Guidance for Grants and Agreements, 69390-69500 [2023-21078]

Agencies

• Management and Budget Office

[Federal Register Volume 88, Number 192 (Thursday, October 5, 2023)]
[Proposed Rules]
[Pages 69390-69500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21078]



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Vol. 88

Thursday,

No. 192

October 5, 2023

Part III





 Office of Management and Budget





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2 CFR Parts 1, 25, 175, et al.





Guidance for Grants and Agreements; Proposed Rule

Federal Register / Vol. 88, No. 192 / Thursday, October 5, 2023 / 
Proposed Rules

[[Page 69390]]


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OFFICE OF MANAGEMENT AND BUDGET

2 CFR Parts 1, 25, 175, 180, 182, 183, 184, 200


Guidance for Grants and Agreements

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

ACTION: Proposed rule; notification of proposed guidance.

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SUMMARY: The Office of Management and Budget (OMB) is proposing to 
revise sections of OMB Guidance for Grants and Agreements. This 
proposed revision reflects comments received from Federal agencies and 
those received in response to the OMB Notice of Request for Information 
published in the Federal Register in February 2023. In response to 
Federal agency and public input, OMB is proposing revisions intended in 
many cases to reduce agency and recipient burden. OMB proposes both 
policy changes and clarifications to existing guidance including plain 
language revisions. OMB also proposes to update the guidance to reflect 
recent OMB priorities related to Federal financial assistance. Finally, 
OMB is proposing revisions to improve Federal financial assistance 
management, transparency, and oversight through more accessible and 
readily comprehensible guidance.

DATES: OMB invites interested persons and organizations to submit 
comments on or before December 4, 2023.

ADDRESSES: Comments on this proposal must be submitted electronically 
before the comment closing date to www.regulations.gov. In submitting 
comments, please search for recent submissions by OMB to find docket 
OMB-2023-0017, which includes the full text of the proposed revisions 
and submit comments there. Please provide clarity as to the section of 
the guidance that each comment is referencing by beginning each comment 
with the section number in brackets. For example; if the comment is on 
2 CFR 200.1 include the following before the comment [200.1]. The 
public comments received by OMB will be posted at https://www.regulations.gov and be a matter of public record. Accordingly, 
please do not include in your comments any confidential business 
information or information of a personal-privacy nature. In general, 
responses to the comments will be summarized and included in the 
preamble of the final guidance.

FOR FURTHER INFORMATION CONTACT: Andrew Reisig or Steven Mackey at the 
OMB Office of Federal Financial Management via email at 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Summary

    The Office of Management and Budget (OMB) proposes to revise 
several parts of the OMB Guidance for Grants and Agreements located in 
title 2 of the Code of Federal Regulations (CFR) to further clarify and 
update guidance to Federal agencies on the consistent and efficient use 
of Federal financial assistance. This document includes proposed 
revisions to Part 1 (About Title 2 of the Code of Federal Regulations 
and Subtitle A); Part 25 (Universal Identifier and System for Award 
Management); Part 170 (Reporting Subaward and Executive Compensation 
Information), Part 175 (Award Term for Trafficking in Persons); Part 
180 (OMB Guidelines to Agencies on Governmentwide Debarment and 
Suspension (Non-procurement)); Part 182 (Governmentwide Requirements 
for Drug-Free Workplace (Financial Assistance)); Part 183 (Never 
Contract with the Enemy); and Part 200 (Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards).
    As explained in further detail below, OMB proposes revising 2 CFR 
for reasons including: (1) incorporating statutory requirements and 
administration priorities; (2) reducing agency and recipient burden; 
(3) clarifying sections that recipients or agencies have interpreted in 
different ways; and (4) rewriting applicable sections in plain 
language, improving flow, and addressing inconsistent use of terms. 
Consistent with these objectives, OMB proposes both policy changes and 
clarifications to existing guidance including plain language revisions. 
OMB also proposes to update the guidance to reflect recent OMB 
priorities related to Federal financial assistance. Finally, OMB's 
proposed revisions are also intended to improve Federal financial 
assistance management, transparency, and oversight through more 
accessible and readily comprehensible guidance.
    OMB summarizes its proposals for policy changes in this document 
below. OMB also explains its general methodology for plain language 
revisions. OMB sought to maintain the existing structure of the 2 CFR 
guidance, which remains generally intact and mostly consistent with 
earlier iterations of the guidance--for example, in terms of the 
structure of parts, structure of subparts, and section numbering. 
Except in cases where OMB proposes policy changes or other edits for 
consistency with statutory requirements, OMB also generally sought to 
maintain the existing content of the 2 CFR guidance. In many cases 
throughout the guidance, however, OMB proposes plain language revisions 
to simplify the guidance text, avoid or reduce technical jargon where 
feasible, provide greater consistency, and make the text more succinct.
    The proposed revisions align with OMB's authority to: (i) issue 
guidance promoting consistent and efficient use of Federal financial 
assistance instruments; and (ii) provide overall direction and 
leadership to Federal agencies on policies and requirements related to 
Federal financial assistance. See 31 U.S.C. 6307 and 31 U.S.C. 
503(a)(2). Additional authorities for the proposed revisions are set 
forth below. Many of the proposed revisions reflect comments received 
from Federal agencies and those received from the public in response to 
the OMB Notice of Request for Information published in the Federal 
Register in February 2023. See 88 FR 8480 (Feb. 9, 2023).

Background

    Between 2012 and 2013, OMB worked with Federal agencies to revise 
and streamline existing guidance to develop the Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards (Uniform Guidance) located in part 200 of 2 CFR. 79 FR 78589 
(Dec. 26, 2013). This effort was intended to assist programs in 
delivering better outcomes on behalf of the American people while 
simultaneously reducing administrative burden and the risk of fraud, 
waste, and abuse. The Uniform Guidance in part 200, which OMB 
established in 2013, consolidated, streamlined, and superseded 
requirements from several earlier OMB Circulars and guidance documents 
related to grants management and implementation of the Single Audit 
Act. OMB explained in 2013 that its guidance intended to improve both 
the clarity and accessibility of these requirements across the Federal 
government. Federal award-making agencies implemented the Uniform 
Guidance through an interim final rule, which became effective on 
December 26, 2014. 79 FR 75867 (Dec. 19, 2014).
    OMB generally reviews the Uniform Guidance every five years in 
accordance with 2 CFR 200.109. OMB made further revisions to the 
Uniform Guidance in 2020. 85 FR 49506 (Aug. 13, 2020). The 2020 
revisions addressed topics including program development and design, as 
well as measuring recipient

[[Page 69391]]

performance to assist Federal awarding agencies and non-Federal 
entities to improve program goals and objectives, share lessons 
learned, and adopt of promising performance practices.
    Based on feedback and ongoing engagement with Federal agencies and 
the broader Federal financial assistance community, OMB believes that 
additional revisions are now warranted to the Uniform Guidance in part 
200 to further streamline, clarify, and update the guidance, including 
raising certain thresholds, where permissible under law, in recognition 
of inflation over time. Further information on OMB's objectives for the 
proposed revisions is provided below.
    In addition to proposed revisions in part 200, OMB also proposes 
revisions to other parts in subtitle A of 2 CFR for similar reasons, 
including parts 1, 25, 170, 175, 180, 182, and 183. OMB established 
these parts at different times in the last 20 years. See, for example, 
69 FR 26276 (May, 11, 2004) (establishing 2 CFR for guidance on grants 
and other financial assistance and nonprocurement agreements); 70 FR 
51863 (Aug. 31, 2005) (establishing part 180); 75 FR 55671 (Sep. 14, 
2010) (establishing part 25); and 75 FR 55663 (Sep. 14, 2010) 
(establishing part 170).

OMB Objectives

    OMB's objectives for the current proposed revisions to several 
parts of subtitle A of 2 CFR include: (1) incorporating statutory 
requirements and administration priorities; (2) reducing agency and 
recipient burden; (3) clarifying sections that recipients or agencies 
have interpreted in different ways; and (4) rewriting applicable 
sections in plain language, improving flow, and addressing inconsistent 
use of terms.
    The proposed revisions to the Uniform Guidance in part 200 and 
other parts of 2 CFR generally support these four objectives. In 
support of objective (1), OMB proposes to implement changes throughout 
the Uniform Guidance and other parts to ensure consistency with 
statutory authorities. For example, OMB proposes to revise Parts 25, 
170, and 175 to ensure its guidance properly aligns with underlying 
statutes, as amended. These potential revisions would reduce 
inconsistencies between OMB's guidance and authorizing statutes to 
ensure proper implementation. OMB has also made several structural 
changes to individual parts within Chapter I to provide further 
structural consistency throughout OMB's guidance in 2 CFR.
    In support of objective (2), OMB proposes to increase several 
monetary thresholds that have not been updated for many years. For 
example, OMB proposes increasing the single audit threshold from 
$750,000 to $1,000,000 and increasing the threshold from $5,000 to 
$10,000 for determining items that are considered to be equipment. OMB 
reviewed previous increases to the thresholds and considered current 
economic data when making its determinations. In further support of 
reducing burden, OMB is proposing a complete revision to the template 
text for a Notice of Funding Opportunity (NOFO) located in Appendix I 
of the Uniform Guidance in part 200. With this revision, OMB intends to 
reduce administrative burden and unnecessary obstacles for applying to 
Federal financial assistance.
    In support of objective (3), OMB proposes revisions to 2 CFR to 
clarify areas of misinterpretation. Many of these clarifications do not 
represent a change in policy but serve to explain the intent of 
specific sections of the Uniform Guidance in part 200, and other parts 
in 2 CFR, with greater precision and clarity. OMB received feedback 
from Federal agencies and the public stating that Federal agencies and 
the recipient community interpret many sections differently. As one 
example, OMB clarifies that Federal agencies approve costs requiring 
prior approval when the Federal award is issued if the costs were 
included in the recipient's proposal, and do not require subsequent 
approval prior to expenditure.
    In support of objective (4), OMB proposes to revise the guidance to 
follow plain language principles. Plain language principles OMB focused 
on included using simple words and phrases, avoiding jargon, using 
terms consistently, and being concise.
    Related to OMB's plain language revisions, throughout subparts A to 
E of part 200, OMB proposes to use the terms ``recipient,'' 
``subrecipient,'' or both in place of ``non-Federal entity.'' OMB 
believes that the existing usage of ``non-Federal entity'' in subparts 
A through E of the existing CFR text in part 200 presents challenges to 
readers and makes it difficult to quickly understand what entity is 
being addressed, especially in situations in which Federal agencies 
apply part 200 to Federal agencies, for-profit organizations, foreign 
public entities, or foreign organizations under 2 CFR 200.101. In the 
revisions to part 200, OMB uses the term ``non-Federal entity,'' as 
defined in section 200.1, only when that entity is specifically 
intended, such as in subpart F implementing the Single Audit Act. In 
many cases in part 200 OMB proposes to replace ``non-Federal entity'' 
with either ``recipient and subrecipient'' or ``recipient or 
subrecipient.'' In cases where the guidance in part 200 relates 
specifically to only either ``recipients'' or ``subrecipients,'' but 
not both, OMB refers specifically to the applicable entity. OMB invites 
comments on this proposal and any effects it may have on specific 
sections or paragraphs of the guidance in part 200.
    OMB notes that these revisions related to the use of the terms 
``non-Federal entity,'' ``recipient,'' and ``subrecipient'' do not 
directly change the existing scope of applicability of the guidance. 
The applicability provision for part 200 at section 200.101, continues 
to provide Federal agencies with discretion on whether to apply 
subparts A through E of part 200 to Federal agencies, for-profit 
entities, foreign public entities, or foreign organizations. In the 
same section, OMB proposes to encourage Federal agencies to apply the 
requirements in subparts A to E of part 200 to all recipients in a 
consistent and equitable manner, but does not require them to do so. In 
cases in which Federal agencies apply part 200 to such entities, OMB's 
proposal further clarifies how the guidance applies to those entities 
as either recipients or subrecipients.
    As another example of plain language revisions, OMB proposes to 
replace the use of the general term ``OMB designated governmentwide 
systems'' with more specific terms to reduce ambiguity for those 
unfamiliar with the Uniform Guidance. In this proposed revisions OMB 
specifically mentions the appropriate system, such as SAM.gov, 
USASpending.gov, the Contractor Performance Assessment Reporting System 
(CPARS), or Grants.gov.
    The overall goal of OMB's plain language revision effort is to make 
the Uniform Guidance more accessible to the general public and ensure 
more equitable access to Federal funding opportunities by making the 
guidance on that topic easier to understand. OMB does not directly 
address the proposed plain language revisions in this preamble unless a 
revision represents a material change to the Uniform Guidance. However, 
OMB invites comment on whether any of its plain language revisions in 
part 200, or other parts, may have unintended consequences. OMB also 
invites comments on whether further modifications or additional 
precision is needed in any specific instance, such as in the case of 
OMB's proposed use of the terms ``recipient,'' ``subrecipient,'' or 
both in particular sections of the guidance.

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Statutory Authority for OMB Guidance for Grants and Agreements

    The Director of OMB is authorized under 31 U.S.C. 6307 to ``issue 
supplementary interpretative guidelines to promote consistent and 
efficient use of . . . grant agreements . . . and cooperative 
agreements.'' The Deputy Director for Management of OMB is authorized 
under 31 U.S.C. 503 to, among other things, provide ``overall direction 
and leadership to the executive branch on financial management matters 
by establishing financial management policies and requirements.'' 31 
U.S.C. 503(a)(2).
    OMB also relies on authorities including the Single Audit Act 
Amendments of 1996 (Pub. L. 104-156, as amended, codified at 31 U.S.C. 
7501-7507); the Federal Funding Accountability and Transparency Act of 
2006 (FFATA or the Transparency Act) (Pub. L. 109-282), as amended; the 
Digital Accountability and Transparency Act of 2014 (DATA Act of 2014) 
(Pub. L. 113-101), as amended; the Federal Program Information Act 
(Pub. L. 95-220 and Pub. L. 98-169, as amended, codified at 31 U.S.C. 
6101-6106); the Federal Grant and Cooperative Agreement Act of 1977 
(Pub. L. 95-224, as amended, codified at 31 U.S.C. 6301-6309); the 
Office of Federal Procurement Policy Act (codified at 41 U.S.C. 1101-
1131); the Budget and Accounting Procedures Act of 1950, as amended 
(codified at 31 U.S.C. 1101-1126); the Chief Financial Officers Act of 
1990 (codified at 31 U.S.C. 503-504); the Trafficking Victims 
Protection Act of 2000 (TVPA), as amended (codified at 22 U.S.C. 7101-
7115); 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.''

Request for Information Issued by OMB in February 2023

    On February 9, 2023, OMB published a Notice of Request for 
Information (RFI) in the Federal Register. 88 FR 8480 (Feb. 9, 2023). 
OMB received approximately 1,250 individual comments from all sources, 
including 113 submissions from the public containing multiple comments 
in each. In response to Federal agency and public input, OMB is 
proposing the revisions discussed below.

Part-by-Part Discussion of the Proposed Revisions

    OMB invites comments on the proposed revisions throughout subtitle 
A of 2 CFR. OMB identifies areas below where comments may be 
particularly useful.

Part 1--About Title 2 of the Code of Federal Regulations and Subtitle A

    OMB proposes to revise the headings of title of 2 CFR and Subtitle 
A and Chapter I to replace ``Grants and Agreements'' with ``Federal 
Financial Assistance.'' This revision will help to ensure that the 
Uniform Guidance is understood to be applicable beyond just grants and 
cooperative agreements, unless noted differently in the applicability 
provision for the Uniform Guidance at section 200.101 or relevant 
provisions in others parts in chapter I.
    OMB proposes to revise section 1.200 to remove paragraphs (b) and 
(c), which are no longer accurate. When OMB first established part 1 in 
2004, see 69 FR 26276 (May 11, 2004), it implemented the Federal 
Financial Assistance Management Improvement Act of 1999 (Pub. L. 106-
107). That legislation ceased to be effective on November 20, 2007 
based on a sunset date included in the law. In addition, chapter II of 
subtitle A in 2 CFR, which now contains part 200, was initially 
intended to contain OMB guidance in its ``initial form'' before it was 
``finalized.'' That statement no longer accurately reflects the 
structure of subtitle A of 2 CFR nor status of the OMB guidance in part 
200.
    OMB proposes to provide a more succinct statement in section 1.215 
explaining that some of the guidance was organized differently within 
previous OMB circulars or other guidance documents before establishment 
of title 2 of the CFR. Because 2 CFR has now existed for almost 20 
years in its current format and location, OMB does not believe it is 
necessary to continue to include the table showing earlier sources of 
certain elements of the OMB guidance in 2 CFR. The Federal Register 
notice establishing 2 CFR in 2004, see 69 FR 26276 (May, 11, 2004), and 
other subsequent Federal Register notices establishing and revising 
particular parts and provisions of subtitle A in 2 CFR, include that 
information.
    OMB also proposes to revise section 1.305 to further clarify 
Federal agency responsibilities, such as coordinating with the Council 
on Federal Financial Assistance (see OMB Memorandum M-23-19), the 
Grants Quality Service Management Office (QSMO), and other governance 
committees.
    OMB also proposes to add section 1.231 to clarify its intent that 
if any provision of this guidance, as finalized, were held to be 
invalid or unenforceable, such provision, or combination of provisions, 
are severable from the remaining provisions of the guidance, as 
finalized.

Part 25--Unique Entity Identifier and System for Award Management

    OMB proposes to revise the guidance in this part to ensure it 
properly aligns with the authorizing statutes, as amended, including 
the Transparency Act and the DATA Act of 2014. OMB first revises the 
title of Part 25 to replace ``universal identifier'' with ``unique 
entity identifier.'' In section 25.105, which is renamed 
``Applicability,'' OMB proposes to clarify that the requirement to 
obtain a Unique Entity Identifier (UEI) and register in SAM.gov does 
not apply to second-tier subrecipients or contractors. In support of 
Federal agency requests, OMB proposes to clarify that recipients of 
loan guarantees must obtain a UEI and register in SAM.gov, while a 
Federal agency may use discretion when determining to apply the 
requirements to beneficiary borrowers.
    In section 25.110, OMB proposes to clarify that, even if an 
exception is granted, a Federal agency remains responsible for 
reporting data to comply with the Transparency Act, as amended, except 
that it may use a generic entity identifier in the circumstances 
described.
    Although not included in the proposed guidance in this document, 
OMB is also considering other ways of reducing the administrative 
burden associated with obtaining a UEI and registering in SAM.gov for 
foreign organizations or foreign public entity receiving Federal awards 
between $25,000 (the Transparency Act threshold for a ``Federal 
award'') and $250,000 (the simplified acquisition threshold). Federal 
agencies have explained to OMB that the process for obtaining a UEI and 
registering in SAM.gov can present significant challenges for some of 
their applicants for, and recipients of, awards in this limited 
category. Based on this feedback, OMB is considering establishing a new 
exception in section 25.110 that would allow an agency to grant a one-
time exception from the requirement to obtain a UEI, register in 
SAM.gov, or both for foreign organizations or foreign public entities 
applying for or receiving an award between $25,000 and $250,000 for a 
project or program performed outside the U.S. OMB will work with 
Federal agency partners to determine if this proposal can be 
implemented in a way that is consistent with Transparency Act reporting 
requirements. If included in the final revisions to the guidance, OMB 
will also consider incorporating further

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limits or safeguards in this exception to mitigate risk, such as not 
allowing its application to awards that will include subawards above 
$30,000--the threshold for subaward reporting established based on the 
pilot program in section 5(b) of the Transparency Act, as amended by 
the Data Act of 2014. Public Law 113-101; 85 FR 49506 (Aug. 13, 2020); 
2 CFR 170.220. This proposed change would provide more flexibility--as 
needed--to agencies operating in overseas environments where SAM.gov 
registration presents particular challenges. If finalized, the 
exception would only be available on a case-by-case basis in situations 
in which the agency has conducted a risk-based analysis and deemed it 
impractical for the entity to comply with the requirements(s). This 
proposed change would only be finalized in a way that would allow 
agencies to continue following Transparency Act reporting requirements 
for this limited category of awards.
    Related to the above analysis, OMB is also considering expanding 
the exigent circumstances exception in section 25.110 to provide 
recipients with additional time to obtain a UEI and complete SAM.gov 
registration if exigent circumstances persist beyond 30 days. This 
proposal is not included in the proposed guidance in this document, but 
OMB is considering ways to provide this additional flexibility in the 
final guidance. When exigent circumstances exist, the current guidance 
at section 25.110 allows agencies to provide recipients up to 30 days 
after the Federal award date to obtain a UEI and complete SAM.gov 
registration. In recognition of the issues that sometimes arise when 
organizations attempt to register in SAM.gov, particularly for new or 
inexperienced applicants, OMB's proposal would provide Federal agencies 
with the option to provide recipients an additional 90 days if exigent 
circumstances persist. OMB will work with Federal agency partners to 
determine if this proposal can be implemented in a way that is 
consistent with Transparency Act reporting requirements. If included in 
the final revisions to the guidance, OMB proposes to further clarify 
that Federal agencies should not issue payments to a recipient that is 
unable to obtain a UEI or complete registration in SAM.gov. OMB also 
proposes to clarify that Federal agencies should include an award term 
expressly providing that the recipient's eligibility to receive any 
future payments under the award (such as outlays of cash) would be 
contingent on the recipient receiving a UEI and completing 
registration. Again, this proposed change would only be finalized in a 
way that would allow agencies to continue following Transparency Act 
reporting requirements for this limited category of awards.
    OMB also proposes several clarifications in the part, such as a 
proposed revision in section 25.205 explaining that the requirement to 
have an active UEI does not apply to amendments to terminate or close a 
Federal award.

Part 170--Reporting Subaward and Executive Compensation Information

    OMB proposes to revise the guidance in this part to ensure it 
properly aligns with the authorizing statutes, as amended, including 
the Transparency Act and the DATA Act of 2014. OMB proposes to clarify 
the specific Federal agency reporting requirements and to revise the 
award term to resolve issues related to which entities the award term 
applies to. OMB also proposes to revise certain sections to clarify 
their intended meaning. For example, OMB proposes to move certain 
requirements currently contained in section 170.110 to section 170.105, 
which OMB proposes to rename ``Applicability.''

Part 175--Award Term for Trafficking in Persons

    OMB proposes to revise the guidance in part 175 to ensure it 
properly aligns with the authorizing statutes that have been amended 
since it was published. See the TVPA of 2000, as codified at 22 U.S.C. 
7101 to 7115. OMB proposes to update the policy and Award Term to 
ensure alignment with the current statute and to further align with the 
format of the CFR. For example, at section 175.105, OMB proposes adding 
provisions related to a compliance plan and requiring notification to 
Inspectors Generals under certain circumstances to further align with 
statute.

Part 180--OMB Guidelines to Agencies on Government-Wide Debarment and 
Suspension (Nonprocurement)

    OMB proposes minimal revisions to this part based on feedback 
received from the Interagency Suspension and Debarment Committee (ISDC) 
in accordance with section 180.40. Considering the role of the ISDC in 
recommending changes, OMB does not propose extensive plain language 
revisions through this document in part 180. Sections in part 180 that 
OMB proposes to revise include sections 180.635 and 180.640 to clarify 
available administrative actions in lieu of debarment. OMB proposes 
amending section 180.705 to include ``other indicators of adequate 
evidence that may include, but are not limited to, warrants and their 
accompanying affidavits'' for officials to consider before initiating a 
suspension. OMB proposes additional clarifying edits to sections 
180.710, 180.815, and 180.860, including adding text to section 180.860 
to address factors influencing a debarment decision; this revision 
proposes to add text on ``whether your business, technical, or 
professional license(s) has been suspended, terminated, or revoked.'' 
OMB proposes changes to this part generally in response to an ISDC 
recommendation to provide additional clarifications to 2 CFR to reflect 
current practice. OMB is not proposing to establish new policy in part 
180 that would negatively impact the ability of Federal agencies or 
recipients to adhere to this guidance.

Part 182--Government-Wide Requirements for Drug-Free Workplace 
(Financial Assistance)

    OMB proposes limited plain language revisions to this part.

Part 183--Never Contract With The Enemy

    OMB proposes limited plain language revisions to this part.

Part 184--Buy America Preferences for Infrastructure Projects

    OMB established this part on Buy America preferences for 
infrastructure projects through a separate process. 88 FR 57750 (Aug. 
23, 2023). OMB does not propose changes to part 184 through this 
document. OMB notes, however, that it may potentially make minor, non-
substantive changes to part 184 through its final guidance if necessary 
to ensure consistency with any changes to the definitions in section 
200.1. OMB notes that part 184, at section 184.3, states that acronyms 
and terms not defined in part 184 have the same meaning as provided in 
section 200.1. Certain terms used in part 184, such as ``Federal 
awarding agency,'' may be affected by OMB's proposed changes under this 
notice. Thus, it may be necessary to make minor conforming changes to 
part 184 to ensure consistent use of terms.

Part 200--Uniform Administrative Requirements, Cost Principles, and 
Audit Requirements for Federal Awards

    In the paragraphs below, OMB discusses proposed changes to each 
subpart of the Uniform Guidance in 2 CFR part 200.

[[Page 69394]]

Subpart A--Acronyms and Definitions

    OMB proposes to update section 200.0 to remove acronyms that either 
appear only once or are used infrequently in the Uniform Guidance. At 
the same time, OMB proposes to add several acronyms that are used more 
frequently, but have been omitted from this section in past updates, 
such as Unique Entity Identifier (UEI).
    In section 200.1, OMB proposes to remove several definitions that 
were used only once or on a limited basis and instead move such 
definitions to the appropriate section of the Uniform Guidance where 
they appear. OMB proposes this change to ease the experience of the 
reader and avoid the need to review Subpart A for an understanding of a 
single section or small set of sections. For example, OMB proposes 
moving the definition of ``Cooperative audit resolution'' to the text 
of Subpart F. OMB also proposes deleting the definition of ``Federal 
awarding agency,'' which OMB now proposes to incorporate within the 
definition of ``Federal agency.''
    OMB also proposes adding several new definitions of commonly used 
terms based on feedback from agencies and the RFI. Proposed new 
definitions include ``continuation funding,'' ``for-profit 
organization,'' ``key personnel,'' ``participant,'' and ``prior 
approval.''
    OMB proposes to revise several definitions to incorporate threshold 
increases referenced in other sections, such as the threshold increase 
for ``equipment'' to $10,000, the threshold for ``supply'' to $10,000, 
and the definition of ``Modified Total Direct Costs,'' which now 
proposes to exclude subaward costs above $50,000, as compared to 
$25,000 in the existing guidance.
    OMB also proposes to revise several definitions for other reasons. 
For example, OMB proposes to shorten the definition of ``improper 
payment'' to ensure that the definition references the appropriate 
source in Appendix C to OMB Circular A-123, Requirements for Payment 
Integrity Improvement. OMB proposes to update the definition of 
``intangible property'' to include more information related to date and 
licenses. OMB also proposes to clarify ``participant support costs'' 
with additional explanatory information and expand the definition of 
``questioned costs'' to provide greater understanding of the terms 
throughout the Uniform Guidance. In addition, other definitions that 
OMB proposes altering include ``cost sharing'' (discussed below under 
section 200.306), ``Federal agency,'' ``Federal award date,'' 
``financial obligations,'' ``Indian tribe,'' ``period of performance,'' 
``prior approval,'' ``real property'', ``recipient,'' ``special purpose 
equipment,'' ``subaward,'' and ``termination.''
    OMB also proposes a minor change to the definition of the term 
``Federal financial assistance.'' OMB proposes the term to include 
assistance received or administered by ``recipients or 
subrecipients''--as compared to assistance received or administered by 
``non-Federal entities'' in the existing guidance. In cases in which 
Federal agencies apply subparts A through E of part 200 to for-profit 
organizations, use of the terms ``recipients or subrecipients'' in this 
definition may provide further clarity on the applicability of the 
Build America, Buy America Act (BABA) (Pub. L. 117-58, 135 Stat. 429, 
70901-70927, Nov. 15, 2021) to Federal awards made by that agency to 
for-profit organizations. Section 70912(4) of BABA incorporates the 
definition of Federal financial assistance from 2 CFR 200.1 or 
successor regulations. For additional information on BABA and OMB's 
guidance in 2 CFR part 184, see 88 FR 55750 (Aug. 23, 2023). OMB does 
not, however, propose to materially change the sentence in the 
applicability section at 200.101(a)(2) providing Federal agencies with 
discretion on whether to apply the guidance to for-profit 
organizations.

Subpart B--General Provisions

    OMB proposes to revise this subpart, in section 200.101, to clarify 
the applicability of the Uniform Guidance. In OMB's proposal, all 
subparts of part 200 continue to apply to Federal agencies that make 
Federal awards to ``non-Federal entities.'' Federal agencies also 
retain discretion on whether to apply subparts A through E of part 200 
to Federal agencies, for-profit entities, foreign public entities, or 
foreign organizations--which are not included in the definition of the 
term ``non-Federal entity.'' OMB proposes to add language encouraging 
agencies to apply the requirements in subparts A through E of part 200 
to all recipients in a consistent and equitable manner to the extent 
permitted within applicable statutes, regulations, and policies.
    In support of plain language principles, OMB proposes to convert 
the applicability table in paragraph (b) of section 200.101 into 
paragraph form.
    OMB proposes multiple clarifying revisions in section 200.102 to 
improve agency and recipient understanding of the availability and use 
of exceptions to, or deviations from, OMB's Uniform Guidance in part 
200.
    In section 200.104, OMB proposes to provide a more succinct 
statement that part 200 supersedes previous OMB guidance issued in 2 
CFR on topics including cost principles and audits for Federal 
financial assistance. Because part 200 has now existed for 10 years in 
its current format and location, OMB does not believe it is necessary 
to continue to include the detailed list identifying elements of the 
Uniform Guidance in part 200 previously contained in OMB Circulars or 
other parts of 2 CFR, subtitle A, chapter II.
    In section 200.111 OMB proposes new guidance to permit Federal 
agencies to request, receive, and distribute Federal award information 
in a language other than English when it is appropriate for a specific 
program or Federal award. This proposal would allow for more 
flexibility when working in international environments or in 
communities where English is the not the primary language.
    Finally, based on feedback from the oversight community, OMB 
proposes to revise the section on mandatory disclosure to clarify that 
recipients and subrecipients must promptly disclose any credible 
evidence of a violation of Federal criminal law potentially affecting 
the Federal award. OMB also proposes to revise this section to require 
recipients and subrecipients to provide written disclosure to the 
agency's Office of Inspector General. OMB believes the proposed 
``credible evidence'' standard is more appropriate because it would not 
require recipients, subrecipients, and applicants to make a legal 
determination that a criminal law has been violated before they are 
required to make a disclosure of ``credible evidence'' of such a 
violation to the Federal agency, pass-through entity (if applicable), 
and the agency's Office of Inspector General.

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

    OMB proposes to revise this subpart to clarify certain requirements 
for fixed amount awards. For example, OMB proposes to clarify in 
section 200.201 that recipients are entitled to any unexpended funds 
under a fixed amount award if the required activities were completed in 
accordance with the terms and conditions of the award. In the same 
section, OMB also proposes to clarify record retention and post award 
certification requirements. In addition--although no specific language 
is proposed in this document--OMB is considering requiring additional 
pre-award certifications for fixed amount awards to address the 
potential

[[Page 69395]]

increased risk of fraud under fixed amount awards. OMB invites comments 
on appropriate pre-award certifications for fixed amount awards and 
notes that it may include a requirement for such certifications in the 
final guidance document. OMB also proposes to more specifically 
identify certain prior approval requirements that specifically relate 
to fixed amount awards.
    OMB also proposes to expand section 200.202 on program planning and 
design to encourage agencies to encourage recipients to engage members 
of the community that will benefit from or be impacted by a Federal 
financial assistance program. OMB also proposes to encourage Federal 
agencies to develop programs in consultation with the communities that 
will benefit from or be impacted by a program. In section 200.202, OMB 
also proposes to underscore that Federal agencies should consider all 
available data and evaluation results from past programs and coordinate 
with other agencies during program planning and design.
    OMB proposes to revise section 200.203 on Assistance Listings to 
reinforce the importance of communicating in plain language and 
highlighting any program-related customer service initiatives.
    OMB proposes to revise section 200.204 on notices of funding 
opportunities in a number of ways to encourage Federal agencies to 
focus more on communicating requirements to the public in an accessible 
and comprehensible manner. For example, OMB proposes to include an 
Executive Summary requirement and to encourage agencies to use plain 
language when publishing opportunities. OMB also proposes that agencies 
should communicate program requirements specifically and clearly, as 
well as limit the length of program announcements. As noted in the 
proposed changes to the guidance, this is particularly important in 
consideration of applicants with less experience applying for Federal 
financial assistance, such as applicants from underserved communities. 
OMB also proposes to encourage Federal agencies to identify all 
eligible applicants in the funding opportunity--for example, by 
providing greater specificity on different types of nonprofit 
organizations such as labor unions. In proposing these revisions, OMB 
aims to make notices of funding opportunities more consistent and 
transparent. OMB also aims to ensure that applicants are not 
unintentionally excluded from funding opportunities.
    OMB also proposes additional changes in section 200.204, such as 
encouraging agencies to provide an anticipated award date and providing 
additional clarifying guidance on the availability period for funding 
opportunities.
    In section 200.205 OMB proposes to clarify that a Federal agency 
should consider diversity when developing policies and procedures for 
merit review panels.
    In section 200.206 OMB proposes to revise the section regarding 
risk evaluation by using the term risk assessment as a standard term 
and clarifying agency requirements to appropriately review eligibility 
qualifications and financial integrity information. OMB also proposes 
to clarify that agency processes may consider any risk criteria 
pertinent to a program, such as cybersecurity risk or impacts on local 
jobs and the community. OMB further proposes to clarify that an agency 
may modify its risk assessment at any time during the lifecycle of an 
award.
    OMB also proposes to clarify in section 200.209 that those entities 
who are exempt from the requirements of 2 CFR part 25 must still 
complete the certifications and representations by submitting the 
appropriate assurance form.
    OMB also proposes to include several additions to section 200.216 
on the prohibition of certain telecommunications and video surveillance 
services or equipment to expand the guidance by incorporating 
additional information from OMB's Frequently Asked Questions document.
    Lastly, OMB proposes to include a new section 200.217 to expand on 
the whistleblower protections and requirements for recipients of 
Federal financial assistance, which had previously been referenced in 
section 200.300.

Subpart D--Post Federal Award Requirements

    OMB proposes to retain the guidance in section 200.300 on statutory 
and national policy requirements, which explains the need to administer 
Federal awards in full accordance with the U.S. Constitution, 
applicable Federal statutes and regulations, and requirements of part 
200. OMB proposes to streamline section 200.300 and to reinforce 
existing nondiscrimination requirements under the Constitution and 
other applicable law, consistent with Executive Order 13988 of January 
20, 2021 (``Preventing and Combating Discrimination on the Basis of 
Gender Identity or Sexual Orientation''), and Executive Order 14075 of 
June 15, 2022 (``Advancing Equality for Lesbian, Gay, Bisexual, 
Transgender, Queer, and Intersex Individuals'').
    In section 200.305 on Federal payment, OMB proposes to provide 
additional flexibilities for recipients when interest bearing accounts 
are not accessible in a foreign country; and to provide a specific link 
for returning funds to the Payment Management System, rather than 
including the more extensive instructions in the guidance itself.
    OMB proposes to revise section 200.306 on cost sharing, as well as 
the definition of cost sharing itself, to clarify that ``matching'' is 
one category of cost sharing overall--thus eliminating the need to 
repeat the term ``matching'' throughout. In the same section, OMB also 
proposes to provide additional guidance on voluntary uncommitted cost 
sharing for institutes of higher education.
    OMB proposes to revise section 200.307 on program income by 
providing clarifications in paragraph (a) regarding use and expenditure 
of program income, including allowing program income for certain 
closeout costs. OMB also proposes to revise and provide further 
clarifying guidance in paragraph (b) for each of the three methods for 
use of program income.
    OMB proposes changes to section 200.308 on revision of budget and 
program plans by combining the requirements for construction and non-
construction awards to provide greater uniformity in the requirements 
for all award types. OMB proposes to clarify that recipients do not 
need approval of individual subrecipients under all circumstances, but 
only when making subawards of programmatic activities not proposed by 
the recipient in the application for an award. A Federal agency may 
also require prior approval of subrecipients through the terms and 
conditions of a Federal award. OMB proposes to further clarify that 
agencies should not require approval of a change in a proposed 
subrecipient unless the initial inclusion of a subrecipient was a 
determining factor in the agency's merit review process. This change is 
proposed to reinforce the role of the recipient as responsible for the 
efficient and effective administration of the Federal award including 
the selection of a qualified and capable subrecipient. OMB also 
proposes to identify other items requiring prior approval, including 
requesting additional funds, transferring funds, and no-cost 
extensions. OMB proposes to clarify that no-cost extensions are 
different from one-time extensions, which an agency is permitted to 
authorize a recipient to do without prior approval.

[[Page 69396]]

    In section 200.309 on modification to the period of performance, 
OMB proposes to provide additional clarification that when an agency 
decides not to continue an award with multiple budget periods, the 
period of performance should be amended to end at the completion of the 
currently authorized budget period. OMB also proposes to incorporate 
the definition of ``renewal award'' in this section.
    In section 200.311, addressing real property, OMB proposes to 
include a new paragraph on appraisals to introduce additional guidance 
on standards for conducting independent appraisals consistent with the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970, as amended, (42 U.S.C. 4601-4655) except as provided in 
the implementing regulations at 49 CFR part 24, ``Uniform Relocation 
Assistance And Real Property Acquisition For Federal And Federally-
Assisted Programs.'' OMB also proposes to include a definition of the 
term ``encumbrance'' in sections 200.311, 200.313, and 200.315.
    In section 200.313, relating to equipment, OMB proposes to increase 
the threshold value for equipment from $5,000 to $10,000 and to provide 
additional guidance on the meaning of a ``conditional title.'' 
Consistent with proposals in sections 200.311 and 200.315, OMB also 
proposes a definition of the term ``encumbrance.'' Consistent with the 
existing requirements for States, OMB also proposes to allow Indian 
Tribe to dispose of equipment in accordance with tribal law. OMB also 
proposes to clarify that agencies may permit the recipient to retain 
equipment with no further obligation to the Federal government when it 
is not prohibited by Federal statue or regulation. OMB also proposes to 
reinforce the responsibility of recipients to maintain updated records 
regarding equipment.
    OMB proposes to revise section 200.314 on supplies to raise the 
threshold from $5,000 to $10,000. OMB also proposes to clarify that the 
requirements for unused supplies apply to the aggregate value of all 
supply types, and not just like-item supplies. OMB also proposes to 
include a definition of ``unused supplies'' in section 200.314.
    In section 200.315 on intangible property, OMB proposes to 
reinforce the potential requirement for recipients and subrecipients to 
make intangible property publicly available on agency-designated 
websites. Consistent with proposals in sections 200.311 and 200.313, 
OMB also proposes a definition of the term ``encumbrance.''
    OMB proposes several revisions to the procurement standards in the 
Uniform Guidance. In recognition of Tribal sovereignty, and consistent 
with the existing requirements for States, in section 200.317 OMB 
proposes to allow Indian tribes to follow their own policies and 
procedures.
    OMB also proposes to revise the procurement standards in section 
200.318. These proposed revisions include providing additional guidance 
that contractors appropriately classify employees consistent with the 
Fair Labor Standards Act. See the Fair Labor Standards Act at 29 U.S.C. 
chapter 8.
    OMB also proposes adding a new paragraph (l) in section 200.318 to 
clarify that that the procurement standards in part 200 do not prohibit 
recipients or subrecipients from using Project Labor Agreements or 
similar forms of pre-hire collective bargaining agreements; requiring 
commitments or goals to hire people residing in high-poverty areas, 
disadvantaged communities as defined by the Justice40 Initiative OMB 
Memorandum M-21-28, or high-unemployment census tracts within a region 
no smaller than the county where a federally funded construction 
project is located, consistent with the policies and procedures of the 
recipient or subrecipient, provided that a recipient or subrecipient 
may not prohibit interstate hiring; requiring commitments or goals to 
individuals with barriers to employment (as defined in section 3 of the 
Workforce Innovation and Opportunity Act (29 U.S.C. 3102(24)), 
including women and people from underserved communities as defined by 
Executive Order 13985; using agreements intended to ensure 
uninterrupted delivery of services; using agreements intended to ensure 
community benefits; or offering employees of a predecessor contractor 
rights of first refusal under a new contract. The proposed paragraph 
explains that Federal agencies may consider allowing recipients or 
subrecipients to use such practices if consistent with the U.S. 
Constitution, applicable Federal statutes and regulations, the 
objectives and purposes of the Federal financial assistance program, 
and other requirements of part 200. For example, any hiring preference 
for a class or groups of persons would be permissible only to the 
extent that it is consistent with the equal protection requirement of 
the U.S. Constitution.
    In section 200.319, OMB proposes to remove the prohibition in the 
Uniform Guidance on using geographic preference requirements. In the 
same section, OMB also proposes to state that subpart D does not 
prohibit recipients and subrecipients from incorporating a scoring 
mechanism that rewards bidders committing to specific numbers and types 
of U.S. jobs, as well as certain compensation and benefits. OMB 
cautions, however, that any geographic preferences or scoring 
mechanisms must be consistent with the U.S. Constitution, applicable 
Federal statutes and regulations, and the terms and conditions of the 
Federal award. OMB also proposes to clarify that any such scoring 
mechanism must be consistent with established practices and legal 
requirements applicable to the recipient or subrecipient.
    In section 200.320 on procurement methods, OMB proposes to change 
``small purchases'' to ``simplified acquisitions'' to further align 
with standard terminology. In paragraph (a), OMB proposes to clarify 
that ``micro-purchases'' and ``simplified acquisitions'' are types of 
``informal procurement methods for small purchases.'' OMB also proposes 
to remove the requirements that local and tribal governments must open 
sealed bids in public; this requirement may be inconsistent with State 
or tribal policies and procedures.
    In section 200.321, OMB proposes to add ``veteran-owned business'' 
to the types of businesses that recipients and subrecipients are 
encouraged to consider for procurement contracts under a Federal award.
    OMB proposes to add a new paragraph (b) in section 200.323. 
Executive Order 14057 of December 8, 2021 (``Catalyzing Clean Energy 
Industries and Jobs Through Federal Sustainability'') establishes that 
it is the policy of this Administration to lead by example and pursue a 
whole-of-government approach on sustainability and expanding American 
technologies, industries, and jobs that support sustainability and 
climate resilience. The Executive Order tasks the Federal government 
with pursuing new strategies to improve the Nation's preparedness and 
resilience to the effects of a changing climate, including financial 
management strategies. In support of this policy, OMB proposes to add a 
new paragraph (b) in section 200.323 encouraging Federal award 
recipients, to the extent permitted by law, to purchase, acquire, or 
use products and services that can be reused, refurbished, or recycled; 
contain recycled content, are biobased, or are energy and water 
efficient; and are sustainable.
    OMB proposes to add additional language to section 200.324 on 
contract cost and price to establish that the

[[Page 69397]]

recipient or subrecipient may consider potential workforce impacts in 
their procurement analysis if the procurement transaction will 
potentially displace public sector employees. OMB also seeks comment on 
its proposal to delete the existing paragraph (b) in 2 CFR 200.324, 
requiring the recipient to negotiate profit as a separate element of 
the price for each contract in which there is no price competition.
    In section 200.328, OMB proposes to provide additional clarity on 
required deadlines for financial reporting to align with progress 
reporting requirements.
    In section 200.329, OMB proposes to revise the reporting of program 
performance section to remind agencies of the importance of not 
requiring information in programmatic reports that is not necessary for 
the effective monitoring of the award. OMB also proposes additional 
language that emphasizes the importance of measuring customer 
experience as well as considering evaluation plans when outlining 
reporting requirements. OMB further proposes to clarify that 
programmatic reporting may not be required more frequently than 
quarterly unless specific conditions have been applied to the award in 
accordance with section 200.208.
    In section 200.331 on subrecipient and contractor determinations, 
OMB proposes additional language to emphasize that Federal agencies do 
not have a direct legal relationship with subrecipients and contractors 
of pass-through entities. OMB also proposes to clarify that the 
characteristics indicative of a subrecipient or contractor 
determination are not limited to the sample characteristics currently 
provided in the guidance.
    Based on feedback from the Federal financial assistance community, 
OMB proposes to include in section 200.332 the requirement for pass-
through entities to confirm that potential subrecipients are not 
suspended, debarred, or otherwise excluded from receiving Federal 
funds.
    In section 200.333, OMB proposes removing the current Simplified 
Acquisition Threshold limit for fixed amount subawards to provide 
agencies and recipients with increased flexibility in making 
programmatic and budgetary decisions, while still allowing recipients 
to establish their own award-specific thresholds with the prior written 
approval of the Federal agency. Under the proposed revision, a 
recipient's use of fixed amount subawards remains subject to the prior 
written approval of the Federal agency.
    OMB also proposes to revise and clarify the guidance pertaining to 
termination and closeout requirements in sections 200.340 through 
200.344. On termination, in section 200.340 OMB proposes to remove 
language that allows a Federal agency or pass-through entity to 
terminate an award ``if an award no longer effectuates the program 
goals or agency priorities.'' This revision is proposed only for the 
purpose of clarifying the guidance; the proposed guidance still allows 
agencies to terminate a Federal award according to the terms and 
condition of the award. OMB also proposes to clarify that a termination 
does not include a Federal agency's decision to not provide 
continuation funding. In section 200.341, OMB also proposes to clarify 
requirements that must be included in a notice of termination.
    In section 200.344 on closeout, OMB proposes to revise closeout 
guidance to clarify that recipients must still submit a final financial 
report even when the recipient does not have a final indirect cost 
rate; and proposes to clarify that an additional final report must be 
submitted when the indirect cost rate is finalized. In the same 
section, OMB also proposes to provide additional flexibilities for 
agencies and recipients to closeout Federal awards in a timely manner. 
OMB proposes to allow an agency and recipient to mutually agree upon a 
final indirect cost rate for an individual award. This proposed 
revision is not intended to grant agencies additional authorities to 
negotiate rates over cognizant agencies for indirect rates; rather, it 
simply proposes to affirm the Federal agency's right to negotiate with 
the recipient or subrecipient on a case-by-case basis with the goal of 
closing out specific awards in a timely manner.

