
include the use of subsidiary records as defined in the non-Federal 
entity's written policy;
* * * * *
    (viii) * * *
    (C) The non-Federal entity's system of internal controls includes 
processes to review after-the-fact interim charges made to a Federal 
award based on budget estimates. All necessary adjustment must be made 
such that the final amount charged to the Federal award is accurate, 
allowable, and properly allocated.
* * * * *

0
68. Revise Sec.  200.431 to read as follows:


Sec.  200.431   Compensation--fringe benefits.

    (a) General. 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) Fringe benefits. 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) Cost objectives. 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

[[Page 49566]]

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) Except for State and Local Governments, the cost assigned to 
each fiscal year should be determined in accordance with GAAP.
    (4) The costs assigned to a given fiscal year are funded for all 
plan participants within six months after the end of that year. 
However, increases to normal and past service pension costs caused by a 
delay in funding the actuarial liability beyond 30 calendar days after 
each quarter of the year to which such costs are assignable are 
unallowable. Non-Federal entity may elect to follow the ``Cost 
Accounting Standard for Composition and Measurement of Pension Costs'' 
(48 CFR 9904.412).
    (5) Pension plan termination insurance premiums paid pursuant to 
the Employee Retirement Income Security Act (ERISA) of 1974 (29 U.S.C. 
1301-1461) are allowable. Late payment charges on such premiums are 
unallowable. Excise taxes on accumulated funding deficiencies and other 
penalties imposed under ERISA are unallowable.
    (6) Pension plan costs may be computed using a pay-as-you-go method 
or an acceptable actuarial cost method in accordance with established 
written policies of the non-Federal entity.
    (i) For pension plans financed on a pay-as-you-go method, allowable 
costs will be limited to those representing actual payments to retirees 
or their beneficiaries.
    (ii) Pension costs calculated using an actuarial cost-based method 
recognized by GAAP are allowable for a given fiscal year if they are 
funded for that year within six months after the end of that year. 
Costs funded after the six-month period (or a later period agreed to by 
the cognizant agency for indirect costs) are allowable in the year 
funded. The cognizant agency for indirect costs may agree to an 
extension of the six-month period if an appropriate adjustment is made 
to compensate for the timing of the charges to the Federal Government 
and related Federal reimbursement and the non-Federal entity's 
contribution to the pension fund. Adjustments may be made by cash 
refund or other equitable procedures to compensate the Federal 
Government for the time value of Federal reimbursements in excess of 
contributions to the pension fund.
    (iii) Amounts funded by the non-Federal entity in excess of the 
actuarially determined amount for a 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

[[Page 49567]]

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, for 
treatment of tuition remission provided to students.
    (k) Fringe benefit programs and other benefit costs. 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 through 200.411;
    (2) The costs are properly supported by approved cost allocation 
plans in accordance with applicable Federal cost accounting principles; 
and
    (3) The costs are not otherwise borne directly or indirectly by the 
Federal Government.

0
69. Revise Sec.  200.432 to read as follows:


Sec.  200.432   Conferences.

    A conference is defined as a meeting, retreat, seminar, symposium, 
workshop or event whose primary purpose is the dissemination of 
technical information beyond the non-Federal entity and is necessary 
and reasonable for successful performance under the Federal award. 
Allowable conference costs paid by the non-Federal entity as a sponsor 
or host of the conference may include rental of facilities, speakers' 
fees, costs of meals and refreshments, local transportation, and other 
items incidental to such conferences unless further restricted by the 
terms and conditions of the Federal award. As needed, the costs of 
identifying, but not providing, locally available dependent-care 
resources are allowable. Conference hosts/sponsors must exercise 
discretion and judgment in ensuring that conference costs are 
appropriate, necessary and managed in a manner that minimizes costs to 
the Federal award. The Federal awarding agency may authorize exceptions 
where appropriate for programs including Indian tribes, children, and 
the elderly. See also Sec. Sec.  200.438, 200.456, and 200.475.

0
70. Amend Sec.  200.433 by revising paragraphs (b) and (c) to read as 
follows:


Sec.  200.433   Contingency provisions.

* * * * *
    (b) It is permissible for contingency amounts other than those 
excluded in paragraph (a) of this section to be explicitly included in 
budget estimates, to the extent they are necessary to improve the 
precision of those estimates. Amounts must be estimated using broadly-
accepted cost estimating methodologies, specified in the budget 
documentation of the Federal award, and accepted by the Federal 
awarding agency. As such, contingency amounts are to be included in the 
Federal award. In order for actual costs incurred to be allowable, they 
must comply with the cost principles and other requirements in this 
part (see also Sec. Sec.  200.300 and 200.403 of this part); be 
necessary and reasonable for proper and efficient accomplishment of 
project or program objectives, and be verifiable from the non-Federal 
entity's records.
    (c) Payments made by the Federal awarding agency to the non-Federal 
entity's ``contingency reserve'' or any similar payment made for events 
the occurrence of which cannot be foretold with certainty as to the 
time or intensity, or with an assurance of their happening, are 
unallowable, except as noted in Sec. Sec.  200.431 and 200.447.