Subpart E--Cost Principles

    In section 200.401 on applicability, OMB proposes to clarify that 
the cost principles in subpart E do not apply to grants and cooperative 
agreements for food commodities.
    In section 200.403, OMB proposes to add language clarifying when 
allowable administrative closeout costs may be incurred in paragraph 
(h).
    In section 200.407, OMB has removed ten items from the prior 
written approval requirements to reduce Federal agency and recipient 
burden. These proposed revisions include no longer requiring prior 
written approval for such items as, real property, equipment, direct 
costs, entertainment costs, exchange rates, memberships, participant 
support costs, selling and marketing costs, and taxes. In this section, 
OMB also proposes to remove the reference to requiring prior written 
approval for use of grants agreements, cooperative agreements, and 
contracts, but other requirements throughout the Uniform Guidance in 
part 200 would continue to apply to use of these instruments.
    In section 200.414, OMB proposes to revise several aspects of the 
guidance pertaining to indirect costs. OMB proposes to clarify that 
recipients and subrecipients may notify OMB of any disputes with 
regards to a Federal agency's application or acceptance of a federally 
negotiated indirect cost rates. OMB also proposes to revise the 
guidance to clarify that pass-through entities must accept all 
federally negotiated indirect cost rates for subrecipients.
    In the same section, in response to feedback from the Federal 
financial assistance community, OMB proposes to raise the de minimis 
rate from 10 percent to 15 percent. This change would allow for a more 
reasonable and realistic recovery of indirect costs, particularly for 
new or inexperienced organizations that may not have the capacity to 
undergo a formal rate negotiation, but still deserve to be fully 
compensated for their overhead costs. The proposed changes still allow 
recipients and subrecipients to apply a rate lower than 15 percent at 
their own discretion. At the same time, the proposed guidance clarifies 
that Federal agencies may not compel recipients and subrecipients to 
use an indirect rate lower than the proposed 15 percent rate, unless 
required by statute. OMB also proposes to clarify that the de minimis 
rate may not be applied to cost reimbursement contracts and recipients 
and subrecipients are not required to use the de minimis rate.
    Finally, OMB also proposes to remove the existing requirement in 
paragraph (h) of section 200.414 for all indirect cost rates to be 
publicly available on a government-wide website--but this may be 
revisited when applicable systems are updated to allow for the posting 
of indirect cost rates. OMB seeks comments that include analysis on the 
advantages and disadvantages of raising the de minimis rate in the way 
proposed.
    Based on feedback from the oversight community, in section 200.415 
OMB proposes to require subrecipients to certify to pass-through 
entities that financial information submitted to the pass-through 
entity is complete and accurate.
    Based on feedback from both Institutions of Higher Education (IHE) 
and Federal agencies, OMB also proposes to remove the requirement in 
section 200.419 for an IHE that receives

[[Page 69398]]

an aggregate total $50 million or more in Federal awards and 
instruments subject to subpart E to submit a disclosure statement form 
(DS-2) containing information on cost accounting standards. This 
proposed change, if finalized, would likely reduce Federal agency and 
recipient burden. OMB received a comment indicating that the DS-2 is 
outdated, not needed for ensuring compliance with statutory authorities 
related to Federal financial assistance, and not universally 
implemented across the IHE community. The commenter also indicated that 
the DS-2 is not used as regular tool by the audit or oversight 
community to enhance compliance or oversight. This commenter also 
stated that information contained in the DS-2 is readily available in 
numerous policy portals at research universities and creates 
unnecessary administrative and cost burden to research universities and 
Federal agencies.
    If finalized, this proposed change would not impact the requirement 
for IHEs receiving Federal awards above the threshold to comply with 
the Cost Accounting Standards Board's cost accounting standards. It 
would only no longer require use of the DS-2 form. This proposed change 
also is not intended to impact any FAR-based requirements related to 
disclosure of cost accounting practices.
    OMB seeks comments on the potential impact of this proposed change 
to section 200.419, including analysis on the advantages and 
disadvantages of removing the requirement for use of the DS-2 form. For 
example, are there any advantages in retaining consistency and 
uniformity in accounting practices followed by educational institutions 
for both contracts under the FAR and Federal financial assistance under 
part 200, which are achieved through use of the DS-2? For additional 
background, see, for example, 58 FR 39996, at 39997 (Jul. 26, 1993) 
(explaining OMB's initial plans to expand the Cost Accounting Standards 
Board's regulations and standards for educational institutions to 
Federal grants). Does the requirement to use the DS-2 at section 
200.419 help ensure that each IHE's practices used in estimating costs 
for a proposal are consistent with cost accounting practices used by 
the institution in accumulating and reporting costs or serve other 
functions? See 48 CFR 9905.501-20. How, if at all, could removing the 
requirement to use the DS-2 from section 200.419 impact compliance by 
research universities with the requirements of 41 U.S.C. 1502 or the 
implementing regulations at FAR, Chapter 99 for government contracts? 
To what extent would removing the requirement to use the DS-2 at 
section 200.419 reduce burden if the statutory and FAR-based 
requirements remain in effect?
    OMB proposes to require several revisions to the general provisions 
for items of costs. Specifically, in section 200.420, OMB proposes to 
add further clarifying text explaining that the listed items of cost 
are not intended to provide a comprehensive list and that failure to 
mention an item, even as an example, is not intended to imply that is 
allowable or unallowable. OMB proposes this clarification to address 
numerous questions about allowability of costs that arise in the 
Federal financial assistance community.
    In section 200.422, OMB proposes to incorporate the definition of 
an ``advisory council or committee.''
    At section 200.431, OMB proposes to revise the section on fringe 
benefits to require recipients and subrecipients to allocate payments 
for unused leave as general administrative expenses or include them in 
a fringe benefit rate with cognizant agency approval. Based on feedback 
from the oversight community, OMB also proposes in section 200.431 to 
clarify that recipients and subrecipients may not charge unfunded 
pension and post-retirement health benefits to an award in a manner 
that is inconsistent with the allocation principles of Subpart E. Also 
in section 200.431, OMB proposes additional clarifying guidance on 
pension plan costs and post-retirement health plans.
    OMB proposes to clarify the description of conferences in section 
200.432 to remove any limitations provided by the specific types of 
events listed in the guidance currently. OMB also proposes to allow for 
dependent-care costs associated with participants' attending or 
partaking in program-related conferences.
    OMB proposes to revise section 200.438 entertainment costs to 
include prizes, which currently reside in Subpart B, despite the fact 
that prizes are an item of cost.
    In section 200.440, OMB removed the requirement for prior approval 
of fluctuations of exchange rates. While a recipient or subrecipient 
needs prior approval for additional Federal funding, no approval is 
required because an exchange rate has fluctuated and resulted in a 
necessary charge to available funding.
    In section 200.454, OMB proposes to remove prior approval 
requirements for the cost of membership in any civic or community 
organization.
    In section 200.455 on organization costs, OMB proposes to clarify 
that any costs associated with either persuading or dissuading 
employees from collective bargaining and related activities are not 
allowable under Federal awards. OMB also proposes to add clarifying 
language that certain costs related to data, evaluation, and other 
related organization costs are allowable.
    In section 200.456, OMB proposes to remove the prior approval 
requirement of participant support costs. OMB proposes to clarify, 
however, that the treatment of participant costs is ultimately the 
responsibility of the recipient or subrecipient to determine, document, 
and treat consistently across all Federal awards (and when negotiating 
indirect rates).
    In section 200.461, OMB proposes additional clarifying guidance on 
publication and printing costs by adding reference to ``article 
processing charges'' or ``similar open access fees.''
    In section 200.467, OMB also proposes to remove the prior approval 
option for selling and marketing costs, clarifying selling and 
marketing costs are unallowable unless they meet the requirements in 
section 200.421 and are required to meet the requirements of the award.
    Finally, OMB proposes to revise the section on termination costs at 
section 200.472 to also include closeout costs. Specifically, OMB 
proposes to include guidance for recipients and subrecipients to charge 
administrative costs specifically associated with the closeout of a 
Federal award. OMB received feedback from the Federal financial 
assistance community that the exclusion of closeout costs in the 
Uniform Guidance has been problematic as recipients and subrecipients 
have been unable to charge actual costs associated with closeout 
actions, such as certain administrative or staff costs not covered 
through indirect cost recoveries.

Subpart F--Audit Requirements

    In this subpart, OMB proposes to raise the audit threshold from 
$750,000 to $1,000,000 in section 200.501. OMB reviewed audit 
submission data as well as economic data when determining the increase 
to this threshold. Every two years, the Director of OMB is authorized 
to adjust the dollar amount of this threshold consistent with the 
purposes of the Single Audit Act, provided the Director does not make 
such adjustments below $300,000. 31 U.S.C. 7502.
    In section 200.502 OMB also proposes to clarify that, in 
determining Federal awards expended, loan and loan guarantees retain 
their Federal character through the end of the Federal award

[[Page 69399]]

period of performance unless otherwise specified in statute or Federal 
agency regulations. In response to feedback from Federal agencies, OMB 
proposes to revise the guidance to require that the schedule of 
expenditures of Federal awards for comprehensive annual financial 
reports identify the State, municipal, or local entity recipient or 
subrecipient of a Federal award. This change is necessary to provide 
greater transparency and understanding of the information provided in 
the schedule.
    In section 200.510, at paragraph (b), OMB proposes additional 
guidance explaining that, for audits covering multiple recipients (such 
as departments, agencies, IHEs, and other organizational units), the 
schedule of expenditures must identify the recipient of the Federal 
award.
    In section 200.513, OMB proposes to revise the responsibilities of 
Federal agencies. Specifically, OMB proposes to encourage Federal 
agencies to engage with external audit stakeholders and the Federal 
agency's Office of Inspector General National Single Audit Coordinator 
(NSAC) prior to submitting compliance supplement drafts to OMB. In the 
same section OMB also proposes to clarify that a Federal agency's key 
management single audit liaison must also coordinate with the agency's 
Office of Inspector General NSAC when appropriate.
    In section 200.514, on scope of audit, OMB proposes to revise 
compliance requirements to specify that compliance testing must include 
a test of transactions and other auditing procedures necessary to 
provide the auditor with sufficient evidence to support an opinion on 
compliance.
    In section 200.516, based on feedback OMB received from the Federal 
financial assistance community, OMB proposes to revise in the 
definitions of known questioned costs and likely questioned costs and 
provide further clarity on how they are identified in an audit report.

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

    OMB proposes to revise this appendix in its entirety in support of 
the goal of simplifying and clarifying the grant solicitation and 
application process, which is a key objective under Executive Order 
14058 on Transforming Federal Customer Experience and Service Delivery 
to Rebuild Trust in Government. The proposed changes to the notice of 
funding opportunity in Appendix I are intended to improve the quality 
and accessibility of funding opportunities. Specifically, the proposed 
revisions to Appendix I intend to: (1) follow plain language 
principles; (2) group similar items together to streamline content; (3) 
align sections more closely to the application process; (4) include 
basic information at the top of a funding opportunity so that 
applicants can more easily make decisions about whether or not to 
apply; (5) clearly define what must be included in a section of the 
funding opportunity versus what is at an agency's discretion; and (6) 
provide flexibility to agencies while also giving applicants a common 
way to find information in every funding opportunity.

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

    OMB proposes to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 for modified total 
direct costs.

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

    OMB proposes to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 for modified total 
direct costs. OMB also proposes to clarify that under the direct cost 
allocation method, joint costs include costs for information 
technology.

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

    OMB proposes to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 under modified total 
direct costs (MTDC). OMB also proposes to clarify the meaning of 
``department or agency'' for State and local governments.
    OMB also proposes a revision to underscore that Federal agencies 
must accept indirect cost proposals developed by State or local 
departments or agencies receiving less than $35 million in their fiscal 
year. The proposed revision to this appendix also provides that Federal 
agencies cannot compel these State or local governmental departments or 
agencies to accept the de minimis rate, or any other rate established 
by the Federal agency, in place of their indirect cost proposals. OMB 
emphasizes, however, that any such indirect cost proposals must be 
developed in accordance with the requirements of part 200 and 
maintained for audit--along with related supporting documentation.

Appendix X to Part 200--Data Collection Form (Form SF-SAC)

    OMB proposes to revise this appendix to clarify where audit 
submission instructions are located.

Appendix XII to Part 200--Award Term and Condition for Recipient 
Integrity and Performance Matters

    OMB proposes to revise this award term to be consistent with the 
statutory obligation and to reflect the appropriate location 
(responsibility and qualification records) in SAM.gov for reporting 
integrity and performance matters. OMB proposes to renumber the award 
term to align to the requirements of the standard organization of the 
Code of Federal Regulations.

Other Revisions Under Consideration for Future Updates

    OMB may consider additional revisions for potential future updates. 
Specifically, OMB welcomes additional comments from the public on the 
following topics for consideration in possible additional revisions in 
the future:
     Establishing specific audit requirements for for-profit 
entities, which are not subject to the requirements of Subpart F;
     Incorporating the requirements of National Security 
Presidential Management (NSPM)-33 on research security requirements;
     Providing additional guidance in 2 CFR concerning the 
relationship of specific aspects of the guidance to loans and loan 
guarantees;
     Establishing mechanisms to automatically adjust certain 
thresholds due to inflation or other triggering events (where permitted 
by law).
     Removing additional prior approval requirements.
     Challenges related to negotiating indirect costs, working 
with cognizant agencies, or any other topics related to indirect costs 
that could be addressed in future updates; and
     Expanding the guidance in Subpart F to include more 
specific requirements on the scope of an audit (``proper perspective'') 
so that agencies have additional contextual information to guide them 
in resolving audit findings.

Request for Comments

    OMB requests comments on all aspects of the propose guidance in 
this document, including on any reliance interests that commenters may 
have based on the existing text of 2 CFR, subtitle A that OMB's 
proposal may affect, and that OMB should consider in deciding whether 
or how to finalize this guidance.

[[Page 69400]]

Executive Order 12866 (Regulatory Planning and Review), Executive Order 
13563 (Improving Regulation and Regulatory Review), and Executive Order 
14094 (Modernizing Regulatory Review)

    Executive Orders (E.O.s) 12866, 13563, and 14094 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 OMB Guidance for Grants and Agreements published in subtitle A of 2 
CFR is guidance to Federal agencies and not regulation. 2 CFR 1.100(b). 
OMB has thus determined that the revision of 2 CFR is not a significant 
regulatory action under E.O. 12866, as amended.

Regulatory Flexibility Act

    This proposed guidance is exempt from the notice and comment 
requirements of the Administrative Procedure Act (APA) because it is 
guidance to Federal agencies and not regulation. See 5 U.S.C. 553(b). 
Moreover, even if this proposed guidance were otherwise subject to 5 
U.S.C. 553, it would be exempt from the notice and comment requirement 
as a matter related to grants. See 5 U.S.C. 553(a)(2). OMB nonetheless 
provides the following information for the information of the public. 
For a rule subject to the notice-and-comment provisions of the APA, the 
Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires that an 
agency provide a final regulatory flexibility analysis or to certify 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Based on the nature of the 
revisions proposed in this notice, OMB does not expect this guidance to 
have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act. There 
are some proposed revisions that may impose a non-significant burden; 
however, there are more proposed revisions that reduce burden to small 
entities. When reviewing all proposed revisions, the burden that will 
be reduced for recipients is much greater than the burden imposed.

Unfunded Mandates Reform Act of 1995

    The proposed guidance would not impose unfunded mandates as defined 
by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 
48). The proposed guidance would not result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $168 million or more in any one year (2 U.S.C. 
1532).

Executive Order 13132 (Federalism Assessment)

    This proposed guidance has been analyzed in accordance with the 
principles and criteria contained in E.O. 13132, ``Federalism,'' 64 FR 
43255 (Aug. 10, 1999). OMB has determined that this proposed guidance 
would not have sufficient federalism implications to warrant the 
preparation of a federalism assessment. The guidance in 2 CFR is 
inherently national in scope and significance. Regardless, in 
accordance with section 4(d) of E.O. 13132, OMB consulted with 
appropriate State and local officials that may be affected by Federal 
agencies' implementation of OMB's revised guidance by means of posting 
the RFI prior to proposing revisions. OMB weighed carefully the 
interests of those who submitted comments in response to the RFI in 
proposing revisions to the guidance, which balance the State interests 
with the need to provide Federal agencies with consistent, uniform, 
efficient, and transparent guidance, which is consistent with 
authorizing law.

Paperwork Reduction Act

    This guidance does not contain a new requirement for information 
collection. Rather, it streamlines requirements in specific sections. 
Thus, the Paperwork Reduction Act does not apply.

Executive Order 13175 (Tribal Consultation)

    OMB has analyzed this revised guidance in accordance with the 
principles and criteria contained in E.O. 13175, ``Consultation and 
Coordination with Indian Tribal Governments'' 65 FR 67249 (Nov. 9, 
2000). On March 7, 2023, OMB held a two-hour Tribal consultation to 
solicit feedback from Tribal representatives. OMB also proposes 
providing greater flexibility to Tribal governments in the proposed 
guidance centered on procurement standards and disposition of 
equipment. OMB also proposes to clarify the definition of Indian 
Tribes.

List of Subjects

2 CFR Part 1

    Administration of Federal financial assistance, Administrative 
practice and procedure, Federal financial assistance programs.

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 175

    Administrative practice and procedures; Grant programs; Indians--
tribal government; Nonprofit organizations; State and local 
governments.

2 CFR Part 180

    Administrative practice and procedure; Grant programs; Loan 
programs; Reporting and recordkeeping requirements.

2 CFR Part 182

    Administrative practice and procedure; Drug abuse; Grant programs; 
Reporting and recordkeeping requirements.

2 CFR Part 183

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

2 CFR Part 200

    Administration of Federal financial assistance, Administrative 
practice and procedure, Federal financial assistance programs.

    For the reasons stated in the preamble, the Office of Management 
and Budget proposes to amend title 2, subtitle A, chapters I and II of 
the Code of Federal Regulations as follows:

0
1. Revise the heading of title 2 to read as follows:

Title 2--Federal Financial Assistance

0
2. Revise the heading of subtitle A of title 2 to read as follows:

Subtitle A--Office of Management and Budget Guidance for Federal 
Financial Assistance

0
3. Revise part 1, consisting of Sec. Sec.  1.100 through 1.305, to read 
as follows:

PART 1--ABOUT TITLE 2 OF THE CODE OF FEDERAL REGULATIONS AND 
SUBTITLE A

Sec.
Subpart A--Introduction to Title 2 of the CFR
1.100 Content of this title.
1.105 Organization and subtitle content.
1.110 Issuing authorities.

[[Page 69401]]

Subpart B--Introduction to Subtitle A
1.200 Purpose of chapters I and II.
1.205 Applicability to Federal financial assistance.
1.210 Applicability to Federal agencies and others.
1.215 Relationship to previous issuances.
1.220 Federal agency implementation of this subtitle.
1.230 Maintenance of this subtitle.
1.231 Severability.
Subpart C--Responsibilities of OMB and Federal Agencies
1.300 OMB responsibilities.
1.305 Federal agency responsibilities.

    Authority:  31 U.S.C. 503; 31 U.S.C. 1111; 31 U.S.C. 6307; 41 
U.S.C. 1121; Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 
10737.

Subpart A--Introduction to Title 2 of the CFR


Sec.  1.100  Content of this title.

    This title contains:
    (a) Office of Management and Budget (OMB) guidance to Federal 
agencies on governmentwide policies for the award and administration of 
Federal financial assistance; and
    (b) Federal agency regulations implementing that OMB guidance.


Sec.  1.105  Organization and subtitle content.

    (a) This title is organized into two subtitles.
    (b) The OMB guidance described in Sec.  1.100(a) is published in 
subtitle A. Publication of the OMB guidance in the CFR does not change 
its nature--it is guidance, not regulation.
    (c) Each Federal agency that awards Federal financial assistance 
has a chapter in subtitle B in which it issues those regulations. The 
Federal agency regulations in subtitle B differ in nature from the OMB 
guidance in subtitle A because the OMB guidance is not regulatory. 
Federal agency regulations in subtitle B may give regulatory effect to 
the OMB guidance, to the extent that the agency regulations require 
compliance with all or portions of the OMB guidance. See also Sec.  
1.220.


Sec.  1.110   Issuing authorities.

    OMB issues this subtitle. Each Federal agency that has a chapter in 
subtitle B of this title issues that chapter.

Subpart B--Introduction to Subtitle A


Sec.  1.200   Purpose of chapters I and II.

    Chapters I and II of subtitle A provide OMB guidance to Federal 
agencies that helps ensure consistent and uniform governmentwide 
policies and procedures for the management of the agencies' Federal 
financial assistance.


Sec.  1.205   Applicability to Federal financial assistance.

    The types of instruments that are subject to the guidance in this 
subtitle vary from one portion of the guidance to another. All portions 
of the guidance apply to grants and cooperative agreements, and some 
portions also apply to other types of Federal financial assistance. For 
example, the:
    (a) Guidance on debarment and suspension in part 180 of this 
subtitle applies broadly to all Federal financial assistance, and not 
just to grants and cooperative agreements.
    (b) Cost principles in subpart E of part 200 of this subtitle apply 
to procurement contracts issued under a Federal award, as well as to 
Federal financial assistance. Cost principles are implemented for 
Federal agencies' direct procurement contracts through the Federal 
Acquisition Regulation in title 48 of the CFR, rather than through 
Federal agency regulations on Federal financial assistance in this 
title.


Sec.  1.210  Applicability to Federal agencies and others.

    (a) This subtitle contains guidance that directly applies only to 
Federal agencies.
    (b) The guidance in this subtitle may affect other entities through 
each Federal agency's implementation of the guidance, portions of which 
may apply to:
    (1) The agency's awarding or administering officials;
    (2) Recipients and subrecipients that receive or apply for the 
agency's Federal financial assistance or receive subawards under grants 
or cooperative agreements; or
    (3) Any other entities involved in agency transactions subject to 
the guidance in this chapter.


Sec.  1.215  Relationship to previous issuances.

    Although some of the guidance was organized differently within OMB 
circulars or other documents, much of the guidance in this subtitle 
existed prior to the establishment of title 2 of the CFR.


Sec.  1.220  Federal agency implementation of this subtitle.

    A Federal agency that awards Federal financial assistance subject 
to the OMB guidance in this subtitle implements the guidance in agency 
regulations in subtitle B of this title and in guidance documents, 
policy documents, and procedural issuances, such as internal 
instructions to the agency's awarding and administering officials. An 
applicant, recipient, or subrecipient would see the effect of that 
implementation in the organization and content of the agency's 
announcements of funding opportunities and in its award terms and 
conditions.


Sec.  1.230  Maintenance of this subtitle.

    OMB issues guidance in this subtitle after publication in the 
Federal Register. Any portion of the guidance that has a potential 
impact on the public is published with an opportunity for public 
comment.


Sec.  1.231  Severability.

    The provisions of this subtitle are separate and severable from one 
another. If any provision of this subtitle is held invalid or 
unenforceable as applied to a particular person or circumstance, the 
provision should be construed so as to continue to give the maximum 
effect permitted by law as applied to other persons not similarly 
situated or to dissimilar circumstances. If any provision is determined 
to be wholly invalid and unenforceable, it should be severed from the 
remaining provisions of this part, which should remain in effect.

Subpart C--Responsibilities of OMB and Federal Agencies


Sec.  1.300  OMB responsibilities.

    OMB is responsible for:
    (a) Issuing and maintaining the guidance in this subtitle, as 
described in Sec.  1.230;
    (b) Interpreting the policy requirements in this subtitle;
    (c) Reviewing Federal agency regulations implementing the 
requirements of this subtitle, as required by Executive Order 12866;
    (d) Conducting broad oversight of governmentwide compliance with 
the guidance in this subtitle; and
    (e) Performing other OMB functions specified in this subtitle.


Sec.  1.305  Federal agency responsibilities.

    The head of each Federal agency that awards and administers Federal 
financial assistance subject to the guidance in this subtitle is 
responsible for:
    (a) Implementing the guidance in this subtitle;
    (b) Ensuring that the Federal agency complies with their 
implementation of the guidance;
    (c) Coordinating with the Council on Federal Financial Assistance, 
the Grants Quality Service Management Office, and other governance 
committees as appropriate; and
    (d) Performing other functions specified in this subtitle.

[[Page 69402]]

0
4. Revise part 25, consisting of Sec.  25.100 through appendix A to 
part 25, to read as follows:

PART 25--UNIQUE ENTITY IDENTIFIER AND SYSTEM FOR AWARD MANAGEMENT

Sec.
Subpart A--General
25.100 Purpose of this part.
25.105 Applicability.
25.110 Exceptions to this part.
Subpart B--Policy
25.200 Requirements for notice of funding opportunities, 
regulations, and application instructions.
25.205 Effect of noncompliance with a requirement to obtain a UEI or 
register in SAM.gov.
25.210 Authority to modify agency application forms or formats.
25.215 Requirements for agency information systems.
25.220 Use of award term.
Subpart C--Recipient Requirements of Subrecipients
25.300 Requirement for recipients to ensure subrecipients have a 
unique entity identifier.
Subpart D--Definitions
25.400 Definitions.

Appendix A to Part 25

Award Term

    Authority: 31 U.S.C. 503; 31 U.S.C. 6102; 31 U.S.C. 6307; Pub. 
L. 109-282; Pub. L. 110-252, Pub. L. 113-101, Pub. L. 117-40.

Subpart A--General


Sec.  25.100  Purpose of this part.

    This part provides guidance to Federal agencies that:
    (a) The unique entity identifier (UEI) is the universal identifier 
for Federal financial assistance applicants, as well as recipients and 
their direct subrecipients, and;
    (b) The System for Award Management (SAM.gov) is the repository for 
standard information about applicants and recipients.


Sec.  25.105  Applicability.

    (a) This part applies to a Federal agency's Federal financial 
assistance as defined in Sec.  25.400. This part applies to all 
applicants for and recipients of Federal financial assistance unless 
exempted by Federal statute or Sec.  25.110.
    (b) Subrecipients are required to obtain a UEI in accordance with 
subpart C. This part does not apply to subrecipients of subrecipients 
(second-tier subrecipients) or contractors under Federal awards.
    (c) This part does not apply to an individual who applies for or 
receives Federal financial assistance as a natural person (unrelated to 
any business or nonprofit organization an individual owns or operates).
    (d) Because this part applies to loan guarantees and other 
guaranteed programs, recipients of the guarantee from the Federal 
agency (for example, lenders of guaranteed loans) are required to 
complete entity validations and acquire a UEI. Additionally, at the 
Federal agency's discretion, non-individual beneficiary borrowers (for 
example, small businesses or corporations) may be required by the 
Federal agency to obtain a UEI or register in SAM.gov.


Sec.  25.110  Exceptions to this part.

    (a) General exceptions. (1) Under a condition identified in 
paragraph (a)(2) of this section, a Federal agency may exempt an 
applicant or recipient of Federal financial assistance from the 
requirement to obtain a UEI, register in SAM.gov, or both.
    (i) If a Federal agency grants an exception under paragraph (a)(2) 
of this section, it must use a generic entity identifier in the data it 
reports to USAspending.gov if reporting for a prime award of Federal 
financial assistance to the recipient is required by the Federal 
Funding Accountability and Transparency Act (Pub. L. 109-282, as 
amended, hereafter cited as ``Transparency Act''). Granting an 
exception under paragraph (a)(2) of this section does not impact a 
Federal agency's responsibility for reporting under the Transparency 
Act, except that it may use a generic entity identifier in the 
circumstances described.
    (ii) Federal agencies should use generic entity identifiers rarely 
as it prevents recipients from fulfilling reporting requirements such 
as subaward or executive compensation reporting required by the 
Transparency Act.
    (2) A Federal agency may exempt either an applicant or recipient 
when:
    (i) The Federal agency determines that it must protect information 
about the entity from disclosure in the national security or foreign 
policy interests of the United States or to avoid jeopardizing the 
personal safety of the entity's staff, partners, beneficiaries, and 
participants;
    (ii) (A) All of the following conditions are met:
    (1) the entity is a foreign organization or foreign public entity;
    (2) the Federal award or subaward will be performed outside the 
United States;
    (3) the Federal award or subaward will be less than $25,000; and
    (5) the Federal agency deems it to be impractical for the entity to 
comply with the requirements of this part.
    (B) The Federal agency must determine this exemption on a case-by-
case basis while utilizing a risk-based approach; or
    (iii) For applicants, the Federal agency determines that there are 
exigent circumstances that prohibit the applicant from receiving a UEI 
and registering in SAM.gov before receiving a Federal award. In these 
instances, Federal agencies must require the recipient to obtain a UEI 
and complete registration in SAM.gov within 30 days of the Federal 
award date.
    (b) Class exceptions. OMB may approve additional exceptions for 
classes of Federal awards, applicants, or recipients subject to the 
requirements of this part when exceptions are not prohibited by 
statute.

Subpart B--Policy


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

    (a) A Federal agency that issues Federal financial assistance (see 
Sec.  25.400) must include the requirements of 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 the effective date of this guidance. A notice of funding 
opportunity is any paper or electronic issuance that a Federal 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 
any other term.
    (b) The notice of funding opportunity, regulation, or other 
issuance must require each applicant that does not have an exemption 
under Sec.  25.110 to:
    (1) Be registered in SAM.gov before submitting an application;
    (2) Maintain a current and active registration in SAM.gov at all 
times during which it has an active Federal award or an application 
under consideration by a Federal agency. The applicant must review and 
update its information in SAM.gov annually from the date of initial 
registration or subsequent updates to ensure it is current, accurate, 
and complete. If applicable, this includes identifying the applicant's 
immediate and highest-level owner and subsidiaries, as well as 
providing information on all predecessors that have received a

[[Page 69403]]

Federal award or contract within the last three years; and
    (3) Include its UEI in each application it submits to the Federal 
agency.
    (c) For the purposes of this policy: the applicant meets the 
Federal agency's eligibility criteria and has the legal authority to 
apply and 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 UEI. If a consortium is eligible 
to receive funding under a Federal agency program, but the agency's 
policy is to make the Federal award to a lead entity for the 
consortium, the UEI of the lead applicant must be used.


Sec.  25.205  Effect of noncompliance with a requirement to obtain a 
UEI or register in SAM.gov.

    (a) Unless an entity is exempt under Sec.  25.110, a Federal agency 
may not issue a Federal award or amend an existing Federal award if the 
entity is not in compliance with the requirements of this part. This 
does not apply to amendments to terminate or close out a Federal award.
    (b) At the time a Federal agency is ready to make a Federal award, 
if the intended recipient has not complied with the requirements to 
obtain a UEI and maintain an active registration in SAM.gov with 
current information, the Federal agency may make a Federal award to 
another applicant.


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 agency may add a UEI field to information collections 
previously approved by OMB, with no further approval required.


Sec.  25.215  Requirements for agency information systems.

    Each Federal agency that awards Federal financial assistance (see 
Sec.  25.400) must ensure that its information systems are able to both 
accept and transmit the UEI as the universal identifier for Federal 
financial assistance applicants and recipients.


Sec.  25.220  Use of award term.

    (a) A Federal agency must include the award term in Appendix A in 
all Federal financial assistance agreements (see Sec.  25.400) to 
accomplish the purpose of Sec.  25.100.
    (b) A Federal agency may use different letters and numbers than 
those in Appendix A to designate the paragraphs of the award term.

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 that has 
not obtained a UEI and provided it to the recipient. Subrecipients are 
not required to complete full registration in SAM.gov to obtain a UEI.
    (b) A recipient must notify any potential subrecipients that the 
recipient cannot make a subaward unless the subrecipient obtains and 
provides a UEI to the recipient.

Subpart D--Definitions


Sec.  25.400  Definitions.

    Terms not defined in this part shall have the same meaning as 
provided in 2 CFR part 200, subpart A. As used in this part:
    Applicant means any entity that applies for a Federal award 
directly to a Federal agency.
    Entity includes:
    (1) Whether for profit or nonprofit:
    (i) A corporation;
    (ii) An association;
    (iii) A partnership;
    (iv) A limited liability company;
    (v) A limited liability partnership;
    (vi) A sole proprietorship;
    (vii) Any other legal business entity;
    (viii) Another grantee or contractor that is not excluded by 
subparagraph (b); and
    (ix) Any State or locality;
    (2) Does not include:
    (i) An individual recipient of Federal financial assistance; or
    (ii) A Federal employee.
    Federal Award means an award of Federal financial assistance that 
an entity receives from a Federal agency.
    Federal financial assistance:
    (1) Means assistance that entities receive or administer in the 
form of a:
    (i) Grant;
    (ii) Cooperative agreement (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);
    (iii) Loan;
    (iv) Loan guarantee;
    (v) Subsidy;
    (vi) Insurance;
    (vii) Food commodity;
    (viii) Direct appropriation;
    (ix) Assessed or voluntary contribution; or
    (x) Any other financial assistance transaction that authorizes the 
entity's expenditure of Federal funds.
    (2) For the purposes of this part, the term ``Federal financial 
assistance'' does not include:
    (i) Technical assistance that provides services in lieu of money; 
and
    (ii) A transfer of title to federally-owned property provided in 
lieu of money, even if the award is called a grant.
    Recipient means an entity that receives or administers a Federal 
Award directly from a Federal agency.
    System for Award Management (SAM.gov) means the Federal repository 
into which an entity must provide the information required for the 
conduct of business as a recipient.
    Unique entity identifier means the universal identifier assigned by 
SAM.gov to uniquely identify an entity.

Appendix A to Part 25--Award Term

I. System for Award Management (SAM.gov) and Universal Identifier 
Requirements

    (a) Requirement for System for Award Management.
    (1) Unless exempt from this requirement under 2 CFR 25.110, you 
must maintain a current and active registration in SAM.gov. Your 
registration must always be current and active until you submit all 
final reports required under this Federal award or receive the final 
payment, whichever is later. You must review and update your 
information in SAM.gov at least annually from the date of your 
initial registration or any subsequent updates to ensure it is 
current, accurate, and complete. If applicable, this includes 
identifying your immediate and highest-level owner and subsidiaries 
and providing information about your predecessors that have received 
a Federal award or contract within the last three years.
    (b) Requirement for Unique Entity Identifier (UEI). (1) If you 
are authorized to make subawards under this Federal award, you:
    (i) Must notify potential subrecipients that no entity may 
receive a subaward from you until the entity has provided its UEI to 
you.
    (ii) May not make a subaward to an entity unless the entity has 
provided its UEI to you. Subrecipients are not required to complete 
full registration in SAM.gov to obtain a UEI.
    (c) Definitions. For the purposes of this award term:
    System for Award Management (SAM.gov) means the Federal 
repository into which a recipient must provide the information 
required for the conduct of business as a recipient. Additional 
information about registration procedures may be found in SAM.gov 
(currently at https://www.sam.gov).
    Unique entity identifier means the universal identifier assigned 
by SAM.gov to uniquely identify an entity.
    Entity is defined at 25 CFR 400 and includes all of the 
following types as defined in 2 CFR 200.1:
    (1) Non-Federal entity;
    (2) Foreign organization;
    (3) Foreign public entity;
    (4) Domestic for-profit organization; and
    (5) Federal agency.
    Subaward has the meaning given in 2 CFR 200.1.
    Subrecipient has the meaning given in 2 CFR 200.1.

[[Page 69404]]

0
5. Revise part 170 to read as follows:

PART 170--REPORTING SUBAWARD AND EXECUTIVE COMPENSATION INFORMATION

Sec.
Subpart A--General
170.100 Purpose of this part.
170.105 Applicability.
Subpart B--Policy
170.200 Federal agency reporting requirements.
170.210 Requirements for notices of funding opportunities, 
regulations, and application instructions.
170.220 Use of award term.
Subpart C--Definitions
170.300 Definitions.

Appendix A to Part 170

Award term

    Authority:  31 U.S.C. 503; 31 U.S.C. 6102; 31 U.S.C. 6307; Pub. 
L. 109-282; Pub. L. 110-252, Pub. L. 113-101, Pub. L. 117-40.

Subpart A--General


Sec.  170.100  Purpose of this part.

    This part provides guidance to Federal agencies on establishing 
requirements for recipients of Federal awards to report information on 
subawards and executive total compensation, as required by the Federal 
Funding Accountability and Transparency Act of 2006 (Public Law 109-
282), as amended by the Digital Accountability and Transparency Act of 
2014 (Public Law 113-101), hereafter referred to as the ``Transparency 
Act.''


Sec.  170.105  Applicability.

    (a) This part applies to a Federal agency's Federal financial 
assistance as defined in Sec.  170.300. This part applies to all 
recipients and subrecipients of Federal awards who meet the reporting 
requirements of paragraph (c) of this section, unless exempt under 
Federal statute or by paragraph (d) of this section.
    (b) This part does not apply to an individual who applies for or 
receives Federal financial assistance as a natural person (that is, 
unrelated to any business or nonprofit organization an individual owns 
or operates).
    (c) Reporting Requirements. (1) The names and total compensation of 
an entity's five most highly compensated executives must be reported 
if:
    (i) In the entity's preceding fiscal year, it received:
    (A) 80 percent or more of its annual gross revenue in Federal 
procurement contracts (and subcontracts) and Federal awards (and 
subawards) subject to the Transparency Act, as defined at Sec.  
170.300; and
    (B) $25,000,000 or more in annual gross revenue from Federal 
procurement contracts (and subcontracts) and Federal awards (and 
subawards) subject to the Transparency Act, as defined at Sec.  
170.300; and
    (ii) The public does not have access to information about the 
compensation of senior executives of the entity 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.
    (d) Class exceptions. OMB may approve additional exceptions for 
classes of Federal awards or recipients when not prohibited by Federal 
statute.

Subpart B--Policy


Sec.  170.200  Federal agency reporting requirements.

    (a) Federal agencies must publicly report Federal awards that equal 
or exceed the micro-purchase threshold (see 2 CFR 200.1). Federal 
agencies must publish the required Federal award information on 
USAspending.gov in accordance with the guidance provided by OMB and the 
U.S. Department of the Treasury's DATA Act Information Model Schema 
(DAIMS).
    (b) Federal agencies should ensure that their agency-specific 
requirements do not require recipients to submit data that is the same 
as or similar to data required by the Transparency Act during a given 
reporting period.


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

    (a) A Federal agency that makes Federal awards subject to the 
Transparency Act must include the requirements of 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. A notice of funding opportunity is any paper or 
electronic issuance that a Federal 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 any other term.
    (b) The notice of funding opportunity, regulation, or other 
issuance must require each applicant, to which this part applies, to 
have the necessary processes and systems in place to comply with this 
part if they receive a Federal award.


Sec.  170.220  Use of award term.

    (a) A Federal 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) Consistent with paragraph (a) of this section, a Federal agency 
is not required to include the award term in Appendix A of this part if 
the total amount of Federal funding under the Federal award will not 
equal or exceed $30,000. However, the Federal agency must subsequently 
add the award term if increases to the Federal funding result in the 
award equaling or exceeding $30,000.
    (c) A Federal agency may use different letters and numbers than 
those in Appendix A to designate the paragraphs of the award term.

Subpart C--Definitions


Sec.  170.300  Definitions

    Terms not defined in this part shall have the same meaning as 
provided in 2 CFR part 200, subpart A. As used in this part:
    Applicant means any entity that applies for a Federal award 
directly from a Federal agency.
    Entity includes:
    (1) Whether for profit or nonprofit:
    (i) A corporation;
    (ii) An association;
    (iii) A partnership;
    (iv) A limited liability company;
    (v) A limited liability partnership;
    (vi) A sole proprietorship;
    (vii) Any other legal business entity;
    (viii) Another grantee or contractor that is not excluded by 
subparagraph (2) or (3); and
    (ix) Any State or locality;
    (2) Does not include:
    (i) An individual recipient of Federal financial assistance; or
    (ii) A Federal employee.
    Federal Award means an award of Federal financial assistance that 
an entity receives from a Federal agency.
    Executive means an officer, managing partner, or any other employee 
holding a management position.
    Federal financial assistance:
    (1) Means assistance that entities receive or administer in the 
form of a:
    (i) Grant;
    (ii) Cooperative agreement (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);
    (iii) Loan;

[[Page 69405]]

    (iv) Loan guarantee;
    (v) Subsidy;
    (vi) Insurance;
    (vii) Food commodity;
    (viii) Direct appropriation;
    (ix) Assessed or voluntary contribution; or
    (x) Any other financial assistance transaction that authorizes the 
entity's expenditure of Federal funds.
    (2) For the purposes of this part, the term ``Federal financial 
assistance'' does not include:
    (i) Technical assistance that provides services in lieu of money;
    (ii) A transfer of title to federally-owned property provided in 
lieu of money, even if the award is called a grant;
    (iii) Any classified Federal award; or
    (iv) Any award funded in whole or in part with Recovery funds, as 
defined in section 1512 of the American Recovery and Reinvestment Act 
of 2009 (Pub. L. 111-5).
    Recipient means an entity that receives or administers a Federal 
Award directly from a Federal agency.
    Total Compensation means the cash and noncash dollar value an 
executive earns during an entity's preceding fiscal year. This includes 
all items of compensation as prescribed in 17 CFR 29.402(c)(2).

Appendix A to Part 170--Award Term

I. Reporting Subawards and Executive Compensation

    (a) Reporting of first-tier subawards--(1) Applicability. Unless 
you are exempt as provided in paragraph (d) of this award term, you 
must report each action that equals or exceeds $30,000 in Federal 
funds for a subaward to an entity or Federal agency. You must 
subsequently report an action if increases to the Federal funding 
results in the subaward equaling or exceeding $30,000.
    (2) Reporting Requirements. (i) The entity or Federal agency 
must report each subaward described in paragraph (a)(1) of this 
award term to the Federal Funding Accountability and Transparency 
Act Subaward Reporting System (FSRS) at https://www.fsrs.gov.
    (ii) For subaward information, report no later than the end of 
the month following the month in which the subaward was made. (For 
example, if the subaward was made on November 7, 2025, the subaward 
must be reported by no later than December 31, 2025).
    (b) Reporting total compensation of recipient executives for 
entities--(1) Applicability. You must report the 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;
    (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 awards 
(and subawards) subject to the Transparency Act; and
    (B) $25,000,000 or more in annual gross revenues from Federal 
procurement contracts (and subcontracts) and Federal awards (and 
subawards) subject to the Transparency Act; 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 after receiving this subaward. (To determine if the public 
has access to the compensation information, see the U.S. Security 
and Exchange Commission total compensation filings at https://www.sec.gov/answers/execomp.htm.)
    (2) Reporting Requirements. You must report executive total 
compensation described in paragraph (b)(1) of this appendix:
    (i) As part of your registration profile at https://www.sam.gov.
    (ii) No later than the month following the month in which this 
Federal award is made, and annually after that. (For example, if 
this Federal award was made on November 7, 2025, the executive total 
compensation must be reported by no later than December 31, 2025.)
    (c) Reporting of total compensation of subrecipient executives--
(1) Applicability. Unless a first-tier subrecipient is exempt as 
provided in paragraph (d) of this appendix, you must report the 
executive total compensation of each of the subrecipient's five most 
highly compensated executives for the subrecipient's preceding 
completed fiscal year, if:
    (i) The total Federal funding authorized to date under the 
subaward equals or exceeds $30,000;
    (ii) 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 awards (and 
subawards) subject to the Transparency Act; and,
    (B) $25,000,000 or more in annual gross revenues from Federal 
procurement contracts (and subcontracts), and Federal awards (and 
subawards) subject to the Transparency Act; 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 after receiving this subaward. (To determine if the public 
has access to the compensation information, see the U.S. Security 
and Exchange Commission total compensation filings at https://www.sec.gov/answers/execomp.htm.)
    (2) Reporting Requirements. Subrecipients must report to you, 
the recipient, their executive total compensation described in 
paragraph (c)(1) of this appendix. You are required to submit this 
information to the Federal Funding Accountability and Transparency 
Act Subaward Reporting System (FSRS) at https://www.fsrs.gov no later 
than the end of the month following the month in which the subaward 
was made. (For example, if the subaward was made on November 7, 
2025, the subaward must be reported by no later than December 31, 
2025).
    (d) Exemptions. (1) If in the previous tax year you had gross 
income 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:
    Entity includes:
    (1) Whether for profit or nonprofit:
    (i) A corporation;
    (ii) An association;
    (iii) A partnership;
    (iv) A limited liability company;
    (v) A limited liability partnership;
    (vi) A sole proprietorship;
    (vii) Any other legal business entity;
    (viii) Another grantee or contractor that is not excluded by 
subparagraph (2); and
    (ix) Any State or locality;
    (2) Does not include:
    (i) An individual recipient of Federal financial assistance; or
    (ii) A Federal employee.
    Executive means an officer, managing partner, or any other 
employee holding a management position.
    Subaward has the meaning given in 2 CFR 200.1.
    Subrecipient has the meaning given in 2 CFR 200.1.
    Total Compensation means the cash and noncash dollar value an 
executive earns during an entity's preceding fiscal year. This 
includes all items of compensation as prescribed in 17 CFR 
229.402(c)(2).
0
6. Revise part 175 to read as follows:

PART 175--AWARD TERM FOR TRAFFICKING IN PERSONS

Sec.
Subpart A--General
175.100 Purpose of this part.
175.105 Statutory requirement.
Subpart B--Guidance
175.200 Use of award term.
175.205 Referral.
Subpart C--Definitions
175.300 Definitions.

Appendix A to Part 175

Award term

    Authority:  22 U.S.C. 7104(g); 22 U.S.C. 7104a; 22 U.S.C. 7104b; 
22 U.S.C. 7104c; 31 U.S.C. 503; 31 U.S.C. 6307; 31 U.S.C. 1111; 41 
U.S.C. 1121; Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 
10737.

Subpart A--General


Sec.  175.100  Purpose of this part.

    This part establishes a Federal award term for grants and 
cooperative

[[Page 69406]]

agreements to implement the requirements in 22 U.S.C. 7104(g).


Sec.  175.105  Statutory requirement.

    (a) Federal agencies are required to include in each Federal grant 
or cooperative agreement a condition that authorizes the Federal agency 
to terminate the award, without penalty, if a private entity receiving 
funds under the award as a recipient or subrecipient engages in:
    (1) Severe forms of trafficking in persons;
    (2) The procurement of a commercial sex act during the period of 
time that the grant or cooperative agreement is in effect;
    (3) The use of forced labor in the performance of the grant or 
cooperative agreement; or
    (4) Acts that directly support or advance trafficking in persons, 
including the following acts:
    (i) Destroying, concealing, removing, confiscating, or otherwise 
denying an employee access to that employee's identity or immigration 
documents;
    (ii) Failing to provide return transportation or pay for return 
transportation costs to an employee from a country outside the United 
States to the country from which the employee was recruited upon the 
end of employment if requested by the employee, unless:
    (A) exempted from the requirement to provide or pay for such return 
transportation by the Federal department or agency providing or 
entering into the grant or cooperative agreement; or
    (B) the employee is a victim of human trafficking seeking victim 
services or legal redress in the country of employment or a witness in 
a human trafficking enforcement action;
    (iii) Soliciting a person for the purpose of employment, or 
offering employment, by means of materially false or fraudulent 
pretenses, representations, or promises regarding that employment;
    (iv) Charging recruited employees a placement or recruitment fee; 
or
    (v) Providing or arranging housing that fails to meet the host 
country's housing and safety standards.
    (b) Compliance plan and certification requirement.
    (1) Certification. Prior to receiving a grant or cooperative 
agreement, if the estimated value of services required to be performed 
under the grant or cooperative agreement outside the United States 
exceeds $500,000, a recipient must certify that:
    (i) The recipient has implemented a plan to prevent the activities 
described in paragraph (a) of this section, and is in compliance with 
this plan;
    (ii) The recipient has implemented procedures to prevent any 
activities described in paragraph (a) of this section and to monitor, 
detect, and terminate any subcontractor, subgrantee, or employee of the 
recipient engaging in any activities described in paragraph (a) of this 
section; and
    (iii) To the best of the recipient's knowledge, neither the 
recipient, nor any subcontractor or subgrantee of the recipient or any 
agent of the recipient or of such a subcontractor or subgrantee, is 
engaged in any of the activities described in paragraph (a) of this 
section.
    (2) Annual certification. If the recipient receives the award, it 
must submit an annual certification consistent with paragraph (b)(1) of 
this section for each year the award is in effect.
    (3) Compliance plan. Any plan or procedures implemented pursuant to 
paragraph (b) must be appropriate to the size and complexity of the 
grant or cooperative agreement and to the nature and scope of its 
activities, including the number of non-United States citizens expected 
to be employed.
    (4) Copies of the compliance plan. The recipient must provide a 
copy of the plan to the grant officer upon request, and as appropriate, 
must post the useful and relevant contents of the plan or related 
materials on its website and at the workplace.
    (5) Minimum requirements of the compliance plan. The compliance 
plan must include, at a minimum, the following:
    (i) An awareness program to inform recipient employees about the 
Government's policy prohibiting trafficking-related activities 
described in paragraph (a) of this section, the activities prohibited, 
and the actions that will be taken against the employee for violations. 
Additional information about Trafficking in Persons and examples of 
awareness programs can be found at the website for the Department of 
State's Office to Monitor and Combat Trafficking in Persons at https://www.state.gov/j/tip/.
    (ii) A process for employees to report, without fear of 
retaliation, activity inconsistent with the policy prohibiting 
trafficking in persons.
    (iii) A recruitment and wage plan that only permits the use of 
recruitment companies with trained employees, prohibits charging 
recruitment fees to the employees or potential employees and ensures 
that wages meet applicable host-country legal requirements or explains 
any variance.
    (iv) A housing plan, if the recipient, subrecipient, contractor, or 
subcontractor intends to provide or arrange housing, that ensures that 
the housing meets host-country housing and safety standards.
    (v) Procedures to prevent agents, subrecipients, contractors, or 
subcontractors at any tier and at any dollar value from engaging in 
trafficking in persons, including activities in paragraph (a) of this 
section, and to monitor, detect, and terminate any agents, subgrants, 
or subrecipient, contractor, or subcontractor employees that have 
engaged in such activities.
    (c) Notification to Inspectors General and cooperation with 
government. The head of a Federal agency making or awarding a grant or 
cooperative agreement must require that the recipient of the grant or 
cooperative agreement:
    (1) Immediately inform the Inspector General of the Federal agency 
of any information it receives from any source that alleges credible 
information that the recipient, any subcontractor or subgrantee of the 
recipient, or any agent of the recipient or of such a subcontractor or 
subgrantee, has engaged in conduct described in paragraph (a) of this 
section; and
    (2) Fully cooperate with any Federal agencies responsible for 
audits, investigations, or corrective actions relating to trafficking 
in persons.

Subpart B--Guidance


Sec.  175.200  Use of award term.

    (a) To implement the requirements of 22 U.S.C. 7104(g) a Federal 
agency must include the award term in Appendix A of this part for the 
following Federal awards:
    (1) A grant or cooperative agreement to a private entity, as 
defined in Sec.  175.300; and
    (2) A grant or cooperative agreement to a State, local government, 
Indian Tribe, foreign public entity, or any other recipient if funding 
under the award could be provided to a subrecipient that is a private 
entity.
    (b) A Federal agency may use different letters and numbers than 
those in Appendix A to designate the paragraphs of the award term.


Sec.  175.205  Referral.

    A Federal agency official should inform the agency's suspension and 
debarment official if an award is terminated based on a violation of a 
prohibition in the award term under Appendix A.

[[Page 69407]]

Subpart C--Definitions


Sec.  175.300  Definitions.

    Terms not defined in this part shall have the same meaning as 
provided in 2 CFR part 200, subpart A. As used in this part:
    Abuse or threatened abuse of law or legal process means the use or 
threatened use of a law or legal process, whether administrative, 
civil, or criminal, in any manner or for any purpose for which the law 
was not designed, in order to exert pressure on another person to cause 
that person to take some action or refrain from taking some action.
    Coercion means:
    (1) Threats of serious harm to or physical restraint against any 
person;
    (2) Any scheme, plan, or pattern intended to cause a person to 
believe that failure to perform an act would result in serious harm to 
or physical restraint against any person; or
    (3) The abuse or threatened abuse of the legal process.
    Commercial sex act means any sex act on account of which anything 
of value is given to or received by any person.
    Debt bondage means the status or condition of a debtor arising from 
a pledge by the debtor of his or her personal services or of those of a 
person under his or her control as a security for debt, if the value of 
those services as reasonably assessed is not applied toward the 
liquidation of the debt or the length and nature of those services are 
not respectively limited and defined.
    Involuntary servitude includes a condition of servitude induced by 
means of:
    (1) Any scheme, plan, or pattern intended to cause a person to 
believe that, if the person did not enter into or continue in such 
condition, that person or another person would suffer serious harm or 
physical restraint; or
    (2) The abuse or threatened abuse of the legal process.
    Private Entity means any entity, including for-profit 
organizations, nonprofit organizations, institutes of higher education, 
and hospitals. The term does not include foreign public entities, 
Indian Tribes, local governments, or states as defined in 2 CFR 200.1.
    Recruitment Fee means fees of any type, including charges, costs, 
assessments, or other financial obligations, that are associated with 
the recruiting process, regardless of the time, manner, or location of 
imposition or collection of the fee.
    (1) Recruitment fees include, but are not limited to, the following 
fees (when they are associated with the recruiting process) for:
    (i) Advertising;
    (ii) Obtaining permanent or temporary labor certification, 
including any associated fees;
    (iii) Processing applications and petitions;
    (iv) Acquiring visas, including any associated fees;
    (v) Acquiring photographs and identity or immigration documents, 
such as passports, including any associated fees;
    (vi) Accessing the job opportunity, including required medical 
examinations and immunizations; background, reference, and security 
clearance checks and examinations; and additional certifications;
    (vii) An employer's recruiters, agents or attorneys, or other 
notary or legal fees;
    (viii) Language interpretation or translation, arranging for or 
accompanying on travel, or providing other advice to employees or 
potential employees;
    (ix) Government-mandated fees, such as border crossing fees, 
levies, or worker welfare fund;
    (x) Transportation and subsistence costs:
    (A) While in transit, including, but not limited to, airfare or 
costs of other modes of transportation, terminal fees, and travel taxes 
associated with travel from the country of origin to the country of 
performance and the return journey upon the end of employment; and
    (B) From the airport or disembarkation point to the worksite;
    (xi) Security deposits, bonds, and insurance; and
    (xii) Equipment charges.
    (2) A recruitment fee, as described in the introductory text of 
this definition, is a recruitment fee, regardless of whether the 
payment is:
    (i) Paid in property or money;
    (ii) Deducted from wages;
    (iii) Paid back in wage or benefit concessions;
    (iv) Paid back as a kickback, bribe, in-kind payment, free labor, 
tip, or tribute; or
    (v) Collected by an employer or a third party, whether licensed or 
unlicensed, including, but not limited to:
    (A) Agents;
    (B) Labor brokers;
    (C) Recruiters;
    (D) Staffing firms (including private employment and placement 
firms);
    (E) Subsidiaries/affiliates of the employer;
    (F) Any agent or employee of such entities; and
    (G) Subcontractors at all tiers.
    Severe forms of trafficking in persons means:
    (1) Sex trafficking in which a commercial sex act is induced by 
force, fraud, or coercion or in which the person induced to perform 
such act has not attained 18 years of age; or
    (2) The recruitment, harboring, transportation, provision, or 
obtaining of a person for labor or services, through the use of force, 
fraud, or coercion for the purpose of subjection to involuntary 
servitude, peonage, debt bondage or slavery.
    Sex trafficking means the recruitment, harboring, transportation, 
provision, obtaining, patronizing, or soliciting of a person for the 
purpose of a commercial sex act.