0
71. Amend Sec.  200.434 by revising paragraphs (b), (c), (f), and 
(g)(2) to read as follows:


Sec.  200.434   Contributions and donations.

* * * * *
    (b) The value of services and property donated to the non-Federal 
entity may not be charged to the Federal award either as a direct or 
indirect (F&A) cost. The value of donated services and property may be 
used to meet cost sharing or matching requirements (see Sec.  200.306). 
Depreciation on donated assets is permitted in accordance with Sec.  
200.436, as long as the donated property is not counted towards cost 
sharing or matching requirements.
    (c) Services donated or volunteered to the non-Federal entity may 
be furnished to a non-Federal entity by professional

[[Page 49568]]

and technical personnel, consultants, and other skilled and unskilled 
labor. The value of these services may not be charged to the Federal 
award either as a direct or indirect cost. However, the value of 
donated services may be used to meet cost sharing or matching 
requirements in accordance with the provisions of Sec.  200.306.
* * * * *
    (f) Fair market value of donated services must be computed as 
described in Sec.  200.306.
* * * * *
    (g) * * *
    (2) The value of the donations may be used to meet cost sharing or 
matching share requirements under the conditions described in Sec.  
200.300 of this part. The value of the donations must be determined in 
accordance with Sec.  200.300. Where donations are treated as indirect 
costs, indirect cost rates will separate the value of the donations so 
that reimbursement will not be made.

0
72. Amend Sec.  200.436 by revising paragraphs (c) introductory text, 
(c)(3) and (4), and (e) 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
* * * * *
    (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
73. Amend Sec.  200.439 by revising paragraphs (a) and (b)(3) and (7) 
to read as follows:


Sec.  200.439   Equipment and other capital expenditures.

    (a) See Sec.  200.1 for the definitions of capital expenditures, 
equipment, special purpose equipment, general purpose equipment, 
acquisition cost, and capital assets.
* * * * *
    (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, 
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
74. Revise Sec.  200.441 to read as follows:


Sec.  200.441   Fines, penalties, damages and other settlements.

    Costs resulting from non-Federal entity violations of, alleged 
violations of, or failure to comply with, Federal, state, tribal, local 
or foreign laws and regulations are unallowable, except when incurred 
as a result of compliance with specific provisions of the Federal 
award, or with prior written approval of the Federal awarding agency. 
See also Sec.  200.435.

0
75. Revise Sec.  200.442 to read as follows:


Sec.  200.442  Fund raising and investment management costs.

    (a) Costs of organized fund raising, including financial campaigns, 
endowment drives, solicitation of gifts and bequests, and similar 
expenses incurred to raise capital or obtain contributions are 
unallowable. Fund raising costs for the purposes of meeting the Federal 
program objectives are allowable with prior written approval from the 
Federal awarding agency. Proposal costs are covered in Sec.  200.460.
    (b) Costs of investment counsel and staff and similar expenses 
incurred to enhance income from investments are unallowable except when 
associated with investments covering pension, self-insurance, or other 
funds which include Federal participation allowed by this part.
    (c) Costs related to the physical custody and control of monies and 
securities are allowable.
    (d) Both allowable and unallowable fund-raising and investment 
activities must be allocated as an appropriate share of indirect costs 
under the conditions described in Sec.  200.413.

0
76. Amend Sec.  200.443 by revising paragraphs (b)(1) and (3) and (d) 
to read as follows:


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

* * * * *
    (b) * * *
    (1) The gain or loss is processed through a depreciation account 
and is reflected in the depreciation allowable under Sec. Sec.  200.436 
and 200.439.
* * * * *
    (3) A loss results from the failure to maintain permissible 
insurance, except as otherwise provided in Sec.  200.447.
* * * * *
    (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.  200.310 through 200.316 of this part.

0
77. Amend Sec.  200.444 by revising paragraphs (a) introductory text, 
(a)(4), and (b) to read as follows:


Sec.  200.444   General costs of government.

    (a) For states, local governments, and Indian Tribes, the general 
costs of government are unallowable (except as provided in Sec.  
200.475). Unallowable costs include:
* * * * *
    (4) Costs of prosecutorial activities unless treated as a direct 
cost to a specific program if authorized by statute or regulation 
(however, this does not preclude the allowability of other legal 
activities of the Attorney General as described in Sec.  200.435); and
* * * * *
    (b) For Indian tribes and Councils of Governments (COGs) (see 
definition for Local government in Sec.  200.1 of this part), 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
78. Amend Sec.  200.447 by revising paragraph (a)(4) to read as 
follows:


Sec.  200.447   Insurance and indemnification.