Appendix A to Part 175--Award Term

    I. Trafficking in persons.
    (a) Provisions applicable to a recipient that is a private 
entity. (1) Under this award, you as the recipient, your employees, 
subrecipients under this award, and subrecipient's employees may not 
engage in:
    (i) Severe forms of trafficking in persons;
    (ii) The procurement of a commercial sex act during the period 
of time that this award or any subaward is in effect;
    (iii) The use of forced labor in the performance of this award 
or any subaward; or
    (iv) Acts that directly support or advance trafficking in 
persons, including the following acts:
    (A) Destroying, concealing, removing, confiscating, or otherwise 
denying an employee access to that employee's identity or 
immigration documents;
    (B) Failing to provide return transportation or pay for return 
transportation costs to an employee from a country outside the 
United States to the country from which the employee was recruited 
upon the end of employment if requested by the employee, unless:
    (1) Exempted from the requirement to provide or pay for such 
return transportation by the Federal department or agency providing 
or entering into the grant or cooperative agreement; or
    (2) The employee is a victim of human trafficking seeking victim 
services or legal redress in the country of employment or a witness 
in a human trafficking enforcement action;
    (C) Soliciting a person for the purpose of employment, or 
offering employment, by means of materially false or fraudulent 
pretenses, representations, or promises regarding that employment;
    (D) Charging recruited employees a placement or recruitment fee; 
or
    (E) Providing or arranging housing that fails to meet the host 
country's housing and safety standards.
    (2) We as the awarding Federal agency may unilaterally terminate 
this award, without penalty, if any private entity under this award:

[[Page 69408]]

    (i) Is determined to have violated a prohibition in paragraph 
(a)(1) of this appendix; or
    (ii) Has an employee that is determined to have violated a 
prohibition in paragraph (a)(1) of this this appendix through 
conduct that is either:
    (A) Associated with the performance under this award; or
    (B) Imputed to you or the subrecipient using the standards and 
due process for imputing the conduct of an individual to an 
organization that are provided in 2 CFR part 180, ``OMB Guidelines 
to Agencies on Government-wide Debarment and Suspension 
(Nonprocurement),'' as implemented by our agency at [agency must 
insert reference here to its regulatory implementation of the OMB 
guidelines in 2 CFR part 180 (for example, ``2 CFR part XX'')].
    (b) Provision applicable to a recipient other than a private 
entity. (1) We as the awarding Federal agency may unilaterally 
terminate this award, without penalty, if a subrecipient that is a 
private entity under this award:
    (i) Is determined to have violated a prohibition in paragraph 
(a)(1) of this appendix; or
    (ii) Has an employee that is determined to have violated a 
prohibition in paragraph (a)(1) of this appendix through conduct 
that is either:
    (A) Associated with the performance under this award; or
    (B) Imputed to the subrecipient using the standards and due 
process for imputing the conduct of an individual to an organization 
that are provided in 2 CFR part 180, ``OMB Guidelines to Agencies on 
Government-wide Debarment and Suspension (Nonprocurement),'' as 
implemented by our agency at [agency must insert reference here to 
its regulatory implementation of the OMB guidelines in 2 CFR part 
180 (for example, ``2 CFR part XX'')].
    (c) Provisions applicable to any recipient. (1) You must inform 
us immediately of any information you receive from any source 
alleging a violation of a prohibition in paragraph (a)(1) of this 
appendix.
    (2) Our right to unilaterally terminate this award as described 
in paragraphs (a)(2) or (b)(1) of this appendix:
    (i) Implements the requirements of 22 U.S.C. 78, and
    (ii) Is in addition to all other remedies for noncompliance that 
are available to us under this award.
    (3) You must include the requirements of paragraph (a)(1) of 
this award term in any subaward you make to a private entity.
    (d) Definitions. For purposes of this award term:
    Employee means either:
    (1) An individual employed by you or a subrecipient who is 
engaged in the performance of the project or program under this 
award; or
    (2) Another person engaged in the performance of the project or 
program under this award and not compensated by you including, but 
not limited to, a volunteer or individual whose services are 
contributed by a third party as an in-kind contribution toward cost 
sharing requirements.
    Private Entity means any entity, including for-profit 
organizations, nonprofit organizations, institutions of higher 
education, and hospitals. The term does not include foreign public 
entities, Indian Tribes, local governments, or states as defined in 
2 CFR 200.1.
    The terms ``severe forms of trafficking in persons,'' 
``commercial sex act,'' ``sex trafficking,'' ``Abuse or threatened 
abuse of law or legal process,'' ``coercion,'' ``debt bondage,'' and 
``involuntary servitude'' have the meanings given at section 103 of 
the TVPA, as amended (22 U.S.C. 7102).

0
7. Revise part 180 to read as follows:

PART 180--OMB GUIDELINES TO AGENCIES ON GOVERNMENT-WIDE DEBARMENT 
AND SUSPENSION (NONPROCUREMENT)

Sec.
180.5 What does this part do?
180.10 How is this part organized?
180.15 To whom does the guidance apply?
180.20 What must a Federal agency do to implement these guidelines?
180.25 What must a Federal agency address in its implementation of 
the guidance?
180.30 Where does a Federal agency implement these guidelines?
180.40 How are these guidelines maintained?
180.45 Do these guidelines cover persons who are disqualified, as 
well as those who are excluded from nonprocurement transactions?
Subpart A--General
180.100 How are subparts A through I organized?
180.105 How is this part written?
180.110 Do terms in this part have special meanings?
180.115 What do subparts A through I of this part do?
180.120 Do subparts A through I of this part apply to me?
180.125 What is the purpose of the nonprocurement debarment and 
suspension system?
180.130 How does an exclusion restrict a person's involvement in 
covered transactions?
180.135 May a Federal agency grant an exception to let an excluded 
person participate in a covered transaction?
180.140 Does an exclusion under the nonprocurement system affect a 
person's eligibility for Federal procurement contracts?
180.145 Does an exclusion under the Federal procurement system 
affect a person's eligibility to participate in nonprocurement 
transactions?
180.150 Against whom may a Federal agency take an exclusion action?
180.155 How do I know if a person is excluded?
Subpart B--Covered Transactions
180.200 What is a covered transaction?
180.205 Why is it important if a particular transaction is a covered 
transaction?
180.210 Which nonprocurement transactions are covered transactions?
180.215 Which nonprocurement transactions are not covered 
transactions?
180.220 Are any procurement contracts included as covered 
transactions?
180.225 How do I know if a transaction in which I may participate is 
a covered transaction?
Subpart C--Responsibilities of Participants Regarding Transactions 
Doing Business With Other Persons
180.300 What must I do before I enter into a covered transaction 
with another person at the next lower tier?
180.305 May I enter into a covered transaction with an excluded or 
disqualified person?
180.310 What must I do if a Federal agency excludes a person with 
whom I am already doing business in a covered transaction?
180.315 May I use the services of an excluded person as a principal 
under a covered transaction?
180.320 Must I verify that principals of my covered transactions are 
eligible to participate?
180.325 What happens if I do business with an excluded person in a 
covered transaction?
180.330 What requirements must I pass down to persons at lower tiers 
with whom I intend to do business?

Disclosing Information--Primary Tier Participants

180.335 What information must I provide before entering into a 
covered transaction with a Federal agency?
180.340 If I disclose unfavorable information required under Sec.  
180.335, will I be prevented from participating in the transaction?
180.345 What happens if I fail to disclose information required 
under Sec.  180.335?
180.350 What must I do if I learn of information required under 
Sec.  180.335 after entering into a covered transaction with a 
Federal agency?

Disclosing Information--Lower Tier Participants

180.355 What information must I provide to a higher tier participant 
before entering into a covered transaction with that participant?
180.360 What happens if I fail to disclose information required 
under Sec.  180.355?
180.365 What must I do if I learn of information required under 
Sec.  180.355 after entering into a covered transaction with a 
higher tier participant?
Subpart D--Responsibilities of Federal Agency Officials Regarding 
Transactions
180.400 May I enter into a transaction with an excluded or 
disqualified person?
180.405 May I enter into a covered transaction with a participant if 
a principal of the transaction is excluded?
180.410 May I approve a participant's use of the services of an 
excluded person?
180.415 What must I do if a Federal agency excludes the participant 
or a principal after I enter into a covered transaction?

[[Page 69409]]

180.420 May I approve a transaction with an excluded or disqualified 
person at a lower tier?
180.425 When do I check to see if a person is excluded or 
disqualified?
180.430 How do I check to see if a person is excluded or 
disqualified?
180.435 What must I require of a primary tier participant?
180.440 What action may I take if a primary tier participant 
knowingly does business with an excluded or disqualified person?
180.445 What action may I take if a primary tier participant fails 
to disclose the information required under Sec.  180.335?
180.450 What action may I take if a lower tier participant fails to 
disclose the information required under Sec.  180.355 to the next 
higher tier?
Subpart E--System for Award Management (SAM.gov) Exclusions
180.500 What is the purpose of the System for Award Management 
(SAM.gov) Exclusions?
180.505 Who uses SAM.gov Exclusions?
180.510 Who maintains SAM.gov Exclusions?
180.515 What specific information is in SAM.gov Exclusions?
180.520 Who places the information into SAM.gov Exclusions?
180.525 Whom do I ask if I have questions about a person in SAM.gov 
Exclusions?
180.530 Where can I find SAM.gov Exclusions?
Subpart F--General Principles Relating to Suspension and Debarment 
Actions
180.600 How do suspension and debarment actions start?
180.605 How does suspension differ from debarment?
180.610 What procedures does a Federal agency use in suspension and 
debarment actions?
180.615 How does a Federal agency notify a person of a suspension or 
debarment action?
180.620 Do Federal agencies coordinate suspension and debarment 
actions?
180.625 What is the scope of a suspension or debarment?
180.630 May a Federal agency impute the conduct of one person to 
another?
180.635 May a Federal agency resolve an administrative action in 
lieu of debarment or suspension?
180.640 May a settlement include a voluntary exclusion?
180.645 Do other Federal agencies know if an agency agrees to a 
voluntary exclusion?
180.650 May an administrative agreement be the result of a 
settlement?
180.655 How will other Federal awarding agencies know about an 
administrative agreement that is the result of a settlement?
180.660 Will administrative agreement information about me in 
SAM.gov be corrected or updated?
Subpart G--Suspension
180.700 When may the suspending official issue a suspension?
180.705 What does the suspending official consider in issuing a 
suspension?
180.710 When does a suspension take effect?
180.715 What notice does the suspending official give me if I am 
suspended?
180.720 How may I contest a suspension?
180.725 How much time do I have to contest a suspension?
180.730 What information must I provide to the suspending official 
if I contest the suspension?
180.735 Under what conditions do I get an additional opportunity to 
challenge the facts on which the suspension is based?
180.740 Are suspension proceedings formal?
180.745 How is fact-finding conducted?
180.750 What does the suspending official consider in deciding 
whether to continue or terminate my suspension?
180.755 When will I know whether the suspension is continued or 
terminated?
180.760 How long may my suspension last?
Subpart H--Debarment
180.800 What are the causes for debarment?
180.805 What notice does the debarring official give me if I am 
proposed for debarment?
180.810 When does a debarment take effect?
180.815 How may I contest a proposed debarment?
180.820 How much time do I have to contest a proposed debarment?
180.825 What information must I provide to the debarring official if 
I contest the proposed debarment?
180.830 Under what conditions do I get an additional opportunity to 
challenge the facts on which the proposed debarment is based?
180.835 Are debarment proceedings formal?
180.840 How is fact-finding conducted?
180.845 What does the debarring official consider in deciding 
whether to debar me?
180.850 What is the standard of proof in a debarment action?
180.855 Who has the burden of proof in a debarment action?
180.860 What factors may influence the debarring official's 
decision?
180.865 How long may my debarment last?
180.870 When do I know if the debarring official debars me?
180.875 May I ask the debarring official to reconsider a decision to 
debar me?
180.880 What factors may influence the debarring official during 
reconsideration?
180.885 May the debarring official extend a debarment?
Subpart I--Definitions
180.900 Adequate evidence.
180.905 Affiliate.
180.910 Agent or representative.
180.915 Civil judgment.
180.920 Conviction.
180.925 Debarment.
180.930 Debarring official.
180.935 Disqualified.
180.940 Excluded or exclusion.
180.945 System for Award Management Exclusions (SAM.gov) Exclusions.
180.950 Federal agency.
180.955 Indictment.
180.960 Ineligible or ineligibility.
180.965 Legal proceedings.
180.970 Nonprocurement transaction.
180.975 Notice.
180.980 Participant.
180.985 Person.
180.990 Preponderance of the evidence.
180.995 Principal.
180.1000 Respondent.
180.1005 State.
180.1010 Suspending official.
180.1015 Suspension.
180.1020 Voluntary exclusion or voluntarily excluded.

Appendix A to Part 180

Covered Transactions

    Authority:  31 U.S.C. 503; 31 U.S.C. 6102; 31 U.S.C. 6307; Pub. 
L. 103-355; Pub. L. 109-282; Pub. L. 110-252; Pub. L. 111-84; Pub. 
L. 113-101; Pub. L. 115-232; Pub. L. 117-40; E.O. 12549; E.O. 12689.


Sec.  180.5  What does this part do?

    This part provides guidance for Federal agencies on how to 
implement the government-wide debarment and suspension system for 
nonprocurement programs and activities.


Sec.  180.10  How is this part organized?

    This part is organized into two segments.
    (a) Sections 180.5 through 180.45 contain general policy direction 
for Federal agencies' use of the standards in subparts A through I.
    (b) Subparts A through I contain uniform government-wide standards 
that Federal agencies are to use to specify:
    (1) The types of transactions that are covered by the 
nonprocurement debarment and suspension system;
    (2) The effects of an exclusion under that nonprocurement system, 
including reciprocal effects with the government-wide debarment and 
suspension system for procurement;
    (3) The criteria and minimum due process to be used in 
nonprocurement debarment and suspension actions; and
    (4) Related policies and procedures to ensure the effectiveness of 
those actions.


Sec.  180.15   To whom does the guidance apply?

    This part provides guidance to Federal agencies. Publication of 
this guidance in the Code of Federal Regulations (CFR) does not change 
its nature--it is guidance and not regulation. Federal agencies' 
implementation of this guidance governs the rights and responsibilities 
of other persons affected by the nonprocurement debarment and 
suspension system.

[[Page 69410]]

Sec.  180.20   What must a Federal agency do to implement these 
guidelines?

    As Section 3 of Executive Order 12549 requires, each Federal agency 
with nonprocurement programs and activities covered by subparts A 
through I of the guidance must issue regulations consistent with those 
subparts.


Sec.  180.25  What must a Federal agency address in its implementation 
of the guidance?

    Each Federal agency's implementing regulation:
    (a) Must establish policies and procedures for that Federal 
agency's nonprocurement debarment and suspension programs and 
activities consistent with this guidance. When adopted by a Federal 
agency, the provisions of the guidance have a regulatory effect on that 
Federal agency's programs and activities.
    (b) Must address some matters for which these guidelines give each 
Federal agency some discretion. Specifically, the regulation must:
    (1) Identify either the Federal agency head or the title of the 
designated official who is authorized to grant exceptions under Sec.  
180.135 to let an excluded person participate in a covered transaction.
    (2) State whether the Federal agency includes as covered 
transactions an additional tier of contracts awarded under covered 
nonprocurement transactions, as permitted under Sec.  180.220(c).
    (3) Identify the method(s) a Federal agency official may use when 
entering into a covered transaction with a primary tier participant to 
communicate to the participant the requirements described in Sec.  
180.435. Examples of methods are an award term that requires compliance 
as a condition of the award, an assurance of compliance obtained at the 
time of application, or a certification.
    (4) State whether the Federal agency specifies a particular method 
that participants must use to communicate compliance requirements to 
lower tier participants, as described in Sec.  180.330(a). If there is 
a specified method, the regulation must require Federal agency 
officials to communicate that requirement when entering into covered 
transactions with primary tier participants.
    (c) May also, at the Federal agency's option:
    (1) Identify any specific types of transactions the Federal agency 
includes as ``nonprocurement transactions'' in addition to the examples 
provided in Sec.  180.970.
    (2) Identify any types of nonprocurement transactions that the 
Federal agency exempts from coverage under these guidelines, as 
authorized under Sec.  180.215(g)(2).
    (3) Identify specific examples of types of individuals who would be 
``principals'' under the Federal agency's nonprocurement programs and 
transactions, in addition to the types of individuals described in 
Sec.  180.995.
    (4) Specify the Federal agency's procedures, if any, by which a 
respondent may appeal a suspension or debarment decision.
    (5) Identify by title the officials designated by the Federal 
agency head as debarring officials under Sec.  180.930 or suspending 
officials under Sec.  180.1010.
    (6) Include a subpart covering disqualifications, as authorized in 
Sec.  180.45.
    (7) Include any provisions authorized by OMB.


Sec.  180.30  Where does a Federal agency implement these guidelines?

    Each Federal agency that participates in the government-wide 
nonprocurement debarment and suspension system must issue a regulation 
implementing these guidelines within its chapter in subtitle B of this 
title.


Sec.  180.40   How are these guidelines maintained?

    The Interagency Committee on Debarment and Suspension, established 
by section 4 of Executive Order 12549, recommends to the OMB any needed 
revisions to the guidelines in this part. The OMB publishes proposed 
changes to the guidelines in the Federal Register for public comment, 
considers comments with the help of the Interagency Committee on 
Debarment and Suspension, and issues the final guidelines.


Sec.  180.45  Do these guidelines cover persons who are disqualified, 
as well as those who are excluded from nonprocurement transactions?

    A Federal agency may add a subpart covering disqualifications to 
its regulation implementing these guidelines, but the guidelines in 
subparts A through I:
    (a) Address disqualified persons only to:
    (1) Provide for their inclusion in the System for Award Management 
(SAM.gov) Exclusions; and
    (2) State the responsibilities of Federal agencies and participants 
to check for disqualified persons before entering into covered 
transactions.
    (b) Do not specify the:
    (1) Transactions for which a disqualified person is ineligible. 
Those transactions vary on a case-by-case basis because they depend on 
the language of the specific statute, Executive order, or regulation 
that caused the disqualification;
    (2) Entities to which a disqualification applies; or
    (3) Process that a Federal agency uses to disqualify a person. 
Unlike exclusion under subparts A through I of this part, 
disqualification is frequently not a discretionary action that a 
Federal agency takes and may include special procedures.

Subpart A--General


Sec.  180.100   How are subparts A through I organized?

    (a) Each subpart contains information related to a broad topic or 
specific audience with special responsibilities, as shown in table 1:

                        Table 1 to Paragraph (a)
------------------------------------------------------------------------
      In subpart . . .         You will find provisions related to . . .
------------------------------------------------------------------------
A...........................  general information about Subparts A
                               through I.
B...........................  the types of transactions that are covered
                               by the government-wide nonprocurement
                               suspension and debarment system.
C...........................  the responsibilities of persons who
                               participate in covered transactions.
D...........................  the responsibilities of Federal agency
                               officials who are authorized to enter
                               into covered transactions.
E...........................  the responsibilities of Federal agencies
                               for entering information into SAM.gov
                               Exclusions.
F...........................  the general principles governing
                               suspension, debarment, voluntary
                               exclusion and settlement.
G...........................  suspension actions.
H...........................  debarment actions.
I...........................  definitions of terms used in this part.
------------------------------------------------------------------------


[[Page 69411]]

    (b) Table 2 shows which subparts may be of special interest to you, 
depending on who you are:

                        Table 2 to Paragraph (b)
------------------------------------------------------------------------
            If you are . . .                   See subpart(s) . . .
------------------------------------------------------------------------
(1) a participant or principal in a       A, B, C and I.
 nonprocurement transaction.
(2) a respondent in a suspension action.  A, B, F, G and I.
(3) a respondent in a debarment action..  A, B, F, H and I.
(4) a suspending official...............  A, B, E, F, G and I.
(5) a debarring official................  A, B, D, F, H and I.
(6) a Federal agency official authorized  A, B, D, E and I.
 to enter into a covered transaction.
------------------------------------------------------------------------

Sec.  180.105  How is this part written?

    (a) This part uses a ``plain language'' format to make it easier 
for the general public and business community. The section headings and 
text must be read together, as they are often in the form of questions 
and answers.
    (b) Pronouns used within this part, such as ``I'' and ``you,'' 
change from subpart to subpart depending on the audience being 
addressed.
    (c) The ``Covered Transactions'' diagram in the appendix to this 
part shows the levels or ``tiers'' at which a Federal agency may 
enforce an exclusion.


Sec.  180.110  Do terms in this part have special meanings?

    This part uses terms throughout the text that have special 
meanings. Those terms are defined in subpart I. For example, three 
important terms are:
    (a) Exclusion or excluded, which refers only to discretionary 
actions taken by a suspending or debarring official under Executive 
Order 12549 and Executive Order 12689 or under the Federal Acquisition 
Regulations (48 CFR part 9, subpart 9.4);
    (b) Disqualification or disqualified, which refers to prohibitions 
under specific statutes, executive orders (other than Executive Order 
12549 and Executive Order 12689), or other authorities. 
Disqualifications frequently are not subject to the discretion of a 
Federal agency official, may have a different scope than exclusions, or 
have special conditions that apply to the disqualification; and
    (c) Ineligibility or ineligible, which generally refers to a person 
who is either excluded or disqualified.


Sec.  180.115  What do subparts A through I of this part do?

    Subparts A through I provide for the reciprocal exclusion of 
persons who have been excluded under the Federal Acquisition 
Regulations and provide for the consolidated listing of all persons who 
are excluded, or disqualified by statute, executive order or other 
legal authority.


Sec.  180.120  Do subparts A through I of this part apply to me?

    Portions of subparts A through I (see table at Sec.  180.100(b)) 
apply to you if you are a:
    (a) Person who has been, is, or may reasonably be expected to be, a 
participant or principal in a covered transaction;
    (b) Respondent (a person against whom a Federal agency has 
initiated a debarment for suspension action);
    (c) Federal agency debarring or suspending official; or
    (d) Federal agency official who is authorized to enter into covered 
transactions with non-Federal parties.


Sec.  180.125  What is the purpose of the nonprocurement debarment and 
suspension system?

    (a) To protect the public interest, the Federal Government ensures 
the integrity of Federal programs by conducting business only with 
responsible persons.
    (b) A Federal agency uses the nonprocurement debarment and 
suspension system to exclude persons who are not presently responsible 
from Federal programs.
    (c) An exclusion is a serious action that a Federal agency may take 
only to protect the public interest. A Federal agency may not exclude a 
person or commodity for the purposes of punishment.


Sec.  180.130  How does an exclusion restrict a person's involvement in 
covered transactions?

    With the exceptions stated in Sec. Sec.  180.135, 315, and 420, a 
person who is excluded by any Federal agency may not:
    (a) Be a participant in a Federal agency transaction that is a 
covered transaction; or
    (b) Act as a principal of a person participating in one of those 
covered transactions.


Sec.  180.135  May a Federal agency grant an exception to let an 
excluded person participate in a covered transaction?

    (a) A Federal agency head or designee may grant an exception 
permitting an excluded person to participate in a particular covered 
transaction. If the Federal agency head or designee grants an 
exception, the exception must be in writing and state the reason(s) for 
deviating from the government-wide policy in Executive Order 12549.
    (b) An exception granted by one Federal agency for an excluded 
person does not extend to the covered transactions of another Federal 
agency.


Sec.  180.140  Does an exclusion under the nonprocurement system affect 
a person's eligibility for Federal procurement contracts?

    When a Federal agency excludes a person under Executive Order 12549 
or Executive Order 12689 on or after August 25, 1995, the excluded 
person is also ineligible for Federal procurement transactions under 
the Federal Acquisition Regulations. Therefore, an exclusion under this 
part has a reciprocal effect on Federal procurement transactions.


Sec.  180.145   Does an exclusion under the Federal procurement system 
affect a person's eligibility to participate in nonprocurement 
transactions?

    When a Federal agency excludes a person under the Federal 
Acquisition Regulations (FAR) on or after August 25, 1995, the excluded 
person is also ineligible to participate in Federal agencies' 
nonprocurement covered transactions. Therefore, an exclusion under the 
FAR has a reciprocal effect on Federal nonprocurement transactions.


Sec.  180.150  Against whom may a Federal agency take an exclusion 
action?

    Given a cause that justifies an exclusion under this part, a 
Federal agency may exclude any person who has been, is, or may 
reasonably be expected to be a participant or principal in a covered 
transaction.

[[Page 69412]]

Sec.  180.155   How do I know if a person is excluded?

    Check the System for Award Management (SAM.gov) Exclusions to 
determine whether a person is excluded. The General Services 
Administration (GSA) maintains SAM.gov Exclusions and makes it 
available, as detailed in subpart E. When a Federal agency takes action 
to exclude a person under the nonprocurement or procurement debarment 
and suspension system, the agency enters the information about the 
excluded person into SAM.gov Exclusions.

Subpart B--Covered Transactions


Sec.  180.200   What is a covered transaction?

    A covered transaction is a nonprocurement or procurement 
transaction subject to this part's prohibitions. It may be a 
transaction at:
    (a) The primary tier, between a Federal agency and a person (see 
Appendix to this part); or
    (b) A lower tier between a participant in a covered transaction and 
another person.


Sec.  180.205  Why is it important if a particular transaction is a 
covered transaction?

    The importance of whether a transaction is a covered transaction 
depends upon who you are.
    (a) As a participant in the transaction, you have the 
responsibilities laid out in subpart C of this part. Those include 
responsibilities to the person or Federal agency at the next higher 
tier from whom you received the transaction, if any. They also include 
responsibilities if you subsequently enter into other covered 
transactions with persons at the next lower tier.
    (b) As a Federal official who enters into a primary tier 
transaction, you have the responsibilities laid out in subpart D of 
this part.
    (c) As an excluded person, you may not be a participant or 
principal in the transaction unless:
    (1) The person who entered into the transaction with you allows you 
to continue your involvement in a transaction that predates your 
exclusion, as permitted under Sec.  180.310 or Sec.  180.415; or
    (2) A Federal agency official obtains an exception from the agency 
head or designee to allow you to be involved in the transaction, as 
permitted under Sec.  180.135.


Sec.  180.210   Which nonprocurement transactions are covered 
transactions?

    All nonprocurement transactions, as defined in Sec.  180.970, are 
covered transactions unless listed in the exemptions under Sec.  
180.215.


Sec.  180.215  Which nonprocurement transactions are not covered 
transactions?

    The following types of nonprocurement transactions are not covered 
transactions:
    (a) A direct award to:
    (1) A foreign government or foreign governmental entity;
    (2) A public international organization;
    (3) An entity owned (in whole or in part) or controlled by a 
foreign government; or
    (4) Any other entity consisting wholly or partially of one or more 
foreign governments or foreign governmental entities.
    (b) A benefit to an individual as a personal entitlement without 
regard to the individual's present responsibility (but benefits 
received in an individual's business capacity are not excepted). For 
example, when a person receives social security benefits under the 
Supplemental Security Income provisions of the Social Security Act, 42 
U.S.C. 1301 et seq., those benefits are not covered transactions and, 
therefore, are not affected if the person is excluded.
    (c) Federal employment.
    (d) A transaction that a Federal agency needs to respond to a 
national or agency recognized emergency or disaster.
    (e) A permit, license, certificate, or similar instrument issued as 
a means to regulate public health, safety, or the environment, unless a 
Federal agency specifically designates it to be a covered transaction.
    (f) An incidental benefit that results from ordinary governmental 
operations.
    (g) Any other transaction if:
    (1) The application of an exclusion to the transaction is 
prohibited by law; or
    (2) A Federal agency's regulation exempts it from coverage under 
this part.
    (h) Notwithstanding paragraph (a) of this section, covered 
transactions must include non-procurement and procurement transactions 
involving entities engaged in activity that contributed to or is a 
significant factor in a country's non-compliance with its obligations 
under arms control, nonproliferation or disarmament agreements, or 
commitments with the United States. Federal agencies and primary tier 
non-procurement recipients must not award, renew, or extend a non-
procurement transaction or procurement transaction, regardless of 
amount or tier, with any entity listed in SAM.gov Exclusions on the 
basis of involvement in activities that violate arms control, 
nonproliferation or disarmament agreements, or commitments with the 
United States (see section 1290 of the National Defense Authorization 
Act for Fiscal Year 2017). The head of a Federal agency may grant an 
exception to this requirement under 2 CFR 180.135 and with the 
concurrence of the OMB Director.


Sec.  180.220   Are any procurement contracts included as covered 
transactions?

    (a) Covered transactions under this part:
    (1) Do not include any procurement contracts awarded directly by a 
Federal agency; but
    (2) Do include some procurement contracts awarded under 
nonprocurement covered transactions.
    (b) Specifically, a contract for goods or services is a covered 
transaction if any of the following applies:
    (1) The contract is awarded by a participant in a nonprocurement 
transaction covered under Sec.  180.210, and the contract amount is 
expected to equal or exceed $25,000.
    (2) The contract requires the consent of an official of a Federal 
agency. In that case, the contract is always a covered transaction 
regardless of the amount or who awarded it. For example, it could be a 
subcontract awarded by a contractor at a tier below a nonprocurement 
transaction, as shown in the Appendix to this part.
    (3) The contract is for Federally-required audit services.
    (c) A subcontract also is a covered transaction if:
    (1) It is awarded by a participant in a procurement transaction 
under a nonprocurement transaction of a Federal agency that extends the 
coverage of paragraph (b)(1) of this section to additional tiers of 
contracts (see the diagram in the Appendix to this part showing that 
optional lower tier coverage); and
    (2) The value of the subcontract is expected to equal or exceed 
$25,000.


Sec.  180.225   How do I know if a transaction in which I may 
participate is a covered transaction?

    As a participant in a transaction, you will know that it is a 
covered transaction because of the Federal agency regulations governing 
the transaction. The appropriate Federal agency official or participant 
at the next higher tier who enters into the transaction with you will 
tell you that you must comply with applicable portions of this part.

[[Page 69413]]

Subpart C--Responsibilities of Participants Regarding Transactions 
Doing Business With Other Persons


Sec.  180.300   What must I do before I enter into a covered 
transaction with another person at the next lower tier?

    When you enter into a covered transaction with another person at 
the next lower tier, you must verify that the person with whom you 
intend to do business is not excluded or disqualified. You do this by:
    (a) Checking SAM.gov Exclusions; or
    (b) Collecting a certification from that person; or
    (c) Adding a clause or condition to the covered transaction with 
that person.


Sec.  180.305   May I enter into a covered transaction with an excluded 
or disqualified person?

    (a) As a participant, you may not enter into a covered transaction 
with an excluded person unless the Federal agency responsible for the 
transaction grants an exception under Sec.  180.135.
    (b) You may not enter into any transaction with a person who is 
disqualified from that transaction unless you have obtained an 
exception under the disqualifying statute, Executive Order, or 
regulation.


Sec.  180.310   What must I do if a Federal agency excludes a person 
with whom I am already doing business in a covered transaction?

    (a) As a participant, you may continue covered transactions with an 
excluded person if the transactions were in existence when the Federal 
agency excluded the person. However, you are not required to continue 
the transactions, and you may consider termination. You should decide 
whether to terminate and the type of termination action, if any, only 
after a thorough review to ensure that the action is proper and 
appropriate.
    (b) You may not renew or extend covered transactions (other than 
no-cost time extensions) with any excluded person unless the Federal 
agency responsible for the transaction grants an exception under Sec.  
180.135.


Sec.  180.315  May I use the services of an excluded person as a 
principal under a covered transaction?

    (a) As a participant, you may continue to use the services of an 
excluded person as a principal under a covered transaction if you were 
using that person's services in the transaction before the person was 
excluded. However, you are not required to continue using that person's 
services as a principal. You should decide whether to discontinue that 
person's services only after a thorough review to ensure that the 
action is proper and appropriate.
    (b) You may not begin to use the services of an excluded person as 
a principal under a covered transaction unless the Federal agency 
responsible for the transaction grants an exception under Sec.  
180.135.


Sec.  180.320  Must I verify that principals of my covered transactions 
are eligible to participate?

    (a) Yes. As a participant, you are responsible for determining 
whether your principals of your covered transactions are excluded or 
disqualified from participating in the transaction.
    (b) You may decide the method and frequency by which you do so. You 
may, but are not required to check SAM.gov Exclusions.


Sec.  180.325   What happens if I do business with an excluded person 
in a covered transaction?

    As a participant, if you knowingly do business with an excluded 
person, the Federal agency responsible for your transaction may 
disallow costs, annul or terminate the transaction, issue a stop work 
order, debar or suspend you, or take other remedies as appropriate.


Sec.  180.330  What requirements must I pass down to persons at lower 
tiers with whom I intend to do business?

    Before entering into a covered transaction with a participant at 
the next lower tier, you must require that participant to:
    (a) Comply with this subpart as a condition of participating in the 
transaction. You may do so using any method(s) unless the regulation of 
the Federal agency responsible for the transaction requires you to use 
specific methods.
    (b) Pass the requirement to comply with this subpart to each person 
the participant enters into a covered transaction at the next lower 
tier.

Disclosing Information--Primary Tier Participants


Sec.  180.335   What information must I provide before entering into a 
covered transaction with a Federal agency?

    Before you enter into a covered transaction at the primary tier, 
you, as the participant, must notify the Federal agency office that is 
entering into the transaction with you if you know that you or any of 
the principals for that covered transaction:
    (a) Are presently excluded or disqualified;
    (b) Have been convicted within the preceding three years of any of 
the offenses listed in Sec.  180.800(a) or had a civil judgment 
rendered against you for one of those offenses within that time period;
    (c) Are presently indicted for or otherwise criminally or civilly 
charged by a governmental entity (Federal, State, or local) with the 
commission of any of the offenses listed in Sec.  180.800(a); or
    (d) Have had one or more public transactions (Federal, State, or 
local) terminated within the preceding three years for cause or 
default.


Sec.  180.340   If I disclose unfavorable information required under 
Sec.  180.335, will I be prevented from participating in the 
transaction?

    As a primary tier participant, disclosing unfavorable information 
about yourself or a principal under Sec.  180.335 will not necessarily 
cause a Federal agency to deny your participation in the covered 
transaction. The Federal agency will consider the information when 
determining whether to enter into the covered transaction. The Federal 
agency will also consider any additional information or explanation you 
elect to submit with the disclosed information.


Sec.  180.345   What happens if I fail to disclose information required 
under Sec.  180.335?

    If a Federal agency later determines that you failed to disclose 
information under Sec.  180.335 that you knew at the time you entered 
into the covered transaction, the Federal agency may:
    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.


Sec.  180.350  What must I do if I learn of information required under 
Sec.  180.335 after entering into a covered transaction with a Federal 
agency?

    At any time after you enter into a covered transaction, you must 
give immediate written notice to the Federal agency office with which 
you entered into the transaction if you learn either that:
    (a) You failed to disclose information earlier, as required by 
Sec.  180.335; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec.  180.335.

[[Page 69414]]

Disclosing Information--Lower Tier Participants


Sec.  180.355  What information must I provide to a higher tier 
participant before entering into a covered transaction with that 
participant?

    Before you enter into a covered transaction with a person at the 
next higher tier, you, as a lower tier participant, must notify that 
person if you know that you or any of the principals are presently 
excluded or disqualified.


Sec.  180.360  What happens if I fail to disclose information required 
under Sec.  180.355?

    When a Federal agency later determines that you failed to tell the 
person at the higher tier that you were excluded or disqualified at the 
time you entered into the covered transaction with that person, the 
agency may pursue any available remedies, including suspension and 
debarment.


Sec.  180.365  What must I do if I learn of information required under 
Sec.  180.355 after entering into a covered transaction with a higher 
tier participant?

    At any time after you enter into a lower tier covered transaction 
with a person at a higher tier, you must provide immediate written 
notice to that person if you learn either that:
    (a) You failed to disclose information earlier, as required by 
Sec.  180.355; or
    (b) Due to changed circumstances, you or any of the principals for 
the transaction now meet any of the criteria in Sec.  180.355.

Subpart D--Responsibilities of Federal Agency Officials Regarding 
Transactions


Sec.  180.400  May I enter into a transaction with an excluded or 
disqualified person?

    (a) As a Federal agency official, you may not enter into a covered 
transaction with an excluded person unless you obtain an exception 
under Sec.  180.135.
    (b) You may not enter into any transaction with a person 
disqualified from that transaction unless you obtain a waiver or 
exception under the statute, Executive Order, or regulation that is the 
basis for the person's disqualification.


Sec.  180.405  May I enter into a covered transaction with a 
participant if a principal of the transaction is excluded?

    As a Federal agency official, you may not enter into a covered 
transaction with a participant if you know that a principal of the 
transaction is excluded unless you obtain an exception under Sec.  
180.135.


Sec.  180.410  May I approve a participant's use of the services of an 
excluded person?

    After entering into a covered transaction with a participant, you, 
as a Federal agency official, may not approve a participant's use of an 
excluded person as a principal under that transaction unless you obtain 
an exception under Sec.  180.135.


Sec.  180.415  What must I do if a Federal agency excludes the 
participant or a principal after I enter into a covered transaction?

    (a) As a Federal agency official, you may continue covered 
transactions with an excluded person or under which an excluded person 
is a principal if the transactions were in existence when the person 
was excluded. However, you are not required to continue the 
transactions, and you may consider termination. You should decide 
whether to terminate and the type of termination action, if any, only 
after a thorough review to ensure that the action is proper and 
appropriate.
    (b) You may not renew or extend covered transactions (other than 
no-cost time extensions) with any excluded person or under which an 
excluded person is a principal unless you obtain an exception under 
Sec.  180.135.


Sec.  180.420  May I approve a transaction with an excluded or 
disqualified person at a lower tier?

    If a transaction at a lower tier is subject to your approval, you, 
as a Federal agency official, may not approve:
    (a) A covered transaction with a person who is currently excluded 
unless you obtain an exception under Sec.  180.135; or
    (b) A transaction with a person who is disqualified from that 
transaction unless you obtain a waiver or exception under the statute, 
Executive Order, or regulation that is the basis for the person's 
disqualification.


Sec.  180.425  When do I check to see if a person is excluded or 
disqualified?

    As a Federal agency official, you must check to see if a person is 
excluded or disqualified before you:
    (a) Enter into a primary tier covered transaction;
    (b) Approve a principal in a primary tier covered transaction;
    (c) Approve a lower tier participant if your Federal agency's 
approval of the lower tier participant is required; or
    (d) Approve a principal in connection with a lower tier transaction 
if your Federal agency's approval of the principal is required.


Sec.  180.430  How do I check to see if a person is excluded or 
disqualified?

    You check to see if a person is excluded or disqualified in two 
ways:
    (a) As a Federal agency official, you must check SAM.gov Exclusions 
when you take any action listed in Sec.  180.425.
    (b) You must review the information that a participant gives you, 
as required by Sec.  180.335, about its status or the status of the 
principals of a transaction.


Sec.  180.435  What must I require of a primary tier participant?

    As a Federal agency official, you must require each participant in 
a primary tier covered transaction to:
    (a) Comply with subpart C as a condition of participation in the 
transaction; and
    (b) Communicate the requirement to comply with subpart C to persons 
at the next lower tier with whom the primary tier participant enters 
into covered transactions.


Sec.  180.440  What action may I take if a primary tier participant 
knowingly does business with an excluded or disqualified person?

    If a participant knowingly does business with an excluded or 
disqualified person, you, as a Federal agency official, may refer the 
matter for suspension and debarment consideration. You may also 
disallow costs, annul or terminate the transaction, issue a stop work 
order, or take any other appropriate remedy.


Sec.  180.445  What action may I take if a primary tier participant 
fails to disclose the information required under Sec.  180.335?

    As a Federal agency official, if you determine that a participant 
failed to disclose information, as required by Sec.  180.335, at the 
time it entered into a covered transaction with you, you may:
    (a) Terminate the transaction for material failure to comply with 
the terms and conditions of the transaction; or
    (b) Pursue any other available remedies, including suspension and 
debarment.


Sec.  180.450  What action may I take if a lower tier participant fails 
to disclose the information required under Sec.  180.355 to the next 
higher tier?

    As a Federal agency official, if you determine that a lower tier 
participant failed to disclose information, as required by Sec.  
180.355, at the time it entered into a covered transaction with a 
participant at the next higher tier, you may pursue any remedies 
available to you, including the initiation of a suspension or debarment 
action.

[[Page 69415]]

Subpart E--System for Award Management (SAM.gov) Exclusions


Sec.  180.500  What is the purpose of the System for Award Management 
(SAM.gov) Exclusions?

    The SAM.gov Exclusions is a widely available source of the most 
current information about persons who are excluded or disqualified from 
covered transactions.


Sec.  180.505  Who uses SAM.gov Exclusions?

    (a) Federal agency officials use SAM.gov Exclusions to determine 
whether to enter into a transaction with a person, as required under 
Sec.  180.430.
    (b) Participants also may, but are not required to, use SAM.gov 
Exclusions to determine if:
    (1) Principals of their transactions are excluded or disqualified, 
as required under Sec.  180.320; or
    (2) Persons with whom they are entering into covered transactions 
at the next lower tier are excluded or disqualified.
    (c) The SAM.gov Exclusions are available to the general public.


Sec.  180.510  Who maintains SAM.gov Exclusions?

    GSA maintains SAM.gov Exclusions. When a Federal agency takes an 
action to exclude a person under the nonprocurement or procurement 
debarment and suspension system, the agency enters the information 
about the excluded person into SAM.gov Exclusions.


Sec.  180.515  What specific information is in SAM.gov Exclusions?

    (a) At a minimum, SAM.gov Exclusions indicate:
    (1) The full name (where available) and address of each excluded 
and disqualified person, in alphabetical order, with cross-references 
if more than one name is involved in a single action;
    (2) The type of action;
    (3) The cause for the action;
    (4) The scope of the action;
    (5) Any termination date for the action;
    (6) The Federal agency and name and telephone number of the agency 
point of contact for the action; and
    (7) The unique entity identifier approved by the GSA of the 
excluded or disqualified person, if available.
    (b)(1) The SAM.gov Exclusions includes a field for the Taxpayer 
Identification Number (TIN), or the Social Security Number (SSN) for an 
individual, of an excluded or disqualified person.
    (2) Agencies disclose an individual's SSN to verify an individual's 
identity only if permitted under the Privacy Act of 1974 and, if 
appropriate, the Computer Matching and Privacy Protection Act of 1988, 
as codified in 5 U.S.C. 552(a).


Sec.  180.520  Who places the information into SAM.gov Exclusions?

    Federal agency officials who take actions to exclude persons under 
this part or officials who are responsible for identifying disqualified 
persons must enter the following information about those persons into 
SAM.gov Exclusions:
    (a) Information required by Sec.  180.515(a);
    (b) The Taxpayer Identification Number (TIN) of the excluded or 
disqualified person, including the Social Security Number (SSN) for an 
individual, if the number is available and may be disclosed under the 
law;
    (c) Information about an excluded or disqualified person, within 
three business days, after:
    (1) Taking an exclusion action;
    (2) Modifying or rescinding an exclusion action;
    (3) Finding that a person is disqualified; or
    (4) Finding that there has been a change in the status of a person 
who is listed as disqualified.


Sec.  180.525  Whom do I ask if I have questions about a person in 
SAM.gov Exclusions?

    If you have questions about a listed person in SAM.gov Exclusions, 
ask the point of contact for the Federal agency that placed the 
person's name into SAM.gov Exclusions. You may find the Federal agency 
point of contact from SAM.gov Exclusions.


Sec.  180.530  Where can I find SAM.gov Exclusions?

    You may access SAM.gov Exclusions through the internet, currently 
at https://www.sam.gov.

Subpart F--General Principles Relating to Suspension and Debarment 
Actions


Sec.  180.600  How do suspension and debarment actions start?

    When Federal agency officials receive information from any source 
concerning a cause for suspension or debarment, they will promptly 
report it, and the agency will investigate. The officials refer the 
question of whether to suspend or debar you to their suspending or 
debarring official for consideration, if appropriate.


Sec.  180.605  How does suspension differ from debarment?

    Suspension differs from debarment in that:

------------------------------------------------------------------------
        A suspending official . . .          A debarring official . . .
------------------------------------------------------------------------
(a) Imposes suspension as a temporary       Imposes debarment for a
 status of ineligibility for procurement     specified period as a final
 and nonprocurement transactions, pending    determination that a person
 completion of an investigation or legal     is not presently
 or debarment proceeding.                    responsible.
(b) Must:
(1) Have adequate evidence that there may   ............................
 be a cause for debarment of a person; and
(2) Conclude that immediate action is       Must conclude, based on a
 necessary to protect the Federal interest.  preponderance of the
                                             evidence, that the person
                                             has engaged in conduct that
                                             warrants debarment.
(c) Usually imposes the suspension first,   Imposes debarment after
 and then promptly notifies the suspended    giving the respondent
 person, giving the person an opportunity    notice of the action and an
 to contest the suspension and have it       opportunity to contest the
 lifted.                                     proposed debarment.
------------------------------------------------------------------------

Sec.  180.610  What procedures does a Federal agency use in suspension 
and debarment actions?

    In deciding whether to suspend or debar you, a Federal agency 
handles the actions as informally as practicable, consistent with 
principles of fundamental fairness.
    (a) For suspension actions, a Federal agency uses the procedures in 
this subpart and subpart G.
    (b) For debarment actions, a Federal agency uses the procedures in 
this subpart and subpart H.

[[Page 69416]]

Sec.  180.615  How does a Federal agency notify a person of a 
suspension or debarment action?

    (a) The suspending or debarring official sends a written notice to 
the last known street address, facsimile number, or email address of:
    (1) You or your identified counsel; or
    (2) Your agent for service of process, or any of your partners, 
officers, directors, owners, or joint venturers.
    (b) The notice is effective if sent to any of these persons.


Sec.  180.620  Do Federal agencies coordinate suspension and debarment 
actions?

    Yes, when more than one Federal agency has an interest in a 
suspension or debarment, the agencies may consider designating one 
Federal agency as the lead agency for making the decision. Agencies are 
encouraged to establish methods and procedures for coordinating their 
suspension and debarment actions.


Sec.  180.625  What is the scope of a suspension or debarment?

    If you are suspended or debarred, the suspension or debarment is 
effective as follows:
    (a) Your suspension or debarment constitutes suspension or 
debarment of all of your divisions and other organizational elements 
from all covered transactions unless the suspension or debarment 
decision is limited:
    (1) By its terms to one or more specifically identified 
individuals, divisions, or other organizational elements; or
    (2) To specific types of transactions.
    (b) Any affiliate of a participant may be included in a suspension 
or debarment action if the suspending or debarring official:
    (1) Officially names the affiliate in the notice; and
    (2) Gives the affiliate an opportunity to contest the action.


Sec.  180.630  May a Federal agency impute the conduct of one person to 
another?

    For purposes of actions taken under this part, a Federal agency may 
impute conduct as follows:
    (a) Conduct imputed from an individual to an organization. A 
Federal agency may impute the fraudulent, criminal, or other improper 
conduct of any officer, director, shareholder, partner, employee, or 
other individual associated with an organization to that organization 
when the improper conduct occurred in connection with the individual's 
performance of duties for or on behalf of that organization, or with 
the organization's knowledge, approval or acquiescence. The 
organization's acceptance of the benefits derived from the conduct is 
evidence of knowledge, approval, or acquiescence.
    (b) Conduct imputed from an organization to an individual or 
between individuals. A Federal agency may impute the fraudulent, 
criminal, or other improper conduct of any organization to an 
individual, or from one individual to another individual, if the 
individual to whom the improper conduct is imputed either participated 
in, had knowledge of, or reason to know of the improper conduct.
    (c) Conduct imputed from one organization to another organization. 
A Federal agency may impute the fraudulent, criminal, or other improper 
conduct of one organization to another organization when the improper 
conduct occurred in connection with a partnership, joint venture, joint 
application, association, corporation, company, or similar arrangement 
or with the organization's knowledge, approval, or acquiescence, or 
when the organization to whom the improper conduct is imputed has the 
power to direct, manage, control or influence the activities of the 
organization responsible for the improper conduct. Acceptance of the 
benefits derived from the conduct is evidence of knowledge, approval, 
or acquiescence.


Sec.  180.635  May a Federal agency resolve an administrative action in 
lieu of debarment or suspension?

    Yes. A Federal agency may resolve an administrative action in lieu 
of debarment or suspension by entering into an agreement at any time if 
it is in the Federal Government's best interest.


Sec.  180.640  May an agreement to resolve an administrative action 
include a voluntary exclusion?

    Yes. If a Federal agency enters into an agreement to resolve an 
administrative action with you in which you agree to be excluded, it is 
called a voluntary exclusion and has a government-wide effect.


Sec.  180.645  Do other Federal agencies know if an agency agrees to a 
voluntary exclusion?

    (a) Yes. The Federal agency agreeing to the voluntary exclusion 
enters information about it into SAM.gov Exclusions.
    (b) Also, any agency or person may contact the Federal agency that 
agreed to the voluntary exclusion to find out the details of the 
voluntary exclusion.


Sec.  180.650  May an administrative agreement be the result of a 
settlement?