    (a) * * *
    (4) Costs of insurance on the lives of trustees, officers, or other 
employees holding positions of similar responsibilities are allowable 
only to the extent that the insurance represents additional 
compensation (see Sec.  200.431). The cost of such insurance when the 
non-Federal entity is

[[Page 49569]]

identified as the beneficiary is unallowable.
* * * * *

0
79. Amend Sec.  200.448 by revising paragraph (a)(1)(iii) to read as 
follows:


Sec.  200.448   Intellectual property.

    (a) * * *
    (1) * * *
    (iii) General counseling services relating to patent and copyright 
matters, such as advice on patent and copyright laws, regulations, 
clauses, and employee intellectual property agreements (See also Sec.  
200.459).
* * * * *

0
80. Amend Sec.  200.449 by revising paragraphs (b)(1) and (c)(4) to 
read as follows:


Sec.  200.449   Interest.

* * * * *
    (b) Capital assets. (1) Capital assets is defined as noted in Sec.  
200.1 of this part. 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 other types of debt 
financing, in which case reimbursement must be limited to the amount of 
interest determined if leasing had been used.
* * * * *

0
81. Amend Sec.  200.450 by revising paragraphs (a), (c)(2)(v) and (vi), 
(c)(2)(vii)(A) introductory text to read as follows:


Sec.  200.450   Lobbying.

    (a) The cost of certain influencing activities associated with 
obtaining grants, contracts, or cooperative agreements, or loans is an 
unallowable cost. Lobbying with respect to certain grants, contracts, 
cooperative agreements, and loans is governed by relevant statutes, 
including among others, the provisions of 31 U.S.C. 1352, as well as 
the common rule, ``New Restrictions on Lobbying'' published on February 
26, 1990, including definitions, and the Office of Management and 
Budget ``Governmentwide Guidance for New Restrictions on Lobbying'' and 
notices published on December 20, 1989, June 15, 1990, January 15, 
1992, and January 19, 1996.
* * * * *
    (c) * * *
    (2) * * *
    (v) When a non-Federal entity seeks reimbursement for indirect 
(F&A) costs, total lobbying costs must be separately identified in the 
indirect (F&A) cost rate proposal, and thereafter treated as other 
unallowable activity costs in accordance with the procedures of Sec.  
200.413.
    (vi) The non-Federal entity must submit as part of its annual 
indirect (F&A) cost rate proposal a certification that the requirements 
and standards of this section have been complied with. (See also Sec.  
200.415.)
    (vii)(A) Time logs, calendars, or similar records are not required 
to be created for purposes of complying with the record keeping 
requirements in Sec.  200.302 with respect to lobbying costs during any 
particular calendar month when:
* * * * *

0
82. Revise Sec.  200.452 to read as follows:


Sec.  200.452   Maintenance and repair costs.

    Costs incurred for utilities, insurance, security, necessary 
maintenance, janitorial services, repair, or upkeep of buildings and 
equipment (including Federal property unless otherwise provided for) 
which neither add to the permanent value of the property nor 
appreciably prolong its intended life, but keep it in an efficient 
operating condition, are allowable. Costs incurred for improvements 
which add to the permanent value of the buildings and equipment or 
appreciably prolong their intended life must be treated as capital 
expenditures (see Sec.  200.439). These costs are only allowable to the 
extent not paid through rental or other agreements.

0
83. Amend Sec.  200.454 by revising paragraph (e) to read as follows:


Sec.  200.454   Memberships, subscriptions, and professional activity 
costs.

* * * * *
    (e) Costs of membership in organizations whose primary purpose is 
lobbying are unallowable. See also Sec.  200.450.

0
84. Revise Sec.  200.456 to read as follows:


Sec.  200.456   Participant support costs.

    Participant support costs as defined in Sec.  200.1 are allowable 
with the prior approval of the Federal awarding agency.

0
85. Revise Sec.  200.457 to read as follows:


Sec.  200.457   Plant and security costs.

    Necessary and reasonable expenses incurred for protection and 
security of facilities, personnel, and work products are allowable. 
Such costs include, but are not limited to, wages and uniforms of 
personnel engaged in security activities; equipment; barriers; 
protective (non-military) gear, devices, and equipment; contractual 
security services; and consultants. Capital expenditures for plant 
security purposes are subject to Sec.  200.439.

0
86. Revise Sec.  200.458 to read as follows:


Sec.  200.458   Pre-award costs.

    Pre-award costs are those incurred prior to the effective date of 
the Federal award or subaward directly pursuant to the negotiation and 
in anticipation of the Federal award where such costs are necessary for 
efficient and timely performance of the scope of work. Such costs are 
allowable only to the extent that they would have been allowable if 
incurred after the date of the Federal award and only with the written 
approval of the Federal awarding agency. 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 or pass-through 
entity.

0
87. Amend Sec.  200.459 by revising paragraph (a) to read as follows:


Sec.  200.459   Professional service costs.

    (a) Costs of professional and consultant services rendered by 
persons who are members of a particular profession or possess a special 
skill, and who are not officers or employees of the non-Federal entity, 
are allowable, subject to paragraphs (b) and (c) of this section when 
reasonable in relation to the services rendered and when not contingent 
upon recovery of the costs from the Federal Government. In addition, 
legal and related services are limited under Sec.  200.435.
* * * * *

0
88. 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 during 
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
89. Amend Sec.  200.463 by revising paragraph (c) to read as follows:

[[Page 49570]]

Sec.  200.463   Recruiting costs.

* * * * *
    (c) Where relocation costs incurred incident to recruitment of a 
new employee have been funded in whole or in part to a Federal award, 
and the newly hired employee resigns for reasons within the employee's 
control within 12 months after hire, the non-Federal entity will be 
required to refund or credit the Federal share of such relocation costs 
to the Federal Government. See also Sec.  200.464.
* * * * *

0
90. Amend Sec.  200.464 by revising paragraph (c) to read as follows:


Sec.  200.464   Relocation costs of employees.

* * * * *
    (c) Allowable relocation costs for new employees are limited to 
those described in paragraphs (b)(1) and (2) of this section. When 
relocation costs incurred incident to the recruitment of new employees 
have been charged to a Federal award and the employee resigns for 
reasons within the employee's control within 12 months after hire, the 
non-Federal entity must refund or credit the Federal Government for its 
share of the cost. If dependents are not permitted at the location for 
any reason and the costs do not include costs of transporting household 
goods, the costs of travel to an overseas location must be considered 
travel costs in accordance with Sec.  200.474 Travel costs, and not 
this relocations costs of employees (See also Sec.  200.464).
* * * * *

0
91. Amend Sec.  200.465 by adding paragraphs (d) through (f) 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. 
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 with 
GAAP.
    (f) The rental of any property owned by any individuals or entities 
affiliated with the non-Federal entity, to include commercial or 
residential real estate, for purposes such as the home office workspace 
is unallowable.

0
92. Amend Sec.  200.466 by revising paragraph (b) to read as follows:


Sec.  200.466   Scholarships and student aid costs.

* * * * *
    (b) Charges for tuition remission and other forms of compensation 
paid to students as, or in lieu of, salaries and wages must be subject 
to the reporting requirements in Sec.  200.430, and must be treated as 
direct or indirect cost in accordance with the actual work being 
performed. Tuition remission may be charged on an average rate basis. 
See also Sec.  200.431.

0
93. Revise Sec.  200.467 to read as follows:


Sec.  200.467   Selling and marketing costs.

    Costs of selling and marketing any products or services of the non-
Federal entity (unless allowed under Sec.  200.421) are unallowable, 
except as direct costs, with prior approval by the Federal awarding 
agency when necessary for the performance of the Federal award.

0
94. Amend Sec.  200.468 by revising paragraph (a) and (b)(2) to read as 
follows:


Sec.  200.468   Specialized service facilities.

    (a) The costs of services provided by highly complex or specialized 
facilities operated by the non-Federal entity, such as computing 
facilities, wind tunnels, and reactors are allowable, provided the 
charges for the services meet the conditions of either paragraph (b) or 
(c) of this section, and, in addition, take into account any items of 
income or Federal financing that qualify as applicable credits under 
Sec.  200.406.
* * * * *
    (b) * * *
    (2) Is designed to recover only the aggregate costs of the 
services. The costs of each service must consist normally of both its 
direct costs and its allocable share of all indirect (F&A) costs. Rates 
must be adjusted at least biennially, and must take into consideration 
over/under-applied costs of the previous period(s).
* * * * *


Sec. Sec.  200.471 through 200.475  [Redesignated as Sec. Sec.  200.472 
through 200.476]

0
95. Redesignate Sec. Sec.  200.471 through 200.475 as Sec. Sec.  
200.472 through 200.476.

0
96. Add new Sec.  200.471 to read as follows:


Sec.  200.471   Telecommunication costs and video surveillance costs

    (a) Costs incurred for telecommunications and video surveillance 
services or equipment such as phones, internet, video surveillance, 
cloud servers are allowable except for the following circumstances:
    (b) Obligating or expending covered telecommunications and video 
surveillance services or equipment or services as described in Sec.  
200.216 to:
    (1) Procure or obtain, extend or renew a contract to procure or 
obtain;
    (2) Enter into a contract (or extend or renew a contract) to 
procure; or
    (3) Obtain the equipment, services, or systems.