    Yes. A Federal agency may enter into an administrative agreement 
with you as part of the settlement of a debarment or suspension action.


Sec.  180.655  How will other Federal awarding agencies know about an 
administrative agreement that is the result of a settlement?

    The suspending or debarring official who enters into an 
administrative agreement with you must report information about the 
agreement in SAM.gov within three business days after entering into the 
agreement. The suspending and debarring official must use the 
Contractor Performance Assessment Reporting System (CPARS) to enter or 
amend information in SAM.gov. This information is required by section 
872 of the Duncan Hunter National Defense Authorization Act for Fiscal 
Year 2009 (41 U.S.C. 2313).


Sec.  180.660  Will administrative agreement information about me in 
SAM.gov be corrected or updated?

    Yes. The suspending or debarring official who entered information 
into SAM.gov about an administrative agreement with you:
    (a) Must correct the information within three business days if the 
official subsequently learn that any information is erroneous.
    (b) Must correct in SAM.gov, within three business days, the ending 
date of the period during which the agreement is in effect if the 
agreement is amended to extend that period.
    (c) Must report any other modification to the administrative 
agreement in SAM.gov within three business days.
    (d) Is strongly encouraged to amend the information in SAM.gov in a 
timely way to incorporate any update that the official obtains and that 
could be helpful to Federal agencies who must use the system.

Subpart G--Suspension


Sec.  180.700  When may the suspending official issue a suspension?

    Suspension is a serious action. Using the procedures of this 
subpart and subpart F of this part, the suspending official may impose 
suspension only when that official determines that:
    (a) There exists an indictment for, or other adequate evidence to 
suspect, an offense listed under Sec.  180.800(a), or
    (b) There exists adequate evidence to suspect any other cause for 
debarment listed under Sec.  180.800(b) through (d); and
    (c) Immediate action is necessary to protect the public interest.


Sec.  180.705  What does the suspending official consider in issuing a 
suspension?

    (a) In determining the adequacy of the evidence to support the 
suspension, the

[[Page 69417]]

suspending official considers how much information is available, how 
credible it is given the circumstances, whether or not important 
allegations are corroborated, and what inferences can reasonably be 
drawn as a result.
    (b) In making this determination, the suspending official may 
examine:
    (1) The basic documents, including grants, cooperative agreements, 
loan authorizations, contracts, and other relevant documents;
    (2) An indictment, criminal information, conviction, civil 
judgment, or other official findings by Federal, State, or local bodies 
that determine factual or legal matters constitutes adequate evidence 
for purposes of suspension actions; and
    (3) Other indicators of adequate evidence that may include, but are 
not limited to, warrants and their accompanying affidavits.
    (c) In deciding whether immediate action is needed to protect the 
public interest, the suspending official has wide discretion. For 
example, the suspending official may infer the necessity for immediate 
action to protect the public interest either from the nature of the 
circumstances giving rise to a cause for suspension or from potential 
business relationships or involvement with a program of the Federal 
Government.


Sec.  180.710  When does a suspension take effect?

    A suspension is effective when the suspending official signs the 
decision to suspend.


Sec.  180.715  What notice does the suspending official give me if I am 
suspended?

    After deciding to suspend you, the suspending official promptly 
sends you a Notice of Suspension advising you:
    (a) That you have been suspended;
    (b) That your suspension is based on:
    (1) An indictment;
    (2) A criminal information;
    (3) A conviction;
    (4) A civil judgment;
    (5) Other adequate evidence that you have committed irregularities 
that seriously reflect on the propriety of further Federal Government 
dealings with you; or
    (6) Conduct of another person that has been imputed to you or your 
affiliation with a suspended or debarred person;
    (c) Of any other irregularities supporting your suspension in terms 
sufficient to put you on notice without disclosing certain evidence in 
the Federal Government's pending or contemplated legal proceedings;
    (d) Of the cause(s) upon which the suspending official relied under 
Sec.  180.700 for imposing suspension;
    (e) That your suspension is for a temporary period pending the 
completion of an investigation or resulting legal or debarment 
proceedings;
    (f) Of the applicable provisions of this subpart, subpart F, and 
any other Federal agency procedures governing suspension decision-
making; and
    (g) Of the government-wide effect of your suspension from 
procurement and nonprocurement programs and activities.


Sec.  180.720  How may I contest a suspension?

    As a respondent, if you wish to contest a suspension, you or your 
representative must provide the suspending official with information in 
opposition to the suspension. You may do this orally or in writing. 
While oral statements may be a part of the official record, any 
information provided orally that you consider important must also be 
submitted in writing for the official record.


Sec.  180.725  How much time do I have to contest a suspension?

    (a) As a respondent, you or your representative must either send or 
make arrangements to appear and present the information and argument to 
the suspending official within 30 days after you receive the Notice of 
Suspension.
    (b) The Federal agency taking the action considers the notice to be 
received by you:
    (1) When delivered, if the Federal agency mails the notice to the 
last known street address, or five days after the agency sends it if 
the letter is undeliverable;
    (2) When sent, if the Federal agency sends the notice by facsimile 
or five days after the agency sends it if the facsimile is 
undeliverable; or
    (3) When delivered, if the Federal agency sends the notice by email 
or five days after the agency sends it if the email is undeliverable.


Sec.  180.730  What information must I provide to the suspending 
official if I contest the suspension?

    (a) In addition to any information and argument in opposition, as a 
respondent, your submission to the suspending official must identify:
    (1) Specific facts that contradict the statements contained in the 
Notice of Suspension. A general denial is insufficient to raise a 
genuine dispute over facts material to the suspension;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing Executive Order 12549 and all similar actions taken by 
Federal, State, or local agencies, including administrative agreements 
that affect only those agencies;
    (3) All criminal and civil proceedings not included in the Notice 
of Suspension that grew out of facts relevant to the cause(s) stated in 
the notice; and
    (4) All of your affiliates.
    (b) Your submission must also identify any of the paragraphs in 
Sec.  180.730(a) that do not apply to you.
    (c) If you fail to disclose this information or provide false 
information, the Federal agency taking the action may seek further 
criminal, civil, or administrative action against you, as appropriate.


Sec.  180.735  Under what conditions do I get an additional opportunity 
to challenge the facts on which the suspension is based?

    (a) As a respondent, you will not have an additional opportunity to 
challenge the facts if the suspending official determines that:
    (1) Your suspension is based upon an indictment, conviction, civil 
judgment, or other findings by a Federal, State, or local body for 
which an opportunity to contest the facts was provided;
    (2) Your presentation in opposition contains only general denials 
to the information contained in the Notice of Suspension;
    (3) The issues raised in your presentation in opposition to the 
suspension are not factual in nature, or are no material to the 
suspending official's initial decision to suspend, or the official's 
decision whether to continue the suspension; or
    (4) On the basis of advice from the Department of Justice, an 
office of the United States Attorney, a State attorney general's 
office, or a State or local prosecutor's office, that substantial 
interests of the government in pending or contemplated legal 
proceedings based on the same facts as the suspension would be 
prejudiced by conducting fact-finding.
    (b) You will have an opportunity to challenge the facts if the 
suspending official determines that:
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the suspension.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the suspending official or designee must conduct 
additional proceedings to resolve those facts.

[[Page 69418]]

Sec.  180.740  Are suspension proceedings formal?

    (a) Suspension proceedings are conducted in a fair and informal 
manner. The suspending official may use flexible procedures to allow 
you to present matters in opposition. In so doing, the suspending 
official is not required to follow formal rules of evidence or 
procedure in creating an official record upon which the official will 
base a final suspension decision.
    (b) As a respondent, you or your representative must submit any 
documentary evidence you want the suspending official to consider.


Sec.  180.745  How is fact-finding conducted?

    (a) If fact-finding is conducted:
    (1) You may present witnesses and other evidence and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.
    (b) A transcribed record of fact-finding proceedings must be made, 
unless you, as a respondent, and the Federal agency agree to waive it 
in advance. If you want a copy of the transcribed record, you may 
purchase it.


Sec.  180.750  What does the suspending official consider in deciding 
whether to continue or terminate my suspension?

    (a) The suspending official bases the decision on all information 
contained in the official record. The record includes:
    (1) All information in support of the suspending official's initial 
decision to suspend you;
    (2) Any further information and argument presented in support of, 
or opposition to, the suspension; and
    (3) Any transcribed record of fact-finding proceedings.
    (b) The suspending official may refer disputed material facts to 
another official for findings of fact. The suspending official may 
reject any resulting findings, in whole or in part, only after 
specifically determining them to be arbitrary, capricious, or clearly 
erroneous.


Sec.  180.755  When will I know whether the suspension is continued or 
terminated?

    The suspending official must make a written decision whether to 
continue, modify, or terminate your suspension within 45 days of 
closing the official record. The official record closes upon the 
suspending official's receipt of final submissions, information, and 
findings of fact, if any. The suspending official may extend that 
period for good cause.


Sec.  180.760  How long may my suspension last?

    (a) If legal or debarment proceedings are initiated at the time of 
or during your suspension, the suspension may continue until the 
conclusion of those proceedings. However, a suspension may not exceed 
12 months if proceedings are not initiated.
    (b) The suspending official may extend the 12-month limit under 
paragraph (a) of this section for an additional 6 months if an office 
of a U.S. Assistant Attorney General, U.S. Attorney, or other Federal, 
State, or local responsible prosecuting official requests an extension 
in writing. In no event may a suspension exceed 18 months without 
initiating proceedings under paragraph (a) of this section.
    (c) The suspending official must notify the appropriate officials 
under paragraph (b) of this section of an impending termination of a 
suspension at least 30 days before the 12-month period expires to allow 
the officials an opportunity to request an extension.

Subpart H--Debarment


Sec.  180.800  What are the causes for debarment?

    A Federal agency may debar a person for:
    (a) Conviction of or civil judgment for:
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction;
    (2) Violation of Federal or State antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification, or destruction of records, making false statements, 
violating Federal criminal tax laws, receiving stolen property, making 
false claims, or obstruction of justice; or
    (4) Commission of any other offense indicating a lack of business 
integrity or business honesty that seriously and directly affects your 
present responsibility;
    (b) Violation of the terms of a public agreement or transaction so 
serious as to affect the integrity of a Federal agency program, such 
as:
    (1) A willful failure to perform in accordance with the terms of 
one or more public agreements or transactions;
    (2) A history of failure to perform or of unsatisfactory 
performance of one or more public agreements or transactions; or
    (3) A willful violation of a statutory or regulatory provision or 
requirement applicable to a public agreement or transaction;
    (c) Any of the following causes:
    (1) A nonprocurement debarment by any Federal agency taken before 
October 1, 1988, or a procurement debarment by any Federal agency taken 
pursuant to 48 CFR part 9, subpart 9.4, before August 25, 1995;
    (2) Knowingly doing business with an ineligible person, except as 
permitted under Sec.  180.135;
    (3) Failure to pay a single substantial debt, or a number of 
outstanding debts (including disallowed costs and overpayments, but not 
including sums owed the Federal Government under the Internal Revenue 
Code) owed to any Federal agency or instrumentality, provided the debt 
is uncontested by the debtor or, if contested, provided that the 
debtor's legal and administrative remedies have been exhausted;
    (4) Violation of a material provision of a voluntary exclusion 
agreement entered into under Sec.  180.640 or of any other agreement 
that resolves a debarment or suspension action; or
    (5) Violation of the provisions of the Drug-Free Workplace Act of 
1988 (41 U.S.C. 701); or
    (d) Any other cause that is so serious or compelling in nature that 
it affects your present responsibility.


Sec.  180.805  What notice does the debarring official give me if I am 
proposed for debarment?

    After consideration of the causes in Sec.  180.800, if the 
debarring official proposes to debar you, the official sends you a 
Notice of Proposed Debarment, pursuant to Sec.  180.615, advising you:
    (a) That the debarring official is considering debarring you;
    (b) The reasons for proposing to debar you in terms sufficient to 
put you on notice of the conduct or transactions upon which the 
proposed debarment is based;
    (c) The cause(s) under Sec.  180.800 upon which the debarring 
official relied for proposing your debarment;
    (d) The applicable provisions of this subpart, subpart F of this 
part, and any other Federal agency procedures governing debarment; and
    (e) The government-wide effect of a debarment from procurement and 
nonprocurement programs and activities.


Sec.  180.810   When does a debarment take effect?

    Unlike a suspension, a debarment is not effective until the 
debarring official issues a decision. The debarring official does not 
issue a decision until the respondent has had an opportunity to contest 
the proposed debarment.

[[Page 69419]]

Sec.  180.815  How may I contest a proposed debarment?

    As a respondent, if you wish to contest a proposed debarment, you 
or your representative must provide the debarring official with 
information in opposition to the proposed debarment. You may do this 
orally or in writing. While oral statements may be a part of the 
official record, any information provided orally that you consider 
important must also be submitted in writing for the official record.


Sec.  180.820   How much time do I have to contest a proposed 
debarment?

    (a) As a respondent, you or your representative must either send or 
make arrangements to appear and present the information and argument to 
the debarring official within 30 days after you receive the Notice of 
Proposed Debarment.
    (b) The Federal agency taking the action considers the Notice of 
Proposed Debarment to be received by you:
    (1) When delivered, if the Federal agency mails the notice to the 
last known street address, or five days after the agency sends it if 
the letter is undeliverable;
    (2) When sent, if the Federal agency sends the notice by facsimile 
or five days after the agency sends it if the facsimile is 
undeliverable; or
    (3) When delivered, if the Federal agency sends the notice by email 
or five days after the agency sends it if the email is undeliverable.


Sec.  180.825  What information must I provide to the debarring 
official if I contest the proposed debarment?

    (a) In addition to any information and argument in opposition, as a 
respondent, your submission to the debarring official must identify:
    (1) Specific facts that contradict the statements contained in the 
Notice of Proposed Debarment. Include any information about any of the 
factors listed in Sec.  180.860. A general denial is insufficient to 
raise a genuine dispute over facts material to the debarment;
    (2) All existing, proposed, or prior exclusions under regulations 
implementing Executive Order 12549 and all similar actions taken by 
Federal, State, or local agencies, including administrative agreements 
that affect only those agencies;
    (3) All criminal and civil proceedings not included in the Notice 
of Proposed Debarment that grew out of facts relevant to the cause(s) 
stated in the notice; and
    (4) All of your affiliates.
    (b) If you fail to disclose this information or provide false 
information, the Federal agency taking the action may seek further 
criminal, civil, or administrative action against you, as appropriate.


Sec.  180.830  Under what conditions do I get an additional opportunity 
to challenge the facts on which the proposed debarment is based?

    (a) As a respondent, you will not have an additional opportunity to 
challenge the facts if the debarring official determines that:
    (1) Your debarment is based upon a conviction or civil judgment;
    (2) Your presentation in opposition contains only general denials 
to the information contained in the Notice of Proposed Debarment; or
    (3) The issues raised in your presentation in opposition to the 
proposed debarment are not factual in nature, or are not material to 
the debarring official's decision whether to debar.
    (b) You will have an additional opportunity to challenge the facts 
if the debarring official determines that:
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the proposed debarment.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the debarring official or designee must conduct 
additional proceedings to resolve those facts.


Sec.  180.835  Are debarment proceedings formal?

    (a) Debarment proceedings are conducted in a fair and informal 
manner. The debarring official may use flexible procedures to allow 
you, as a respondent, to present matters in opposition. In so doing, 
the debarring official is not required to follow formal rules of 
evidence or procedure in creating an official record upon which the 
official will base the decision on whether to debar.
    (b) You or your representative must submit any documentary evidence 
you want the debarring official to consider.


Sec.  180.840  How is fact-finding conducted?

    (a) If fact-finding is conducted:
    (1) You may present witnesses and other evidence and confront any 
witness presented; and
    (2) The fact-finder must prepare written findings of fact for the 
record.
    (b) A transcribed record of fact-finding proceedings must be made 
unless you, as a respondent, and the Federal agency agree to waive it 
in advance. If you want a copy of the transcribed record, you may 
purchase it.


Sec.  180.845   What does the debarring official consider in deciding 
whether to debar me?

    (a) The debarring official may debar you for any of the causes in 
Sec.  180.800. However, the official need not debar you even if a cause 
for debarment exists. The official may consider the seriousness of your 
acts or omissions and the mitigating or aggravating factors set forth 
at Sec.  180.860.
    (b) The debarring official bases the decision on all information 
contained in the official record. The record includes:
    (1) All information in support of the debarring official's proposed 
debarment;
    (2) Any further information and argument presented in support of, 
or in opposition to, the proposed debarment; and
    (3) Any transcribed record of fact-finding proceedings.
    (c) The debarring official may refer disputed material facts to 
another official for findings of fact. The debarring official may 
reject any resultant findings, in whole or in part, only after 
specifically determining them to be arbitrary, capricious, or clearly 
erroneous.


Sec.  180.850   What is the standard of proof in a debarment action?

    (a) In any debarment action, the Federal agency must establish the 
cause for debarment by a preponderance of the evidence.
    (b) If the proposed debarment is based upon a conviction or civil 
judgment, the standard of proof is met.


Sec.  180.855  Who has the burden of proof in a debarment action?

    (a) The Federal agency has the burden to prove that a cause for 
debarment exists.
    (b) Once a cause for debarment is established, you as a respondent 
have the burden of demonstrating to the satisfaction of the debarring 
official that you are presently responsible and that debarment is not 
necessary.


Sec.  180.860  What factors may influence the debarring official's 
decision?

    This section lists the mitigating and aggravating factors that the 
debarring official may consider in determining whether to debar you and 
the length of your debarment period. The debarring official may 
consider other factors if appropriate in light of the circumstances of 
a particular case. The existence or nonexistence of any factor, such as 
one of those set forth in this section, is not necessarily 
determinative of your present responsibility. In making a debarment 
decision, the debarring official may consider the following factors:

[[Page 69420]]

    (a) The actual or potential harm or impact that results or may 
result from the wrongdoing.
    (b) The frequency of incidents or duration of the wrongdoing.
    (c) Whether there is a pattern or prior history of wrongdoing. For 
example, if you have been found by another Federal agency or a State 
agency to have engaged in wrongdoing similar to that found in the 
debarment action, the existence of this fact may be used by the 
debarring official in determining that you have a pattern or prior 
history of wrongdoing.
    (d) Whether you are or have been excluded or disqualified by an 
agency of the Federal Government or have not been allowed to 
participate in State or local contracts or assistance agreements on a 
basis of conduct similar to one or more of the causes for debarment 
specified in this part.
    (e) Whether you have entered into an administrative agreement with 
a Federal agency or a State or local government that is not government-
wide but is based on conduct similar to one or more of the causes for 
debarment specified in this part.
    (f) Whether and to what extent you planned, initiated, or carried 
out the wrongdoing.
    (g) Whether you have accepted responsibility for the wrongdoing and 
recognize the seriousness of the misconduct that led to the cause for 
debarment.
    (h) Whether you have paid or agreed to pay all criminal, civil, and 
administrative liabilities for the improper activity, including any 
investigative or administrative costs incurred by the government, and 
have made or agreed to make full restitution.
    (i) Whether you have cooperated fully with the government agencies 
during the investigation and any court or administrative action. In 
determining the extent of cooperation, the debarring official may 
consider when the cooperation began and whether you disclosed all 
pertinent information known to you.
    (j) Whether the wrongdoing was pervasive within your organization.
    (k) The kind of positions held by the individuals involved in the 
wrongdoing.
    (l) Whether your organization took appropriate corrective action or 
implemented remedial or protective measures in the form of procedures, 
policies, and programs to effectively address the activity cited as a 
basis for the debarment.
    (m) Whether your principals tolerated the offense.
    (n) Whether you brought the activity cited as a basis for the 
debarment to the attention of the appropriate government agency in a 
timely manner.
    (o) Whether you have fully investigated the circumstances 
surrounding the cause for debarment and, if so, made the result of the 
investigation available to the debarring official.
    (p) Whether you had effective standards of conduct and internal 
control systems in place at the time the questioned conduct occurred.
    (q) Whether you have taken appropriate disciplinary action against 
the individuals responsible for the activity which constitutes the 
cause for debarment.
    (r) Whether you have had adequate time to eliminate the 
circumstances within your organization that led to the cause for the 
debarment.
    (s) Whether your business, technical, or professional license(s) 
has been suspended, terminated, or revoked.
    (t) Other factors that are appropriate to the circumstances of a 
particular case.


Sec.  180.865   How long may my debarment last?

    (a) If the debarring official decides to debar you, your period of 
debarment will be based on the seriousness of the cause(s) upon which 
your debarment is based. Generally, debarment should not exceed three 
years. However, if circumstances warrant, the debarring official may 
impose a longer period of debarment.
    (b) In determining the period of debarment, the debarring official 
may consider the factors in Sec.  180.860. If a suspension has preceded 
your debarment, the debarring official must consider the time you were 
suspended.
    (c) If the debarment is for a violation of the provisions of the 
Drug-Free Workplace Act of 1988, your period of debarment may not 
exceed five years.


Sec.  180.870  When do I know if the debarring official debars me?

    (a) The debarring official must make a written decision whether to 
debar within 45 days of closing the official record. The official 
record closes upon the debarring official's receipt of final 
submissions, information, and findings of fact, if any. The debarring 
official may extend that period for good cause.
    (b) The debarring official sends you written notice, pursuant to 
Sec.  180.615, that the official decided either:
    (1) Not to debar you; or
    (2) To debar you. In this event, the notice:
    (i) Refers to the Notice of Proposed Debarment;
    (ii) Specifies the reasons for your debarment;
    (iii) States the period of your debarment, including the effective 
dates; and
    (iv) Advises you that your debarment is effective for covered 
transactions and contracts that are subject to the Federal Acquisition 
Regulations (48 CFR chapter 1) throughout the executive branch of the 
Federal Government unless an agency head or an authorized designee 
grants an exception.


Sec.  180.875   May I ask the debarring official to reconsider a 
decision to debar me?

    Yes. As a debarred person, you may ask the debarring official to 
reconsider the debarment decision or to reduce the time period or scope 
of the debarment. However, you must submit your request in writing and 
support it with documentation.


Sec.  180.880   What factors may influence the debarring official 
during reconsideration?

    The debarring official may reduce or terminate your debarment based 
on:
    (a) Newly discovered material evidence;
    (b) A reversal of the conviction or civil judgment upon which your 
debarment was based;
    (c) A bona fide change in ownership or management;
    (d) Elimination of other causes for which the debarment was 
imposed; or
    (e) Other reasons the debarring official finds appropriate.


Sec.  180.885   May the debarring official extend a debarment?

    (a) Yes. The debarring official may extend a debarment for an 
additional period if that official determines that an extension is 
necessary to protect the public interest.
    (b) However, the debarring official may not extend a debarment 
solely on the basis of the facts and circumstances upon which the 
initial debarment action was based.
    (c) If the debarring official decides that a debarment for an 
additional period is necessary, the debarring official must follow the 
applicable procedures in this subpart, and subpart F, to extend the 
debarment.

Subpart I--Definitions


Sec.  180.900   Adequate evidence.

    Adequate evidence means information sufficient to support the 
reasonable belief that a particular act or omission has occurred.


Sec.  180.905   Affiliate.

    Persons are affiliates of each other if, directly or indirectly, 
either one controls or has the power to control the other or a third 
person controls or has

[[Page 69421]]

the power to control both. The ways a Federal agency may determine 
control include, but are not limited to:
    (a) Interlocking management or ownership;
    (b) Identity of interests among family members;
    (c) Shared facilities and equipment;
    (d) Common use of employees; or
    (e) A business entity organized following the exclusion of a person 
with the same or similar management, ownership, or principal employees 
as the excluded person.


Sec.  180.910  Agent or representative.

    Agent or representative means any person who acts on behalf of or 
who is authorized to commit a participant in a covered transaction.


Sec.  180.915  Civil judgment.

    Civil judgment means the disposition of a civil action by any court 
of competent jurisdiction, whether by verdict, decision, settlement, 
stipulation, or other disposition which creates a civil liability for 
the complained of wrongful acts or a final determination of liability 
under the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. 3801-
3812).


Sec.  180.920  Conviction.

    Conviction means:
    (a) A judgment or any other determination of guilt of a criminal 
offense by any court of competent jurisdiction, whether entered upon a 
verdict or plea, including a plea of nolo contendere; or
    (b) Any other resolution that is the functional equivalent of a 
judgment, including probation before judgment and deferred prosecution. 
A disposition without the participation of the court is the functional 
equivalent of a judgment only if it includes an admission of guilt.


Sec.  180.925  Debarment.

    Debarment means an action taken by a debarring official under 
Subpart H to exclude a person from participating in covered 
transactions and transactions covered under the Federal Acquisition 
Regulations (48 CFR chapter 1). A person so excluded is debarred.


Sec.  180.930   Debarring official.

    Debarring official means a Federal agency official who is 
authorized to impose debarment. A debarring official is either:
    (a) The agency head; or
    (b) An official designated by the agency head.


Sec.  180.935  Disqualified.

    Disqualified means that a person is prohibited from participating 
in specified Federal procurement or nonprocurement transactions as 
required under a statute, Executive order (other than Executive Orders 
12549 and 12689), or other authority. Examples of disqualifications 
include persons prohibited under--
    (a) The Davis-Bacon Act (40 U.S.C. 3142);
    (b) The equal employment opportunity acts and Executive orders; or
    (c) The Clean Air Act (42 U.S.C. 7606), Clean Water Act (33 U.S.C. 
1368), and Executive Order 11738 (38 FR 25161).


Sec.  180.940   Excluded or exclusion.

    Excluded or exclusion means:
    (a) That a person or commodity is prohibited from being a 
participant in covered transactions, whether the person has been 
suspended; debarred; proposed for debarment under 48 CFR part 9, 
subpart 9.4; voluntarily excluded; or
    (b) The act of excluding a person.


Sec.  180.945  System for Award Management (SAM.gov) Exclusions.

    System for Award Management (SAM.gov) Exclusions means the list 
maintained and disseminated by the General Services Administration 
(GSA) containing the names and other information about ineligible 
persons.


Sec.  180.950  Federal agency.

    Federal agency means any United States executive department, 
military department, defense agency, or any other executive branch 
agency. For the purposes of this part, other agencies of the Federal 
Government are not considered ``agencies'' unless they issue 
regulations adopting the government-wide Debarment and Suspension 
system under Executive Orders 12549 and 12689.


Sec.  180.955   Indictment.

    Indictment means an indictment for a criminal offense. A 
presentment, information, or other filing by a competent authority 
charging a criminal offense will be given the same effect as an 
indictment.


Sec.  180.960  Ineligible or ineligibility.

    Ineligible or ineligibility means that a person or commodity is 
prohibited from covered transactions because of an exclusion or 
disqualification.


Sec.  180.965   Legal proceedings.

    Legal proceeding means any criminal proceeding or any civil 
judicial proceeding, including a proceeding under the Program Fraud 
Civil Remedies Act of 1986 (31 U.S.C. 3801-3812), to which the Federal 
Government or a State or local government or quasi-governmental 
authority is a party. The term also includes appeals from those 
proceedings.


Sec.  180.970  Nonprocurement transaction.

    (a) Nonprocurement transaction means any transaction, regardless of 
type (except procurement contracts), including, but not limited to, the 
following:
    (1) Grants;
    (2) Cooperative agreements;
    (3) Scholarships;
    (4) Fellowships;
    (5) Contracts of assistance;
    (6) Loans;
    (7) Loan guarantees;
    (8) Subsidies;
    (9) Insurances;
    (10) Payments for specified uses; and
    (11) Donation agreements.
    (b) A nonprocurement transaction at any tier does not require the 
transfer of Federal funds.


Sec.  180.975   Notice.

    Notice means a written communication served in person, sent by 
certified mail or its equivalent, or sent electronically by email or 
facsimile. (See Sec.  180.615.)


Sec.  180.980   Participant.

    Participant means any person who submits a proposal for or enters 
into a covered transaction, including an agent or representative of a 
participant.


Sec.  180.985   Person.

    Person means any individual, corporation, partnership, association, 
unit of government, or legal entity, regardless of how organized.


Sec.  180.990   Preponderance of the evidence.

    Preponderance of the evidence means proof by information that, 
compared with information opposing it, leads to the conclusion that the 
fact at issue is more probably true than not.


Sec.  180.995   Principal.

    Principal means:
    (a) An officer, director, owner, partner, principal investigator, 
or another person within a participant with management or supervisory 
responsibilities related to a covered transaction; or
    (b) A consultant or other person, whether or not employed by the 
participant or paid with Federal funds, who:
    (1) Is in a position to handle Federal funds;
    (2) Is in a position to influence or control the use of those 
funds; or,
    (3) Occupies a technical or professional position capable of

[[Page 69422]]

substantially influencing the development or outcome of an activity 
required to perform the covered transaction.


Sec.  180.1000  Respondent.

    Respondent means a person against whom a Federal agency has 
initiated a debarment or suspension action.


Sec.  180.1005   State.

    (a) State means:
    (1) Any of the states of the United States;
    (2) The District of Columbia;
    (3) The Commonwealth of Puerto Rico;
    (4) Any territory or possession of the United States; or
    (5) Any agency or instrumentality of a State.
    (b) For purposes of this part, State does not include institutions 
of higher education, hospitals, or units of local government.


Sec.  180.1010   Suspending official.

    (a) Suspending official means a Federal agency official authorized 
to impose suspension. The suspending official is either:
    (1) The agency head; or
    (2) An official designated by the agency head.


Sec.  180.1015  Suspension.

    Suspension is an action taken by a suspending official under 
subpart G of this part that immediately prohibits a person from 
participating in covered transactions and transactions covered under 
the Federal Acquisition Regulations (48 CFR chapter 1) for a temporary 
period, pending completion of a Federal agency investigation and any 
judicial or administrative proceedings that may ensue. A person so 
excluded is suspended.


Sec.  180.1020  Voluntary exclusion or voluntarily excluded.

    (a) Voluntary exclusion means a person's agreement to be excluded 
under the terms of a settlement between the person and one or more 
agencies. Voluntary exclusion must have a government-wide effect.
    (b) Voluntarily excluded means the status of a person who has 
agreed to a voluntary exclusion.

Appendix A to Part 180--Covered Transactions

BILLING CODE 3110-01-P

[[Page 69423]]

[GRAPHIC] [TIFF OMITTED] TP05OC23.078

BILLING CODE 3110-01-C
0
8. Revise part 182 to read as follows:

PART 182--GOVERNMENT-WIDE REQUIREMENTS FOR DRUG-FREE WORKPLACE 
(FINANCIAL ASSISTANCE)

Sec.
182.5 What does this part do?
182.10 How is this part organized?
182.15 To whom does the guidance apply?
182.20 What must a Federal agency do to implement the guidance?
182.25 What must a Federal agency address in its implementation of 
the guidance?
182.30 Where does a Federal agency implement the guidance?
182.40 How is the guidance maintained?
Subpart A--Purpose and Coverage
182.100 How is this part written?
182.105 Do terms in this part have special meanings?
182.110 What do subparts A through F of this part do?
182.115 Does this part apply to me?
182.120 Are any of my Federal assistance awards exempt from this 
part?
182.125 Does this part affect the Federal contracts that I receive?
Subpart B--Requirements for Recipients Other Than Individuals
182.200 What must I do to comply with this part?
182.205 What must I include in my drug-free workplace statement?
182.210 To whom must I distribute my drug-free workplace statement?
182.215 What must I include in my drug-free awareness program?

[[Page 69424]]

182.220 By when must I publish my drug-free workplace statement and 
establish my drug-free awareness program?
182.225 What actions must I take concerning employees who are 
convicted of drug violations in the workplace?
182.230 How and when must I identify workplaces?
Subpart C--Requirements for Recipients Who Are Individuals
182.300 What must I do to comply with this part if I am an 
individual recipient?
Subpart D--Responsibilities of Agency Awarding Officials
182.400 What are my responsibilities as an agency awarding official?
Subpart E--Violations of This Part and Consequences
182.500 How are violations of this part determined for recipients 
other than individuals?
182.505 How are violations of this part determined for recipients 
who are individuals?
182.510 What actions will the Federal Government take against a 
recipient determined to have violated this part?
182.515 Are there any exceptions to those actions?
Subpart F--Definitions
182.605 Award.
182.610 Controlled substance.
182.615 Conviction.
182.620 Cooperative agreement.
182.625 Criminal drug statute.
182.630 Debarment.
182.635 Drug-free workplace.
182.640 Employee.
182.645 Federal agency or agency.
182.650 Grant.
182.655 Individual.
182.660 Recipient.
182.665 State.
182.670 Suspension.

    Authority: 41 U.S.C. 8101-8106; 31 U.S.C. 503; 31 U.S.C. 6307.


Sec.  182.5  What does this part do?

    This part provides guidance for Federal agencies on the portion of 
the Drug-Free Workplace Act of 1988 (41 U.S.C. 8101-8106, as amended) 
that applies to grants. It also applies the provisions of the Act to 
cooperative agreements and other financial assistance awards, as a 
matter of Federal Government policy.


Sec.  182.10  How is this part organized?

    This part is organized into two segments.
    (a) Sections 182.5 through 182.40 contain general policy direction 
for Federal agencies' use of the uniform policies and procedures in 
subparts A through F.
    (b) Subparts A through F contain uniform government-wide policies 
and procedures for Federal agency use to specify the:
    (1) Types of awards that are covered by drug-free workplace 
requirements;
    (2) Drug-free workplace requirements with which a recipient must 
comply;
    (3) Actions required of a Federal agency awarding official; and
    (4) Consequences of a violation of drug-free workplace 
requirements.


Sec.  182.15  To whom does the guidance apply?

    This part provides guidance to Federal agencies. Publication of 
this guidance in the Code of Federal Regulations (CFR) does not change 
its nature--it is guidance and not regulation. Federal agencies' 
implementation of this guidance governs the rights and responsibilities 
of other persons affected by the drug-free workplace requirements.


Sec.  182.20  What must a Federal agency do to implement the guidance?

    To comply with the requirement in 41 U.S.C. 8106 for government-
wide regulations, each Federal agency that awards grants or cooperative 
agreements or makes other financial assistance awards that are subject 
to the drug-free workplace requirements in subparts A through F of the 
guidance must issue a regulation consistent with those subparts.


Sec.  182.25   What must a Federal agency address in its implementation 
of the guidance?

    Each Federal agency's implementing regulation:
    (a) Must establish drug-free workplace policies and procedures for 
that Federal agency's Federal awards consistent with this guidance. 
When adopted by a Federal agency, the provisions of the guidance have a 
regulatory effect on that Federal agency's awards.
    (b) Must address some matters for which the guidance in this part 
gives the Federal agency discretion. Specifically, the regulation must:
    (1) State whether the Federal agency:
    (i) Has a central point to which a recipient may send the 
notification of a conviction that is required under Sec.  182.225(a) or 
Sec.  182.300(b); or
    (ii) Requires the recipient to send the notification to the Federal 
agency awarding official or their designee for each Federal award.
    (2) Either:
    (i) State that the Federal agency head is the official authorized 
to determine under Sec.  182.500 or Sec.  182.505 that a recipient has 
violated the drug-free workplace requirements; or
    (ii) Provide the title of the official designated to make that 
determination.
    (c) May also, at the Federal agency's option, identify any specific 
types of financial assistance awards, in addition to grants and 
cooperative agreements, to which the Federal agency makes this guidance 
applicable.


Sec.  182.30  Where does a Federal agency implement the guidance?

    Each Federal agency that awards grants or cooperative agreements or 
makes other financial assistance awards that are subject to the drug-
free workplace guidance in this part must issue a regulation 
implementing the guidance within its chapter in subtitle B of this 
title of the Code of Federal Regulations.


Sec.  182.40  How is the guidance maintained?

    The OMB publishes proposed changes to the guidance in the Federal 
Register for public comment, considers comments with the help of 
appropriate interagency working groups, and then issues any changes to 
the guidance in final form.

Subpart A--Purpose and Coverage


Sec.  182.100  How is this part written?

    (a) This part uses a ``plain language'' format to make it easier 
for the general public and business community to use and understand. 
The section headings and text must be read together, as they are often 
in the form of questions and answers.
    (b) Pronouns used within this part, such as ``I'' and ``you,'' 
change from subpart to subpart depending on the audience being 
addressed.


Sec.  182.105  Do terms in this part have special meanings?

    This part uses terms that have special meanings. Those terms are 
defined in subpart F.


Sec.  182.110   What do subparts A through F of this part do?

    Subparts A through F specify standard policies and procedures to 
carry out the Drug-Free Workplace Act of 1988 for financial assistance 
awards.


Sec.  182.115  Does this part apply to me?

    (a) Portions of this part apply to you if you are either:
    (1) A recipient of a Federal assistance award (see definitions of 
award and recipient in Sec. Sec.  182.605 and 182.660, respectively); 
or
    (2) A Federal agency awarding official.
    (b) The following table shows the subparts that apply to you:

------------------------------------------------------------------------
           If you are * * *                    See subparts * * *
------------------------------------------------------------------------
(1) a recipient who is not an          A, B and E.
 individual.
(2) a recipient who is an individual.  A, C and E.

[[Page 69425]]

 
(3) a Federal agency awarding          A, D and E.
 official.
------------------------------------------------------------------------

Sec.  182.120  Are any of my Federal assistance awards exempt from this 
part?

    This part does not apply to any award to which the Federal agency 
head, or their designee, determines that the application of this part 
would be inconsistent with the international obligations of the United 
States or the laws or regulations of a foreign government.


Sec.  182.125  Does this part affect the Federal contracts that I 
receive?

    This part will affect future contract awards indirectly if you are 
debarred or suspended for a violation of the requirements of this part, 
as described in Sec.  182.510(c). However, this part does not apply 
directly to procurement contracts. The portion of the Drug-Free 
Workplace Act of 1988 that applies to Federal procurement contracts is 
carried out through the Federal Acquisition Regulation in Chapter 1 of 
Title 48 of the Code of Federal Regulations (the drug-free workplace 
coverage currently is in 48 CFR part 23, subpart 23.5).

Subpart B--Requirements for Recipients Other Than Individuals


Sec.  182.200  What must I do to comply with this part?

    There are two general requirements if you are a recipient other 
than an individual.
    (a) First, you must make a good faith effort, on a continuing 
basis, to maintain a drug-free workplace. You must agree to do so as a 
condition for receiving any award covered by this part. The specific 
measures that you must take in this regard are described in more detail 
in subsequent sections of this subpart. Briefly, those measures are to:
    (1) Publish a drug-free workplace statement and establish a drug-
free awareness program for your employees (see Sec. Sec.  182.205 
through 182.220); and
    (2) Take actions concerning employees convicted of violating drug 
statutes in the workplace (see Sec.  182.225).
    (b) Second, you must identify all known workplaces under your 
Federal awards (see Sec.  182.230).


Sec.  182.205  What must I include in my drug-free workplace statement?

    You must publish a statement that--
    (a) Tells your employees that the unlawful manufacture, 
distribution, dispensing, possession, or use of a controlled substance 
is prohibited in your workplace;
    (b) Specifies the actions that you will take against employees for 
violating that prohibition; and
    (c) Lets each employee know that, as a condition of employment 
under any award, the employee:
    (1) Will abide by the terms of the statement; and
    (2) Must notify you in writing if the employee is convicted for a 
violation of a criminal drug statute occurring in the workplace and 
must do so no more than five calendar days after the conviction.


Sec.  182.210   To whom must I distribute my drug-free workplace 
statement?

    You must require that a copy of the statement described in Sec.  
182.205 be given to each employee who will be engaged in the 
performance of any Federal award.


Sec.  182.215  What must I include in my drug-free awareness program?

    You must establish an ongoing drug-free awareness program to inform 
employees about:
    (a) The dangers of drug abuse in the workplace;
    (b) Your policy of maintaining a drug-free workplace;
    (c) Any available drug counseling, rehabilitation, and employee 
assistance programs; and
    (d) The penalties that you may impose upon them for drug abuse 
violations occurring in the workplace.


Sec.  182.220   By when must I publish my drug-free workplace statement 
and establish my drug-free awareness program?

    If you are a new recipient that does not already have a policy 
statement as described in Sec.  182.205 and an ongoing awareness 
program as described in Sec.  182.215, you must publish the statement 
and establish the program by the time given in the following table:

------------------------------------------------------------------------
                If * * *                          Then you * * *
------------------------------------------------------------------------
(a) The performance period of the award  Must have the policy statement
 is less than 30 days.                    and program in place as soon
                                          as possible, but before the
                                          date on which performance is
                                          expected to be completed.
(b) The performance period of the award  Must have the policy statement
 is 30 days or more.                      and program in place within 30
                                          days after award.
(c) You believe there are extraordinary  May ask the Federal agency
 circumstances that will require more     awarding official to give you
 than 30 days for you to publish the      more time to do so. The amount
 policy statement and establish the       of additional time, if any, to
 awareness program.                       be given is at the discretion
                                          of the Federal agency awarding
                                          official.
------------------------------------------------------------------------

Sec.  182.225  What actions must I take concerning employees who are 
convicted of drug violations in the workplace?

    There are two actions you must take if an employee is convicted of 
a drug violation in the workplace:
    (a) First, you must notify Federal agencies if an employee who is 
engaged in the performance of an award informs you about a conviction, 
as required by Sec.  182.205(c)(2), or you otherwise learn of the 
conviction. Your notification to the Federal agencies must:
    (1) Be in writing;
    (2) Include the employee's position title;
    (3) Include the identification number(s) of each affected award;
    (4) Be sent within ten calendar days after you learn of the 
conviction; and
    (5) Be sent to every Federal agency on whose award the convicted 
employee was working. It must be sent to every Federal agency awarding 
official or their designee, unless the Federal agency has specified a 
central point for the receipt of the notices.
    (b) Second, within 30 calendar days of learning about an employee's 
conviction, you must either:
    (1) Take appropriate personnel action against the employee, up to 
and including termination, consistent with the requirements of the 
Rehabilitation Act of 1973 (29 U.S.C. 794), as amended; or
    (2) Require the employee to participate satisfactorily in a drug 
abuse assistance or rehabilitation program approved for these purposes 
by a Federal, State, or local health, law enforcement, or another 
appropriate agency.


Sec.  182.230  How and when must I identify workplaces?

    (a) You must identify all known workplaces under each Federal 
agency award. A failure to do so is a violation of your drug-free 
workplace

[[Page 69426]]

requirements. You may identify the workplaces:
    (1) To the Federal agency awarding official that is making the 
Federal award, either at the time of application or upon award; or
    (2) In documents that you keep on file in your offices during the 
performance of the Federal award, in which case you must make the 
information available for inspection upon request by agency officials 
or their designated representatives.
    (b) Your workplace identification for a Federal award must include 
the actual address of buildings (or parts of buildings) or other sites 
where work under the award takes place. Categorical descriptions may be 
used (for example, all vehicles of a mass transit authority or State 
highway department while in operation, State employees in each local 
unemployment office, performers in concert halls or radio studios).
    (c) If you identified workplaces to the Federal agency awarding 
official at the time of application or award, as described in paragraph 
(a)(1) of this section, and any workplace that you identified changes 
during the performance of the Federal award, you must inform the 
Federal agency awarding official.

Subpart C--Requirements for Recipients Who Are Individuals


Sec.  182.300  What must I do to comply with this part if I am an 
individual recipient?

    As a condition of receiving a Federal award, if you are an 
individual recipient, you must agree that:
    (a) You will not engage in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance in conducting 
any activity related to the Federal award; and
    (b) If you are convicted of a criminal drug offense resulting from 
a violation occurring during the conduct of any Federal award activity, 
you will report the conviction:
    (1) In writing.
    (2) Within 10 calendar days of the conviction.
    (3) To the Federal agency awarding official or their designee for 
each Federal award that you currently have, unless the agency 
designates a central point for the receipt of the notices, either in 
the award document or its regulation implementing the guidance in this 
part. When notice is made to a central point, it must include the 
identification number(s) of each affected Federal award.

Subpart D--Responsibilities of Federal Agency Awarding Officials


Sec.  182.400  What are my responsibilities as a Federal agency 
awarding official?

    As a Federal agency awarding official, you must obtain each 
recipient's agreement, as a condition of the award, to comply with the 
requirements in:
    (a) Subpart B, if the recipient is not an individual; or
    (b) Subpart C, if the recipient is an individual.

Subpart E--Violations of This Part and Consequences


Sec.  182.500  How are violations of this part determined for 
recipients other than individuals?

    A recipient other than an individual is in violation of the 
requirements of this part if the Federal agency head or their designee 
determines, in writing, that:
    (a) The recipient has violated the requirements of subpart B; or
    (b) The number of convictions of the recipient's employees for 
violating criminal drug statutes in the workplace is large enough to 
indicate that the recipient has failed to make a good-faith effort to 
provide a drug-free workplace.


Sec.  182.505  How are violations of this part determined for 
recipients who are individuals?

    A recipient who is an individual is in violation of the 
requirements of this part if the Federal agency head or their designee 
determines, in writing, that:
    (a) The recipient has violated the requirements of subpart C; or
    (b) The recipient is convicted of a criminal drug offense resulting 
from a violation occurring during the conduct of any award activity.


Sec.  182.510  What actions will the Federal Government take against a 
recipient determined to have violated this part?

    If a recipient is determined to have violated this part, as 
described in Sec.  182.500 or Sec.  182.505, the Federal agency may 
take one or more of the following actions:
    (a) Suspension of payments under the award;
    (b) Suspension or termination of the award; and
    (c) Suspension or debarment of the recipient under the Federal 
agency's regulation implementing the OMB guidance on nonprocurement 
debarment and suspension (2 CFR part 180) for a period not to exceed 
five years.


Sec.  182.515  Are there any exceptions to those actions?

    For a particular award, the Federal agency head may waive, in 
writing, a suspension of payments under an award, suspension or 
termination of an award, or suspension or debarment of a recipient if 
the agency head determines that such a waiver would be in the public 
interest. This exception authority cannot be delegated to any other 
official.

Subpart F--Definitions


Sec.  182.605  Award.

    Award means an award of financial assistance by a Federal agency 
directly to a recipient.
    (a) The term award includes:
    (1) A Federal grant or cooperative agreement, in the form of money 
or property in lieu of money.
    (2) A block grant or a grant in an entitlement program, whether or 
not the grant is exempted from coverage under the government-wide rule 
that implements OMB Circular A-102 (for availability of OMB circulars, 
see 5 CFR 1310.3) and specifies uniform administrative requirements.
    (b) The term award does not include:
    (1) Technical assistance that provides services instead of money.
    (2) Loans.
    (3) Loan guarantees.
    (4) Interest subsidies.
    (5) Insurance.
    (6) Direct appropriations.
    (7) Veterans' benefits to individuals (that is, any benefit to 
veterans, their families, or survivors by virtue of the service of a 
veteran in the Armed Forces of the United States).


Sec.  182.610  Controlled substance.

    Controlled substance means a controlled substance in schedules I 
through V of the Controlled Substances Act (21 U.S.C. 812), and as 
further defined by regulation at 21 CFR 1308.11 through 1308.15.


Sec.  182.615  Conviction.

    Conviction means a finding of guilt (including a plea of nolo 
contendere) or imposition of sentence, or both, by any judicial body 
charged with the responsibility to determine violations of the Federal 
or State criminal drug statutes.


Sec.  182.620  Cooperative agreement.

    Cooperative agreement means an award of financial assistance that, 
consistent with 31 U.S.C. 6305, is used to enter into the same kind of 
relationship as a grant (see definition of grant in Sec.  182.650), 
except that substantial involvement is expected between the Federal 
agency and the

[[Page 69427]]

recipient when carrying out the activity contemplated by the award. The 
term does not include cooperative research and development agreements 
as defined in 15 U.S.C. 3710a.


Sec.  182.625   Criminal drug statute.

    Criminal drug statute means a Federal or non-Federal criminal 
statute involving the manufacture, distribution, dispensing, use, or 
possession of any controlled substance.


Sec.  182.630   Debarment.

    Debarment means an action taken by a Federal agency to prohibit a 
recipient from participating in Federal Government procurement 
contracts and covered nonprocurement transactions. A recipient so 
prohibited is debarred, in accordance with the Federal Acquisition 
Regulation for procurement contracts (48 CFR part 9, subpart 9.4) and 
Federal agency regulations implementing the OMB guidance on 
nonprocurement debarment and suspension (2 CFR part 180, which 
implements Executive Orders 12549 and 12689).


Sec.  182.635   Drug-free workplace.

    Drug-free workplace means a site for the performance of work done 
in connection with a specific award at which employees of the recipient 
are prohibited from engaging in the unlawful manufacture, distribution, 
dispensing, possession, or use of a controlled substance.


Sec.  182.640  Employee.

    (a) Employee means the employee of a recipient directly engaged in 
the performance of work under the award, including:
    (1) All direct charge employees;
    (2) All indirect charge employees, unless their impact or 
involvement in the performance of work under the award is insignificant 
to the performance o' the award; and
    (3) Temporary personnel and consultants who are directly engaged in 
the performance of work under the award and who are on the recipient's 
payroll.
    (b) This definition does not include workers not on the payroll of 
the recipient (for example, volunteers, even if used to meet a cost 
sharing requirement; consultants or independent contractors not on the 
payroll; or employees of subrecipients or subcontractors in covered 
workplaces).


Sec.  182.645  Federal agency or agency.

    Federal agency or agency means any United States executive 
department, military department, government corporation, government-
controlled corporation, any other establishment in the executive branch 
(including the Executive Office of the President), or any independent 
regulatory agency.


Sec.  182.650  Grant.

    Grant means an award of financial assistance that, consistent with 
31 U.S.C. 6304, is used to enter into a relationship:
    (a) The principal purpose of which is to transfer a thing of value 
to the recipient to carry out a public purpose of support or 
stimulation authorized by a law of the United States rather than to 
acquire property or services for the Federal Government's direct 
benefit or use; and
    (b) In which substantial involvement is not expected between the 
Federal agency and the recipient when carrying out the activity 
contemplated by the award.


Sec.  182.655  Individual.

    Individual means a natural person.


Sec.  182.660   Recipient.

    Recipient means any individual, corporation, partnership, 
association, unit of government (except a Federal agency), or legal 
entity, regardless of how it is organized, that receives an award 
directly from a Federal agency.


Sec.  182.665  State.

    State means any of the States of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, or any territory or 
possession of the United States.


Sec.  182.670  Suspension.