0
97. Amend newly redesignated Sec.  200.472 by revising paragraphs 
(c)(2), (e)(1)(i), and (f) to read as follows:


Sec.  200.472   Termination costs.

* * * * *
    (c) * * *
    (2) The interest of the Federal Government is protected by transfer 
of title or by other means deemed appropriate by the Federal awarding 
agency (see also Sec.  200.313 (d)), and
* * * * *
    (e) * * *
    (1) * * *
    (i) The preparation and presentation to the Federal awarding agency 
of settlement claims and supporting data with respect to the terminated 
portion of the Federal award, unless the termination is for cause (see 
subpart D, including Sec. Sec.  200.339-200.343); and
* * * * *
    (f) Claims under subawards, including the allocable portion of 
claims which are common to the Federal award and to other work of the 
non-Federal entity, are generally allowable. An appropriate share of 
the non-Federal entity's indirect costs may be allocated to the amount 
of settlements with contractors and/or subrecipients, provided that the 
amount allocated is otherwise consistent with the basic guidelines 
contained in Sec.  200.414. The indirect costs so allocated must 
exclude the same and similar costs claimed directly or indirectly as 
settlement expenses.

0
98. Amend newly redesignated Sec.  200.475 by revising paragraphs (a) 
and (c)(2) to read as follows:

[[Page 49571]]

Sec.  200.475   Travel costs.

    (a) General. Travel costs are the expenses for transportation, 
lodging, subsistence, and related items incurred by employees who are 
in travel status on official business of the non-Federal entity. Such 
costs may be charged on an actual cost basis, on a per diem or mileage 
basis in lieu of actual costs incurred, or on a combination of the two, 
provided the method used is applied to an entire trip and not to 
selected days of the trip, and results in charges consistent with those 
normally allowed in like circumstances in the non-Federal entity's non-
federally-funded activities and in accordance with non-Federal entity's 
written travel reimbursement policies. Notwithstanding the provisions 
of Sec.  200.444, travel costs of officials covered by that section are 
allowable with the prior written approval of the Federal awarding 
agency or pass-through entity when they are specifically related to the 
Federal award.
* * * * *
    (c) * * *
    (2) Travel costs for dependents are unallowable, except for travel 
of duration of six months or more with prior approval of the Federal 
awarding agency. See also Sec.  200.432.
* * * * *

0
99. Revise newly redesignated Sec.  200.476 to read as follows:


Sec.  200.476   Trustees.

    Travel and subsistence costs of trustees (or directors) at IHEs and 
nonprofit organizations are allowable. See also Sec.  200.475.

Subpart F--Audit Requirements

0
100. Amend Sec.  200.501 by revising paragraphs (b), (c), (d), (f), and 
(h) to read as follows:


Sec.  200.501   Audit requirements.

* * * * *
    (b) Single audit. A non-Federal entity that expends $750,000 or 
more during the non-Federal entity's fiscal year in Federal awards must 
have a single audit conducted in accordance with Sec.  200.514 except 
when it elects to have a program-specific audit conducted in accordance 
with paragraph (c) of this section.
    (c) Program-specific audit election. When an auditee expends 
Federal awards under only one Federal program (excluding R&D) and the 
Federal program's statutes, regulations, or the terms and conditions of 
the Federal award do not require a financial statement audit of the 
auditee, the auditee may elect to have a program-specific audit 
conducted in accordance with Sec.  200.507. A program-specific audit 
may not be elected for R&D unless all of the Federal awards expended 
were received from the same Federal agency, or the same Federal agency 
and the same pass-through entity, and that Federal agency, or pass-
through entity in the case of a subrecipient, approves in advance a 
program-specific audit.
    (d) Exemption when Federal awards expended are less than $750,000. 
A non-Federal entity that expends less than $750,000 during the non-
Federal entity's fiscal year in Federal awards is exempt from Federal 
audit requirements for that year, except as noted in Sec.  200.503, but 
records must be available for review or audit by appropriate officials 
of the Federal agency, pass-through entity, and Government 
Accountability Office (GAO).
* * * * *
    (f) Subrecipients and contractors. An auditee may simultaneously be 
a recipient, a subrecipient, and a contractor. Federal awards expended 
as a recipient or a subrecipient are subject to audit under this part. 
The payments received for goods or services provided as a contractor 
are not Federal awards. Section Sec.  200.331 sets forth the 
considerations in determining whether payments constitute a Federal 
award or a payment for goods or services provided as a contractor.
* * * * *
    (h) For-profit subrecipient. Since this part does not apply to for-
profit subrecipients, the pass-through entity is responsible for 
establishing requirements, as necessary, to ensure compliance by for-
profit subrecipients. The agreement with the for-profit subrecipient 
must describe applicable compliance requirements and the for-profit 
subrecipient's compliance responsibility. Methods to ensure compliance 
for Federal awards made to for-profit subrecipients may include pre-
award audits, monitoring during the agreement, and post-award audits. 
See also Sec.  200.332.