    Suspension means an action taken by a Federal agency that 
immediately prohibits a recipient from participating in Federal 
Government procurement contracts and covered nonprocurement 
transactions for a temporary period, pending completion of an 
investigation and any judicial or administrative proceedings that may 
ensue. A recipient so prohibited is suspended in accordance with the 
Federal Acquisition Regulation for procurement contracts (48 CFR part 
9, subpart 9.4) and Federal agency regulations implementing the OMB 
guidance on nonprocurement debarment and suspension (2 CFR part 180, 
which implements Executive Orders 12549 and 12689). Suspension of a 
recipient is a distinct and separate action from suspension of an award 
or suspension of payments under an award.
0
9. Revise 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 agencies.
183.20 Reporting responsibilities of Federal agencies.
183.25 Responsibilities of recipients.
183.30 Access to records.
183.35 Definitions.

Appendix A to Part 183

Award Terms for Never Contract With the Enemy

    Authority: Pub. L. 113-291, as amended by Pub. L. 115-232, Pub. 
L. 116-92, Pub. L. 116-283, Pub. L. 117-263; 31 U.S.C. 503; 31 
U.S.C. 6307.


Sec.  183.5   Purpose of this part.

    This part provides guidance to Federal 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. 
820 of the National Defense Authorization Act for Fiscal Year 2023 
(Pub. L. 117-263), hereafter cited as ``Never Contract with the 
Enemy'').


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 agencies.

    (a) Prior to making an award for a covered grant or cooperative 
agreement (see also Sec.  183.35), the Federal agency must check the 
current list of prohibited or restricted persons or entities in the 
System for Award Management (SAM.gov) Exclusions.
    (b) The Federal agency may include the award term provided in 
appendix A in all covered grant and cooperative agreement awards in 
accordance with Never Contract with the Enemy.
    (c) A Federal 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 no funds, 
including goods

[[Page 69428]]

and services, received under an executive agency's covered grant or 
cooperative agreement are provided directly or indirectly to covered 
persons or entities.
    (d) When a Federal 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 grant funds directly or 
indirectly to a covered person or entity.
    (2) Terminate any grant, cooperative agreement, or contract to a 
covered person or entity upon becoming aware that the recipient has 
failed to exercise due diligence to ensure that no 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 another 
appropriate official that the grant or cooperative agreement provides 
funds directly or indirectly to a covered person or entity.
    (e) The Federal agency must notify recipients in writing regarding 
its decision to restrict all future awards, terminate or void a grant 
or cooperative agreement, or both. 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 agencies.

    (a) If a Federal agency restricts all future awards to a covered 
person or entity, it must enter information on the ineligible person or 
entity into SAM.gov Exclusions as a prohibited or restricted source 
pursuant to Never Contract with the Enemy.
    (b) When a Federal agency terminates or voids a grant or 
cooperative agreement due to Never Contract with the Enemy, it must 
report the action as a termination for material failure to comply in 
SAM.gov. Federal agencies must use the Contractor Performance 
Assessment Reporting System (CPARS) to enter or amend information in 
SAM.gov.
    (c) The Federal agency must 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 must 
include the following:
    (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 must 
include the following:
    (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 (for 
example, 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 agency may only exercise this 
authority upon a written determination by the Federal 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. 101(a)(13), 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, 12301(a), 
12302, 12304, 12304a, 12305, 12406 of 10 U.S.C. chapter 15, 14 U.S.C. 
3713 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.

[[Page 69429]]

    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 agencies may include the following award terms in all 
awards for covered grants and cooperative agreements in accordance 
with Never Contract with the Enemy:

I. Term 1--Prohibition on Providing Funds to the Enemy

    (a) You must:
    (1) Exercise due diligence to ensure that no 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 the System for Award 
Management (SAM.gov) as a prohibited or restricted source pursuant 
to subtitle E of Title VIII of the NDAA for FY 2015, unless the 
Federal agency provides written approval to continue the subaward or 
contract.
    (b) You 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 agency has the authority to terminate or void 
this grant or cooperative agreement, in whole or in part, if the 
Federal agency becomes aware that you have failed to exercise due 
diligence as required by paragraph (a) of this clause or if the 
Federal 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)

II. 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 of 
your records and the records of your 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 the 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), 
must 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)
0
10. Revise the authority citation for part 200 to read as follows:

    Authority: 31 U.S.C. 503; 31 U.S.C. 6101-6106; 31 U.S.C. 6307; 
31 U.S.C. 7501-7507.

0
11. Amend part 200 by revising subparts A through F to read as follows:

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

Subpart A--Acronyms and Definitions

Acronyms

Sec.
200.0 Acronyms.
200.1 Definitions.
Subpart B--General Provisions
200.100 Purpose.
200.101 Applicability.
200.102 Exceptions.
200.103 Authorities.
200.104 Supersession.
200.105 Effect on other issuances.
200.106 Agency implementation.
200.107 OMB responsibilities.
200.108 Inquiries.
200.109 Review date.
200.110 Effective date.
200.111 English language.
200.112 Conflict of interest.
200.113 Mandatory disclosures.
Subpart C--Pre-Federal Award Requirements and Contents of Federal 
Awards
200.200 Purpose.
200.201 Use of grants, cooperative agreements, fixed amount awards, 
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 agency review of merit of proposals.
200.206 Federal 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 an applicant is not qualified 
for a Federal award.
200.214 Suspension and debarment.
200.215 Never contract with the enemy.
200.216 Prohibition on certain telecommunications and video 
surveillance services or equipment.
200.217 Whistleblower Protections
Subpart D--Post Federal Award Requirements
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.
200.307 Program income.
200.308 Revision of budget and program plans.
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 and Indian Tribes.
200.318 General procurement standards.
200.319 Competition.
200.320 Procurement Methods.
200.321 Contracting with small businesses, minority businesses, 
women's business enterprises, veteran-owned businesses, 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 Record retention requirements.
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.

[[Page 69430]]

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 E--Cost Principles

General Provisions

200.400 Policy guide.
200.401 Application.

Basic Considerations

200.402 Composition of costs.
200.403 Factors affecting allowability of costs.
200.404 Reasonable costs.
200.405 Allocable costs.
200.406 Applicable credits.
200.407 Prior written approval (prior approval).
200.408 Limitation on allowance of costs.
200.409 Special considerations.
200.410 Collection of unallowable costs.
200.411 Adjustment of previously negotiated indirect cost rates 
containing unallowable costs.

Direct and Indirect Costs

200.412 Classification of costs.
200.413 Direct costs.
200.414 Indirect costs.
200.415 Required certifications.

Special Considerations for States, Local Governments and Indian Tribes

200.416 Cost allocation plans and indirect cost proposals.
200.417 Interagency service.

Special Considerations for Institutions of Higher Education

200.418 Costs incurred by states and local governments.
200.419 Cost accounting standards.

General Provisions for Selected Items of Cost

200.420 Considerations for selected items of cost.
200.421 Advertising and public relations.
200.422 Advisory councils.
200.423 Alcoholic beverages.
200.424 Alumni activities.
200.425 Audits conducted in accordance with the Single Audit Act.
200.426 Bad debts.
200.427 Bonding costs.
200.428 Collections of improper payments.
200.429 Commencement and convocation costs.
200.430 Compensation--personal services.
200.431 Compensation--fringe benefits.
200.432 Conferences.
200.433 Contingency provisions.
200.434 Contributions and donations.
200.435 Defense and prosecution of criminal and civil proceedings, 
claims, appeals and patent infringements.
200.436 Depreciation.
200.437 Employee health and welfare costs.
200.438 Entertainment and prizes.
200.439 Equipment and other capital expenditures.
200.440 Exchange rates.
200.441 Fines, penalties, damages and other settlements.
200.442 Fund raising and investment management costs.
200.443 Gains and losses on the disposition of depreciable assets.
200.444 General costs of government.
200.445 Goods or services for personal use.
200.446 Idle facilities and idle capacity.
200.447 Insurance and indemnification.
200.448 Intellectual property.
200.449 Interest.
200.450 Lobbying.
200.451 Losses on other awards or contracts.
200.452 Maintenance and repair costs.
200.453 Materials and supplies costs, including costs of computing 
devices.
200.454 Memberships, subscriptions, and professional activity costs.
200.455 Organization costs.
200.456 Participant support costs.
200.457 Plant and security costs.
200.458 Pre-award costs.
200.459 Professional service costs.
200.460 Proposal costs.
200.461 Publication and printing costs.
200.462 Rearrangement and reconversion costs.
200.463 Recruiting costs.
200.464 Relocation costs of employees.
200.465 Rental costs of real property and equipment.
200.466 Scholarships and student aid costs.
200.467 Selling and marketing costs.
200.468 Specialized service facilities.
200.469 Student activity costs.
200.470 Taxes (including Value Added Tax).
200.471 Telecommunication and video surveillance costs.
200.472 Termination and standard closeout costs.
200.473 Training and education costs.
200.474 Transportation costs.
200.475 Travel costs.
200.476 Trustees.
Subpart F--Audit Requirements

General

200.500 Purpose.

Audits

200.501 Audit requirements.
200.502 Basis for determining Federal awards expended.
200.503 Relation to other audit requirements.
200.504 Frequency of audits.
200.505 Remedies for noncompliance.
200.506 Audit costs.
200.507 Program-specific audits.

Auditees

200.508 Auditee responsibilities.
200.509 Auditor selection.
200.510 Financial statements.
200.511 Audit findings follow-up.
200.512 Report submission.

Federal Agencies

200.513 Responsibilities.

Auditors

200.514 Scope of audit.
200.515 Audit reporting.
200.516 Audit findings.
200.517 Audit documentation.
200.518 Major program determination.
200.519 Criteria for Federal program risk.
200.520 Criteria for a low-risk auditee.

Management Decisions

200.521 Management decisions.

Subpart A--Acronyms and Definitions

Acronyms


Sec.  200.0  Acronyms.

(a) CAS Cost Accounting Standards
(b) CFR Code of Federal Regulations
(c) F&A Facilities and Administration
(d) FAC Federal Audit Clearinghouse
(e) FAIN Federal Award Identification Number
(f) FAR Federal Acquisition Regulation
(g) FASB Financial Accounting Standards Board
(h) FFATA Federal Funding Accountability and Transparency Act of 2006 
or Transparency Act--Public Law 109-282, as amended by section 6202(a) 
of Public Law 110-252; section 3 of Public Law 113-101; section 2(a) of 
Public Law 117-40 (See 31 U.S.C. 6101, statutory note)
(i) FOIA Freedom of Information Act
(j) FR Federal Register
(k) GAAP Generally Accepted Accounting Principles
(l) GAGAS Generally Accepted Government Auditing Standards
(m) GASB Government Accounting Standards Board
(n) GAO Government Accountability Office
(o) GSA General Services Administration
(p) IBS Institutional Base Salary
(q) IHE Institutions of Higher Education
(r) IRC Internal Revenue Code
(s) ISDEAA Indian Self-Determination and Education and Assistance Act
(t) MTC Modified Total Cost
(u) MTDC Modified Total Direct Cost
(v) NFE Non-Federal Entity
(w) NOFO Notice of Funding Opportunity
(x) OMB Office of Management and Budget
(y) PII Personally Identifiable Information
(z) PMS Payment Management System
(aa) SAM System for Award Management (SAM.gov)

[[Page 69431]]

(bb) UEI Unique Entity Identifier
(cc) U.S.C. United States Code
(dd) VAT Value Added Tax


Sec.  200.1   Definitions.

    The following is a list of definitions of key terms frequently used 
in 2 CFR part 200. Definitions found in Federal statutes or regulations 
that apply to particular programs take precedence over the following 
definitions. However, where the following definitions implement 
specific statutory requirements that apply government-wide, such as the 
Single Audit Act, the following definitions take precedence over 
Federal regulations. For purposes of this part, the following 
definitions apply--
    Acquisition cost means the (total) cost of the asset including the 
cost to ready the asset for its intended use. For example, acquisition 
cost for equipment 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 include 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 recipient's or subrecipient's regular accounting practices.
    Advance payment means a payment that a Federal agency or pass-
through entity makes by any appropriate payment mechanism and payment 
method before the recipient or subrecipient 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 refer to the publicly available listing of 
Federal assistance programs managed and administered by the General 
Services Administration (GSA) at SAM.gov.
    Assistance Listing number means a unique number assigned to 
identify an Assistance Listing.
    Assistance Listing program title means the title that corresponds 
to the Assistance Listing number.
    Audit finding means deficiencies which the auditor is required to 
report in the schedule of findings and questioned costs. (See Sec.  
200.516(a))
    Auditee means any non-Federal entity that must be audited under 
this part. (See Sec.  200.501)
    Auditor means an auditor who is a public accountant or a Federal, 
State, local government, or Indian Tribe audit organization that 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 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 agency or pass-through entity.
    Budget period means the time interval from the start date of a 
funded portion of an award to the end date of that funded portion, 
during which recipients and subrecipients are authorized to incur 
financial obligations of 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 or equipment for a 
period of time under a lease contract. See 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, local 
government, or Indian Tribe to its departments and agencies on a 
centralized basis. The costs of these services may be allocated or 
billed to users.
    Claim means, depending on the context, either:
    (1) A written demand or assertion by one of the parties to a 
Federal award seeking as a matter of right:
    (i) The payment of money;
    (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 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 recipient or group of recipients to which specific provisions 
or exceptions may apply.
    Closeout means the process by which the Federal 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 defined by OMB in the 
compliance supplement or designated by a State for Federal awards the 
State provides to its subrecipients that meet the definition of a 
cluster of programs. When designating ``other clusters,'' 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 cluster of programs must be considered 
one program when determining major programs as described in Sec.  
200.518, and with the exception of R&D as described in Sec.  
200.501(d), 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

[[Page 69432]]

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 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, 
paragraph C.11.
    (2) For nonprofit organizations: Appendix IV, paragraph C.2.a.
    (3) For State and local governments: Appendix V, paragraph F.1.
    (4) For Indian Tribes: Appendix VII, paragraph D.1.
    Compliance supplement means an annually updated authoritative 
source of information for auditors that identifies 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 that 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 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.
    Continuation funding means a discretionary decision by a Federal 
agency to fund a second or subsequent budget period within the period 
of performance.
    Cooperative agreement means a legal instrument of financial 
assistance between a Federal agency or pass-through entity and a 
recipient or 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 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) Insurance.
    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 a central service 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, and capital projects. A cost 
objective may be a major function of the recipient or subrecipient, a 
particular service or project, a Federal award, or an indirect 
(Facilities & Administrative (F&A)) cost activity, as described in 
subpart E. See also the definitions of final cost objective and 
intermediate cost objective in this section.
    Cost sharing means the portion of project costs not paid by Federal 
funds or contributions (unless authorized by Federal statute). This 
term includes matching, which refers to required levels of cost share 
that must be provided. See Sec.  200.306.
    Disallowed cost means charges to a Federal award that the Federal 
agency or pass-through entity determines to be unallowable.
    Discretionary award means an award in which the Federal agency, in 
keeping with specific statutory authority that enables the agency to 
exercise judgment (``discretion''), selects the recipient 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 that equals or exceeds the lesser of the 
capitalization level established by the recipient or subrecipient for 
financial statement purposes, or $10,000. See this section's 
definitions of capital assets, computing devices, general purpose 
equipment, information technology systems, special purpose equipment, 
and supplies.
    Expenditures means charges made by a recipient or subrecipient to a 
Federal award.
    (1) The charges may be reported on a cash or accrual basis as long 
as the methodology is disclosed and 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 
recipient or subrecipient 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 has the meaning in paragraph (2) of this definition 
unless the context clearly indicates that the more general meaning in 
paragraph (1) of this definition is intended:
    (1) An ``agency'' as defined at 5 U.S.C. 551(1) and further 
clarified by 5 U.S.C. 552(f); or
    (2) An ``agency'' as defined at 5 U.S.C. 551(1) and further 
clarified by 5 U.S.C. 552(f) that provides a Federal award directly to 
a recipient.
    See also definitions of Federal award and recipient.
    Federal Audit Clearinghouse (FAC) means the repository of record

[[Page 69433]]

designated by OMB where non-Federal entities must transmit the 
information required by subpart F.
    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 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 
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 government-owned, contractor- operated (GOCO) facilities.
    (4) See also definitions of Federal financial assistance, grant 
agreement, and cooperative agreement.
    Federal award date means the date when the authorized official of 
the Federal agency signed (physically or digitally) the Federal award 
or when an alternative binding agreement, consistent with the 
requirements of 31 U.S.C. 1501, is reached with the recipient.
    Federal financial assistance means:
    (1) Assistance that recipients or subrecipients 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 recipients or subrecipients 
receive or administer in the form of:
    (i) Loans;
    (ii) Loan Guarantees;
    (iii) Interest subsidies; and
    (iv) Insurance.
    (3) For Sec.  200.216, Federal financial assistance includes 
assistance that recipients or subrecipients 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 paid using Federal funds.
    Final cost objective means a cost objective that has allocated to 
it both direct and indirect costs and, in the recipient's or 
subrecipient's accumulation system, is one of the final accumulation 
points, such as a particular award, internal project, or other direct 
activity of a recipient or subrecipient. See also the definitions of 
cost objective and intermediate cost objective in this section.
    Financial obligations means orders placed for property and 
services, contracts and subawards made, and similar transactions that 
require payment by a recipient or subrecipient under a Federal award 
that result in expenditures by a recipient or subrecipient under a 
Federal award.
    Fixed amount award means a type of grant or cooperative agreement 
pursuant to which the Federal agency or pass-through entity provides a 
specific amount of funding 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 
recipient or subrecipient and the Federal 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.
    For-profit organization generally means an organization or entity 
organized for the purpose of earning a profit. The term includes but is 
not limited to:
    (1) An ``S corporation'' incorporated under Subchapter S of the 
Internal Revenue Code;
    (2) A corporation incorporated under another authority;
    (3) A partnership;
    (4) A limited liability company or partnership; and
    (5) A sole proprietorship.
    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 the 
country where it is registered and is not a university, college, 
accredited degree-granting institution of education, private 
foundation, hospital, an 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.

[[Page 69434]]

    General purpose equipment means equipment that 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 Government Accounting 
Standards Board (GASB) and the Financial Accounting Standards Board 
(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 
apply to financial audits.
    Grant agreement or grant means a legal instrument of financial 
assistance between a Federal agency or pass-through entity and a 
recipient or subrecipient 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 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 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 an applicant or that owns or controls one or more 
entities that control an immediate owner of an applicant. 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 a payment that should not have been made or 
that was made in an incorrect amount under statutory, contractual, 
administrative, or other legally applicable requirements. The term 
improper payment includes: any payment to an ineligible recipient; any 
payment for an ineligible good or service; any duplicate payment; any 
payment for a good or service not received, except for those payments 
where authorized by law; any payment that is not authorized by law; and 
any payment that does not account for credit for applicable discounts. 
See OMB Circular A-123 Appendix C, Requirements for Payment Integrity 
Improvement for additional definitions and guidance on the requirements 
for payment integrity.
    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. See 25 U.S.C. 5304(e). This includes any Indian Tribe 
identified in the annually published Bureau of Indian Affairs list of 
``Indian Entities Recognized and Eligible to Receive Services'' and 
other entities that qualify as an Alaska Native village or regional 
village corporation as defined in or established pursuant to the Alaska 
Native Claims Settlement Act.
    Indirect (facilities & administrative (F&A)) cost 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. It may be necessary to establish multiple pools of indirect 
costs to facilitate equitable distribution of indirect expenses to the 
cost objectives served. Indirect 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 
recipient to substantiate its request to establish 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.
    Institution of Higher Education (IHE) is defined at 20 U.S.C. 1001.
    Intangible property means property having no physical existence, 
such as trademarks, copyrights, data (including data licenses), 
websites, IP licenses, trade secrets, patents, patent applications, and 
property such as loans, notes and other debt instruments, lease 
agreements, stocks and other instruments of property ownership of 
either tangible or intangible property ownership, such as intellectual 
property, software, or software subscriptions/licenses. 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 this 
section's definitions of cost objective and final cost objective.
    Internal control for recipients and subrecipients means:
    (1) Processes designed and implemented by recipients and 
subrecipients 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.
    Key Personnel means any individuals (including employees and 
contractors) working under a Federal award that are designated in the 
Federal award as being particularly integral or meaningful to the 
program.
    Loan means a Federal loan or loan guarantee received or 
administered by a recipient, except as used in this section's 
definition of program income.
    (1) The term ``direct loan'' means a disbursement of funds by the 
Federal Government to a non-Federal borrower under a contract that 
requires the repayment of such funds with or without interest. The term 
includes the purchase of, or participation in, a loan made by another 
lender and financing arrangements that defer payment for more than 90 
days, including the sale of a Federal Government asset on credit terms. 
The term does not include the acquisition of a federally guaranteed 
loan in satisfaction of default claims or the price support loans of 
the Commodity Credit Corporation.
    (2) The term ``direct loan obligation'' means a binding agreement 
by a Federal 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 pledges for the payment of all or a part 
of the principal or interest on any debt obligation of a

[[Page 69435]]

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 agency to make a loan guarantee when specified 
conditions are fulfilled by the borrower, the lender, or any other 
party to the guarantee agreement.
    Local government means any unit of government within a State, 
including a:
    (1) County;
    (2) Borough;
    (3) Municipality;
    (4) City;
    (5) Town;
    (6) Township;
    (7) Parish;
    (8) Local public authority, including any public housing agency 
under the United States Housing Act of 1937;
    (9) Special district;
    (10) School district;
    (11) Intrastate district;
    (12) Council of governments, whether or not incorporated as a 
nonprofit corporation under State law; and
    (13) Any other agency or instrumentality of a multi-, regional, or 
intra-State or local government.
    Major program means a Federal program determined by the auditor to 
be a major program in accordance with Sec.  200.518 or a program 
identified as a major program by a Federal agency or pass-through 
entity in accordance with Sec.  200.503(e).
    Management decision means the Federal 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 an individual procurement transaction for 
supplies or services, the aggregate amount of which does not exceed the 
micro-purchase threshold. Micro-purchases comprise a subset of a 
recipient's or subrecipient's small purchases using informal 
procurement methods as set forth in Sec.  200.320.
    Micro-purchase threshold means the dollar amount at or below which 
a recipient or subrecipient 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 
recipient or subrecipient 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 $50,000 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 $50,000. 
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 agency 
to specific recipients in accordance with statutory, eligibility, and 
compliance requirements, such that in keeping with specific statutory 
authority, the Federal agency has cannot exercise judgment 
(``discretion''). A non-discretionary award amount could be 
specifically determined 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 organization that:
    (1) Is operated primarily for scientific, educational, service, 
charitable, or similar purposes in the public interest;
    (2) Is not organized primarily for profit;
    (3) Uses net proceeds to maintain, improve, or expand the 
organization's operations; and
    (4) Is not an IHE.
    Notice of funding opportunity means a formal announcement of the 
availability of Federal funding through a financial assistance program 
from a Federal agency. The notice of funding opportunity provides 
information on the award, such as who is eligible to apply, the 
evaluation criteria for selecting a recipient or subrecipient, the 
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 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 recipient or subrecipient 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 recipient or subrecipient, then the Federal agency 
with the predominant amount of total funding is the designated 
oversight agency for audit. When there is no direct funding, the 
Federal agency that 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 generally means an individual who is not a recipient or 
subrecipient staff member or consultant, or an individual who is 
developing or leading the implementation of the Federal award; but 
rather attending, benefitting from, or is otherwise playing a role in 
the overall program activities. Examples include, community members 
participating in a community outreach program, members of the public 
whose perspectives or input are sought as part of a program, exchange 
students, or conference attendees.
    Participant support costs means direct costs that support 
participants and their involvement in a Federal award, such as 
stipends, subsistence allowances, travel allowances, registration fees, 
dependent care, and per diem paid directly to or on behalf of 
participants.
    Pass-through entity means a recipient or subrecipient that provides 
a subaward to a subrecipient (including lower tier subrecipients) to 
carry out part of a Federal program.
    Performance goal means a measurable 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 (for example, 
discretionary research awards), this may be limited to the requirement 
to submit technical performance reports (to be evaluated in accordance 
with agency policy).
    Period of performance means the time during which the recipient and 
subrecipient must perform and complete the work authorized under the 
Federal award. It is the time interval between the start and end date 
of a Federal award, which may include one or more funded portions or 
budget

[[Page 69436]]

periods. The period of performance does not commit the Federal agency 
to fund the award beyond the currently approved budget period.
    Personal property means property other than real property. It may 
be tangible 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 PII is 
available in public sources such as telephone books, websites, and 
university listings. This type of information is considered Public PII. 
Public PII 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 attached to any 
single category of information or technology. Instead, 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 could 
be used to identify an individual when combined with other available 
information.
    Prior approval means the written approval by an authorized official 
of a Federal agency or pass-through entity of certain costs or 
programmatic decisions.
    Program income means gross income earned by the recipient or 
subrecipient that is directly generated by a supported activity or 
earned as a result of the Federal award during the period of 
performance except as provided in Sec.  200.307(c). Program income 
includes but is not limited to income from fees for services performed, 
the use or rental of real or personal property acquired under 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 
Sec.  200.407. See also 35 U.S.C. 200-212 ``Disposition of Rights in 
Educational Awards,'' which applies to inventions made under Federal 
awards.
    Project cost means total allowable costs incurred under a Federal 
award and all cost sharing, including third-party contributions.
    Property means real property or personal property. See this 
section's definitions of real property and personal property.
    Protected Personally Identifiable Information (Protected PII) means 
an individual's first name or first initial and last name in 
combination with any one or more type 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 definition does not include PII that must 
be disclosed by law. See this section's definition of Personally 
Identifiable Information (PII).
    Questioned cost has the meaning given in paragraphs (1) through 
(3).
    (1) Questioned cost means an amount, expended or received from a 
Federal award, that in the auditor's judgment:
    (i) Is noncompliant or suspected noncompliant with Federal 
statutes, regulations, or the terms and conditions of the Federal 
award;
    (ii) At the time of the audit, lacked adequate documentation to 
support compliance; or
    (iii) Appeared unreasonable and did not reflect the actions a 
prudent person would take in the circumstances.
    (2) The questioned cost amount under (1)(ii) is calculated as if 
the portion of a transaction that lacked adequate documentation were 
confirmed noncompliant.
    (3) There is no questioned cost solely because of:
    (i) Deficiencies in internal control; or
    (ii) Noncompliance with reporting requirements if this 
noncompliance does not affect the amount expended or received from the 
Federal award.
    (4) Known questioned cost means a questioned cost specifically 
identified by the auditor. Known questioned costs are a subset of 
likely questioned costs.
    (5) Likely questioned cost means the auditor's best estimate of 
total questioned costs, not just the known questioned costs. Likely 
questioned costs are developed by extrapolating from audit evidence 
obtained, for example, by projecting known questioned costs identified 
in an audit sample to the entire population from which the sample was 
drawn. In evaluating the effect of questioned costs on the opinion on 
compliance, the auditor considers the likely questioned costs, not just 
the known questioned costs.
    Real property means land, including land improvements, structures, 
appurtenances thereto, and legal interests in land such as a fee title, 
licenses, rights of way, easements, but excludes moveable machinery and 
equipment.
    Recipient means an entity that receives a Federal award directly 
from a Federal agency to carry out an activity under a Federal program. 
The term recipient does not include subrecipients or individuals that 
are participants and beneficiaries of the award.
    Renewal award means an award made after the expiration of a Federal 
award for which the start date is contiguous with, or closely follows, 
the end of the expiring Federal award. The start date of a renewal 
award begins a new and distinct period of performance.
    Research and Development (R&D) means all basic and applied research 
activities and all development activities performed by a recipient or 
subrecipient. The term research also includes activities involving the 
training of individuals in research techniques where such activities 
use the same facilities as other research and development activities 
and where such activities are not included in the instruction function. 
``Research'' is the 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 
to produce useful materials, devices, systems, or methods, including 
designing and developing prototypes and processes.
    Simplified acquisition threshold means the dollar amount below 
which a recipient or subrecipient may purchase property or services 
using small purchase methods (see Sec.  200.320). Recipients and 
subrecipients adopt small purchase procedures to expedite the purchase 
of items at or below the simplified acquisition threshold. The 
simplified acquisition threshold set in the FAR at 48 CFR part 2, 
subpart 2.1 is used in this part as the simplified acquisition 
threshold for secondary procurement activities administered under 
Federal awards. The recipient or subrecipient is responsible for 
determining an appropriate simplified acquisition threshold, which is 
less than or equal to the dollar value established in the FAR, based on 
internal controls, an evaluation of risk, and its documented 
procurement procedures. Recipients and subrecipients should also 
determine if local government purchasing laws apply. This threshold 
must never exceed the dollar value established in the FAR.
    Special purpose equipment means equipment that is used only for 
research, medical, scientific, or other

[[Page 69437]]

technical activities. Examples of special purpose equipment include 
microscopes, x-ray machines, surgical instruments, spectrometers, and 
associated software. 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 the U.S. Department of Education administers, 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 contribute to the goals and 
objectives of the project by carrying out part of a Federal award 
received by the pass-through entity. It does not include payments to a 
contractor or to an individual that is a Federal program beneficiary. A 
subaward may be provided through any legal agreement, including an 
agreement the pass-through entity considers a contract.
    Subrecipient means an entity that receives a subaward from a pass-
through entity to carry out part of a Federal award. It does not 
include an individual that is a Federal program beneficiary or 
participant. A subrecipient may also be a recipient of other Federal 
awards directly from a Federal 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.
    Supply means all tangible personal property other than those 
described in the equipment definition. A computing device is a supply 
if the acquisition cost is below the lesser of the capitalization level 
established by the recipient or subrecipient for financial statement 
purposes or $10,000, regardless of the length of its useful life. See 
this section's definitions of computing devices and equipment.
    Telecommunications cost means the cost of using communication 
technologies such as mobile phones, landlines, and the internet.
    Termination means the action a Federal agency or pass-through 
entity takes to discontinue a Federal award, in whole or in part at any 
time before the planned end date of the period of performance. 
Termination does not include discontinuing a Federal award (for 
example, not issuing continuation funding which is at the discretion of 
a Federal agency), or a lack of available funds.
    Third-party in-kind contributions means the value of non-cash 
contributions (meaning, property or services) that:
    (1) Benefit a federally-assisted project or program Federal award; 
and
    (2) Are contributed by non-Federal third parties, without charge, 
to a recipient or subrecipient under a Federal award.
    Unliquidated financial obligation means financial obligations 
incurred by the recipient or subrecipient but not paid (liquidated) for 
financial reports prepared on a cash basis. For reports prepared on an 
accrual basis, these are financial obligations incurred by the 
recipient or subrecipient but not recorded.
    Unobligated balance means the amount of funds under a Federal award 
that the recipient or subrecipient has not obligated. The amount is 
computed by subtracting the cumulative amount of the recipient's or 
subrecipient's unliquidated financial obligations and expenditures 
under the Federal award from the cumulative amount of funds the Federal 
agency or pass-through entity authorized the recipient or subrecipient 
to obligate.
    Voluntary committed cost sharing means cost sharing specifically 
pledged voluntarily in the proposal's budget on the part of the 
recipient or subrecipient, which becomes a binding requirement of the 
Federal award. See Sec.  200.306.

Subpart B--General Provisions


Sec.  200.100  Purpose.

    (a) Purpose. (1) This part establishes uniform administrative 
requirements, cost principles, and audit requirements for Federal 
awards. Federal agencies must not impose additional requirements except 
as allowed in Sec. Sec.  200.102, 200.211, or unless specifically 
required by Federal statute, regulation, or Executive order.
    (2) This part provides Federal agencies with the policy for 
collecting and submitting information on all Federal financial 
assistance programs to the Office of Management and Budget (OMB) and 
communicating this information to the public. It also establishes 
Federal policies related to the delivery of this information to the 
public, including through the use of electronic media. It also sets 
forth how the General Services Administration (GSA), OMB, and Federal 
agencies implement the Federal Program Information Act (31 U.S.C. 6101-
6106).
    (b) Administrative requirements. Subparts B through D set forth the 
uniform administrative requirements for Federal financial assistance. 
This includes establishing requirements for Federal agencies management 
of Federal financial assistance programs before a Federal award is 
made, and requirements that Federal agencies may impose on recipients 
and subrecipients throughout the lifecycle of a Federal award.
    (c) Cost principles. Subpart E establishes principles for 
determining allowable costs incurred by recipients and subrecipients 
under Federal awards. These principles are for the purpose of cost 
determination. They do not address the circumstances nor dictate the 
extent of Federal Government funding of a particular program or 
project.
    (d) Single Audit Requirements and Audit Follow-up. Subpart F is 
issued pursuant to the Single Audit Act Amendments of 1996 (31 U.S.C. 
7501-7507). Subpart F sets forth the standards for achieving 
consistency and uniformity among Federal agencies for the audit of non-
Federal entities administering Federal awards. Subpart F also provides 
the policies and procedures for Federal agencies or pass-through 
entities when using the results of these audits.


Sec.  200.101  Applicability.

    (a) General applicability to Federal agencies. (1) Subparts A 
through F apply to Federal agencies that make Federal awards to non-
Federal entities.
    (2) Federal agencies may apply subparts A through E to Federal 
agencies, for-profit organizations, foreign public entities, or foreign 
organizations as permitted in agency regulations or program statutes, 
except when a Federal agency determines that the application of these 
subparts would be inconsistent with the international responsibilities 
of the United States or the laws of a foreign government. If a Federal 
agency does not apply subpart E to for-profit organizations, the cost 
principles of the Federal Acquisition Regulations (FAR) will apply. 
Subpart F only applies to non-Federal entities as defined in the Single 
Audit Act Amendments of 1996 (31 U.S.C. 7501-7507). Federal agencies 
should apply the requirements to all recipients in a consistent and 
equitable manner to the

[[Page 69438]]

extent permitted within applicable statutes, regulations, and policies.
    (b) Applicability to different types of Federal awards. (1) 
Throughout subparts A through F, the word ``must'' indicates a 
requirement. The word ``should'' or ``may'' indicates a recommended 
approach and permits discretion.
    (2) Paragraphs (b)(3) through (6) of this section describe what 
portions of this part apply to specific types of Federal financial 
assistance. The terms and conditions of Federal awards and the 
requirements of this part flow down to subrecipients unless indicated 
otherwise in Federal statute, regulation, or the terms and conditions 
of the Federal award. Pass-through entities must comply with the 
requirements described in Sec. Sec.  200.331 through 200.333, and any 
other sections directed toward pass-through entities.
    (3) Subparts A and B apply to all Federal financial assistance with 
the following exceptions:
    (i) Sections 200.111, 200.112, and 200.113 do not apply to 
agreements for loans, loan guarantees, interest subsidies, insurance, 
and procurement contracts under the FAR and subcontracts under those 
contracts.
    (4) Subparts C and D apply only to grants and cooperative 
agreements with the following exceptions:
    (i) Section 200.203 also applies to agreements for loans, loan 
guarantees, interest subsidies, and insurance;
    (ii) Section 200.216 also applies to loans and loan guarantees; and
    (iii) Sections 200.303 and 200.331 through 200.333 also apply to 
all types of Federal financial assistance.
    (5) Subpart E applies to grants, cooperative agreements, and 
certain procurement contracts under the FAR but does not apply to the 
following:
    (i) Grants and Cooperative Agreements providing food commodities;
    (ii) Fixed Amount Awards;
    (iii) Agreements for loans, loan guarantees, interest subsidies, 
and insurance;
    (iv) Procurement contracts under the FAR that are not negotiated; 
and
    (v) Federal awards to hospitals (See Appendix IX--Hospital Cost 
Principles)
    (6) Subpart F only applies to the following:
    (i) Grants and cooperative agreements (including fixed amount 
awards);
    (ii) Contracts and subcontracts awarded under the FAR (except for 
fixed price contracts and subcontracts);
    (iii) Agreements for loans, loan guarantees, interest subsidies, 
and insurance; and
    (iv) Any other form of Federal financial assistance as defined by 
the Single Audit Act Amendment of 1996.
    (c) Federal award of a cost-reimbursement contract under the 
Federal Acquisition Regulations (FAR) to a non-Federal entity. When a 
non-Federal entity is awarded a cost-reimbursement contract under the 
FAR, only subpart D, Sec. Sec.  200.331 through 200.333, and subparts E 
and F are incorporated by reference into the contract. The requirements 
of subparts D, E, and F are supplementary to the FAR and the contract. 
In cases of conflict, the FAR and the terms and conditions of the 
contract awarded under the FAR shall prevail over the incorporated 
requirements from this part. When the Cost Accounting Standards (CAS) 
are applicable to the contract, they also take precedence over the 
incorporated requirements from this part. In addition, costs that are 
identified as unallowable under 41 U.S.C. 4304(a) and as stated 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, the terms of 
the contract and the FAR apply.
    (d) Governing provisions. With the exception of subpart F, which is 
required by the Single Audit Act, Federal statutes or regulations 
govern in any circumstances where they conflict with the provisions of 
this part. For agreements with Indian Tribes, this includes the 
provisions of the Indian Self-Determination and Education and 
Assistance Act (ISDEAA), as amended (see 25 U.S.C. 5301-5423.
    (e) Program applicability. Except for Sec. Sec.  200.203, 200.216, 
and 200.331 through 200.333, the requirements in subparts C, D, and E 
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 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. Sec.  200.203 
and 200.216, the guidance in subpart C 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) Federal Payments for Foster Care, Prevention, and Permanency 
(Title IV-E of the Act, 42 U.S.C. 670-679c);
    (iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and 
XVI-AABD of the Act, as amended);
    (v) Medical Assistance (Medicaid) (Title XIX of the Act, 42 U.S.C. 
1396-1396w-5) not including the State Medicaid Fraud Control program 
authorized by Section 1903(a)(6)(B) of the Social Security Act (42 
U.S.C. 1396b(a)(6)(B)); and
    (vi) Children's Health Insurance Program (Title XXI of the Act, 42 
U.S.C. 1397aa-1397mm).
    (2) A Federal award for an experimental, pilot, or demonstration 
project that is also supported by a Federal award listed in paragraph 
(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);

[[Page 69439]]

    (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.


Sec.  200.102  Exceptions.

    (a) OMB exceptions. Except for subpart F, OMB may allow either 
exceptions to or deviations from requirements of this part for classes 
of Federal awards, or of recipients, subrecipients, or both, when not 
prohibited by statute. For example, OMB may allow exceptions or 
deviations in support of innovative program designs or emergency 
situations. Deviation means applying more or less restrictive 
requirements to a class of Federal awards, recipients, or 
subrecipients.
    (b) Statutory exceptions. When required by Federal statute, a 
Federal agency does not need OMB approval to allow exceptions to or 
deviations from requirements of this part (except for subpart F) for a 
class of Federal awards or recipients, subrecipients, or both.
    (c) Agency exceptions. Federal agencies may allow exceptions to 
requirements of this part for individual Federal awards, or recipients, 
or subrecipients on a case-by-case basis when the exceptions are not 
prohibited by statute and OMB approval is not expressly required by 
this part. Only the cognizant agency for indirect costs may authorize 
exceptions related to cost allocation plans or indirect cost rate 
proposals. A Federal agency may also apply less restrictive 
requirements when issuing fixed amount awards (see Sec.  200.1), except 
for those requirements imposed by statute or in subpart F.


Sec.  200.103  Authorities.

    This part is issued under the following authorities.
    (a) Subparts B through D are authorized under 31 U.S.C. 503 (the 
Chief Financial Officers Act, Functions of the Deputy Director for 
Management); the Federal Program Information Act (Pub. L. 95-220 and 
Pub. L. 98-169, as amended, codified at 31 U.S.C. 6101-6106); the 
Federal Grant and Cooperative Agreement Act of 1977 (Pub. L. 95-224, as 
amended, codified at 31 U.S.C. 6301-6309); 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''); and the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507).
    (b) Subpart E 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. 1101-1126); 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.'' OMB also relies on authority under 31 U.S.C. 503 and 31 
U.S.C. 6307.
    (c) Subpart F is authorized under the Single Audit Act Amendments 
of 1996, (31 U.S.C. 7501-7507). OMB also relies on authority under 31 
U.S.C. 503 and 31 U.S.C. 6307.


Sec.  200.104  Supersession.

    This part supersedes previous OMB guidance issued under Title 2, 
subtitle A, chapter I of the Code of Federal Regulations related to 
uniform administrative requirements, cost principles, and audit 
requirements for Federal awards.


Sec.  200.105  Effect on other issuances.

    (a) Superseding inconsistent requirements. For Federal awards made 
subject to this part by a Federal agency, this part takes precedence 
over any administrative requirements, program manuals, handbooks, and 
other non-regulatory materials that are inconsistent with the 
requirements of those subparts upon implementation of this part by the 
Federal agency, except to the extent that they are required by statute 
or authorized in accordance with Sec.  200.102.
    (b) Imposition of requirements on recipients. Agencies may only 
impose legally binding requirements on recipients and subrecipients 
through:
    (1) Notice and public comment procedures through an approved agency 
process, including as authorized by this part, other statutes, or 
regulations; or
    (2) Incorporating requirements into the terms and conditions of a 
Federal award as permitted by Federal statute, regulation, or this 
part.


Sec.  200.106  Agency implementation.

    The specific requirements and responsibilities of Federal agencies, 
non-Federal entities, recipients, and subrecipients 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.


Sec.  200.107  OMB responsibilities.

    OMB will review Federal agency regulations and implementation of 
this part. OMB will provide interpretations of policy requirements and 
assistance to ensure effective, efficient, and consistent 
implementation. Any exceptions will be subject to approval by OMB and 
only with adequate justification from the Federal agency.


Sec.  200.108  Inquiries.

    Inquiries from Federal agencies concerning this part may be 
directed to OMB. Inquiries from recipients or subrecipients should be 
addressed to the Federal agency, the cognizant agency for indirect 
costs, the cognizant agency for audit, or the pass-through entity as 
appropriate.


Sec.  200.109  Review date.

    OMB will review this part periodically.


Sec.  200.110  Effective date.

    (a) The standards set forth in this part affecting the 
administration of Federal awards by Federal agencies become effective 
once implemented by Federal agencies or when any future amendment to 
this part becomes final.
    (b) Existing negotiated indirect cost rates will remain in place 
until they expire. The effective date of changes to indirect cost rates 
must be based upon the date a newly re-negotiated rate goes into effect 
for the recipient's or subrecipient's fiscal year. Therefore, for 
indirect cost rates and cost allocation plans, the revisions to this 
part (as of the publication date for revisions to this guidance) become 
effective in generating proposals and negotiating a new rate (when the 
rate is re-negotiated).


Sec.  200.111  English language.

    (a) All Federal financial assistance announcements, applications, 
and Federal award information should be in the English language and 
must be in terms of U.S. dollars. However, Federal agencies, 
recipients, and subrecipients may issue or translate a Federal award

[[Page 69440]]

or other documents into another language. A Federal agency may 
translate formal or informal announcements of the availability of 
Federal funding through a financial assistance program, such as a 
notice of funding opportunity, when translations may serve to increase 
the pool of applicants or the participation of a specific community 
(for example, programs administered in foreign countries where the 
primary language is not English). There must be official controlling 
English versions of announcements and award documents.
    (b) Applications, reports, and official correspondence may be 
submitted in languages other than English if specified in the notice of 
funding opportunity or the terms and conditions of the Federal award.
    (c) In the event of inconsistency between English and another 
language, the English language meaning will control. When a significant 
portion of the recipient's or subrecipient's employees administering a 
Federal award are not fluent in English, the Federal award should be 
provided in English and the language(s) with which employees are more 
familiar.


Sec.  200.112  Conflict of interest.

    Federal agencies must establish conflict of interest policies for 
Federal awards. A recipient or subrecipient must disclose in writing 
any potential conflict of interest to the Federal agency or pass-
through entity in accordance with the established Federal agency 
policies.


Sec.  200.113  Mandatory disclosures.

    An applicant, recipient, or subrecipient of a Federal award must 
promptly disclose whenever they have credible evidence of a violation 
of Federal criminal law potentially affecting the Federal award (for 
example, fraud, embezzlement, bribery, gratuity violations, identity 
theft, or sexual assault and exploitation) or a violation of the civil 
False Claims Act. (See also 2 CFR 175.105 regarding the obligation to 
report credible information related to conduct prohibited by the 
Trafficking Victims Protection Act, 22 U.S.C. 7104c). The disclosure 
must be made in writing to the Federal agency, pass-through entity (if 
applicable), and the agency's Office of Inspector General. Recipients 
and subrecipients are required to report matters related to recipient 
integrity and performance in accordance with Appendix XII of this part. 
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.)

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 agencies in the program 
planning, announcement, application, and award processes.


Sec.  200.201  Use of grants, cooperative agreements, fixed amount 
awards, and contracts.

    (a) Federal awards. The Federal agency or pass-through entity must 
decide on the appropriate type of agreement for a Federal award (for 
example, a grant, cooperative agreement, subaward, or contract) in 
accordance with this guidance. See the Federal Grant and Cooperative 
Agreement Act (31 U.S.C. 6301-6309).
    (b) Fixed amount awards. The Federal agency or pass-through entity 
(see Sec.  200.333) may use fixed amount awards (see Fixed amount 
awards in Sec.  200.1) for 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 
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 
budget based on a reasonable estimate of actual costs. Accountability 
must be based on performance and results, which can be communicated in 
performance reports or through routine monitoring. Except in the case 
of termination before the completion of the Federal award, there is no 
review of the actual costs incurred by the recipient or subrecipient 
under the Federal award. Therefore, no financial reporting is required. 
This does not absolve the awardee from the record retention 
requirements contained in sections 200.334 through 200.338. Payments 
must be based on meeting specific requirements of the Federal 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 payment as well 
as the ``milestone'' or event triggering the payment, should be agreed 
to in advance and included in the Federal award;
    (ii) On a unit price basis. The defined unit(s) or price(s) should 
be agreed to in advance and included in the Federal award; or
    (iii) In one payment at the completion of the Federal award.
    (2) A fixed amount award may not be used in programs that require 
mandatory cost sharing.
    (3) A fixed amount award may generate and use program income in 
accordance with the terms and conditions of the Federal award; however, 
the requirements of Sec.  200.307 do not apply.
    (4) At the end of a fixed amount award, the recipient or 
subrecipient must certify in writing to the Federal agency or pass-
through entity that the project was completed as agreed to in the 
Federal award and that all expenditures were incurred in accordance 
with Sec.  200.403. When the required activities were not carried out, 
including fixed amount awards paid on a unit price basis under 
200.201(b)(1)(ii), the amount of the Federal award must be reduced by 
the amount that reflects the activities that were not completed in 
accordance with the Federal award. When the required activities were 
completed in accordance with the terms and conditions of the Federal 
award, the recipient or subrecipient is entitled to any unexpended 
funds.
    (5) Periodic reports may be established for fixed amount awards.
    (6) Prior approval requirements that apply to fixed amount awards 
are Sec.  200.308 (paragraphs 1 through 3, 6, and 10) and Sec.  
200.333.


Sec.  200.202  Program planning and design.

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

[[Page 69441]]

well as the Foundations for Evidence-Based Policymaking Act (Pub. L. 
115-435), as applicable; and
    (5) To encourage the recipient to engage members of the community 
that will benefit from or be impacted by a program during the design 
phase, when practicable.
    (b) Federal agencies should develop programs in consultation with 
communities benefiting from or impacted by the program. In addition, 
Federal agencies should consider available data and evaluation results 
from past programs and make every effort to extend eligibility 
requirements to all potential applicants. Federal agencies are 
encouraged to coordinate with other agencies during program planning 
and design, particularly when the goals and objectives of a program or 
project align with those of other agencies.


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

    (a) The Federal agency must maintain an accurate list of Federal 
programs in the Assistance Listings maintained by the General Services 
Administration (GSA) at SAM.gov.
    (1) The Assistance Listings is the comprehensive government-wide 
source of Federal financial assistance program information produced by 
the executive branch of the Federal Government.
    (2) The information that the Federal agency must submit to GSA for 
approval by OMB is listed in paragraph (b). GSA must prescribe the 
format for the submission in coordination with OMB.
    (3) The Federal agency must assign the appropriate Assistance 
Listing before making the Federal award unless exigent circumstances 
require otherwise (for example, timing requirements imposed by a 
Federal statute).
    (b) To the extent practicable, the Federal agency must create, 
update, and manage Assistance Listing entries based on the authorizing 
statute for the program and comply with additional guidance provided by 
GSA (in consultation with OMB) to ensure consistent and accurate 
information is available to prospective applicants. Assistance Listings 
should be communicated to the public in plain language. Accordingly, 
Federal agencies must submit the following information to GSA when 
creating an Assistance Listing:
    (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 performance measurement should align with the 
strategic goals and objectives within the Federal agency's performance 
plan and should support the Federal agency's performance measurement, 
management, customer service initiatives, and reporting as required by 
Part 6 of OMB Circular A-11;
    (2) Identification. Identification of whether the program will 
issue Federal awards on a discretionary or non-discretionary basis;
    (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 the agency, sub-agency, or specific program 
unit that will issue the Federal awards (to the extent possible) and 
associated funding identifier (for example, 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 (for 
example, type of recipient); and
    (6) Applicability of Single Audit Requirements. Applicability of 
Single Audit Requirements as required by subpart F.


Sec.  200.204  Notices of funding opportunities.

    The Federal agency must announce specific funding opportunities for 
Federal financial assistance that will be openly competed. The term 
openly competed means opportunities that are not directed to one or 
more specifically identified applicants. To the extent possible, the 
Federal agency should communicate opportunities to the public in plain 
language to ensure the announcement is accessible to diverse 
communities of eligible applicants, including underserved communities. 
The Federal agency should also make efforts to limit the length and 
complexity of the announcement and only include the information that is 
necessary for the effective communication of the program objectives. 
Federal agencies may offer pre-application technical assistance or 
provide clarifying information for funding opportunities. However, 
Federal agencies must ensure these resources are made accessible and 
widely available to all potential applicants; for example, by posting 
answers to questions and requests on Grants.gov. The Federal agency 
should make every effort to identify in the NOFO all eligible 
applicants (for example, different types of nonprofit organizations 
such as labor unions). The following information must be provided in a 
public notice:
    (a) Summary information in notices of funding opportunities. The 
Federal agency must display the following information on Grants.gov, in 
a location preceding the full text of the announcement:
    (1) Federal Agency Name;
    (2) Funding Opportunity Title;
    (3) Announcement Type (whether the funding opportunity is the 
initial announcement or a modification of a previously announced 
opportunity);
    (4) Funding Opportunity Number (required, if the Federal agency has 
assigned a number to the funding opportunity announcement);
    (5) Assistance Listing Number(s);
    (6) Funding Details. To the extent appropriate, the total amount of 
funding that the Federal agency expects to award, the anticipated 
number of awards, and the expected dollar values of individual awards, 
which may be a range or average;
    (7) Key Dates. Key dates include due dates for submitting 
applications or Executive Order 12372 submissions, as well as for any 
letters of intent or preapplications. 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 Federal 
agency. If possible, the Federal agency should provide an anticipated 
award date. If the NOFO states that applications will be evaluated on a 
``rolling'' basis (that is, at different points during a specified 
period of time), the Federal agency should provide an estimate of the 
time needed to process an application and notify the applicant of the 
Federal agency's decision;
    (8) Executive Summary. A brief description that is written in plain 
language and summarizes the goals and objectives of the program, the 
target audience, and eligible applicants. The text of the executive 
summary should not exceed 500 words; and
    (9) Agency contact information.
    (b) Availability period. The Federal agency should make all funding 
opportunities available for application for at least 60 calendar days. 
However, the Federal agency may extend the availability period of an 
opportunity as needed. For example, extending the period may be 
necessary to provide technical assistance to an applicant pool that was 
not anticipated when the

[[Page 69442]]

announcement was made or has less experience with applying for Federal 
financial assistance. The Federal agency may also determine that an 
availability period of less than 60 days is sufficient for a particular 
funding opportunity. However, no funding opportunity should be 
available for less than 30 calendar days unless the Federal agency 
determines that exigent circumstances justify this.
    (c) Full text of funding opportunities. (1) The Federal agency must 
include the information in Appendix I for every funding opportunity.
    (2) Federal agencies should ensure that funding opportunities are 
written using plain language. To the extent possible Federal agencies 
must streamline opportunities to make them accessible, particularly for 
funding opportunities that are new, targeted to underserved 
communities, or intended to reach inexperienced applicants.
    (3) To reduce application burden, Federal agencies should consider 
whether programmatic or administrative requirements specific to the 
agency, program, or funding opportunity must be met at the time of 
application or as a requirement of receiving a Federal award.


Sec.  200.205  Federal agency merit review of proposals.

    Unless prohibited by Federal statute, the Federal agency must 
design and execute a merit review process of applications for 
discretionary Federal awards. The objective of a merit review process 
is to select recipients most likely to be successful in delivering 
results based on the program objectives as outlined in section Sec.  
200.202. A merit review is an objective process of evaluating Federal 
award applications in accordance with the written standards of the 
Federal agency. If utilizing external peer reviewers, these standards 
should identify the number of people the agency requires to participate 
in the merit review process and provide opportunities for a diverse 
group of participants, including those representing underserved 
communities. 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 agency must also periodically 
review its merit review process.


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

    (a) Review of OMB-designated repositories of government-wide data. 
(1) Prior to making a Federal award, the Federal agency is required to 
review eligibility information for applicants and financial integrity 
information for applicants available in OMB-designated databases per 
the Payment Integrity Information Act of 2019 (Pub. L. 116-117), the 
``Do Not Pay Initiative'' (31 U.S.C. 3354), and 41 U.S.C. 2313.
    (2) The Federal agency is required to review the responsibility and 
qualification records available in the non-public segment of the System 
for Award Management (SAM.gov) prior to making a Federal award where 
the Federal share is expected to exceed the simplified acquisition 
threshold. See 41 U.S.C. 2313. The Federal agency must consider all of 
the information available in SAM.gov with regard to the applicant and 
any immediate highest-level owner, predecessor (meaning, an 
organization that is replaced by a successor), or subsidiary, 
identified for that applicant in SAM.gov. See Public Law 112-239, 
National Defense Authorization Act for Fiscal Year 2013. The 
information in the system for a prior recipient of a Federal award must 
demonstrate a satisfactory record of administering programs or 
activities under Federal financial assistance or procurement awards, 
and integrity and business ethics. The Federal agency may make a 
Federal award to a recipient that does not fully meet these standards 
if it is determined that the information is not relevant to the Federal 
award under consideration or there are specific conditions that can 
appropriately mitigate the risk associated with the recipient in 
accordance with Sec.  200.208.
    (b) Risk Assessment. (1) The Federal agency must establish and 
maintain policies and procedures for conducting a risk assessment to 
evaluate the risks posed by applicants before issuing Federal awards. 
This assessment helps identify risks that may affect the advancement 
toward or the achievement of a project's goals and objectives. Risk 
assessments assist Federal managers in determining appropriate 
resources and time to devote to project oversight and monitor recipient 
progress. This assessment may incorporate elements such as the quality 
of the application, award amount, risk associated with the program, 
cybersecurity risks, and impacts on local jobs and the community. If 
the Federal agency determines that the Federal award will be made, 
specific conditions that address the assessed risk may be implemented 
in the Federal award. The risk criteria to be evaluated must be 
described in the announcement of the funding opportunity described in 
Sec.  200.204.
    (2) In evaluating risks posed by applicants, the Federal agency 
should consider the following items:
    (i) Financial stability. The applicant's record of effectively 
managing financial risks, assets, and resources;
    (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 of managing 
previous and current Federal awards, including compliance with 
reporting requirements and conformance to the terms and conditions of 
Federal awards, if applicable;
    (iv) Audit reports and findings. Reports and findings from audits 
performed under subpart F or the reports and findings of any other 
available audits, if applicable; and
    (v) Ability to effectively implement requirements. The applicant's 
ability to effectively implement statutory, regulatory, or other 
requirements imposed on recipients of Federal awards.
    (c) Adjustments to the Risk Assessment. The Federal agency may 
modify the risk assessment at any time during the period of 
performance, which may justify changes to the terms and conditions of 
the Federal award. See Sec.  200.208.
    (d) Suspension and debarment compliance. (1) The Federal agency 
must comply with the government-wide suspension and debarment guidance 
in 2 CFR part 180 and individual Federal agency suspension and 
debarment requirements in title 2 of the Code of Federal Regulations. 
Federal agencies must also require recipients to comply with these 
requirements. These requirements restrict making Federal awards, 
subawards, and contracts with certain parties that are debarred, 
suspended, or otherwise excluded from receiving Federal awards 
participating in Federal awards.


Sec.  200.207   Standard application requirements.

    (a) Paperwork clearances. The Federal 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, government-wide data elements 
available from the OMB-designated standards lead. OMB will authorize 
additional information collections only on a limited basis and 
consistent with these requirements.

[[Page 69443]]

    (b) Information collection. The Federal agency may inform 
applicants that they do not need to provide certain information already 
being collected through other means.


Sec.  200.208   Specific conditions.

    (a) Federal agencies are responsible for ensuring that specific 
Federal award conditions and performance expectations are consistent 
with the program design (See Sec.  200.202 and Sec.  200.301)
    (b) The Federal agency or pass-through entity may adjust specific 
conditions in the Federal award based on an analysis of the following 
factors:
    (1) Review of OMB-designated repositories of government-wide data 
(for example, SAM.gov) or review of its risk assessment (See Sec.  
200.206);
    (2) The recipient's or subrecipient's history of compliance with 
the terms and conditions of Federal awards;
    (3) The recipient's or subrecipient's ability to meet expected 
performance goals as described in Sec.  200.211; or
    (4) A determination that a recipient or subrecipient has adequate 
financial resources to perform the Federal award.
    (c) Specific conditions may include 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;
    (3) Requiring additional or more detailed financial reports;
    (4) Requiring additional project monitoring;
    (5) Requiring the recipient or subrecipient to obtain technical or 
management assistance; or
    (6) Establishing additional prior approvals.
    (d) Prior to imposing specific conditions, the Federal agency or 
pass-through entity must notify the recipient or subrecipient as to:
    (1) The nature of the specific condition(s);
    (2) The reason why the specific condition(s) is being imposed;
    (3) The nature of the action needed to remove the specific 
condition(s);
    (4) The time allowed for completing the actions; and
    (5) The method for requesting the Federal agency or pass-through 
entity to reconsider imposing a specific condition.
    (e) Any specific conditions 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 agency or pass-through entity is authorized 
to require a recipient or subrecipient to submit certifications and 
representations annually in SAM.gov. Submission may be required more 
frequently if a recipient or subrecipient fails to meet a requirement 
of a Federal award. When a recipient or subrecipient is provided an 
exception to the requirements of 2 CFR 25.110, the recipient or 
subrecipient must submit the appropriate assurance form (for example, 
SF-424B).


Sec.  200.210  Pre-award costs.

    For requirements on costs incurred by the applicant prior to the 
start date of the period of performance of the Federal award, see Sec.  
200.458.


Sec.  200.211  Information contained in a Federal award.

    The Federal award must include the following information:
    (a) Federal award performance goals. Where applicable, performance 
goals, indicators, targets, and baseline data must be included in the 
Federal award. The Federal agency must also specify in the terms and 
conditions of the Federal award how performance will be assessed, 
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 agency must 
include the following information in each Federal award:
    (1) Recipient Name (which must match the name associated with its 
unique entity identifier as defined at 2 CFR 25.400);
    (2) Recipient's Unique Entity Identifier;
    (3) Unique Federal Award Identification Number (FAIN);
    (4) Federal Award Date (see Federal award date in Sec.  200.1);
    (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, where applicable;
    (10) Total Amount of the Federal Award including, approved Cost 
Sharing;
    (11) Budget Approved by the Federal Agency;
    (12) Federal Award Description (to comply with statutory 
requirements (for example, FFATA));
    (13) Name of the Federal agency (including contact information for 
the awarding official),
    (14) Assistance Listings Number and Title;
    (15) 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 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 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. When the total 
Federal share of the Federal award may include more than $500,000 over 
the period of performance, the Federal agency must include the terms 
and conditions available in Appendix XII. See also Sec.  200.113.
    (iv) Future budget periods. When it is anticipated that the period 
of performance will include multiple budget periods, the Federal 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 agencies must inform recipients 
of the termination provisions in Sec.  200.340, including the 
applicable termination provisions in the Federal agency's regulations 
or terms and conditions of the Federal award.
    (2) The Federal award must incorporate, by reference, all general 
terms and conditions of the Federal award, which must be maintained on 
the Federal agency's website.
    (3) The Federal agency must provide a copy of the full text of the 
general terms and conditions if a recipient requests it.
    (4) The Federal agency must maintain an archive of previous 
versions of the general terms and conditions, with effective dates, for 
use by a recipient, auditors, or others. The archive should be located 
on the Federal agency's

[[Page 69444]]

website in the same place where current terms and conditions are 
available.
    (d) Federal award specific terms and conditions. The Federal agency 
must include in each Federal award any specific terms and conditions 
that are in addition to the general terms and conditions. See also 
Sec.  200.208. Whenever practicable, these specific terms and 
conditions should also be available on the Federal agency's website and 
in notices of funding opportunities (as outlined in Sec.  200.204).
    (e) Federal agency requirements. Any other information required by 
the Federal agency.


Sec.  200.212  Public access to Federal award information.

    (a) Except as noted in paragraph (c) of this section, the Federal 
agency must publish the required Federal award information on 
USAspending.gov in accordance with the guidance provided by OMB and the 
U.S. Department of the Treasury's DATA Act Information Model Schema 
(DAIMS).
    (b) All responsibility and qualification records posted in SAM.gov 
will be publicly available after a waiting period of 14 calendar days, 
except for:
    (1) Past performance reviews required by Federal Government 
contractors (See 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 a Federal agency.
    (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 an applicant is not 
qualified for a Federal award.

    (a) The Federal agency must report in SAM.gov if it does not make a 
Federal award to an applicant because it determines that the applicant 
does not meet the minimum qualification standards as described in Sec.  
200.206(a)(2). The Federal agency must report that determination only 
if all of the following apply:
    (1) The only basis for the determination is the applicant's prior 
record of performance on administering Federal awards or its record of 
integrity and business ethics, as described in Sec.  200.206(a)(2) 
(meaning, the applicant was determined to be qualified based on all 
factors other than those two standards); and
    (2) The total Federal share of the Federal award was expected to 
exceed the simplified acquisition threshold over the period of 
performance.
    (b) The Federal agency is not required to report a determination 
that an applicant is not qualified for a Federal award if they issue 
the Federal award in accordance with the requirements of Sec.  200.208.
    (c) If the Federal agency reports a determination that an applicant 
is not qualified for a Federal award, the Federal agency also must 
notify the applicant that:
    (1) The determination was made and reported in SAM.gov and provides 
an explanation of the determination;
    (2) The information will be kept in the system for a period of five 
years from the date of the determination and then archived (See section 
872 of Pub. L. 110-417, as amended, codified at 41 U.S.C. 2313);
    (3) Each Federal agency that considers making a Federal award to 
the applicant during that five-year period will consider that 
information in determining the applicant's qualification to receive a 
Federal award when the total Federal share of a Federal award is 
expected to exceed the simplified acquisition threshold over the period 
of performance;
    (4) The applicant may review the responsibility/qualification 
records accessible in SAM.gov and comment on any information the system 
contains about the applicant; and
    (5) Federal agencies must consider the applicant's comments in 
determining whether the applicant is qualified for a future Federal 
award.
    (d) If the Federal agency enters information into SAM.gov about a 
determination that an applicant is not qualified for a Federal award 
and subsequently:
    (1) Learns that any of that information is erroneous, the Federal 
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 agencies, the Federal agency should amend the information 
in the system within 30 days.
    (e) Federal agencies must not post any information that will be 
made publicly available in the non-public segment of the 
responsibility/qualification records that is covered by a disclosure 
exemption under the Freedom of Information Act. If a recipient asserts 
within seven calendar days to a Federal agency that some or all of the 
publicly available information is covered by a disclosure exemption 
under the Freedom of Information Act, the Federal 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 agency must resolve the issue in accordance with the 
agency's Freedom of Information Act procedures.


Sec.  200.214  Suspension and debarment.

    Recipients and subrecipients are subject to the non-procurement 
debarment and suspension regulations implementing Executive Orders 
12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR 
part 180 restrict making Federal awards, subawards, and contracts with 
certain parties that are debarred, suspended, or otherwise excluded 
from receiving or participating in Federal awards.


Sec.  200.215  Never contract with the enemy.

    Federal agencies, recipients, and subrecipients are subject to the 
guidance implementing Never Contract with the Enemy in 2 CFR part 183. 
The guidance in 2 CFR part 183 affects covered contracts, grants, and 
cooperative agreements that are expected to exceed $50,000 during 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 Federal 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 section 889 of Public Law 115-232, 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

[[Page 69445]]

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 section 889 of Public Law 
115-232, 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) A recipient or subrecipient may use covered telecommunications 
equipment or services for their own purposes (not program activities) 
provided they are not procured with Federal funds.
    (d) The prohibition on covered telecommunications equipment or 
services applies to funds generated as program income, indirect cost 
recoveries, or to satisfy cost share requirements.
    (e) The recipient or subrecipient is not required to certify that 
funds were not expended on covered telecommunications equipment or 
services beyond the certification provided upon signing the award.
    (f) For additional information, see section 889 of Public Law 115-
232 and Sec.  200.471.


Sec.  200.217  Whistleblower protections.

    An employee of a recipient or subrecipient may not be discharged, 
demoted, or otherwise discriminated against as a reprisal for 
disclosing to a person or body described in paragraph (a)(2) of 41 
U.S.C. 4712 information that the employee reasonably believes is 
evidence of gross mismanagement of a Federal contract or grant, a gross 
waste of Federal funds, an abuse of authority relating to a Federal 
contract or grant, a substantial and specific danger to public health 
or safety, or a violation of law, rule, or regulation related to a 
Federal contract (including the competition for or negotiation of a 
contract) or grant. See statutory requirements for whistleblower 
protections at 10 U.S.C. 4701, 41 U.S.C. 4712, 41 U.S.C. 4304, and 10 
U.S.C. 4310.

Subpart D--Post Federal Award Requirements


Sec.  200.300  Statutory and national policy requirements.

    (a) The Federal agency or pass-through entity 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, applicable Federal statutes 
(including statutes that prohibit discrimination) and regulations, and 
the requirements of this part. The Federal agency or pass-through 
entity must communicate to a recipient or subrecipient all relevant 
requirements, including those contained in general appropriations 
provisions, and incorporate them directly or by reference in the terms 
and conditions of the Federal award.
    (b) In administering Federal awards that are subject to Federal 
statutes prohibiting discrimination based on sex, the Federal agency or 
pass-through entity must ensure that the award is administered in a way 
that does not unlawfully discriminate based on sexual orientation or 
gender identity, consistent with the Supreme Court's reasoning in 
Bostock v. Clayton County, 140 S. Ct. 1731 (2020).
    (c) In administering awards in accordance with the U.S. 
Constitution, the Federal agency must take account of the heightened 
constitutional scrutiny that may apply under the Constitution's Equal 
Protection clause for government action that provides differential 
treatment based on sexual orientation or gender identity.


Sec.  200.301  Performance measurement.

    (a) The Federal agency must measure the recipient's performance to 
show achievement of program goals and objectives, share lessons 
learned, improve program outcomes, and foster the adoption of promising 
practices. The Federal agency should establish program goals and 
objectives during program planning and design (see Sec.  200.202). The 
Federal agency should clearly communicate the specific program goals 
and objectives in the Federal award, including how the Federal agency 
will measure the achievement of the goals and objectives, the expected 
timeline, and information on how the recipient must report the 
achievement of program goals and objectives. The Federal agency should 
also clearly communicate in the Federal award any expected outcomes, 
indicators, targets, baseline data, or data collections that the 
recipient is responsible for measuring and reporting. The Federal 
agency must ensure all requirements for measuring performance align 
with the Federal agency's strategic goals, strategic objectives, or 
performance goals relevant to a program (see OMB Circular A-11, 
Preparation, Submission, and Execution of the Budget Part 6).
    (b) When establishing performance reporting frequency and content, 
the Federal agency should consider what information will be necessary 
to measure the recipient's progress, to identify promising practices of 
recipients, and build the evidence upon which the Federal agency makes 
program and performance decisions. The Federal agency should not 
require additional information that is not necessary for measuring 
program performance. See Sec.  200.329 for more information on 
reporting program performance.
    (c) The Federal agency should also specify in the Federal award any 
requirements of the recipients' participation in federally-funded 
evaluations.


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 funds. All recipient and subrecipient 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 the terms and conditions; and tracking expenditures to 
establish that funds have been used in accordance with Federal 
statutes, regulations, and the terms and conditions of the Federal 
award. See Sec.  200.450
    (b) The recipient's or subrecipient's financial management system 
must provide for the following (see Sec. Sec.  200.334, 200.335, 
200.336, and 200.337):
    (1) Identification of all Federal awards by the Assistance Listings 
title and number, Federal award identification number, Federal award 
year, and name of the Federal agency or pass-through entity.
    (2) Accurate, current, and complete disclosure of the financial 
results of each Federal award or program in accordance with the 
reporting

[[Page 69446]]

requirements in Sec. Sec.  200.328 and 200.329. When a Federal agency 
or pass-through entity requires reporting on an accrual basis from a 
recipient or subrecipient that maintains its records other than on an 
accrual basis, the recipient or subrecipient must not be required to 
establish an accrual accounting system. This recipient or subrecipient 
may develop accrual data for its reports based on an analysis of the 
documentation on hand.
    (3) Maintaining records that sufficiently identify the source and 
expenditure of Federal funds for Federal awards. These records must 
contain information necessary to identify 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 assets. The recipient or subrecipient must safeguard all 
assets and ensure 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 and the terms and conditions of the Federal 
award.


Sec.  200.303   Internal controls.

    The recipient or subrecipient must:
    (a) Establish, document, and maintain effective internal control 
over the Federal award that provides reasonable assurance that the 
recipient or subrecipient is managing the Federal award in compliance 
with Federal statutes, regulations, and the terms and conditions of the 
Federal award. These internal controls should comply with the 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 award.
    (c) Evaluate and monitor the recipient's or subrecipient's 
compliance with statutes, regulations, and the terms and conditions of 
Federal awards.
    (d) Take prompt action when instances of noncompliance are 
identified.
    (e) Take cybersecurity and other measures as appropriate to 
safeguard information including protected personally identifiable 
information (PII). This also includes information the Federal agency or 
pass-through entity designates as sensitive or other information the 
recipient or subrecipient considers sensitive and is consistent with 
applicable Federal, State, local, and tribal laws regarding privacy and 
responsibility over confidentiality.


Sec.  200.304   Bonds.

    (a) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, the Federal agency may 
require adequate bonding and insurance if the bonding and insurance 
requirements of the recipient are not deemed adequate to protect the 
interest of the Federal Government.
    (b) The Federal agency may require adequate fidelity bond coverage 
where the recipient entity lacks coverage to protect the interest of 
the Federal Government.
    (c) Where bonds, insurance, or both are required in the situations 
described above, the bonds and insurance must be obtained from 
companies holding certificates of authority issued by the U.S. 
Department of Treasury (see 31 CFR part 223).


Sec.  200.305  Federal payment.

    (a) Payments for States. Payments for states 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) Payments for recipients and subrecipients other than States. 
The payment methods must minimize the time elapsing between the 
transfer and disbursement of funds regardless of whether the payment is 
made by electronic funds transfer or by other means. See Sec.  
200.302(b)(6). Except as noted in this part, the Federal agency must 
require recipients to use only OMB-approved, government-wide 
information collections to request payment.
    (1) The recipient or subrecipient must be paid in advance, provided 
it maintains or demonstrates the willingness to maintain written 
procedures. Such procedures must minimize the time elapsing between the 
transfer and disbursement of funds. The procedures must also establish 
a financial management system that meets the standards for fund control 
and accountability as established in this part. Advance payments to a 
recipient or subrecipient must be limited to the minimum amounts needed 
and be timed with actual, immediate cash requirements 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 for direct program or project costs and the 
proportionate share of any allowable indirect costs. The recipient or 
subrecipient must make timely payments to contractors in accordance 
with the contract provisions.
    (2) Whenever possible, advance payment requests by the recipient or 
subrecipient must be consolidated to cover anticipated cash needs for 
all Federal awards received by the recipient from the Federal agency or 
pass-through entity.
    (i) Advance payment mechanisms must comply with 31 CFR part 208 and 
include, but are not limited to, Treasury checks and electronic funds 
transfers.
    (ii) Recipients and subrecipients must be authorized to submit 
payment requests as often as necessary when electronic fund transfers 
are used or at least monthly when electronic transfers are not used. 
See Electronic Fund Transfer Act (15 U.S.C. 1693-1693r).
    (3) Reimbursement is preferred when the requirements in paragraph 
(b) cannot be met, when the Federal agency or pass-through entity sets 
a specific condition per Sec.  200.208, when requested by the recipient 
or subrecipient, when a Federal award is for construction, or when a 
significant 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 agency or pass-through entity must make 
payment within 30 calendar days after receipt of the payment request 
unless the Federal agency or pass-through entity reasonably believes 
the request to be improper.
    (4) If the recipient or subrecipient cannot meet the criteria for 
advance payments and the Federal agency or pass-through entity has 
determined that reimbursement is not feasible because the recipient or 
subrecipient lacks sufficient working capital, the Federal agency or 
pass-through entity may provide cash on a working capital advance 
basis. Under this procedure, the Federal agency or pass-through entity 
must advance cash payments to the recipient or subrecipient to cover 
its estimated disbursement needs for an initial period generally 
aligned to the recipient's or subrecipient's disbursing cycle. After 
that, the Federal agency or

[[Page 69447]]

pass-through entity must reimburse the recipient or subrecipient for 
its actual cash disbursements. Use of the working capital advance 
payment method requires that the pass-through entity provide timely 
advance payments to any subrecipients to meet the subrecipient's actual 
cash disbursements. The pass-through entity must not use the working 
capital advance method of payment 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) If available, the recipient or subrecipient must disburse funds 
available from program income (including repayments to a revolving 
fund), rebates, refunds, contract settlements, audit recoveries, and 
interest earned on Federal funds before requesting additional cash 
payments.
    (6) Payments for allowable costs must not be withheld at any time 
during the period of performance unless required by Federal statute, 
regulations, or in one of the following instances:
    (i) The recipient or subrecipient has failed to comply with the 
terms and conditions of the Federal award; or
    (ii) The recipient or subrecipient 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 agency or pass-through entity may, upon reasonable notice, 
inform the recipient that payments must not be made for financial 
obligations incurred after a specified date until the conditions are 
corrected or the debt is repaid to the Federal Government.
    (7) A payment withheld for failure to comply with the terms and 
conditions of the Federal award must be released to the recipient or 
subrecipient upon subsequent compliance. When a Federal award is 
suspended, payment adjustments must be made in accordance with Sec.  
200.343.
    (8) A payment must not be made to a recipient or subrecipient for 
amounts that the recipient or subrecipient withholds from contractors 
to assure satisfactory completion of work. Payment must be made when 
the recipient or subrecipient disburses the withheld funds to the 
contractors or to escrow accounts established to ensure satisfactory 
completion of work.
    (9) The Federal agency or pass-through entity must not require 
separate depository accounts for funds provided to the recipient or 
subrecipient or establish any eligibility requirements for 
depositories. However, the recipient or subrecipient must be able to 
account for all Federal funds received, obligated, and expended.
    (10) Advance payments of Federal funds must be deposited and 
maintained in insured accounts whenever possible.
    (11) The recipient or subrecipient must maintain advance payments 
of Federal funds in interest-bearing accounts unless one of the 
following applies:
    (i) The recipient or subrecipient receives less than $250,000 in 
Federal funding per year;
    (ii) The best available interest-bearing account would not 
reasonably 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 with the expected Federal and non-
Federal cash resources;
    (iv) A foreign government or banking system prohibits or precludes 
interest-bearing accounts; or
    (v) An interest-bearing account is not readily accessible (for 
example, due to public or political unrest in a foreign country).
    (12) The recipient or subrecipient may retain up to $500 per year 
of interest earned on Federal funds to use for administrative expenses 
of the recipient or subrecipient. Any additional interest earned on 
Federal funds must be returned annually to the Department of Health and 
Human Services Payment Management System (PMS) through either the 
Automated Clearing House (ACH) network or a Fedwire Funds Service 
payment. All interest in excess of $500 per year must be returned to 
PMS regardless of whether the recipient or subrecipient was paid 
through PMS. Instructions for returning interest can be found at 
https://pms.psc.gov/grant-recipients/returning-funds-interest.html.
    (13) All other Federal funds must be returned to the payment system 
of the Federal agency. Returns should follow the instructions provided 
by the Federal agency. All returns to PMS should follow the 
instructions provided at https://pms.psc.gov/grant-recipients/returning-funds-interest.html.


Sec.  200.306  Cost sharing.

    (a) Cost sharing may not be used as a factor during the merit 
review of applications or proposals unless allowed by the Federal 
agency's regulations, and the information is included in the notice of 
funding opportunity. Voluntarily committed cost sharing is not expected 
under Federal research grants. See Sec. Sec.  200.414, 200.204, and 
Appendix I.
    (b) The Federal agency or pass-through entity must accept any cost 
sharing or in-kind contributions as part of the recipient's or 
subrecipient's contributions to a program when they:
    (1) Are verifiable in the recipient's or subrecipient's records;
    (2) Are not included as contributions for any other Federal award;
    (3) Are necessary and reasonable for achieving the objectives of 
the Federal award;
    (4) Are allowable under subpart E;
    (5) Are not paid by the Federal Government under another Federal 
award, except where the program's Federal authorizing statute 
specifically provides that Federal funds made available for the program 
can be applied to cost sharing requirements of other Federal programs;
    (6) Are provided for in the approved budget when required by the 
Federal agency; and
    (7) Conform to other applicable provisions of this part.
    (c) Unrecovered indirect costs, including indirect costs on cost 
sharing, may be included as part of cost sharing with the prior 
approval of the Federal agency or pass-through entity. 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 recipient's or subrecipient's approved indirect 
cost rate.
    (d) Values for recipient or subrecipient contributions of services 
and property must be established in accordance with the cost principles 
in subpart E. When a Federal agency or pass-through entity authorizes 
the recipient or subrecipient to donate buildings or land for 
construction/facilities acquisition projects or long-term use, the 
value of the donated property for cost sharing must be the lesser of 
paragraph (d)(1) or (2) below.
    (1) The value of the remaining life of the property recorded in the 
recipient's or subrecipient's accounting records at the time of 
donation.
    (2) The current fair market value. However, when there is 
sufficient justification, the Federal agency or pass-through may 
approve using the current fair market value of the donated property, 
even if it exceeds the value described in paragraph (d)(1) at the time 
of donation.
    (e) Volunteer services furnished by third-party professional and 
technical personnel, consultants, and other labor may be counted as 
cost sharing if the service is necessary for the program. Rates for 
third-party volunteer services must be consistent with those paid for

[[Page 69448]]

similar work by the recipient or subrecipient. When the required skills 
are not found in the recipient's or subrecipient's workforce, rates 
must be consistent with those paid for similar work in the labor market 
where the recipient or subrecipient competes for the services involved. 
In either case, fringe benefits that are allowable, allocable, and 
reasonable 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 are allowable, allocable, 
and reasonable. These services may also include indirect costs at 
either the third-party organization's federally-negotiated indirect 
cost rate or a rate in accordance with Sec.  200.414(d). These services 
are allowable if they 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 items such as 
equipment, office supplies, laboratory supplies, or workshop and 
classroom supplies. The assessed value of donated property included as 
cost sharing must not exceed the property's fair market value at the 
time of the donation.
    (h) The method used for determining the value of donated equipment, 
buildings, and land for which title passes to the recipient or 
subrecipient may differ according to the following:
    (1) If the purpose of the Federal award is to assist the recipient 
or subrecipient in acquiring equipment, buildings, or land, the 
aggregate value of the donated property may be claimed as cost sharing.
    (2) If the purpose of the Federal award is to support activities 
that require the use of equipment, buildings, or land, 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 if provided in the terms and 
conditions of the Federal award. See Sec.  200.420.
    (i) The value of donated property must be determined in accordance 
with the accounting policies of the recipient or subrecipient 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 recipient or 
subrecipient as established by an independent appraiser (for example, 
certified real property appraiser or General Services Administration 
representative) and certified by a responsible official of the 
recipient or subrecipient as required by the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970, as 
amended, (42 U.S.C. 4601-4655) except as provided in the implementing 
regulations at 49 CFR part 24, ``Uniform Relocation Assistance And Real 
Property Acquisition For Federal And Federally-Assisted Programs.''
    (2) The value of donated equipment must not exceed the fair market 
value 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) The fair market value of third-party in-kind contributions must 
be documented and, to the extent feasible, supported by the same 
methods used internally by the recipient or subrecipient.
    (k) For institutions of higher education (IHE), voluntary 
uncommitted cost sharing should be treated differently from mandatory 
or voluntary committed cost sharing and should not be included in the 
organized research base for computing the indirect cost rate or 
reflected in any allocation of indirect costs. Voluntary uncommitted 
cost sharing effort, is faculty-donated additional time above that 
agreed to as part of the award. See 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. The recipient or subrecipient is encouraged to earn 
income to defray program costs when appropriate. Program income must be 
used for the original purpose of the Federal award. Program income 
earned during the period of performance may only be used for costs 
incurred during the period of performance or allowable closeout costs. 
Program income must be expended prior to requesting additional Federal 
funds. Program income exceeding amounts specified in the Federal award 
may be added to or deducted from the total allowable costs in 
accordance with the terms and conditions of the Federal award.
    (b) Use of program income. There are three methods of applying 
program income: deduction; addition; and cost-sharing. The Federal 
agency should specify how program income will be used in the terms and 
conditions of the Federal award. The deduction method will be used if 
the Federal agency does not specify a method for applying program 
income. However, the addition method will be used when no method is 
specified for awards made to institutions of higher education (IHE) and 
nonprofit research institutions. In specifying alternatives to the 
deduction and addition methods, the Federal agency may distinguish 
between income earned by the recipient and income earned by 
subrecipients as well as between the sources, kinds, or amounts of 
income.
    (1) Deduction. Program income is deducted from the total allowable 
costs, reducing the overall total amount of the Federal award.
    (2) Addition. Program income is added to the total allowable costs, 
increasing the overall total amount of the Federal award. If no program 
income method is specified in the Federal award, prior approval is 
required to use the addition method.
    (3) Cost sharing. Program income is used to meet the Federal 
award's cost sharing requirement. If no program income method is 
specified in the Federal award, prior approval is required to use the 
cost sharing method.
    (c) Income after the period of performance. There are no 
requirements governing the disposition of program income earned after 
the end of the period of performance of the Federal award unless 
stipulated in the Federal agency regulations or the terms and 
conditions of the Federal award. The Federal agency may negotiate 
agreements with recipients regarding appropriate uses of income earned 
after the end of the period of performance as part of the closeout 
process. See Sec.  200.344.
    (d) Cost of generating program income. If authorized by Federal 
regulations or the Federal award, costs incidental to generating 
program income may be deducted from gross income to determine program 
income, provided these costs have not been charged to the Federal 
award.
    (e) Not considered program income. The following are not considered 
program income unless specified in Federal statutes, regulations, or 
the terms and conditions of the Federal award:
    (1) Governmental revenues. Taxes, special assessments, levies, 
fines, and similar revenues the recipient or subrecipient raised.

[[Page 69449]]

    (2) Property. Proceeds from the sale of real property, equipment, 
or supplies. The proceeds must be handled in accordance with the 
requirements of the Property Standards of Sec. Sec.  200.311, 200.313, 
200.314, or as explicitly identified in Federal statutes, regulations, 
or the terms and conditions of the Federal award.
    (3) License fees and royalties. License fees and royalties for 
copyrighted material, patents, patent applications, trademarks, and 
inventions made under the Federal award subject to 37 CFR part 401.


Sec.  200.308  Revision of budget and program plans.

    (a) Approved budget in general. 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 the Federal 
share, non-Federal share, or both depending upon Federal agency 
requirements.
    (b) Deviations from approved budget. The recipient or subrecipient 
must report deviations from the approved budget, project or program 
scope, or objective(s) in accordance with Sec.  200.329. The recipient 
or subrecipient must request prior approvals from the Federal agency or 
pass-through entity for budget and program plan revisions in accordance 
with this section.
    (c) Requesting approval for budget revisions. When requesting 
approval for budget revisions, the recipient or subrecipient must use 
the same format for budget information that was used in their 
application. However, the Federal agency or pass-through entity may 
inform the recipient or subrecipient that a letter of request is 
sufficient.
    (d) Federal agency or pass-through entity review. The Federal 
agency or pass-through entity must review the request for budget or 
program plan revision and notify the recipient or subrecipient whether 
the revisions have been approved within 30 days of receipt of the 
request. The Federal agency or pass-through entity must inform the 
recipient or subrecipient in writing when a decision can be expected if 
more than 30 days is required for a review.
    (e) Limitation on other prior approval requirements. Unless 
specified in this guidance, the Federal agency may not impose other 
prior approval requirements for specific items not approved by OMB. See 
also Sec. Sec.  200.102 and 200.407.
    (f) Revisions Requiring Prior Approval. A recipient or subrecipient 
must request prior written approval from the Federal agency or pass-
through entity for the following 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 key personnel specified in the recipient's or 
subrecipient's application and included in the Federal award.
    (3) The disengagement from a project for more than three months, or 
a 25 percent reduction in time and effort devoted to the Federal award 
over the course of the period of performance, by the approved project 
director or principal investigator.
    (4) Incurring costs that require prior approval in accordance with 
subpart E. The Federal agency may waive prior approval of these costs 
when the costs requiring prior approval are included in the recipient's 
or subrecipient's application, and also included in the Federal award.
    (5) The transfer of funds budgeted for participant support costs to 
other budget categories.
    (6) Subaward activities not proposed in the application and 
approved in the Federal award. A change in subrecipient only requires 
prior approval if the Federal agency or pass-through entity includes 
the requirement in the terms and conditions of the Federal award. In 
general, a Federal agency or pass-through entity should not require 
prior approval of a change to the subrecipient unless the inclusion was 
a determining factor in the merit review or eligibility process. This 
requirement does not apply to acquiring equipment, supplies, or general 
support services.
    (7) Changes in the total approved cost-sharing amount.
    (8) Requesting additional Federal funds to complete the project. If 
approved, the Federal agency must ensure that adequate funds are 
available to avoid a violation of the Antideficiency Act.
    (9) Transferring funds between the construction and nonconstruction 
work under a Federal award.
    (10) A no-cost extension (meaning, an extension of time that 
requires no additional Federal funds) of the period of performance, 
other than any one-time extension authorized by the Federal agency in 
accordance with paragraph (g)(2). All requests for no-cost extensions 
should be submitted at least 10 calendar days before the conclusion of 
the period of performance. The Federal agency may approve multiple no-
cost extensions under a Federal award if not prohibited by Federal 
statute or regulation.
    (g) Waiver of certain prior approvals. Except for the requirements 
listed in paragraphs (f)(1) through (10), the Federal agency is 
authorized to waive other prior written approvals contained in subparts 
D and E. Such waivers may include authorizing recipients to do one or 
more of the following:
    (1) Pre-award costs. Incur project costs 90 calendar days before 
the Federal award date. Expenses incurred more than 90 calendar days 
before the Federal award date requires prior approval of the Federal 
agency. All costs incurred before the Federal award date are at the 
recipient's own risk (for example, the Federal agency is not required 
to reimburse such costs if the recipient does not receive the Federal 
award or if the Federal award is less than anticipated and inadequate 
to cover such costs). Pre-award costs must be charged to the initial 
budget period of the Federal award unless otherwise specified by the 
Federal agency. See also Sec.  200.458.
    (2) One-time extensions. 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 (g)(2)(i) through (iii) of this 
section apply. Prior approval is not required if a recipient is 
authorized in the terms and conditions of the Federal award to initiate 
a one-time extension. However, the recipient must notify the Federal 
agency in writing with the supporting justification and a revised 
period of performance at least 10 calendar days before the conclusion 
of the period of performance. A one-time extension may not be exercised 
for the sole purpose of using unobligated balances. This paragraph does 
not preclude the Federal agency from approving further no-cost 
extensions to the Federal award. One-time extensions require prior 
approval from the Federal agency 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 scope of 
the project.
    (3) Unobligated Balances. Carry forward unobligated balances to 
subsequent budget periods.
    (h) Prior approvals for research awards. The prior approval 
requirements described in paragraph (g) are automatically waived for 
Federal awards that support research unless stipulated in the Federal 
agency's regulations or terms and conditions of the Federal award. 
However, one-time extensions require the Federal agency's prior 
approval when one of the conditions in paragraph (g)(2) of this section 
applies.

[[Page 69450]]

    (i) Awards above the Simplified Acquisition Threshold. The Federal 
agency cannot permit a transfer that would cause any Federal 
appropriation to be used for purposes other than those consistent with 
the appropriation. The Federal agency may restrict the transfer of 
funds among direct cost categories (for example, personnel, travel, and 
supplies) or programs, functions, and activities when:
    (1) The Federal share of the Federal award exceeds the simplified 
acquisition threshold; and
    (2) The cumulative amount of a transfer exceeds 10 percent of the 
total budget, including cost share, as last approved by the Federal 
agency.


Sec.  200.309  Modifications to Period of Performance.

    When the Federal agency or pass-through entity extends the Federal 
award, the period of performance will be amended to end at the 
completion of the extension. When the Federal agency decides not to 
continue a Federal award with multiple budget periods, the period of 
performance will be amended to end at the completion of the authorized 
budget period. If termination occurs, the period of performance will be 
amended to end upon the effective date of termination. A renewal award 
means an award made after the expiration of a Federal award for which 
the start date is contiguous with, or closely follows, the end of the 
expiring Federal award. The start date of a renewal award begins a new 
and distinct period of performance.

Property Standards


Sec.  200.310   Insurance coverage.

    The recipient or subrecipient must, at a minimum, provide the 
equivalent insurance coverage for real property and equipment acquired 
or improved with Federal funds as provided to property and equipment 
owned by the recipient or subrecipient. Insurance is not required for 
Federally-owned property 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 the 
Federal award will vest upon acquisition in the recipient or 
subrecipient.
    (b) Use. Except as otherwise provided by Federal statutes or the 
Federal agency, real property must be used for the originally-
authorized purpose as long as it is needed for that purpose. While the 
property is being used for the originally-authorized purpose, the 
recipient or subrecipient must not dispose of or encumber its title or 
other interests except as provided by the Federal agency. An 
encumbrance is a claim or liability that is attached to the property or 
some other right held by a party that is not the owner. An encumbrance 
may lessen the value of the property and restrict its free use until 
the encumbrance is lifted.
    (c) Appraisals. Appraisals of real property must be as conducted by 
an independent appraiser (for example, certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient or subrecipient as 
required by the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601-4655) 
except as provided in the implementing regulations at 49 CFR part 24, 
``Uniform Relocation Assistance And Real Property Acquisition For 
Federal And Federally-Assisted Programs.''
    (d) Disposition. When real property is no longer needed for the 
originally-authorized purpose, the recipient or subrecipient must 
obtain disposition instructions from the Federal agency or pass-through 
entity. The instructions must specify one of the following disposition 
methods:
    (1) Retain title after compensating the Federal agency. When the 
recipient or subrecipient retains title to the property, it must pay 
the Federal agency an amount calculated by multiplying the percentage 
of the Federal agency's contribution towards the original purchase (and 
costs of any improvements) by the current fair market value of the 
property. However, in situations where the recipient or subrecipient is 
disposing of real property acquired or improved with the 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 agency. When a 
recipient or subrecipient sells the property, it must pay the Federal 
agency an amount calculated by multiplying the percentage of the 
Federal agency's contribution towards the original purchase (and cost 
of any improvements) by the proceeds of the sale after deducting any 
actual and reasonable expenses paid to sell or fix up the property for 
sale. When the Federal award has not been closed out, the net proceeds 
from the sale may be offset against the original cost of the property. 
When directed to sell the property, the recipient or subrecipient must 
sell the property utilizing procedures that provide for competition to 
the extent practicable and that results in the highest possible return.
    (3) Transfer title to the Federal agency or a third party 
designated/approved by the Federal agency. When a recipient or 
subrecipient transfers title to the property to a Federal agency or 
third party designated or approved by the Federal agency, the recipient 
or subrecipient is entitled to be paid an amount calculated by 
multiplying the percentage of the recipient's or subrecipient's 
contribution towards the original purchase of the real property (and 
cost of any improvements) by 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 recipient or subrecipient must submit an inventory 
listing of Federally owned property in its custody to the Federal 
agency or pass-through entity on an annual basis. The recipient or 
subrecipient must request disposition instructions from the Federal 
agency or pass-through entity upon completion of the Federal award or 
when the property is no longer needed.
    (b) If the Federal 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 agency has 
statutory authority to dispose of the property by alternative methods 
(for example, the authority provided by the Federal Technology Transfer 
Act (15 U.S.C. 3710(i)). The Federal agency or pass-through entity must 
issue appropriate instructions to the recipient or subrecipient.
    (c) Exempt property means property acquired under the Federal award 
where the Federal agency has chosen to vest title to the property to 
the recipient or subrecipient without further responsibility to the 
Federal Government. The Federal agency may only exercise this option 
when permitted by Federal statute and set forth in the terms and 
conditions of the Federal award. Absent statutory authority and 
specific terms and conditions of the Federal award, the title to exempt 
property acquired under the Federal award remains with the Federal 
Government.


Sec.  200.313  Equipment.

    See also Sec.  200.439.

[[Page 69451]]

    (a) Title. Title to equipment acquired under the Federal award will 
vest upon acquisition in the recipient or subrecipient subject to the 
conditions of this section. This title must be a conditional title 
unless a Federal statute specifically authorizes the Federal agency to 
vest title in the recipient or subrecipient without further 
responsibility to the Federal Government (and the Federal agency elects 
to do so). A conditional title means a clear title is withheld by the 
Federal agency until conditions and requirements specified in the terms 
and conditions of a Federal award have been fulfilled. Title for 
equipment vested in a recipient or subrecipient is 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) While the equipment is being used for the originally-authorized 
purpose, the recipient or subrecipient must not dispose of or encumber 
its title or other interests without the approval of the Federal agency 
or pass-through entity. An encumbrance is a claim or liability that is 
attached to the property or some other right held by a party that is 
not the owner. An encumbrance may lessen the value of the property and 
restrict its free use until the encumbrance is lifted.
    (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 in accordance with State laws and 
procedures. Indian Tribes must use, manage, and dispose of equipment 
acquired under a Federal award in accordance with tribal laws and 
procedures. If such laws and procedures do not exist, Indian Tribes 
must follow the guidance in this section. Other recipients and 
subrecipients must follow paragraphs (c) through (e) of this section.
    (c) Use. (1) The recipient or subrecipient must use equipment for 
the project or program for which it was acquired and for as long as 
needed, whether or not the project or program continues to be supported 
by the Federal award. The recipient or subrecipient must not encumber 
the equipment without prior approval of the Federal agency or pass-
through entity. The Federal agency may require the submission of the 
applicable common forms for reporting on equipment. When no longer 
needed for the original project or program, the equipment may be used 
in other activities in the following order of priority:
    (i) Activities under other Federal awards from the Federal agency 
that funded the original project; then
    (ii) Activities under Federal awards from other Federal agencies. 
These activities include 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 recipient or subrecipient must 
also make the equipment available for use on other programs or projects 
supported by the Federal Government, provided that such use will not 
interfere with the purpose for which it was originally acquired. First 
preference for other use of the equipment must be given to other 
programs or projects supported by the Federal agency that financed the 
equipment. Second preference must be given to programs or projects 
under Federal awards from other Federal agencies. Use for non-
federally-funded projects is also permissible, provided such use will 
not interfere with the purpose for which it was originally acquired. 
The recipient or subrecipient should consider charging user fees as 
appropriate.
    (3) Notwithstanding the encouragement in Sec.  200.307 to earn 
program income, the recipient or subrecipient must not use equipment 
acquired with the Federal award to provide services for a fee that is 
less than a private company would charge for similar services. This 
restriction is effective as long as the Federal Government retains an 
interest in the equipment or as authorized by Federal statute.
    (4) When acquiring replacement equipment, the recipient or 
subrecipient may either trade-in or sell the equipment and use the 
proceeds to offset the cost of the replacement equipment.
    (d) Management requirements. Regardless of whether equipment is 
acquired in part or its entirety under the Federal award, the recipient 
or subrecipient must manage equipment (including replacing equipment) 
utilizing procedures that meet the following requirements:
    (1) Property records must include a description of the property, a 
serial number or another identification number, the source of funding 
for the property (including the FAIN), the title holder, the 
acquisition date, the cost of the property, the percentage of the 
Federal agency contribution towards the original purchase, the 
location, use and condition of the property, and any disposition data 
including the date of disposal and sale price of the property. The 
recipient is responsible for maintaining and updating property records 
when there is a change in the status of the property.
    (2) A physical inventory of the property must be conducted, and the 
results must be reconciled with the property records at least once 
every two years.
    (3) A control system must be in place to ensure safeguards for 
preventing property loss, damage, or theft. Any loss, damage, or theft 
of equipment must be investigated and reported to the Federal agency or 
pass-through entity.
    (4) Regular maintenance procedures must be in place to ensure the 
property is in proper working condition.
    (5) If the recipient or subrecipient is authorized or required to 
sell the property, proper sales procedures must be in place to ensure 
the highest possible return.
    (e) Disposition. When equipment acquired under a Federal award is 
no longer needed for the original project, program, or for other 
activities currently or previously supported by a Federal agency, the 
recipient or subrecipient must request disposition instructions from 
the Federal agency or pass-through entity if required by the terms and 
conditions of the Federal award. Disposition of the equipment will be 
made as follows, in accordance with Federal agency or pass-through 
entity disposition instructions:
    (1) Equipment with a current fair market value of $10,000 or less 
(per unit) may be retained, sold, or otherwise disposed of with no 
further responsibility to the Federal agency or pass-through entity.
    (2) Except as provided in Sec.  200.312(b), or if the Federal 
agency or pass-through entity fails to provide requested disposition 
instructions within 120 days, items of equipment with a current fair 
market value in excess of $10,000 (per-unit) may be retained or sold by 
the recipient or subrecipient. However, the Federal agency is entitled 
to an amount calculated by multiplying the percentage of the Federal 
agency's contribution towards the original purchase by the current 
market value or proceeds from the sale. If the equipment is sold, the 
Federal agency or pass-through entity may permit the recipient or 
subrecipient to retain $1,000 or 10 percent (whichever is less) from 
the Federal share of the proceeds to cover expenses associated with the 
selling and handling of the equipment.
    (3) The recipient or subrecipient may transfer title to the 
property to the Federal Government or to an eligible third party 
provided that the recipient or subrecipient must be entitled to

[[Page 69452]]

compensation for its attributable percentage of the current fair market 
value of the property.
    (4) In cases where a recipient or subrecipient fails to take 
appropriate disposition actions, the Federal agency or pass-through 
entity may direct the recipient or subrecipient to take disposition 
actions.
    (f) Equipment retention. When included in the terms and conditions 
of the Federal award, the Federal agency may permit the recipient to 
retain equipment with no further obligation to the Federal Government 
unless prohibited by Federal statute or regulation.


Sec.  200.314   Supplies.

    See also Sec.  200.453.
    (a) Title to supplies acquired under the Federal award will vest 
upon acquisition in the recipient or subrecipient. When there is a 
residual inventory of unused supplies exceeding $10,000 in aggregate 
value at the end of the period of performance, and the supplies are not 
needed for any other Federal award, the recipient or subrecipient may 
retain or sell the unused supplies. Unused supplies means supplies that 
are in new condition, not having been used or opened before. The 
aggregate value of unused supplies consists of all supply types, not 
just like-item supplies. The Federal agency or pass-through entity is 
entitled to compensation in an amount calculated by multiplying the 
percentage of the Federal agency's or pass-through-through entity's 
contribution towards the cost of the original purchase(s) by the 
current market value or proceeds from the sale. If the supplies are 
sold, the Federal agency or pass-through entity may permit the 
recipient or subrecipient to retain $500 or 10 percent (whichever is 
less) from the Federal share of the proceeds to cover expenses 
associated with the selling and handling of the supplies.
    (b) Unless expressly authorized by Federal statute, the recipient 
or subrecipient must not use supplies acquired with the Federal award 
to provide services for a fee that is less than a private company would 
charge for similar services. This restriction is effective as long as 
the Federal Government retains an interest in the supplies or as 
authorized by Federal statute.


Sec.  200.315  Intangible property.