0
101. Amend Sec.  200.503 by revising paragraph (e) to read as follows:


Sec.  200.503   Relation to other audit requirements.

* * * * *
    (e) Request for a program to be audited as a major program. A 
Federal awarding agency may request that an auditee have a particular 
Federal program audited as a major program in lieu of the Federal 
awarding agency conducting or arranging for the additional audits. To 
allow for planning, such requests should be made at least 180 calendar 
days prior to the end of the fiscal year to be audited. The auditee, 
after consultation with its auditor, should promptly respond to such a 
request by informing the Federal awarding agency whether the program 
would otherwise be audited as a major program using the risk-based 
audit approach described in Sec.  200.518 and, if not, the estimated 
incremental cost. The Federal awarding agency must then promptly 
confirm to the auditee whether it wants the program audited as a major 
program. If the program is to be audited as a major program based upon 
this Federal awarding agency request, and the Federal awarding agency 
agrees to pay the full incremental costs, then the auditee must have 
the program audited as a major program. A pass-through entity may use 
the provisions of this paragraph for a subrecipient.

0
102. Revise Sec.  200.505 to read as follows:


Sec.  200.505   Sanctions.

    In cases of continued inability or unwillingness to have an audit 
conducted in accordance with this part, Federal agencies and pass-
through entities must take appropriate action as provided in Sec.  
200.339.

0
103. Revise Sec.  200.506 to read as follows:


Sec.  200.506   Audit costs.

    See Sec.  200.425.

0
104. Amend Sec.  200.507 by revising paragraphs (a), (b)(2), (b)(3)(ii) 
through (v), (b)(4)(iv), (c)(2) and (3), and (d)(8) to read as follows:


Sec.  200.507   Program-specific audits.

    (a) Program-specific audit guide available. In some cases, a 
program-specific audit guide will be available to provide specific 
guidance to the auditor with respect to internal controls, compliance 
requirements, suggested audit procedures, and audit reporting 
requirements. A listing of current program-specific audit guides can be 
found in the compliance supplement, Part 8, Appendix VI, Program-
Specific Audit Guides, which includes a website where a copy of the 
guide can be obtained. When a current program-specific audit guide is 
available, the auditor must follow GAGAS and the guide when performing 
a program-specific audit.
* * * * *
    (b) * * *
    (2) The auditee must prepare the financial statement(s) for the 
Federal program that includes, at a minimum, a schedule of expenditures 
of Federal awards for the program and notes that

[[Page 49572]]

describe the significant accounting policies used in preparing the 
schedule, a summary schedule of prior audit findings consistent with 
the requirements of Sec.  200.511(b), and a corrective action plan 
consistent with the requirements of Sec.  200.511(c).
    (3) * * *
    (ii) Obtain an understanding of internal controls and perform tests 
of internal controls over the Federal program consistent with the 
requirements of Sec.  200.514(c) for a major program;
    (iii) Perform procedures to determine whether the auditee has 
complied with Federal statutes, regulations, and the terms and 
conditions of Federal awards that could have a direct and material 
effect on the Federal program consistent with the requirements of Sec.  
200.514(d) for a major program;
    (iv) Follow up on prior audit findings, perform procedures to 
assess the reasonableness of the summary schedule of prior audit 
findings prepared by the auditee in accordance with the requirements of 
Sec.  200.511, and report, as a current year audit finding, when the 
auditor concludes that the summary schedule of prior audit findings 
materially misrepresents the status of any prior audit finding; and
    (v) Report any audit findings consistent with the requirements of 
Sec.  200.516.
    (4) * * *
    (iv) A schedule of findings and questioned costs for the Federal 
program that includes a summary of the auditor's results relative to 
the Federal program in a format consistent with Sec.  200.515(d)(1) and 
findings and questioned costs consistent with the requirements of Sec.  
200.515(d)(3).
    (c) * * *
    (2) When a program-specific audit guide is available, the auditee 
must electronically submit to the FAC the data collection form prepared 
in accordance with Sec.  200.512(b), as applicable to a program-
specific audit, and the reporting required by the program-specific 
audit guide.
    (3) When a program-specific audit guide is not available, the 
reporting package for a program-specific audit must consist of the 
financial statement(s) of the Federal program, a summary schedule of 
prior audit findings, and a corrective action plan as described in 
paragraph (b)(2) of this section, and the auditor's report(s) described 
in paragraph (b)(4) of this section. The data collection form prepared 
in accordance with Sec.  200.512(b), as applicable to a program-
specific audit, and one copy of this reporting package must be 
electronically submitted to the FAC.
    (d) * * *
    (8) 200.521 Management decision; and
* * * * *

0
105. Amend Sec.  200.508 by revising paragraphs (a), (b), and (c) to 
read as follows:


Sec.  200.508   Auditee responsibilities.