    (a) Title to intangible property acquired under a Federal award 
vest upon acquisition in the recipient or subrecipient. The recipient 
or subrecipient must use that intangible property for the originally-
authorized purpose and must not encumber the property without the 
approval of the Federal agency or pass-through entity. An encumbrance 
is a claim or liability that is attached to the property or some other 
right held by a party that is not the owner. An encumbrance may lessen 
the value of the property and restrict its free use until the 
encumbrance is lifted. 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) To the extent permitted by law, the recipient or subrecipient 
is not prohibited from asserting any copyright it may own in any work 
resulting from or acquired under the Federal award. To the extent 
permitted by law, the Federal 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. 
This includes the right to require recipients and subrecipients to make 
such works available through agency-designated public access 
repositories.
    (c) The recipient or subrecipient is subject to applicable 
regulations governing patents and inventions, including government-wide 
regulations in 37 CFR 401.
    (d) The Federal Government has the right to:
    (1) Obtain, reproduce, publish, or otherwise use the data produced 
under a Federal award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use the data for Federal purposes.
    (e)(1) The recipient or subrecipient must provide research data 
relating to published research findings produced under the Federal 
award and that were used by the Federal Government in developing an 
agency action that has the force and effect of law if requested by the 
Federal agency in response to a Freedom of Information Act (FOIA) 
request. When the Federal agency obtains the research data solely in 
response to a FOIA request, the Federal agency may charge the requester 
a fee for the cost of obtaining the research data. This fee should 
reflect the costs incurred by the Federal agency and the recipient or 
subrecipient. This fee is in addition to any fees the Federal agency 
may assess under the FOIA (5 U.S.C. 552(a)(4)(A)).
    (2) Published research findings mean:
    (i) Research findings published in a peer-reviewed scientific or 
technical journal; or
    (ii) Research findings publicly cited by a Federal agency in 
developing 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. Research data does not include any of the following:
    (i) Preliminary analyses, drafts of scientific papers, plans for 
future research, peer reviews, or communications with colleagues. This 
``recorded'' material excludes physical objects (for example, 
laboratory samples).
    (ii) 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
    (iii) Personnel, medical, and other personally identifiable 
information that, if disclosed, would constitute an invasion of 
personal privacy. Information that could identify a particular person 
in a research study is not considered research data.


Sec.  200.316  Property trust relationship.

    Real property, equipment, and intangible property acquired or 
improved with the Federal award must be held in trust by the recipient 
or subrecipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. The Federal 
agency or pass-through entity may require the recipient or subrecipient 
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.

Procurement Standards


Sec.  200.317  Procurements by States and Indian Tribes.

    When conducting procurement transactions under a Federal award, a 
State or Indian Tribe must follow the same policies and procedures it 
uses for procurements with non-Federal funds. If such policies and 
procedures do not exist, States and Indian Tribes must follow the 
procurement standards in Sec. Sec.  200.318 through 200.327. In 
addition to its own policies and procedures, a State or Indian Tribe 
must also comply with the following procurement standards: Sec. Sec.  
200.321, 200.322, 200.323, and 200.327. All other recipients and 
subrecipients, including subrecipients of a State, must follow the 
procurement

[[Page 69453]]

standards in Sec. Sec.  200.318 through 200.327.


Sec.  200.318  General procurement standards.

    (a) Documented procurement procedures. The recipient or 
subrecipient must maintain and use documented procedures for 
procurement transactions under a Federal award or subaward, including 
for acquisition of property or services. These documented procurement 
procedures must be consistent with State, local, and tribal laws and 
regulations and the standards identified in Sec. Sec.  200.317 through 
200.327.
    (b) Oversight of contractors. Recipients and subrecipients must 
maintain oversight to ensure that contractors perform in accordance 
with the terms, conditions, and specifications of their contracts or 
purchase orders.
    (c) Conflicts of interest. (1) The recipient or subrecipient 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, agent, or 
board member with a real or apparent conflict of interest may 
participate in the selection, award, or administration of a contract 
supported by the Federal award. A conflict of interest includes when 
the employee, officer, or agent, any member of their immediate family, 
their partner, or an organization that 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 an entity considered for a 
contract. An employee, officer, and agent of the recipient or 
subrecipient may neither solicit nor accept gratuities, favors, or 
anything of monetary value from contractors. However, the recipient or 
subrecipient may set standards for situations where the financial 
interest is not substantial or a gift is an unsolicited item of nominal 
value. The recipient's or subrecipient's standards of conduct must also 
provide for disciplinary actions to be applied for violations by its 
employees, officers, agents, or board members.
    (2) If the recipient or subrecipient has a parent, affiliate, or 
subsidiary organization that is not a State or Indian Tribe, the 
recipient or subrecipient must also maintain written standards of 
conduct covering organizational conflicts of interest. Organizational 
conflicts of interest mean that because of relationships with a parent 
company, affiliate, or subsidiary organization, the recipient or 
subrecipient is unable or appears to be unable to be impartial in 
conducting a procurement action involving a related organization.
    (d) Avoidance of unnecessary or duplicative items. The recipient's 
or subrecipient's procedures must avoid the acquisition of unnecessary 
or duplicative items. Consideration should be given to consolidating or 
breaking out procurements to obtain a more economical purchase. When 
appropriate, an analysis should be made between leasing and purchasing 
property or equipment to determine the most economical approach.
    (e) Procurement arrangements using strategic sourcing. When 
appropriate for the procurement or use of common or shared goods and 
services, recipients and subrecipients are encouraged to enter into 
State and local intergovernmental agreements or inter-entity agreements 
for procurement transactions. These or similar procurement arrangements 
using strategic sourcing may foster greater economy and efficiency. 
Documented procurement actions of this type (using strategic sourcing, 
shared services, and other similar procurement arrangements) will meet 
the competition requirements of this part.
    (f) Use of excess and surplus Federal property. The recipient or 
subrecipient is encouraged to use excess and surplus Federal property 
instead of purchasing new equipment and property when it is feasible 
and reduces project costs.
    (g) Use of value engineering clauses. When practical, the recipient 
or subrecipient is encouraged to use value engineering clauses in 
contracts for construction projects of sufficient size to offer 
reasonable opportunities for cost reductions. Value engineering means 
analyzing each contract item or task to ensure its essential function 
is provided at the overall lowest cost.
    (h) Responsible contractors. The recipient or subrecipient must 
award contracts only to responsible contractors that possess the 
ability to perform successfully under the terms and conditions of a 
proposed contract. The recipient or subrecipient must consider 
contractor integrity, public policy compliance, proper classification 
of employees (see the Fair Labor Standards Act, 29 U.S.C. 201, chapter 
8), past performance record, and financial and technical resources when 
conducting a procurement transaction. See also Sec.  200.214.
    (i) Procurement records. The recipient or subrecipient must 
maintain records sufficient to detail the history of each procurement 
transaction. These records must include the rationale for the 
procurement method, contract type selection, contractor selection or 
rejection, and the basis for the contract price.
    (j) Time-and-materials type contracts. (1) The recipient or 
subrecipient 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 
recipient or subrecipient 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) Because 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 recipient or subrecipient awarding such a 
contract must assert a high degree of oversight to obtain reasonable 
assurance that the contractor is using efficient methods and effective 
cost controls.
    (k) Settlement of contractual and administrative issues. The 
recipient or subrecipient is responsible for the settlement of all 
contractual and administrative issues arising out of its procurement 
transactions. These issues include but are not limited to, source 
evaluation, protests, disputes, and claims. In resolving these issues, 
the Federal agency may not substitute its judgment for that of the 
recipient or subrecipient unless the matter is primarily a Federal 
concern. Proper oversight does not relieve the recipient or 
subrecipient of any of its contractual responsibilities. Violations of 
law must be referred to the Federal, State, or local authority with 
proper jurisdiction.
    (l) Examples of labor and employment practices. The procurement 
standards in this subpart do not prohibit recipients or subrecipients 
from using Project Labor Agreements (PLAs) or similar forms of pre-hire 
collective bargaining agreements; requiring construction contractors to 
use hiring preferences or goals for people residing in high-poverty 
areas, disadvantaged communities as defined by the Justice40 Initiative 
OMB Memorandum M-21-28, or high-unemployment census tracts within a 
region no smaller than the county where a federally funded construction 
project is located, consistent with the policies and procedures of the 
recipient or subrecipient, provided that a recipient or subrecipient 
may not prohibit interstate hiring; requiring a contractor to use 
hiring preferences or goals for individuals with barriers to employment

[[Page 69454]]

(as defined in section 3 of the Workforce Innovation and Opportunity 
Act (29 U.S.C. 3102(24)), including women and people from underserved 
communities as defined by Executive Order 13985; using agreements 
intended to ensure uninterrupted delivery of services; using agreements 
intended to ensure community benefits; or offering employees of a 
predecessor contractor rights of first refusal under a new contract. 
Federal agencies may allow recipients and subrecipients to use such 
practices if consistent with the U.S. Constitution, applicable Federal 
statutes and regulations, the objectives and purposes of the applicable 
Federal financial assistance program, and other requirements of this 
part.


Sec.  200.319   Competition.

    (a) All procurement transactions under the Federal award must be 
conducted in a manner that provides full and open competition and is 
consistent with the standards of this section and Sec.  200.320.
    (b) To ensure objective contractor performance and eliminate unfair 
competitive advantage, contractors that assist recipients and 
subrecipients with developing or drafting specifications, requirements, 
statements of work, or invitations for bids must be excluded from 
competing on those procurements.
    (c) Examples of requirements that may restrict competition include, 
but are not limited to:
    (1) Placing unreasonable requirements on firms 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.
    (d) The recipient or subrecipient must have written procedures for 
procurement transactions. These procedures must ensure that all 
solicitations:
    (1) Are made in accordance with Sec.  200.319(b);
    (2) Incorporate a clear and accurate description of the technical 
requirements for the property, equipment, or service being procured. 
The description may include a statement of the qualitative nature of 
the property, equipment, or service to be procured. When necessary, the 
description must provide minimum essential characteristics and 
standards to which the property, equipment, or service must conform. 
Detailed product specifications should be avoided if at all possible. 
When it is impractical or uneconomical to clearly and accurately 
describe the technical requirements, a ``brand name or equivalent'' 
description of features may be used to provide procurement 
requirements. The specific features of the named brand must be clearly 
stated; and
    (3) Identify any additional requirements which the offerors must 
fulfill and all other factors that will be used in evaluating bids or 
proposals.
    (e) The recipient or subrecipient must ensure that all prequalified 
lists of persons, firms, or products used in procurement transactions 
are current and include enough qualified sources to ensure maximum open 
competition. When establishing or amending prequalified lists, the 
recipient or subrecipient must consider objective factors that evaluate 
price and cost to maximize competition. The recipient or subrecipient 
must not preclude potential bidders from qualifying during the 
solicitation period.
    (f) To the extent consistent with established practices and legal 
requirements applicable to the recipient or subrecipient, this subpart 
does not prohibit recipients or subrecipients from developing written 
procedures for procurement transactions that incorporate a scoring 
mechanism that rewards bidders that commit to specific numbers and 
types of U.S. jobs, minimum compensation, benefits, on-the-job-training 
for employees making work or products providing services on a contract, 
and other worker protections. This subpart also does not prohibit 
recipients and subrecipients from making inquiries of bidders about 
these subjects and assessing the responses. Any scoring mechanism must 
be consistent with the U.S. Constitution, applicable Federal statutes 
and regulations, and the terms and conditions of the Federal award.
    (g) Noncompetitive procurements can only be awarded in accordance 
with Sec.  200.320(c).


Sec.  200.320   Procurement Methods.

    There are three types of procurement methods described in this 
section: informal procurement methods (for micro-purchases and 
simplified acquisitions); formal procurement methods (through sealed 
bids or proposals); and noncompetitive procurement methods. For any of 
these methods, the recipient or subrecipient must maintain and use 
documented procurement procedures, consistent with the standards of 
this section and Sec. Sec.  200.317, 200.318, and 200.319.
    (a) Informal procurement methods for small purchases. These 
procurement methods expedite the completion of transactions, minimize 
administrative burdens, and reduce costs. Informal procurement methods 
may be used when the value of the procurement transaction under the 
Federal award does not exceed the simplified acquisition threshold as 
defined in Sec.  200.1. Recipients and subrecipients may also establish 
a lower threshold. Informal procurement methods include:
    (1) Micro-purchases--(i) Distribution. The aggregate amount of the 
procurement transaction does not exceed the micro-purchase threshold 
defined in Sec.  200.1. To the extent practicable, the recipient or 
subrecipient 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 recipient or 
subrecipient considers the price reasonable based on research, 
experience, purchase history, or other information. Purchase cards may 
be used as a method of payment for micro-purchases.
    (iii) Micro-purchase thresholds. The recipient or subrecipient 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 recipient or subrecipient must be authorized or not 
prohibited under State, local, or tribal laws or regulations. The 
recipient or subrecipient 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) Recipient or subrecipient increase to the micro-purchase 
threshold up to $50,000. The recipient or subrecipient may establish a 
threshold higher than the micro-purchase threshold identified in the 
FAR in accordance with the requirements of this section. The recipient 
or subrecipient may self-certify a threshold up to $50,000 on an annual 
basis and must maintain documentation to be made available to the 
Federal agency or pass-through entity and auditors in accordance with 
Sec.  200.334. The self-certification must include a justification, 
clear

[[Page 69455]]

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 is consistent with 
State law.
    (v) Recipient or subrecipient 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 
recipient or subrecipient must submit a request that includes the 
requirements in paragraph (a)(1)(iv) of this section. The increased 
threshold is valid until any factor that was relied on in the 
establishment and rationale of the threshold changes.
    (2) Simplified acquisitions--(i) Simplified acquisition procedures. 
The aggregate dollar amount of the procurement transaction is higher 
than the micro-purchase threshold but does not exceed the simplified 
acquisition threshold. If simplified acquisition procedures are used, 
price or rate quotations must be obtained from an adequate number of 
qualified sources as determined appropriate by the recipient or 
subrecipient.
    (ii) Simplified acquisition thresholds. The recipient or 
subrecipient is responsible for determining an appropriate simplified 
acquisition threshold based on internal controls, an evaluation of 
risk, and its documented procurement procedures, which may be lower 
than, but not exceed, the threshold established in the FAR.
    (b) Formal procurement methods. Formal procurement methods are 
required when the value of the procurement transaction under a Federal 
award exceeds the simplified acquisition threshold of the recipient or 
subrecipient. Formal procurement methods are competitive and require 
public notice. The following formal methods of procurement are used for 
procurement transactions above the simplified acquisition threshold 
determined by the recipient or subrecipient in accordance with 
paragraph (a)(2)(ii) of this section:
    (1) Sealed bids. This is a procurement method in which bids are 
publicly solicited through an invitation and a firm fixed-price 
contract (lump sum or unit price) is awarded to the responsible bidder 
whose bid conforms with all the material terms and conditions of the 
invitation and is the lowest in price. The sealed bids procurement 
method is preferred for procuring construction services.
    (i) 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 have been identified as 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 
based on 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 with sufficient response time prior to the date 
set for opening the bids. For local governments, the invitation for 
bids must be publicly advertised.
    (B) The invitation for bids must define the items or services with 
specific information, including any required specifications, for the 
bidder to properly respond;
    (C) All bids will be opened at the time and place prescribed in the 
invitation for bids. For local governments, the bids must be opened 
publicly.
    (D) A firm-fixed-price contract is awarded in writing to the lowest 
responsive bid and responsible bidder. When specified in the invitation 
for bids, factors such as discounts, transportation cost, and life-
cycle costs must be considered in determining which bid is the lowest. 
Payment discounts must only be used to determine the low bid when the 
recipient or subrecipient determines they are a valid factor based on 
prior experience.
    (E) The recipient or subrecipient must document and provide a 
justification for all bids it rejects.
    (2) Proposals. This is a procurement method used when conditions 
are not appropriate for using sealed bids. This procurement method may 
result in either a fixed-price or cost-reimbursement contract. They are 
awarded in accordance with the following requirements:
    (i) Requests for proposals require public notice, and all 
evaluation factors and their relative importance must be identified. 
Proposals must be solicited from multiple qualified entities. To the 
maximum extent practicable, any proposals submitted in response to the 
public notice must be considered.
    (ii) The recipient or subrecipient must have written procedures for 
conducting technical evaluations and making selections.
    (iii) Contracts must be awarded to the responsible offeror whose 
proposal is most advantageous to the recipient or subrecipient 
considering price and other factors; and
    (iv) The recipient or subrecipient may use competitive proposal 
procedures for qualifications-based procurement of architectural/
engineering (A/E) professional services whereby the offeror's 
qualifications are evaluated, and the most qualified offeror is 
selected, subject to negotiation of fair and reasonable compensation. 
The method, where the price is not used as a selection factor, can only 
be used to procure architectural/engineering (A/E) professional 
services. The method may not be used to purchase other services 
provided by A/E firms that are a potential source to perform the 
proposed effort.
    (c) Noncompetitive procurement. There are specific circumstances in 
which the recipient or subrecipient may use a noncompetitive 
procurement method. The noncompetitive procurement method may only be 
used if one of the following circumstances apply:
    (1) The aggregate amount of the procurement transaction does not 
exceed the micro-purchase threshold (see paragraph (a)(1) of this 
section);
    (2) The procurement transaction can only be fulfilled by a single 
source;
    (3) The public exigency or emergency for the requirement will not 
permit a delay resulting from providing public notice of a competitive 
solicitation;
    (4) The recipient or subrecipient requests in writing to use a 
noncompetitive procurement method, and the Federal agency or pass-
through entity provides written approval; or
    (5) After soliciting several sources, competition is determined 
inadequate.


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

    (a) When possible, the recipient or subrecipient should ensure that 
small businesses, minority businesses, women's business enterprises, 
veteran-owned businesses, and labor surplus area firms (See U.S. 
Department of Labor's list) are considered as set forth below.
    (b) Such consideration means:
    (1) These business types are included on solicitation lists;
    (2) These business types are solicited whenever they are deemed 
eligible as potential sources;
    (3) Dividing procurement transactions into separate procurements to 
permit

[[Page 69456]]

maximum participation by these business types;
    (4) Establishing delivery schedules (for example, the percentage of 
an order to be delivered by a given date of each month) that encourage 
participation by these business types;
    (5) Utilizing organizations such as the Small Business 
Administration and the Minority Business Development Agency of the 
Department of Commerce; and
    (6) Requiring a contractor under a Federal award to apply this 
section to subcontracts.


Sec.  200.322  Domestic preferences for procurements.

    (a) The recipient or subrecipient should, to the greatest extent 
practicable and consistent with law, 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, contracts, and purchase 
orders under Federal awards.
    (b) For purposes of this section:
    (1) ``Produced in the United States'' means, for iron and steel 
products, that all manufacturing processes, from the initial melting 
stage through the application of coatings, occurred in the United 
States.
    (2) ``Manufactured products'' means items and construction 
materials composed in whole or in part of non-ferrous metals such as 
aluminum; plastics and polymer-based products such as polyvinyl 
chloride pipe; aggregates such as concrete; glass, including optical 
fiber; and lumber.
    (c) Federal agencies providing Federal financial assistance for 
infrastructure projects must implement the Buy America preferences set 
forth in 2 CFR part 184.


Sec.  200.323   Procurement of recovered materials.

    (a) A recipient or subrecipient 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 of 1976 as amended, 42 U.S.C. 
6962. The requirements of Section 6002 include procuring only items 
designated in the 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.
    (b) The recipient or subrecipient should, to the greatest extent 
practicable and consistent with law, purchase, acquire, or use products 
and services that can be reused, refurbished, or recycled; contain 
recycled content, are biobased, or are energy and water efficient; and 
are sustainable. This may include purchasing compostable items and 
other products and services that reduce the use of single-use plastic 
products. See Executive Order 14057, section 101, Policy.


Sec.  200.324  Contract cost and price.

    (a) The recipient or subrecipient must perform a cost-benefit or 
price analysis for every procurement transaction, including contract 
modifications, in excess of the Simplified Acquisition Threshold. The 
method and degree of analysis conducted depend on the facts surrounding 
the particular procurement transaction. For example, the recipient or 
subrecipient should consider potential workforce impacts in their 
analysis if the procurement transaction will displace public sector 
employees. However, as a starting point, the recipient or subrecipient 
must develop their own estimates before receiving bids or proposals.
    (b) Costs or prices based on estimated costs for contracts under 
the Federal award are allowable only to the extent that the costs 
incurred or cost estimates included in negotiated prices would be 
allowable for the recipient or subrecipient under subpart E of this 
part. The recipient or subrecipient may reference its own cost 
principles as long as they comply with subpart E of this part.
    (c) The recipient or subrecipient may not use the ``cost plus a 
percentage of cost'' and ``percentage of construction costs'' methods 
of contracting.


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

    (a) The Federal agency or pass-through entity may review the 
technical specifications of proposed procurements under the Federal 
award if the Federal agency or pass-through entity believes the review 
is needed to ensure that the item or service specified is the one being 
proposed for acquisition. The recipient or subrecipient must submit the 
technical specifications of proposed procurements when requested by the 
Federal agency or pass-through entity. This review should take place 
prior to the time the specifications are incorporated into a 
solicitation document. When the recipient or subrecipient desires to 
accomplish the review after a solicitation has been developed, the 
Federal agency or pass-through entity may still review the 
specifications. In those cases, the review should be limited to the 
technical aspects of the proposed purchase.
    (b) When requested, the recipient or subrecipient must provide 
procurement documents (such as requests for proposals, invitations for 
bids, or independent cost estimates) to the Federal agency or pass-
through entity for pre-procurement review. The Federal agency or pass-
through entity may conduct a pre-procurement review when:
    (1) The recipient's or subrecipient'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 is expected to be received in response to a solicitation;
    (3) The procurement is expected to exceed the Simplified 
Acquisition Threshold and specifies a ``brand name'' product;
    (4) The procurement is expected to exceed the Simplified 
Acquisition Threshold, and a sealed bid procurement is to be awarded to 
an entity other than the apparent low bidder; 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 recipient or subrecipient is exempt from the pre-
procurement review in paragraph (b) of this section if the Federal 
agency or pass-through entity determines that its procurement systems 
comply with the standards of this part.
    (1) The recipient or subrecipient may request that the Federal 
agency or pass-through entity review its procurement system to 
determine whether it meets these standards for its system to be 
certified. Generally, these reviews must occur where there is 
continuous high-dollar funding and third-party contracts are awarded 
regularly.
    (2) The recipient or subrecipient may self-certify its procurement 
system. However, self-certification does not limit the Federal agency's 
or pass-

[[Page 69457]]

through-through entity's right to review the system. Under a self-
certification procedure, the Federal agency or pass-through entity may 
rely on written assurances from the recipient or subrecipient that it 
is complying with the standards of this part. The recipient or 
subrecipient must cite specific policies, procedures, regulations, or 
standards as complying with these requirements and have its system 
available for review.


Sec.  200.326   Bonding requirements.

    The Federal agency or pass-through entity may accept the 
recipient's or subrecipient's bonding policy and requirements for 
construction or facility improvement contracts or subcontracts 
exceeding the Simplified Acquisition Threshold. Before doing so, the 
Federal agency or pass-through entity must determine 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 any required contractual obligations within the 
specified timeframe.
    (b) A performance bond on the contractor's part for 100 percent of 
the contract price. A performance bond is a bond executed in connection 
with a contract to secure the fulfillment of all the contractor's 
requirements under a contract.
    (c) A payment bond on the contractor's part for 100 percent of the 
contract price. A payment bond is a bond executed in connection with a 
contract to assure payment as required by the law of all persons 
supplying labor and material in the execution of the work provided for 
under a contract.


Sec.  200.327  Contract provisions.

    The recipient's or subrecipient's contracts must contain the 
applicable provisions described in Appendix II of this part.

Performance and Financial Monitoring and Reporting


Sec.  200.328   Financial reporting.

    (a) The Federal agency must only require OMB-approved government-
wide data elements on recipient financial reports. At the time of 
publication, this consists of the Federal Financial Report (SF-425); 
however, this also applies to any future OMB-approved government-wide 
data elements available from the OMB-designated standards lead.
    (b) The Federal agency or pass-through entity must collect 
financial reports no less than annually. The Federal agency or pass-
through entity may not collect financial reports more frequently than 
quarterly unless a specific condition has been implemented in 
accordance with Sec.  200.208. To the extent practicable, the Federal 
agency or pass-through entity should collect financial reports in 
coordination with performance reports.
    (c) The recipient or subrecipient must submit financial reports as 
required by the Federal award. Reports submitted annually by the 
recipient or subrecipient 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.
    (d) The final financial report submitted by the recipient must be 
due no later than 120 calendar days after the conclusion of the period 
of performance. A subrecipient must submit a final financial report to 
a pass-through entity no later than 90 calendar days after the 
conclusion of the period of performance. See also Sec.  200.344. The 
Federal agency or pass-through entity may extend the due date for any 
financial report with justification from the recipient or subrecipient.


Sec.  200.329  Monitoring and reporting program performance.

    (a) Monitoring by the recipient. The recipient or subrecipient is 
responsible for the oversight of the Federal award. The recipient or 
subrecipient must monitor its activities under Federal awards to ensure 
they are compliant with all requirements and meeting performance 
expectations. Monitoring by the recipient or subrecipient must cover 
each program, function, or activity. See also Sec.  200.332.
    (b) Reporting program performance. The Federal agency must use OMB-
approved common information collections, as applicable, when requesting 
performance reporting information. The Federal agency must only require 
OMB-approved government-wide data elements in collection of performance 
information including Research Performance Progress Reports if 
applicable. The Federal agency or pass-through entity may not collect 
performance reports more frequently than quarterly unless a specific 
condition has been implemented in accordance with Sec.  200.208. To the 
extent practicable, the Federal agency or pass-through entity should 
collect performance reports in coordination with financial reports. 
When reporting program performance, the recipient or subrecipient must 
relate financial data and project or program accomplishments to the 
performance goals and objectives of the Federal award. Also, the 
recipient or subrecipient must provide cost information to demonstrate 
cost-effective practices (for example, through unit cost data) when 
required by the terms and conditions of the Federal award. In some 
instances (for example, discretionary research awards), this may be 
limited to the requirement to submit technical performance reports. 
Reporting requirements must clearly indicate a standard against which 
the recipient's or subrecipient's performance can be measured. As noted 
in OMB Circular A-11, Part 6, Section 280, measures of customer 
experience are of co-equal importance as traditional measures of 
financial and operational performance. Reporting requirements should 
not solicit information from the recipient or subrecipient that is not 
necessary for the effective monitoring of the Federal award. Federal 
agencies should consult monitoring framework documents such as the 
agency's Evaluation Plan to make that determination.
    (c) Submitting performance reports. (1) The recipient or 
subrecipient must submit performance reports as required by the Federal 
award. Intervals must be no less frequent than annually nor more 
frequent than quarterly except if specific conditions are applied (See 
Sec.  200.208). Reports submitted annually by the recipient or 
subrecipient 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 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 recipient must be 
due no later than 120 calendar days after the period of performance. A 
subrecipient must submit a final performance report to a pass-through 
entity no later than 90 calendar days after the conclusion of the 
period of performance. See also Sec.  200.344. The Federal agency or 
pass-through entity may extend the due date for any performance report 
with justification from the recipient or subrecipient.
    (2) As applicable, performance reports should contain information 
on the following:

[[Page 69458]]

    (i) A comparison of accomplishments to the objectives of the 
Federal award established for the reporting period (for example, 
comparing costs to units of accomplishment). Where performance trend 
data and analysis would be informative to the Federal agency program, 
the Federal agency should include this as a performance reporting 
requirement.
    (ii) Explanations on why established goals or objectives were not 
met; and
    (iii) Additional information, analysis, and explanation of cost 
overruns or higher-than-expected unit costs.
    (d) Construction performance reports. Federal agencies or pass-
through-through entities rely on on-site technical inspections and 
certified percentage of completion data to monitor progress under 
Federal awards for construction. Therefore, the Federal agency or pass-
through entity may require additional performance reports when 
necessary to ensure the goals and objectives of Federal awards are met.
    (e) Significant developments. The recipient or subrecipient must 
inform the Federal agency or pass-through entity of any significant 
developments between performance reporting due dates that could impact 
the Federal award. Significant developments include events that enable 
meeting milestones and objectives sooner or at less cost than 
anticipated or that produce different beneficial results than 
originally planned. Significant developments also include problems, 
delays, or adverse conditions which will impact the recipient's or 
subrecipient's ability to meet milestones or the objectives of the 
Federal award. When significant developments occur that negatively 
impact the Federal Award, the recipient or subrecipient must include 
information on their plan for corrective action and any assistance 
needed to resolve the situation.
    (f) Site visits. The Federal agency or pass-through entity may 
conduct in-person or virtual site visits as warranted.
    (g) Performance report requirement waiver. The Federal agency may 
waive any performance report that is not necessary to ensure the goals 
and objectives of the Federal award are being achieved.


Sec.  200.330   Reporting on real property.

    The Federal agency or pass-through entity must require the 
recipient or subrecipient to submit at least annual reports on the 
status of real property in which the Federal Government retains an 
interest. In instances where the Federal Government's interest in the 
real property extends for 15 years or more, the Federal agency or pass-
through entity may require the recipient or subrecipient to report at 
various multi-year frequencies. Reports submitted at multi-year 
frequencies may not exceed a five-year reporting period. The Federal 
agency must only require OMB-approved government-wide data elements on 
recipient real property reports.

Subrecipient Monitoring and Management


Sec.  200.331   Subrecipient and contractor determinations.

    An entity may concurrently receive Federal awards as a recipient, a 
subrecipient, and a contractor. The recipient or subrecipient is 
responsible for making case-by-case determinations to determine whether 
the entity receiving Federal funds is a subrecipient or a contractor. 
The Federal agency may require the recipient or subrecipient to comply 
with additional guidance to inform these determinations. The Federal 
agency does not have a direct legal relationship with subrecipients or 
contractors of any tier. All of the characteristics listed below may 
not be present in all cases, and some characteristics from both 
categories may be present at the same time. Therefore, the recipient or 
subrecipient is responsible for determining the nature of an agreement. 
The substance of the relationship is more important than the form of 
the agreement.
    (a) Subrecipients. A subaward is for the purpose of carrying out a 
portion of the Federal award and creates a Federal financial assistance 
relationship with a subrecipient. See the definition of Subaward in 
Sec.  200.1. Characteristics that support the classification of the 
entity as a subrecipient include, but are not limited to, when the 
entity:
    (1) Determines who is eligible to receive what Federal assistance;
    (2) Has its performance measured in relation to whether the 
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) Implements 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 recipient's or subrecipient's use and creates a 
procurement relationship with a contractor. See the definition of 
contract in Sec.  200.1. Characteristics that support a procurement 
relationship between the recipient or subrecipient and a contractor 
include, but are not limited to, 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 
implementation of a Federal program; and
    (5) Is not subject to compliance requirements of a Federal program 
as a result of the agreement. However, similar requirements may apply 
for other reasons.


Sec.  200.332   Requirements for pass-through entities.

    A pass-through entity must:
    (a) Confirm in SAM.gov that a potential subrecipient is not 
suspended, debarred, or otherwise excluded from receiving Federal 
funds.
    (b) Ensure that every subaward is clearly identified to the 
subrecipient as a subaward and includes the information provided below. 
A pass-through entity must provide the best available information when 
some of the information below is unavailable. A pass-through entity 
must amend a subaward if additional information becomes available or 
data elements change. Required information includes:
    (1) Federal award identification.
    (i) Subrecipient's name (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;
    (v) Subaward Period of Performance Start and End Date;
    (vi) Subaward Budget Period Start and End Date;
    (vii) Amount of Federal Funds Obligated in the subaward;
    (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 by the Federal 
Funding Accountability and Transparency Act (FFATA);
    (xi) Name of the Federal agency, pass-through entity, and contact 
information for awarding official of the pass-through entity;
    (xii) Assistance Listings title and number; the pass-through entity 
must

[[Page 69459]]

identify the dollar amount made available under each Federal award and 
the Assistance Listings Number at the time of disbursement;
    (xiii) Identification of whether the Federal award is for research 
and development; and
    (xiv) Indirect cost rate for the Federal award (including if the de 
minimis rate is used in accordance with Sec.  200.414).
    (2) All requirements of the subaward, including requirements 
imposed by 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 for the pass-through entity to meet its 
responsibilities under the Federal award. This includes information and 
certifications (see Sec.  200.415) required for submitting financial 
and performance reports that the pass-through entity must provide to 
the Federal agency;
    (4) Indirect Cost Rate;
    (i) An approved indirect cost rate negotiated between the 
subrecipient and the Federal Government. If no approved rate exists, a 
pass-through entity must determine the appropriate rate in 
collaboration with the subrecipient. The indirect cost rate may be 
either:
    (A) An indirect cost rate negotiated between the pass-through 
entity and the subrecipient. These rates may be based on a prior 
negotiated rate between a different pass-through entity and the 
subrecipient. In these instances, the pass-through entity is not 
required to collect information justifying the rate but may elect to do 
so; or
    (B) The de minimis indirect cost rate.
    (ii) The pass-through entity must not require the use of the de 
minimis indirect cost rate if the subrecipient has an approved indirect 
cost rate negotiated with the Federal Government. Subrecipients may 
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 access the subrecipient's records and financial 
statements for the pass-through entity to fulfill its monitoring 
requirements; and
    (6) Appropriate terms and conditions concerning the closeout of the 
subaward.
    (c) Prior to issuing a subaward, evaluate each subrecipient's risk 
of noncompliance with a subaward to determine the appropriate 
subrecipient monitoring described in paragraph (e) of this section. 
When evaluating a subrecipient's risk, a pass-through entity should 
consider the following:
    (1) The subrecipient's prior experience with the same or similar 
subawards;
    (2) The results of previous audits. This includes considering 
whether or not the subrecipient receives a Single Audit in accordance 
with subpart F and the extent to which the same or similar subawards 
have been audited as a major program;
    (3) Whether the subrecipient has new personnel or new or 
substantially changed systems, policies, or procedures; and
    (4) Any Federal agency monitoring results (for example, if the 
subrecipient also receives Federal awards directly from the Federal 
agency).
    (d) If appropriate, consider implementing specific conditions in a 
subaward described in Sec.  200.208 and notify the Federal agency of 
the specific conditions.
    (e) Monitor the activities of a subrecipient to ensure that a 
subaward complies with Federal statutes, regulations, and the terms and 
conditions of the subaward. The pass-through entity is responsible for 
monitoring the overall performance of a subrecipient to ensure that the 
goals and objectives of the subaward are achieved. In monitoring a 
subrecipient, a pass-through entity must:
    (1) Review financial and performance reports.
    (2) Ensure that the subrecipient takes corrective action on all 
significant developments that negatively affect the subaward. 
Significant developments include Single Audit findings related to the 
subaward, other audit findings, site visits, and written notifications 
from a subrecipient of adverse conditions which will impact their 
ability to meet the milestones or the objectives of a subaward. When 
significant developments negatively impact the subaward, a subrecipient 
must provide the pass-through entity with information on their plan for 
corrective action and any assistance needed to resolve the situation.
    (3) Issue a management decision for audit findings pertaining only 
to the Federal award provided to the subrecipient from the pass-through 
entity as required by Sec.  200.521.
    (4) Resolve audit findings specifically related to the subaward. 
However, the pass-through entity is not responsible for resolving 
cross-cutting findings that apply to the subaward and other Federal 
awards or subawards. If a subrecipient has a current Single Audit 
report and has not been excluded from receiving Federal funding 
(meaning, has not 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.  200.513(a)(4)(viii). 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.
    (f) Depending upon the pass-through entity's assessment of the risk 
posed by the subrecipient (as described in paragraph (c) 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;
    (2) Performing site visits to review the subrecipient's program 
operations; and
    (3) Arranging for agreed-upon-procedures engagements as described 
in Sec.  200.425.
    (g) Verify that a subrecipient is audited as required by subpart F 
of this part.
    (h) Consider whether the results of a subrecipient's audit, on-site 
reviews, or other monitoring necessitate adjustments to the pass-
through entity's records.
    (i) Consider taking enforcement action against noncompliant 
subrecipients as described in Sec.  200.339 and in program regulations.


Sec.  200.333   Fixed amount subawards.

    With prior written approval from the Federal agency, the recipient 
may provide subawards based on fixed amounts. Fixed amount subawards 
must meet the requirements of Sec.  200.201.

Record Retention and Access


Sec.  200.334  Record retention requirements.

    The recipient or subrecipient must retain all Federal award records 
for three years from the date of submission of the final financial 
report. For awards that are renewed quarterly or annually, the 
recipient or subrecipient must retain records for three years from the 
date of submission of the quarterly or annual financial report, 
respectively. Records to be retained include but are not limited to, 
financial records, supporting documentation, and statistical records. 
Federal agencies or pass-through-through entities may not impose any 
other record retention requirements except for the following:

[[Page 69460]]

    (a) The records must be retained until all litigation, claims, or 
audit findings involving the records have been resolved and final 
action taken if any litigation, claim, or audit is started before the 
expiration of the three-year period.
    (b) When the recipient or subrecipient is notified in writing by 
the Federal agency or pass-through entity, cognizant agency for audit, 
oversight agency for audit, or cognizant agency for indirect costs to 
extend the retention period.
    (c) The records for property and equipment acquired with the 
support of Federal funds must be retained for three years after final 
disposition.
    (d) The three-year retention requirement does not apply to the 
recipient or subrecipient when records are transferred to or maintained 
by the Federal agency.
    (e) The records for program income earned after the period of 
performance must be retained for three years from the end of the 
recipient's or subrecipient's fiscal year in which the program income 
is earned. This only applies if the Federal agency or pass-through 
entity requires the recipient or subrecipient to report on program 
income earned after the period of performance in the terms and 
conditions of the Federal award.
    (f) The records for 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) must 
be retained according to the applicable option below:
    (1) If submitted for negotiation. When a proposal, plan, or other 
computation must be submitted to the Federal Government to form the 
basis for negotiation of an indirect cost rate (or other standard 
rates), then the three-year retention period for its supporting records 
starts from the date of submission.
    (2) If not submitted for negotiation. When a proposal, plan, or 
other computation is not required to be submitted to the Federal 
Government to form the basis for negotiation of an indirect cost rate 
(or other standard rates), then the three-year retention period for its 
supporting records starts from the end of the fiscal year (or another 
accounting period) covered by the proposal, plan, or other computation.


Sec.  200.335  Requests for transfer of records.

    The Federal agency must request the transfer of records to its 
custody from the recipient or subrecipient when it determines that the 
records possess long-term retention value. However, the Federal agency 
may arrange for the recipient or subrecipient to retain the records 
that have long-term retention value so long as they are continuously 
available to the Federal Government.


Sec.  200.336  Methods for collection, transmission, and storage of 
information.

    When practicable, the Federal agency or pass-through entity and the 
recipient or subrecipient must collect, transmit, and store Federal 
award information in an open file, non-licensed, and machine-readable 
formats. A machine-readable format is a format in a standard computer 
language (not English text) that can be read automatically by a 
computer system. Upon request, the Federal agency or pass-through 
entity must always provide or accept paper versions of Federal award 
information to and from the recipient or subrecipient. The Federal 
agency or pass-through entity must not require additional copies of 
Federal award information submitted in paper versions. The recipient or 
subrecipient does not need to create and retain paper copies when 
original records are electronic and cannot be altered. In addition, the 
recipient or subrecipient may substitute electronic versions of 
original paper records through duplication or other forms of electronic 
conversion, provided that the procedures are subject to periodic 
quality control reviews. Quality control reviews must ensure that 
electronic conversion procedures provide safeguards against the 
alteration of records and assurance that records remain in a format 
that is readable by a computer system.


Sec.  200.337  Access to records.

    (a) Records of recipients and subrecipients. The Federal agency or 
pass-through entity, Inspectors General, the Comptroller General of the 
United States, or any of their authorized representatives must have the 
right of access to any records of the recipient or subrecipient 
pertinent to the Federal award to perform audits, execute site visits, 
or for any other official use. This right also includes timely and 
reasonable access to the recipient's or subrecipient's personnel for 
the purpose of interview and discussion related to such documents or 
the Federal award in general.
    (b) Extraordinary and rare circumstances. The recipient or 
subrecipient and Federal agency or pass-through entity must take 
measures to protect the name of victims of a crime when access to the 
victim's name is necessary. Only under extraordinary and rare 
circumstances would such access include a 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. Any such access, other than under a court order or 
subpoena pursuant to a bona fide confidential investigation, must be 
approved by the head or delegate of the Federal agency.
    (c) Expiration of right of access. The Federal agency's or pass-
through-through entity's rights of access are not limited to the 
required retention period of this part but last as long as the records 
are retained. Federal agencies or pass-through-through entities must 
not impose any other access requirements upon recipients and 
subrecipients.


Sec.  200.338   Restrictions on public access to records.

    Federal agencies or pass-through-through entities may not place 
restrictions on the recipient or subrecipient that limit public access 
to the records of the recipient or subrecipient pertinent to a Federal 
award, except for protected personally identifiable information (PII) 
or other sensitive information when the Federal 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 
agency. The Freedom of Information Act (5 U.S.C. 552) (FOIA) does not 
apply to records that remain under the recipient's or subrecipient's 
control except as required by Sec.  200.315. Unless required by 
Federal, State, local, and tribal law, recipients and subrecipients are 
not required to permit public access to their records. The recipient's 
or subrecipient'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.

    The Federal agency or pass-through entity may implement specific 
conditions if the recipient or subrecipient fails to comply with the 
U.S. Constitution, Federal statutes, regulations, or terms and 
conditions of the Federal award. See Sec.  200.208 for additional 
information on specific conditions. When the Federal agency or pass-
through entity determines that noncompliance cannot be remedied by 
imposing specific conditions, the Federal agency or pass-through entity

[[Page 69461]]

may take one or more of the following actions:
    (a) Temporarily withhold payments until the recipient or 
subrecipient takes corrective action.
    (b) Disallow costs for all or part of the activity associated with 
the noncompliance of the recipient or subrecipient.
    (c) Suspend or terminate the Federal award in part or in its 
entirety.
    (d) Initiate suspension or debarment proceedings as authorized in 2 
CFR part 180 and the Federal agency's regulations. Pass-through 
entities must recommend suspension or debarment proceedings for a 
subrecipient or subcontractor be initiated by the Federal agency.
    (e) Withhold further Federal funds (new awards or continuation 
funding) for the project or program.
    (f) Pursue other legally available remedies.


Sec.  200.340  Termination.

    (a) The Federal award may be terminated in part or its entirety as 
follows:
    (1) By the Federal agency or pass-through entity if the recipient 
or subrecipient fails to comply with the terms and conditions of the 
Federal award;
    (2) By the Federal agency or pass-through entity with the consent 
of the recipient or subrecipient, in which case the two parties must 
agree upon the termination conditions. These conditions include the 
effective date and, in the case of partial termination, the portion to 
be terminated;
    (3) By the recipient or subrecipient upon sending the Federal 
agency or pass-through entity a written notification of the reasons for 
such termination, the effective date, and, in the case of partial 
termination, the portion to be terminated. However, if the Federal 
agency or pass-through entity determines that the remaining portion of 
the Federal award will not accomplish the purposes for which the 
Federal award was made, the Federal agency or pass-through entity may 
terminate the Federal award in its entirety; or
    (4) By the Federal agency or pass-through entity pursuant to the 
terms and conditions of the Federal award.
    (b) The Federal agency or pass-through entity must clearly and 
unambiguously specify all termination provisions in the terms and 
conditions of the Federal award.
    (c) When the Federal agency terminates the Federal award prior to 
the end of the period of performance due to the recipient's material 
failure to comply with the terms and conditions of the Federal award, 
the Federal agency must report the termination in SAM.gov. A Federal 
agency must use the Contractor Performance Assessment Reporting System 
(CPARS) to enter information in SAM.gov.
    (1) The information required under paragraph (c) of this section is 
not to be reported in SAM.gov until the recipient has either:
    (i) 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 agency that it intends to appeal the 
decision to terminate.
    (2) If a Federal agency, after entering information about a 
termination in SAM.gov, subsequently:
    (i) Learns that any of that information is erroneous, the Federal 
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 agencies. The Federal agency is strongly encouraged to 
amend the information in the system to incorporate the update in a 
timely way.
    (3) The Federal agency must not post any information that will be 
made publicly available in the non-public segment of SAM.gov that is 
covered by a disclosure exemption under the Freedom of Information Act 
(FOIA). When the recipient asserts within seven calendar days to the 
Federal agency which posted the information that a disclosure exemption 
under FOIA covers some of the information made publicly available, the 
Federal agency that posted the information must remove the posting 
within seven calendar days of receiving the assertion. Before reposting 
the releasable information, the Federal agency must resolve the issue 
in accordance with the agency's FOIA procedures.
    (d) When the Federal award is terminated in part or its entirety, 
the Federal agency or pass-through entity and recipient or subrecipient 
remain responsible for compliance with the requirements in Sec. Sec.  
200.344 and 200.345.
    (e) A Federal agency determination to not award continuation 
funding does not constitute a termination. For example, if an award no 
longer effectuates the program goals or agency priorities or continued 
Federal funding is not available.


Sec.  200.341   Notification of termination requirement.

    (a) The Federal agency or pass-through entity must provide written 
notice of termination to the recipient or subrecipient. The written 
notice of termination should include the reasons for termination, the 
effective date, and the portion of the Federal award to be terminated, 
if applicable.
    (b) If the Federal award is terminated for the recipient's material 
failure to comply with a Federal award, the notification must state the 
following:
    (1) The termination decision will be reported in SAM.gov;
    (2) The information will be available in SAM.gov for five years 
(and then archived) from the date of the termination;
    (3) A Federal agency that considers making a Federal award to the 
recipient during that five-year period that is expected to exceed the 
simplified acquisition threshold over the period of performance must 
consider the information regarding the recipient's material failure to 
comply in judging whether the entity is qualified to receive the 
Federal award.
    (4) The recipient may comment on any information in SAM.gov about 
the recipient for future consideration by Federal agencies. The 
recipient may submit comments in SAM.gov.
    (5) Federal agencies should consider the recipient's comments when 
determining whether the recipient is qualified for a Federal award.
    (c) Upon termination of the Federal award, the Federal agency must 
provide the information to USAspending.gov as required by the Federal 
Funding Accountability and Transparency Act (FFATA). In addition, the 
Federal agency must update or notify any other relevant government-wide 
systems or entities of any indications of poor performance as required 
by 41 U.S.C. 2313 and 31 U.S.C. 3321.


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

    The Federal agency or pass-through entity must maintain written 
procedures for processing objections, hearings, and appeals. Upon 
initiating a remedy for noncompliance (for example, disallowed costs, a 
corrective action plan, or termination), the Federal agency or pass-
through entity must provide the recipient or subrecipient with an 
opportunity to object and provide information challenging the action. 
The Federal agency or pass-through entity must comply with any 
requirements for hearings, appeals, or other administrative proceedings 
to which the recipient or subrecipient is entitled under any statute or 
regulation applicable to the action involved.

[[Page 69462]]

Sec.  200.343   Effects of suspension and termination.

    Costs to the recipient or subrecipient resulting from financial 
obligations incurred by the recipient or subrecipient during a 
suspension or after the termination of a Federal award are not 
allowable unless the Federal 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 recipient or subrecipient 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.

    (a) The Federal agency or pass-through entity must close out the 
Federal award when it determines that all administrative actions and 
required work of the Federal award have been completed. When the 
recipient or subrecipient fails to complete the necessary 
administrative actions or the required work for an award, the Federal 
agency or pass-through entity must proceed with closeout based on the 
information available. This section specifies the administrative 
actions required at the end of the period of performance.
    (b) A recipient must submit all reports (financial, performance, 
and other reports required by the Federal award) no later than 120 
calendar days after the conclusion of the period of performance. A 
subrecipient must submit all reports (financial, performance, and other 
reports required by a subaward) to the pass-through entity no later 
than 90 calendar days after the conclusion of the period of performance 
of the subaward (or an earlier date as agreed upon by the pass-through 
entity and subrecipient). When justified, the Federal agency or pass-
through entity may approve extensions for the recipient or 
subrecipient. When the recipient does not have a final indirect cost 
rate covering the period of performance, a final financial report must 
still be submitted to fulfill the requirements of this section. The 
recipient must submit a revised final financial report when all 
applicable indirect cost rates have been finalized.
    (c) The recipient must liquidate all financial obligations incurred 
under the Federal award no later than 120 calendar days after the 
conclusion of the period of performance. A subrecipient must liquidate 
all financial obligations incurred under a subaward no later than 90 
calendar days after the conclusion of the period of performance of the 
subaward (or an earlier date as agreed upon by the pass-through entity 
and subrecipient). When justified, the Federal agency or pass-through 
entity may approve extensions for the recipient or subrecipient.
    (d) The Federal agency or pass-through entity must not delay 
payments to the recipient or subrecipient for costs meeting the 
requirements of subpart E of this part.
    (e) The recipient or subrecipient must immediately refund any 
unobligated funds that the Federal agency or pass-through entity paid 
and that are not authorized to be retained. See OMB Circular A-129 and 
Sec.  200.346.
    (f) The Federal agency or pass-through entity must make all 
necessary adjustments to the Federal share of costs after closeout 
reports are received. For example, the disallowance of any costs or the 
deobligation of an unliquidated balance.
    (g) The recipient or subrecipient must account for any property 
acquired with Federal funds or received from the Federal Government in 
accordance with Sec. Sec.  200.310 through 200.316 and 200.330.
    (h) The Federal agency must make every effort to complete all 
closeout actions no later than one year after the end of the period of 
performance. If the indirect cost rate has not been finalized and would 
delay closeout, the Federal agency is authorized to mutually agree with 
the recipient to close an award using the current or most recently 
negotiated rate. However, the recipient is not required to agree to a 
final rate for a Federal award for the purpose of prompt closeout.
    (i) If the recipient does not comply with the requirements of this 
section, including submitting all final reports, the Federal agency 
must report the recipient's material failure to comply with the terms 
and conditions of the Federal award in SAM.gov. A Federal agency must 
use the Contractor Performance Assessment Reporting System (CPARS) to 
enter or amend information in SAM.gov. Federal agencies may also pursue 
other enforcement actions as appropriate. See Sec.  200.339.

Post-Closeout Adjustments and Continuing Responsibilities


Sec.  200.345  Post-closeout adjustments and continuing 
responsibilities.