* * * * *
    (a) Procure or otherwise arrange for the audit required by this 
part in accordance with Sec.  200.509, and ensure it is properly 
performed and submitted when due in accordance with Sec.  200.512.
    (b) Prepare appropriate financial statements, including the 
schedule of expenditures of Federal awards in accordance with Sec.  
200.510.
    (c) Promptly follow up and take corrective action on audit 
findings, including preparation of a summary schedule of prior audit 
findings and a corrective action plan in accordance with Sec.  
200.511(b) and (c), respectively.
* * * * *

0
106. 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.  200.317 through 200.326 of subpart D of this 
part 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.  200.321, or the FAR (48 CFR 
part 42), as applicable.
* * * * *

0
107. Amend Sec.  200.510 by revising paragraphs (a), (b) introductory 
text, and (b)(3), (5), and (6) to read as follows:


Sec.  200.510   Financial statements.

    (a) Financial statements. The auditee must prepare financial 
statements that reflect its financial position, results of operations 
or changes in net assets, and, where appropriate, cash flows for the 
fiscal year audited. The financial statements must be for the same 
organizational unit and fiscal year that is chosen to meet the 
requirements of this part. However, non-Federal entity-wide financial 
statements may also include departments, agencies, and other 
organizational units that have separate audits in accordance with Sec.  
200.514(a) and prepare separate financial statements.
    (b) Schedule of expenditures of Federal awards. The auditee must 
also prepare a schedule of expenditures of Federal awards for the 
period covered by the auditee's financial statements which must include 
the total Federal awards expended as determined in accordance with 
Sec.  200.502. While not required, the auditee may choose to provide 
information requested by Federal awarding agencies and pass-through 
entities to make the schedule easier to use. For example, when a 
Federal program has multiple Federal award years, the auditee may list 
the amount of Federal awards expended for each Federal award year 
separately. At a minimum, the schedule must:
* * * * *
    (3) Provide total Federal awards expended for each individual 
Federal program and the Assistance Listings 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.
* * * * *
    (5) For loan or loan guarantee programs described in Sec.  
200.502(b), identify in the notes to the schedule the balances 
outstanding at the end of the audit period. This is in addition to 
including the total Federal awards expended for loan or loan guarantee 
programs in the schedule.
    (6) Include notes that describe that significant accounting 
policies used in preparing the schedule, and note whether or not the 
auditee elected to use the 10% de minimis cost rate as covered in Sec.  
200.414.

0
108. Amend Sec.  200.511 by revising paragraphs (a) and (c) to read as 
follows:


Sec.  200.511   Audit findings follow-up.

    (a) General. The auditee is responsible for follow-up and 
corrective action on all audit findings. As part of this 
responsibility, the auditee must prepare a summary schedule of prior 
audit findings. The auditee must also prepare a corrective action plan 
for current year audit findings. The summary schedule

[[Page 49573]]

of prior audit findings and the corrective action plan must include the 
reference numbers the auditor assigns to audit findings under Sec.  
200.516(c). Since the summary schedule may include audit findings from 
multiple years, it must include the fiscal year in which the finding 
initially occurred. The corrective action plan and summary schedule of 
prior audit findings must include findings relating to the financial 
statements which are required to be reported in accordance with GAGAS.
* * * * *
    (c) Corrective action plan. At the completion of the audit, the 
auditee must prepare, in a document separate from the auditor's 
findings described in Sec.  200.516, a corrective action plan to 
address each audit finding included in the current year auditor's 
reports. The corrective action plan must provide the name(s) of the 
contact person(s) responsible for corrective action, the corrective 
action planned, and the anticipated completion date. If the auditee 
does not agree with the audit findings or believes corrective action is 
not required, then the corrective action plan must include an 
explanation and specific reasons.

0
109. Amend Sec.  200.512 by revising paragraphs (b) introductory text, 
(b)(1), (c)(1) through (4), and (g) to read as follows:


Sec.  200.512   Report submission.

* * * * *
    (b) Data collection. The FAC is the repository of record for 
subpart F of this part reporting packages and the data collection form. 
All Federal agencies, pass-through entities and others interested in a 
reporting package and data collection form must obtain it by accessing 
the FAC.
    (1) The auditee must submit required data elements described in 
Appendix X to Part 200, which state whether the audit was completed in 
accordance with this part and provides information about the auditee, 
its Federal programs, and the results of the audit. The data must 
include information available from the audit required by this part that 
is necessary for Federal agencies to use the audit to ensure integrity 
for Federal programs. The data elements and format must be approved by 
OMB, available from the FAC, and include collections of information 
from the reporting package described in paragraph (c) of this section. 
A senior level representative of the auditee (e.g., state controller, 
director of finance, chief executive officer, or chief financial 
officer) must sign a statement to be included as part of the data 
collection that says that the auditee complied with the requirements of 
this part, the data were prepared in accordance with this part (and the 
instructions accompanying the form), the reporting package does not 
include protected personally identifiable information, the information 
included in its entirety is accurate and complete, and that the FAC is 
authorized to make the reporting package and the form publicly 
available on a website.
* * * * *
    (c) * * *
    (1) Financial statements and schedule of expenditures of Federal 
awards discussed in Sec.  200.510(a) and (b), respectively;
    (2) Summary schedule of prior audit findings discussed in Sec.  
200.511(b);
    (3) Auditor's report(s) discussed in Sec.  200.515; and
    (4) Corrective action plan discussed in Sec.  200.511(c).
* * * * *
    (g) FAC responsibilities. The FAC must make available the reporting 
packages received in accordance with paragraph (c) of this section and 
Sec.  200.507(c) to the public, except for Indian tribes exercising the 
option in (b)(2) of this section, and maintain a data base of completed 
audits, provide appropriate information to Federal agencies, and follow 
up with known auditees that have not submitted the required data 
collection forms and reporting packages.
* * * * *

0
110. Amend Sec.  200.513 by revising paragraphs (a)(1) and (2), 
(a)(3)(ii) and (vii), (b) introductory text, (c) introductory text, and 
(c)(3)(i) and (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) (as listed on the Schedule 
of expenditures of Federal awards, see Sec.  200.510(b)) 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 expenditures (as direct and subawards) by the non-Federal entity, 
then the Federal agency with the predominant amount of total funding is 
the designated cognizant agency for audit.
    (2) To provide for continuity of cognizance, the determination of 
the predominant amount of direct funding must be based upon direct 
Federal awards expended in the non-Federal entity's fiscal years ending 
in 2019, and every fifth year thereafter.
    (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 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 
agencies, State auditors, and professional audit associations. This 
governmentwide audit quality project must be performed once every 6 
years (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 (see in Sec.  200.1 of this part) 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 
Sec.  200.1 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):

[[Page 49574]]

    (3) * * *
    (i) Issue a management decision as prescribed in Sec.  200.521;
* * * * *
    (iii) Use cooperative audit resolution mechanisms (see the 
definition of cooperative audit resolution in Sec.  200.1 of this part) 
to improve Federal program outcomes through better audit resolution, 
follow-up, and corrective action; and
* * * * *

0
111. Amend Sec.  200.514 by revising paragraphs (d)(4), (e), and (f) to 
read as follows:


Sec.  200.514   Scope of audit.

* * * * *
    (d) * * *
    (4) When internal control over some or all of the compliance 
requirements for a major program are likely to be ineffective in 
preventing or detecting noncompliance, the planning and performing of 
testing described in paragraph (c)(3) of this section are not required 
for those compliance requirements. However, the auditor must report a 
significant deficiency or material weakness in accordance with Sec.  
200.516, assess the related control risk at the
    (e) Audit follow-up. The auditor must follow-up on prior audit 
findings, perform procedures to assess the reasonableness of the 
summary schedule of prior audit findings prepared by the auditee in 
accordance with Sec.  200.511(b), and report, as a current year audit 
finding, when the auditor concludes that the summary schedule of prior 
audit findings materially misrepresents the status of any prior audit 
finding. The auditor must perform audit follow-up procedures regardless 
of whether a prior audit finding relates to a major program in the 
current year.
    (f) Data collection form. As required in Sec.  200.512(b)(3), the 
auditor must complete and sign specified sections of the data 
collection form.

0
112. Amend Sec.  200.515 by revising paragraphs (a), (d)(1)(vi) through 
(ix), (d)(3), and (e) to read as follows:


Sec.  200.515   Audit reporting.

* * * * *
    (a) Financial statements. The auditor must determine and provide an 
opinion (or disclaimer of opinion) whether the financial statements of 
the auditee are presented fairly in all materials respects in 
accordance with generally accepted accounting principles (or a special 
purpose framework such as cash, modified cash, or regulatory as 
required by state law). The auditor must also decide whether the 
schedule of expenditures of Federal awards is stated fairly in all 
material respects in relation to the auditee's financial statements as 
a whole.
* * * * *
    (d) * * *
    (1) * * *
    (vi) A statement as to whether the audit disclosed any audit 
findings that the auditor is required to report under Sec.  200.516(a);
    (vii) An identification of major programs by listing each 
individual major program; however, in the case of a cluster of 
programs, only the clu