    (a) The closeout of the Federal award does not affect any of the 
following:
    (1) The right of the Federal agency or pass-through entity to 
disallow costs and recover funds on the basis of a later audit or 
review. However, the Federal agency or pass-through entity must make 
determinations to disallow costs and notify the recipient or 
subrecipient within the record retention period.
    (2) The recipient's or subrecipient's requirement to return funds 
or right to receive any remaining and available funds as a result of 
refunds, corrections, final indirect cost rate adjustments (unless the 
Federal award in closed in accordance with Sec.  200.344(h)), or other 
transactions.
    (3) The ability of the Federal agency or pass-through entity to 
make financial adjustments to a previously closed Federal 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.
    (6) Records retention as required in Sec. Sec.  200.334 through 
200.337.
    (b) After the closeout of the Federal award, a relationship created 
under the Federal award may be modified or ended in whole or in part. 
This may only be done with the consent of the awarding Federal agency 
or pass-through entity and the recipient or subrecipient, provided the 
responsibilities of the recipient or subrecipient referred to in 
paragraph (a) of this section, including those for property management 
as applicable, are considered and provisions made for continuing 
responsibilities of the recipient or subrecipient, as appropriate.

Collection of Amounts Due


Sec.  200.346  Collection of amounts due.

    Any Federal funds paid to the recipient or subrecipient in excess 
of the amount that the recipient or subrecipient is determined to be 
entitled to under the Federal award constitutes a debt to the Federal 
Government. The Federal agency must collect all debts arising out of 
its Federal awards in accordance with the Standards for the 
Administrative Collection of Claims (31 CFR 901).

[[Page 69463]]

Subpart E--Cost Principles

General Provisions


Sec.  200.400  Policy guide.

    The application of these cost principles is based on the 
fundamental premises that:
    (a) The recipient or subrecipient is responsible for the efficient 
and effective administration of the Federal award through sound 
management practices.
    (b) The recipient or subrecipient is responsible for administering 
Federal funds in a manner consistent with Federal statutes, 
regulations, and the terms and conditions of the Federal award.
    (c) The recipient or subrecipient, in recognition of its unique 
combination of staff, facilities, and experience, is responsible for 
employing organization and management techniques necessary to ensure 
the proper and efficient administration of the Federal award.
    (d) The accounting practices of the recipient or subrecipient must 
be consistent with these cost principles and support the accumulation 
of costs as required by these cost principles, including maintaining 
adequate documentation to support costs charged to the Federal award.
    (e) The cognizant agency for indirect costs should ensure that the 
recipient or subrecipient consistently applies these cost principles 
when reviewing, negotiating, and approving cost allocation plans or 
indirect cost proposals. Where wide variations exist in the treatment 
of a given cost item by the recipient or subrecipient, the 
reasonableness and equity of such treatments should be fully 
considered. See the definition of indirect costs in Sec.  200.1.
    (f) For recipients and subrecipients that educate and engage 
students in research, the dual role of students as both trainees and 
employees (including pre- and post-doctoral staff) contributing to the 
completion of Federal awards for research must be recognized in the 
application of these principles.
    (g) The recipient or subrecipient may not earn or keep any profit 
resulting from Federal financial assistance unless explicitly 
authorized by the terms and conditions of the Federal award. See also 
Sec.  200.307.


Sec.  200.401  Application.

    (a) General. The recipient or subrecipient must apply these 
principles in determining allowable costs under Federal awards. The 
recipient or subrecipient must also use these principles as a guide in 
pricing fixed-price contracts and subcontracts when costs are used in 
determining the appropriate price. These cost principles do not apply 
to:
    (1) Arrangements under which Federal financing is in the form of 
loans, scholarships, fellowships, traineeships, or other fixed amounts 
based on items such as education allowance or published tuition rates 
and fees.
    (2) Capitation awards to Institutions of Higher Education (IHEs) 
based on case counts or the number of beneficiaries.
    (3) Fixed amount awards. See 200.201.
    (4) Federal awards to hospitals (see Appendix IX of this part).
    (5) Grants and cooperative agreements for food commodities.
    (6) Other awards under which the recipient or subrecipient is not 
required to account for actual costs incurred.
    (b) Federal contract. A Federal contract awarded to a recipient is 
subject to the Cost Accounting Standards (CAS). It must incorporate the 
applicable CAS requirements per 48 CFR Chapter 99 and 48 CFR part 30 
(FAR Part 30). With respect to the allocation of costs, the Cost 
Accounting Standards at 48 CFR parts 9904 or 9905 take precedence over 
the cost principles in subpart E. When a contract with a recipient 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 (for example, 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 instead of the allowability 
provisions of Sec.  200.449). For example, the allowability of costs in 
CAS-covered costs is determined first by the allocation provisions of 
the Cost Accounting Standards rather than the allowability provisions 
in Sec.  200.449 (unless the CAS does not address the specific costs). 
In complying with those requirements, the recipient's application of 
cost accounting practices for estimating, accumulating, and reporting 
costs for Federal awards and CAS-covered contracts must be consistent 
with the cost accounting practices for the CAS-covered contracts. The 
recipient must maintain only one set of accounting records supporting 
the allocation of costs if the recipient administers both Federal 
awards and CAS-covered contracts.
    (c) Exemptions. Some nonprofit organizations, because of their size 
and nature of operations, can be considered to be similar to for-profit 
organizations in terms of the applicability of cost principles. These 
nonprofit organizations must operate under Federal cost principles that 
apply to for-profit organizations located at 48 CFR 31.2. Appendix VIII 
contains a list of these nonprofit organizations. Other organizations 
may be added to this list if approved by the cognizant agency for 
indirect costs.

Basic Considerations


Sec.  200.402   Composition of costs.

    The total cost of a Federal award is the sum of the allowable 
direct and allocable indirect costs minus any applicable credits.


Sec.  200.403  Factors affecting allowability of costs.

    Except where otherwise authorized by statute, costs must meet the 
following criteria to be allowable under Federal awards:
    (a) Be necessary and reasonable for the performance of the Federal 
award and be allocable thereto under these principles.
    (b) Conform to any limitations or exclusions set forth in these 
principles or in the Federal award as to types or amount of cost items.
    (c) Be consistent with policies and procedures that apply uniformly 
to both federally-financed and other activities of the recipient or 
subrecipient.
    (d) Be accorded consistent treatment. For example, a cost may not 
be assigned to a Federal award as a direct cost if any other cost 
incurred for the same purpose in like circumstances has been allocated 
to the Federal award as an indirect cost.
    (e) Be determined in accordance with generally accepted accounting 
principles (GAAP), except, for State and local governments and Indian 
Tribes only, as otherwise provided for in this part.
    (f) Not be included as a cost or used to meet cost sharing 
requirements of any other federally-financed program in either the 
current or a prior period. See Sec.  200.306(b).
    (g) Be adequately documented. See Sec. Sec.  200.300 through 
200.309.
    (h) Administrative closeout costs may be incurred until the due 
date of the final report(s). If incurred, these costs must be 
liquidated prior to the due date of the final report(s) and charged to 
the final budget period of the award unless otherwise specified by the 
Federal agency. All other costs must be incurred during the approved 
budget period. At its discretion, the Federal agency is authorized to 
waive prior written approvals to carry forward unobligated balances to 
subsequent budget periods. See Sec.  200.308(g)(3).

[[Page 69464]]

Sec.  200.404  Reasonable costs.

    A cost is reasonable if it does not exceed an amount that a prudent 
person would incur under the circumstances prevailing when the decision 
was made to incur the cost. In determining the reasonableness of a 
given cost, consideration must be given to the following:
    (a) Whether the cost is generally recognized as ordinary and 
necessary for the recipient's or subrecipient's operation or the proper 
and efficient performance of the Federal award;
    (b) The restraints or requirements imposed by such factors as sound 
business practices; arm's-length bargaining; Federal, State, local, 
tribal, and other laws and regulations; and terms and conditions of the 
Federal award.
    (c) Market prices for comparable costs for the geographic area; and
    (d) Whether the individuals concerned acted with prudence in the 
circumstances considering their responsibilities to the recipient or 
subrecipient, its employees, its students or membership (if 
applicable), the public at large, and the Federal Government.
    (e) The degree to which the cost represents a deviation from the 
recipient's or subrecipient's established written policies and 
procedures for incurring costs.


Sec.  200.405   Allocable costs.

    (a) Allocable costs in general. A cost is allocable to a Federal 
award if the cost is assignable to that Federal award in accordance 
with the relative benefits received. This standard is met if the cost 
satisfies any of the following criteria:
    (1) Is incurred specifically for the Federal award;
    (2) Benefits both the Federal award and other work of the recipient 
or subrecipient and can be distributed in proportions that may be 
approximated using reasonable methods; or
    (3) Is necessary to the overall operation of the recipient or 
subrecipient and is assignable in part to the Federal award in 
accordance with these cost principles.
    (b) Allocation of indirect costs. All activities which benefit from 
the recipient's or subrecipient's indirect cost, including unallowable 
activities and donated services by the recipient or subrecipient or 
third parties, will receive an appropriate allocation of indirect 
costs.
    (c) Limitation on charging certain allocable costs to other Federal 
awards. A cost allocable to a particular Federal award may not be 
charged to other Federal awards (for example, to overcome fund 
deficiencies or to avoid restrictions imposed by Federal statutes, 
regulations, or the terms and conditions of the Federal awards). 
However, this prohibition would not preclude the recipient or 
subrecipient from shifting costs that are allowable under two or more 
Federal awards in accordance with existing Federal statutes, 
regulations, or the terms and conditions of the Federal awards.
    (d) Direct cost allocation principles. If a cost benefits two or 
more projects or activities in proportions that can be determined 
without undue effort or cost, the cost must be allocated to the 
projects based on the proportional benefit. However, when those 
proportions cannot be determined because of the interrelationship of 
the work involved, then, notwithstanding paragraph (c), 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.
    (e) Costs of contracts subject to CAS. Costs of contracts subject 
to CAS must be allocated according to the Cost Accounting Standards, 
which take precedence over the allocation provisions in this part.


Sec.  200.406  Applicable credits.

    (a) Applicable credits refer to transactions that offset or reduce 
direct or indirect costs allocable to a Federal award. Examples of such 
transactions are purchase discounts, rebates or allowances, recoveries 
or indemnities on losses, insurance refunds or rebates, adjustments of 
overpayments, or erroneous charges. To the extent that such credits 
accruing to or received by the recipient or subrecipient relate to 
allowable costs, they must be credited to the Federal award either as a 
cost reduction or cash refund, as appropriate.
    (b) In some instances, the amounts received from the Federal 
Government to finance activities or service operations of the recipient 
or subrecipient should be treated as applicable credits. Specifically, 
the concept of netting such credit items (including any amounts used to 
meet cost sharing 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 potential application areas.


Sec.  200.407  Prior written approval (prior approval).

    The reasonableness and allocability of certain costs under Federal 
awards may be difficult to determine. To avoid subsequent disallowance 
or dispute based on unreasonableness or nonallocability, the recipient 
may seek the prior written approval of the Federal agency (or, for 
indirect costs, the cognizant agency for indirect costs) before 
incurring the cost. The absence of prior written approval on any 
element of cost will not, in itself, affect the reasonableness or 
allocability of that cost unless prior approval is specifically 
required for allowability as described under certain circumstances in 
the following sections:
    (a) Section 200.306 Cost sharing;
    (b) Section 200.307 Program income;
    (c) Section 200.308 Revision of budget and program plans;
    (d) Section 200.333 Fixed amount subawards;
    (e) Section 200.430 Compensation--personal services, paragraph (h);
    (f) Section 200.431 Compensation--fringe benefits;
    (g) Section 200.439 Equipment and other capital expenditures;
    (h) Section 200.441 Fines, penalties, damages and other 
settlements;
    (i) Section 200.442 Fund raising and investment management costs;
    (j) Section 200.445 Goods or services for personal use;
    (k) Section 200.447 Insurance and indemnification;
    (l) Section 200.455 Organization costs;
    (m) Section 200.458 Pre-award costs;
    (n) Section 200.462 Rearrangement and reconversion costs;
    (o) Section 200.475 Travel costs.


Sec.  200.408   Limitation on allowance of costs.

    Statutory requirements may limit the allowability of costs. Any 
costs that exceed the maximum amount allowed by statute may not be 
charged to the Federal award. Only the amount allowable by statute may 
be charged to the Federal award.


Sec.  200.409  Special considerations.

    Other sections 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 recipients and 
subrecipients, as specified in the following sections:

[[Page 69465]]

    (a) Direct and Indirect Costs (Sec. Sec.  200.412-200.415);
    (b) Special Considerations for States, Local Governments and Indian 
Tribes (Sec. Sec.  200.416 and 200.417); and
    (c) Special Considerations for Institutions of Higher Education 
(Sec. Sec.  200.418 and 200.419).


Sec.  200.410  Collection of unallowable costs.

    Payments made for costs determined to be unallowable by either the 
awarding Federal agency, cognizant agency for indirect costs, or pass-
through entity must be refunded with interest to the Federal 
Government. Unless directed by Federal statute or regulation, 
repayments must be made in accordance with the instructions provided by 
the Federal agency or pass-through entity that made the allowability 
determination. See Sec. Sec.  200.300 through 200.309, and Sec.  
200.346.


Sec.  200.411   Adjustment of previously negotiated indirect cost rates 
containing unallowable costs.

    (a) Federal negotiated indirect cost rates based on a proposal 
later found to have included costs that:
    (1) Are unallowable as specified by Federal statutes, regulations 
or the terms and conditions of a Federal award; or
    (2) Are unallowable because they are not allocable to the Federal 
award(s), must be adjusted, or a refund must be made in accordance with 
the requirements of this section. These adjustments or refunds are 
intended to correct the proposals used to establish the rates and do 
not constitute a reopening of the rate negotiation. The adjustments or 
refunds must be made regardless of the type of rate negotiated 
(predetermined, final, fixed, or provisional).
    (b) For rates covering a future fiscal year of the recipient or 
subrecipient, the unallowable costs must be removed from the indirect 
cost pools and the rates must be adjusted.
    (c) For rates covering a past period, the Federal share of the 
unallowable costs must be computed for each year involved, and a cash 
refund (including interest) must be made to the Federal Government in 
accordance with the directions provided by the cognizant agency for 
indirect costs. When cash refunds are made for past periods covered by 
provisional or fixed rates, appropriate adjustments must be made when 
the rates are finalized to avoid duplicate recovery of the unallowable 
costs.
    (d) For rates covering the current period, either a rate adjustment 
or a refund, as described in paragraphs (b) and (c) of this section, 
must be required by the cognizant agency for indirect costs. The choice 
of method must be at the discretion of the cognizant agency for 
indirect costs, based on its judgment as to which method would be most 
practical.
    (e) The amount or proportion of unallowable costs included in each 
year's rate will be assumed to be the same as the amount or proportion 
of unallowable costs included in the base year proposal used to 
establish the rate.

Direct and Indirect Costs


Sec.  200.412   Classification of costs.

    There is no universal rule for classifying certain costs as direct 
or indirect costs. A cost may be direct for some specific service or 
function but indirect for the Federal award or other final cost 
objective. Therefore, each cost incurred for the same purpose in like 
circumstances must be treated consistently either as a direct or an 
indirect cost to avoid possible double-charging of Federal awards. 
Guidelines for determining direct and indirect costs charged to Federal 
awards are provided in this subpart.


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 direct or indirect costs. 
See Sec.  200.405.
    (b) Application to Federal awards. The association of costs with a 
Federal award (rather than the nature of the procurement transaction) 
determines whether costs are direct or indirect. Costs charged directly 
to a Federal award are typically incurred specifically for that Federal 
award (including, for example, supplies needed to achieve the award's 
objectives and the proportion of staff salary expended in relation to 
that specific award). However, costs that otherwise would be treated as 
indirect costs may also be considered direct costs if they are directly 
related to a specific award (including, for example, extraordinary 
utility consumption, the cost of materials supplied from stock or 
services rendered by specialized facilities, cybersecurity, integrated 
data systems, asset management systems, performance management costs, 
program evaluation costs, or other institutional service operations).
    (c) Administrative and clerical staff salaries. Administrative and 
clerical staff salaries should normally be treated as indirect costs. 
Direct charging of these costs may be appropriate only if they meet all 
of the following conditions:
    (1) The administrative or clerical services are integral to a 
Federal award;
    (2) Individuals involved can be specifically identified with a 
Federal award; and
    (3) The costs are not also recovered as indirect costs.
    (d) Minor items. A minor direct cost may be treated as an indirect 
cost when it is practical to do so and provided that it is treated 
consistently for all Federal and non-Federal purposes.
    (e) Treatment of unallowable costs in determining indirect cost 
rates. Unallowable costs for Federal awards must be treated as direct 
costs when determining indirect cost rates. Additionally, unallowable 
costs must be allocated their equitable share of the recipient's or 
subrecipient's indirect costs if they represent activities which:
    (1) Include the salaries of personnel;
    (2) Occupy space; and
    (3) Benefit from the recipient's or subrecipient's indirect costs.
    (f) Treatment of certain costs for nonprofit organizations. For 
nonprofit organizations, the costs of activities performed by the 
nonprofit organization primarily as a service to members, clients, or 
the general public when significant and necessary to the organization's 
mission must be treated as direct costs whether or not allowable, and 
be allocated an equitable share of indirect costs. Some examples of 
these types of activities include:
    (1) Maintenance of membership rolls, subscriptions, publications, 
and related functions. See Sec.  200.454.
    (2) Providing services and information to members, the government, 
or the public. See Sec. Sec.  200.454 and 200.450.
    (3) Promotion, lobbying, and other forms of public relations. See 
Sec. Sec.  200.421 and 200.450.
    (4) Conferences (except in support of the general administration of 
the recipient or subrecipient). See also Sec.  200.432.
    (5) Maintenance, protection, and investment of special funds not 
used in the recipient's or subrecipient's operation. See also Sec.  
200.442.
    (6) 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.


Sec.  200.414   Indirect costs.

    (a) Facilities and administration classification. For major 
Institutions of Higher Education (IHE) and major

[[Page 69466]]

nonprofit organizations, indirect costs must be classified within two 
broad categories: ``Facilities'' and ``Administration.'' ``Facilities'' 
is defined as depreciation on buildings, equipment and capital 
improvements, 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. Major nonprofit organizations are those which 
receive more than $10 million in direct Federal funding.
    (b) Diversity of nonprofit organizations. It is not always possible 
to specify the types of costs that may be classified as indirect costs 
for nonprofit organizations due to the diversity of their accounting 
practices. Identification with a Federal award rather than the nature 
of the procurement transaction involved is the determining factor in 
distinguishing direct from indirect costs of Federal awards. However, 
typical examples of indirect cost for many nonprofit organizations may 
include depreciation on buildings and equipment, the costs of operating 
and maintaining facilities, and general administration and general 
expenses, such as the salaries and expenses of executive officers, 
personnel administration, and accounting.
    (c) Federal Agency Acceptance of Negotiated Indirect Cost Rates. 
(See Sec.  200.306.)
    (1) Negotiated indirect cost rates must be accepted by all Federal 
agencies. A Federal agency may only use a rate different from the 
negotiated rate for either a class of Federal awards or a single 
Federal award when required by Federal statute, regulation, or when 
approved by the awarding Federal agency based on documented 
justification described in paragraph (c)(3) of this section.
    (2) The Federal agency must notify OMB of any approved deviations. 
The recipient or subrecipient may notify OMB of any disputes with 
Federal agencies regarding the application of a federally negotiated 
indirect cost rate.
    (3) The Federal 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) The Federal agency must include the policies relating to 
indirect cost rate reimbursement or cost share as approved under 
paragraph (e) in the notice of funding opportunity. As appropriate, the 
Federal agency should incorporate discussion of these policies into its 
outreach activities with applicants before posting a notice of funding 
opportunity. See Sec.  200.204.
    (d) Pass-through entities. Pass-through entities are subject to the 
requirements in Sec.  200.332(b)(4) and must accept all federally 
negotiated indirect costs rates for subrecipients.
    (e) Appendices. Requirements for development and submission of 
indirect cost rate proposals and cost allocation plans are contained in 
the following Appendices:
    (1) Appendix III to Part 200--Indirect (F&A) Costs Identification 
and Assignment, and Rate Determination for Institutions of Higher 
Education (IHEs);
    (2) Appendix IV to Part 200--Indirect (F&A) Costs Identification 
and Assignment, and Rate Determination for Nonprofit Organizations;
    (3) Appendix V to Part 200--State/Local Government-wide Central 
Service Cost Allocation Plans;
    (4) Appendix VI to Part 200--Public Assistance Cost Allocation 
Plans;
    (5) Appendix VII to Part 200--States and Local Government and 
Indian Tribe Indirect Cost Proposals; and
    (6) Appendix IX to Part 200--Hospital Cost Principles.
    (f) De minimis rate. Recipients and subrecipients that do not have 
a current Federal negotiated indirect cost rate (including provisional 
rate) may elect to charge a de minimis rate of up to 15 percent of 
modified total direct costs (MTDC). The recipient or subrecipient is 
authorized to determine the appropriate rate up to this limit. Federal 
agencies may not require recipients and subrecipients to use a de 
minimis rate lower than this standard unless required by Federal 
statute. The de minimis rate must not be applied to cost reimbursement 
contracts issued directly by the Federal Government in accordance with 
the FAR. Recipients and subrecipients are not required to use the de 
minimis rate and may submit an indirect cost proposal in accordance 
with the appropriate Appendix referenced in paragraph (e) of this 
section. When applying the de minimis rate, costs must be consistently 
charged as either direct or indirect costs and may not be double 
charged or inconsistently charged as both. The de minimis rate does not 
require documentation to justify its use and may be used indefinitely. 
Once elected, the recipient or subrecipient must use the de minimis 
rate for all Federal awards until the recipient or subrecipient chooses 
to receive a negotiated rate. A governmental department or agency that 
receives more than $35 million in direct Federal funding during its 
fiscal year may not elect to use the de minimis rate (see Appendix VII, 
paragraph D.1.b.).
    (g) One-time extension of indirect rates. A recipient or 
subrecipient with a current Federal negotiated indirect cost rate may 
apply for a one-time extension of that agreement for up to four years. 
This extension will be subject to review and approval by the cognizant 
agency for indirect costs. If granted, the recipient or subrecipient 
may only request a rate review when the extension period ends. The 
recipient or subrecipient must re-apply to negotiate a new rate when 
the extension ends. When a new rate is negotiated, the recipient or 
subrecipient may again apply for a one-time extension of the new rate 
in accordance with this paragraph.


Sec.  200.415   Required certifications.

    (a) Financial reports and payment requests under Federal awards 
must include a certification, signed by an official who is authorized 
to legally bind the recipient or subrecipient, which reads as follows: 
``By signing this report, I certify to the best of my knowledge and 
belief that the report is true, complete, and accurate, and the 
expenditures, disbursements and cash receipts are for the purposes and 
objectives set forth in the terms and conditions of the Federal award. 
I am aware that any false, fictitious, or fraudulent information, or 
the omission of any material fact, may subject me to criminal, civil or 
administrative penalties for fraud, false statements, false claims or 
otherwise. (U.S. Code Title 18, Section 1001 and Title 31, Sections 
3729-3730 and 3801-3812).''
    (b) Subrecipients under the Federal award must certify to the pass-
through entity whenever applying for funds, requesting payment, and 
submitting reports: ``I certify to the best of my knowledge and belief 
that the information provided herein is true, complete, and accurate. I 
am aware that the provision of false, fictitious, or fraudulent 
information, or the omission of any material fact, may subject me to 
criminal, civil, or administrative consequences including, but not 
limited

[[Page 69467]]

to violations of U.S. Code Title 18, Sections 2, 1001, 1343 and Title 
31, Sections 3729-3730 and 3801-3812.'' Each such certification must be 
maintained pursuant to the requirements of Sec.  200.334. This 
paragraph applies to all tiers of subrecipients.
    (c) Certification of cost allocation plan or indirect cost rate 
proposal. Each cost allocation plan or indirect cost rate proposal must 
comply with the following:
    (1) A proposal to establish a cost allocation plan or an indirect 
cost rate, whether submitted to a Federal cognizant agency for indirect 
costs or maintained on file by the recipient, must be certified by the 
recipient 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 recipient by 
an individual at a level no lower than the vice president or chief 
financial officer of the recipient that submits the proposal.
    (2) The Federal Government may either disallow all indirect costs 
or unilaterally establish an indirect cost rate when the recipient 
fails to submit a certified proposal for establishing a rate. This rate 
should be based upon audited historical data or other data furnished to 
the cognizant agency for indirect costs and for which it can be 
demonstrated that all unallowable costs have been excluded. The rate 
established must ensure that potentially unallowable costs are not 
reimbursed. Alternatively, the recipient may use the de minimis 
indirect cost rate. See Sec.  200.414(f).
    (d) Nonprofit organizations must certify that they did not meet the 
definition of a major nonprofit organization as defined in Sec.  
200.414(a), if applicable.
    (e) The recipient must certify that the requirements and standards 
for lobbying (see Sec.  200.450) have been met when submitting its 
annual indirect cost rate proposal.

Special Considerations for States, Local Governments and Indian Tribes


Sec.  200.416   Cost allocation plans and indirect cost proposals.

    (a) Awards to states, local governments, and Indian Tribes are 
often implemented at the level of department within the State, local 
government, or Indian Tribe. A central service cost allocation plan is 
established to allow such department to claim a portion of centralized 
service costs that are incurred in proportion to the award's 
activities. Examples of centralized service costs may include motor 
pools, computer centers, purchasing, and accounting. Since Federal 
awards are performed within the individual operating agencies, there 
needs to be a process whereby these central service costs can be 
identified and assigned to benefitted activities on a reasonable and 
consistent basis. The central service cost allocation plan establishes 
this process.
    (b) Individual departments typically charge Federal awards for 
indirect costs through an indirect cost rate. A separate indirect cost 
rate proposal for each operating department is usually necessary to 
claim indirect costs under Federal awards. Indirect costs include:
    (1) The indirect costs originating in each operating department of 
the State, local government, or Indian Tribe carrying out Federal 
awards; and
    (2) The costs of central governmental services distributed through 
the central service cost allocation plan and not otherwise treated as 
direct costs.
    (c) The requirements for developing and submitting cost allocation 
plans (for central service costs and public assistance programs) and 
indirect cost rate proposals are contained in Appendices V, VI, and VII 
of this part.


Sec.  200.417  Interagency service.

    An operating department may provide services to another operating 
department of the same State, local government, or Indian Tribe. In 
these instances, the cost of services provided may include allowable 
direct costs of the service plus a pro-rated share of indirect costs. A 
standard indirect cost rate equal to 10 percent of the direct salaries 
and wages for providing the service (excluding overtime, shift 
premiums, and fringe benefits) may be used instead of determining the 
actual indirect costs of the service. These services do not include 
centralized services that are included in central service cost 
allocation plans described in Appendix V of this part.

Special Considerations for Institutions of Higher Education


Sec.  200.418  Costs incurred by states and local governments.

    Costs incurred or paid by a State or local government on behalf of 
and in direct benefit to its IHEs are allowable. These costs include 
but are not limited to fringe benefit programs such as pension costs 
and Federal Insurance Contributions Act (FICA) costs. These costs are 
allowable regardless of whether or not they are recorded in the 
accounting records of the institutions, subject to the following 
conditions:
    (a) The costs meet the requirements of Sec.  200.402--200.411;
    (b) The costs are properly supported by approved cost allocation 
plans in accordance with the applicable cost accounting principles of 
this part; and
    (c) The costs are not otherwise borne directly or indirectly by the 
Federal Government.


Sec.  200.419  Cost accounting standards.

    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).

General Provisions for Selected Items of Cost


Sec.  200.420  Considerations for selected items of cost.

    (a) This section provides principles to be applied in establishing 
the allowability of certain items involved in determining cost, in 
addition to other requirements of this subpart. These principles apply 
whether or not a particular cost item is properly treated as a direct 
or indirect cost.
    (b) The following sections are not intended to be a comprehensive 
list of potential items of cost encountered under Federal awards. 
Failure to mention a particular item of cost, including as an example 
in certain sections, is not intended to imply that it is either 
allowable or unallowable. When determining the allowability for an item 
of cost, 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.


Sec.  200.421  Advertising and public relations.

    (a) The term advertising costs means the costs of advertising media 
and corollary administrative costs. Advertising media includes, but is 
not limited to, magazines, newspapers, radio and television, direct 
mail, exhibits, and electronic or computer transmittals.

[[Page 69468]]

    (b) The only allowable advertising costs are those which are solely 
for:
    (1) The recruitment of personnel required by the recipient or 
subrecipient for the performance of a Federal award (See also Sec.  
200.463);
    (2) The procurement of goods and services for the performance of a 
Federal award;
    (3) The disposal of scrap or surplus materials acquired in the 
performance of a Federal award except when the recipient or 
subrecipient is reimbursed for disposal costs at a predetermined 
amount; or
    (4) Program outreach and other specific purposes necessary to meet 
the Federal award requirements.
    (c) The term ``public relations'' includes community relations and 
means those activities dedicated to maintaining the recipient's or 
subrecipient's image or maintaining or promoting understanding and 
favorable relations with the community or public at large or any 
segment of the public.
    (d) The only allowable public relations costs are:
    (1) Costs specifically required by the Federal award;
    (2) Costs of communicating with the public and press about specific 
activities or accomplishments which result from the performance of the 
Federal award (these costs are considered necessary as part of the 
outreach effort for the Federal award); or
    (3) Costs of conducting general liaison with news media and 
government public relations officers, to the extent that such 
activities are limited to communication and liaison necessary to keep 
the public informed on matters of public concern, such as notices of 
funding opportunities or financial matters.
    (e) Unallowable advertising and public relations costs include the 
following:
    (1) All advertising and public relations costs other than as 
specified in paragraphs (b) and (d) of this section;
    (2) Costs of meetings, conventions, conferences, or other events 
related to other activities of the entity (see also Sec.  200.432), 
including:
    (i) Costs of displays, demonstrations, and exhibits;
    (ii) Costs of meeting rooms, hospitality suites, and other special 
facilities used in conjunction with shows and other special events; and
    (iii) Salaries and wages of employees engaged in setting up and 
displaying exhibits, making demonstrations, and providing briefings;
    (3) Costs of promotional items and memorabilia;
    (4) Costs of advertising and public relations designed solely to 
promote the recipient or subrecipient.


Sec.  200.422   Advisory councils.

    An advisory council or committee is a body that provides advice to 
the management of such entities as corporations, organizations, or 
foundations. Costs incurred by advisory councils or committees are 
unallowable unless authorized by statute, the Federal agency, or as an 
indirect cost where allocable to Federal awards. See Sec.  200.444, 
which applies to States, local governments, and Indian Tribes.


Sec.  200.423  Alcoholic beverages.

    The cost of alcoholic beverages is unallowable.


Sec.  200.424   Alumni activities.

    Costs incurred by IHEs for, or in support of, alumni activities are 
unallowable.


Sec.  200.425   Audits conducted in accordance with the Single Audit 
Act.

    (a) A reasonably proportionate share of the costs of audits 
required by and performed in accordance with the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507), and the requirements of this 
part are allowable. However, the following audit costs are unallowable:
    (1) Any costs for audits that are not required by and performed in 
accordance with the Single Audit Act, and the requirements of this 
part; and
    (2) Any costs of auditing a recipient or subrecipient exempt from 
having an audit conducted under the Single Audit Act and the 
requirements of this part.
    (b) The costs of a financial statement audit of a recipient or 
subrecipient that does not currently have a Federal award may be 
included in the indirect cost pool for a cost allocation plan or 
indirect cost proposal.
    (c) Pass-through entities may charge Federal awards for the cost of 
agreed-upon procedures engagements to monitor subrecipients (in 
accordance with Sec. Sec.  200.331-333) exempt from having an audit 
conducted under the Single Audit Act and the requirements of this part. 
This cost is allowable only if the agreed-upon procedures engagements 
are:
    (1) Conducted in accordance with GAGAS or applicable international 
attestation standards, as appropriate;
    (2) Paid for and arranged by the pass-through entity; and
    (3) Limited in scope to one or more of the following compliance 
requirements: activities allowed or unallowed; allowable costs/cost 
principles; eligibility; and reporting.


Sec.  200.426  Bad debts.

    Bad debts (debts 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 are also unallowable. See Sec.  
200.428.


Sec.  200.427  Bonding costs.

    (a) Bonding costs arise when the Federal agency requires assurance 
against financial loss to itself or others because of an act or default 
of the recipient. They also arise when the recipient requires similar 
assurance, including bonds as bid, performance, payment, advance 
payment, infringement, and fidelity bonds for employees and officials.
    (b) Bonding costs required under the Federal award's terms and 
conditions are allowable.
    (c) Bonding costs required by the recipient in the general conduct 
of its operations are allowable as an indirect cost to the extent that 
such bonding is in accordance with sound business practice and the 
rates and premiums are reasonable under the circumstances.


Sec.  200.428  Collections of improper payments.

    The costs incurred by a recipient or subrecipient to recover 
improper payments, including improper overpayments, are allowable as 
either direct or indirect costs, as appropriate. The recipient or 
subrecipient may use the amounts collected in accordance with cash 
management standards described in Sec.  200.305.


Sec.  200.429  Commencement and convocation costs.

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


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 
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:

[[Page 69469]]

    (1) Is reasonable for the services rendered and conforms to the 
established written policy of the recipient or subrecipient 
consistently applied to both Federal and non-Federal activities;
    (2) Follows an appointment made in accordance with the recipient's 
or subrecipient's laws, rules, or written policies and meets the 
requirements of Federal statute, where applicable; and
    (3) Is determined and supported as provided in paragraph (g) of 
this section, when applicable.
    (b) Reasonableness. Compensation for employees engaged in work on 
Federal awards will be reasonable to the extent that it is consistent 
with that paid for similar work in other activities of the recipient or 
subrecipient. In cases where the kinds of employees required for 
Federal awards are not found in the different activities of the 
recipient or subrecipient, compensation will be considered reasonable 
to the extent that it is comparable to that paid for similar work in 
the labor market in which the recipient or subrecipient competes for 
the kind of employees involved.
    (c) Professional activities outside the recipient or subrecipient. 
Unless the Federal agency expressly authorizes an arrangement, a 
recipient or subrecipient must follow its written policies and 
procedures concerning the permissible extent of professional services 
that can be provided outside the recipient or subrecipient for non-
organizational compensation. Where the recipient or subrecipient does 
not have written policies or procedures, or they do not adequately 
define the permissible extent of consulting or other non-organizational 
activities undertaken for extra outside pay, the Federal Government may 
require the recipient or subrecipient to allocate the effort of 
professional staff working on Federal awards between:
    (1) Recipient or subrecipient activities, and
    (2) Non-organizational professional activities. Appropriate 
arrangements governing compensation must be negotiated on a case-by-
case basis if the Federal agency considers the extent of non-
organizational professional effort excessive or inconsistent with the 
conflicts-of-interest terms and conditions of the Federal award.
    (d) Unallowable costs. (1) Costs unallowable under other sections 
of these principles must not be allowable under this section solely 
because they constitute personnel compensation.
    (2) The allowable compensation for certain employees is subject to 
a ceiling in accordance with Federal statute. See 10 U.S.C. 
2324(e)(1)(P), 41 U.S.C. 1127, and 41 U.S.C. 4304(a)(16) for the 
ceiling amount, covered compensation subject to the ceiling, covered 
employees, and other relevant provisions for cost-reimbursement 
contracts. For different types of Federal awards, other statutory 
ceilings may apply.
    (e) Special considerations. Special considerations in determining 
the allowability of compensation will be given to any change in a 
recipient's or subrecipient's compensation policy resulting in a 
substantial increase in its employees' level of compensation 
(particularly when the change was concurrent with an increase in the 
ratio of Federal awards to other activities) or any change in the 
treatment of allowability of specific types of compensation due to 
changes in Federal policy.
    (f) Incentive compensation. Incentive compensation to employees 
based on cost reduction, efficient performance, suggestion awards, or 
safety awards is allowable to the extent that the overall compensation 
is determined to be reasonable and such costs are paid or accrued 
according to an agreement entered into in good faith between the 
recipient or subrecipient and the employees before the services were 
rendered, or according to an established plan followed by the recipient 
or subrecipient so consistently as to imply, in effect, an agreement to 
make such payment.
    (g) Standards for Documentation of Personnel Expenses. (1) Charges 
to Federal awards for salaries and wages must be based on records that 
accurately reflect the work performed. These records must:
    (i) Be supported by a system of internal control that provides 
reasonable assurance that the charges are accurate, allowable, and 
properly allocated;
    (ii) Be incorporated into the official records of the recipient or 
subrecipient;
    (iii) Reasonably reflect the total activity for which the employee 
is compensated by the recipient or subrecipient, not exceeding 100 
percent of compensated activities (for IHEs, this is the IBS);
    (iv) Encompass federally-assisted and all other activities 
compensated by the recipient or subrecipient on an integrated basis but 
may include the use of subsidiary records as defined in the recipient's 
or subrecipient's written policy;
    (v) Comply with the established accounting policies and procedures 
of the recipient or subrecipient (See paragraph (i)(1)(ii) of this 
section for treatment of incidental work for IHEs.); and
    (vi) Support the distribution of the employee's salary or wages 
among specific activities or cost objectives if the employee works on 
more than one Federal award; a Federal award and non-Federal award; an 
indirect cost activity and a direct cost activity; two or more indirect 
activities allocated using different allocation bases; or an 
unallowable activity and a direct or indirect cost activity.
    (vii) Budget estimates (meaning, estimates determined before the 
services are performed) alone do not qualify as support for charges to 
Federal awards, but may be used for interim accounting purposes, 
provided that:
    (A) The system for establishing the estimates produces reasonable 
approximations of the activity performed;
    (B) Significant changes in the related work activity (as defined by 
the recipient's or subrecipient's written policies) are promptly 
identified and entered into the records. Short-term (such as one or two 
months) fluctuation between workload categories do not need to be 
considered as long as the distribution of salaries and wages is 
reasonable over the longer term; and
    (C) The recipient's or subrecipient's system of internal controls 
includes processes to perform periodic after-the-fact reviews of 
interim charges made to a Federal award based on budget estimates. All 
necessary adjustments must be made so that the final amount charged to 
the Federal award is accurate, allowable, and properly allocated based 
on actual work performed.
    (viii) Because practices vary as to the activity constituting a 
full workload (for example, IBS for IHEs), records may reflect 
categories of activities expressed as a percentage distribution of 
total activities.
    (ix) It is recognized that teaching, research, service, and 
administration are often inextricably intermingled in an academic 
setting. Therefore, a precise assessment of factors contributing to 
costs is not required when IHEs record salaries and wages are charged 
to Federal awards.
    (2) For records that meet the standards required in paragraph 
(g)(1) of this section, the recipient or subrecipient is not required 
to provide additional support or documentation for the work performed 
other than that referenced in paragraph (g)(3) of this section.
    (3) In accordance with Department of Labor regulations implementing 
the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the 
salaries and wages of nonexempt employees, in

[[Page 69470]]

addition to the supporting documentation described in this section, 
must also be supported by records indicating the total number of hours 
worked each day.
    (4) Salaries and wages of employees used in meeting cost sharing 
requirements on Federal awards must be supported in the same manner as 
salaries and wages claimed for reimbursement from Federal awards.
    (5) States, local governments, and Indian Tribes may use substitute 
processes or systems for allocating salaries and wages to Federal 
awards either in place of or in addition to the records described in 
paragraph (g)(1) of this section if approved by the cognizant agency 
for indirect cost. Such systems may include, but are not limited to, 
random moment sampling, ``rolling'' time studies, case counts, or other 
quantifiable measures of work performed.
    (i) Substitute systems that use sampling methods (primarily for 
Temporary Assistance for Needy Families (TANF), the Supplemental 
Nutrition Assistance Program (SNAP), Medicaid, and other public 
assistance programs) must meet acceptable statistical sampling 
standards, including:
    (A) The sampling universe must include all of the employees whose 
salaries and wages are to be allocated based on sample results except 
as provided in paragraph (g)(5)(iii);
    (B) The sample must cover the entire period involved; and
    (C) The results must be statistically valid and applied to the 
period being sampled.
    (ii) Allocating charges for the sampled employees' supervisors and 
clerical and support staff, based on the results of the sampled 
employees, will be acceptable.
    (iii) Less than full compliance with the statistical sampling 
standards noted in paragraph (5)(i) may be accepted by the cognizant 
agency for indirect costs if it concludes that the amounts allocated to 
Federal awards will be minimal or if it concludes that the system 
proposed by the recipient or subrecipient will result in lower costs to 
Federal awards than a system which complies with the standards.
    (6) Cognizant agencies for indirect costs are encouraged to approve 
alternative proposals based on outcomes and milestones for program 
performance when these are clearly documented. These plans are 
acceptable as an alternative to requirements in paragraph (g)(1) of 
this section when approved by the cognizant agency for indirect costs.
    (7) For Federal awards of similar purpose activity or instances of 
approved blended funding, a recipient or subrecipient may submit 
performance plans that incorporate funds from multiple Federal awards 
and account for their combined use based on performance-oriented 
metrics, provided the plans are approved in advance by all involved 
Federal agencies. In these instances, the recipient or subrecipient 
must submit a request for waiver of the requirements based on 
documentation that describes the method of charging costs, relates the 
charging of costs to the specific activity that is applicable to all 
fund sources, and is based on quantifiable measures of the activity in 
relation to time charged.
    (8) For a recipient or subrecipient whose records do not meet the 
standards described in this section, the Federal Government may require 
personnel activity reports, including prescribed certifications, or 
equivalent documentation supporting the records as required in this 
section.
    (h) Nonprofit organizations. This paragraph provides guidance 
specific to only nonprofit organizations. For compensation to members 
of nonprofit organizations, trustees, directors, associates, officers, 
or the immediate families thereof, a determination must be made that 
the compensation is reasonable for the actual personal services 
rendered rather than a distribution of earnings above actual costs. 
Compensation may include director's and executive committee member's 
fees, incentive awards, off-site or incentive pay, location allowances, 
hardship pay, and cost-of-living differentials.
    (i) Institutions of Higher Education (IHEs). This paragraph 
provides guidance specific to only IHEs.
    (1) Determining allowable personnel costs. Certain conditions 
require special consideration and possible limitations in determining 
allowable personnel compensation costs under Federal awards. Among such 
conditions are the following:
    (i) Allowable activities. Charges to Federal awards may include 
reasonable amounts for activities contributing and directly related to 
work under an agreement, such as delivering special lectures about 
specific aspects of the ongoing activity, writing reports and articles, 
developing and maintaining protocols (human, animals, etcetera), 
managing substances/chemicals, managing and securing project-specific 
data, coordinating research subjects, participating in appropriate 
seminars, consulting with colleagues and graduate students, and 
attending meetings and conferences.
    (ii) Incidental activities. Incidental activities for which 
supplemental compensation is allowable under the written institutional 
policy (at a rate not to exceed institutional base salary) do not need 
to be included in the records described in paragraph (g) to charge 
payments of incidental activities directly, such activities must either 
be expressly authorized in the Federal award budget or receive prior 
written approval by the Federal agency.
    (2) Salary basis. Charges for work performed on Federal awards by 
faculty members during the academic year are allowable at the 
institutional base salary (IBS) rate. Except as noted in paragraph 
(i)(1)(ii), in no event will charges to Federal awards, irrespective of 
the basis of computation, exceed the proportionate share of the IBS for 
that period. This principle applies to all members of the faculty at an 
institution. IBS is the annual compensation paid by an IHE for an 
individual's appointment, whether that individual's time is spent on 
research, instruction, administration, or other activities. IBS 
excludes any income an individual earns outside of duties performed for 
the IHE. Unless there is prior approval by the Federal agency, charges 
of a faculty member's salary to a Federal award may not exceed the 
proportionate share of the IBS for the period during which the faculty 
member worked on the Federal award.
    (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 members is 
in addition to their regular responsibilities, any charges for such 
work representing additional compensation above IBS are allowable 
provided that such consulting arrangements are expressly authorized in 
the Federal award or approved in writing by the Federal agency.
    (4) Extra service pay. Extra service pay typically represents 
overload compensation, subject to institutional compensation policies 
for services above and beyond IBS. Where extra service pay results from 
Intra-IHE consulting, it is subject to the same requirements of 
paragraph (b) of this section. It is allowable if all of the following 
conditions are met:
    (i) The IHE establishes consistent written policies which apply 
uniformly to all faculty members, not just those working on Federal 
awards.

[[Page 69471]]

    (ii) The IHE establishes a consistent written definition of work 
covered by IBS, which is specific enough to determine conclusively when 
work beyond that level has occurred. This definition may be described 
in appointment letters or other documentation.
    (iii) The supplementation amount paid is commensurate with the IBS 
pay rate and additional work performed. See paragraph (i)(2) of this 
section.
    (iv) The salaries, as supplemented, fall within the salary 
structure and pay ranges established by and documented in writing or 
otherwise applicable to the IHE.
    (v) The total salaries charged to Federal awards, including extra 
service payments, are subject to the standards of documentation as 
described in paragraph (g).
    (5) Periods outside the academic year. (i) Except as specified for 
teaching activity in paragraph (i)(5)(ii) of this section, charges for 
work performed by faculty members on Federal awards during periods not 
included in the base salary period must be at a rate not more than the 
IBS.
    (ii) Charges for teaching activities performed by faculty members 
on Federal awards during periods not included in IBS period must be 
based on the written policy of the IHE governing compensation to 
faculty members for teaching assignments during such periods.
    (6) Part-time faculty. Charges for work performed on Federal awards 
by faculty members having only part-time appointments must be 
determined at a rate not more than that regularly paid for part-time 
assignments.
    (7) Sabbatical leave costs. Rules for sabbatical leave are as 
follows:
    (i) Costs of leaves of absence by employees for performance of 
graduate work or sabbatical study, travel, or research are allowable, 
provided the IHE has a uniform written policy on sabbatical leave for 
persons engaged in instruction and persons engaged in research. These 
costs must be allocated equitably among all related activities of the 
IHE.
    (ii) Where sabbatical leave is included in fringe benefits as a 
direct charge, the aggregate amount of assessments applicable to all 
work of the institution during the base period must be reasonable in 
relation to the IHE's experience under its sabbatical leave policy.
    (8) Salary rates for non-faculty members. Non-faculty full-time 
professional personnel may also earn ``extra service pay'' in 
accordance with the recipient's written policy and paragraph (i)(1)(i).


Sec.  200.431  Compensation--fringe benefits.

    (a) General. Fringe benefits are allowances and services employers 
provide 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, sick, or military), employee 
insurance, pensions, and unemployment benefits. 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, an organization-employee agreement, or an established policy of 
the recipient or subrecipient.
    (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 recipient or 
subrecipient or a specified grouping of employees.
    (i) When a recipient or subrecipient 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 
and must be allocated as a general administrative expense to all 
activities. These costs may be included in fringe benefit rates with 
the approval of the cognizant agency for indirect costs.
    (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 recipient or subrecipient 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; and other similar 
benefits are allowable, provided such benefits are permitted under 
established written policies. The recipient or subrecipient must 
allocate fringe benefits 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 following the recipient's or subrecipient's 
accounting practices.
    (d) Cost objectives. The recipient or subrecipient may assign 
fringe benefits to cost objectives by identifying specific benefits to 
specific individual employees or by allocating them based on 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 recipient or subrecipient 
demonstrates that costs in relationship to salaries and wages do not 
differ significantly for different groups of employees.
    (e) Insurance. See also Sec.  200.447(d)(1) and (2).
    (1) Provisions for a reserve under a self-insurance program for 
unemployment compensation or workers' compensation are allowable to the 
extent that the provisions represent reasonable estimates of the 
liabilities for such compensation and the types of coverage, the 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) Insurance costs 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 cost of such insurance is unallowable when the 
recipient or subrecipient is named as beneficiary.
    (3) Actual claims paid to or on behalf of employees or former 
employees for workers' compensation, unemployment compensation, 
severance pay, and similar employee benefits (for example, post-
retirement health benefits) are allowable in the year of payment 
provided that the recipient or subrecipient follows a consistent 
costing policy.
    (f) Automobiles. That portion of automobile costs furnished by the 
recipient or subrecipient that relates to personal use by employees 
(including transportation to and from work) is unallowable as a fringe 
benefit or

[[Page 69472]]

indirect costs regardless of whether the cost is reported as taxable 
income to the employees.
    (g) Pension plan costs. Pension plan costs incurred in accordance 
with the established written policies of the recipient or subrecipient 
are allowable, provided that:
    (1) Such policies meet the test of reasonableness.
    (2) The methods of cost allocation are not discriminatory.
    (3) The cost assigned to each fiscal year should be determined in 
accordance with GAAP, except for State and local governments.
    (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. The recipient or subrecipient may follow the ``Cost 
Accounting Standard for Composition and Measurement of Pension Costs'' 
(48 CFR 9904.412).
    (5) Premiums for pension plan termination insurance that are paid 
according 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 actuarial cost method recognized by GAAP and following the 
recipient's or subrecipient's established written policies.
    (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 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 six months (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 if an 
appropriate adjustment is made to compensate for the timing of the 
charges to the Federal Government and related Federal reimbursement and 
the recipient's or subrecipient'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 recipient or subrecipient in excess of 
the costs calculated using an actuarial cost-based method recognized by 
GAAP for a fiscal year may be used as the recipient's or subrecipient's 
contribution in future periods.
    (iv) When a recipient or subrecipient establishes or 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) Payments for unfunded pension costs must be charged in 
accordance with the allocation principles of this subpart. 
Specifically, the recipient or subrecipient may not charge unfunded 
pension costs directly to a Federal award if those unfunded pension 
costs are related to compensation not allocable to that award. In all 
cases, the payments for unfunded pension costs may not exceed the 
contribution rate of the employee's current pension costs. Payments for 
unfunded pension costs may only be charged to a Federal award with the 
prior approval of the awarding Federal agency or cognizant agency for 
indirect costs if included as part of an approved negotiated indirect 
cost rate agreement. The recipient or subrecipient must notify the 
awarding Federal agency or cognizant agency for indirect costs, as 
applicable, if unfunded pension costs are re-amortized.
    (vi) The recipient or subrecipient must provide the Federal 
Government an equitable share of any previously allowed pension costs 
(including subsequent earnings) that the recipient or subrecipient 
receives through a refund, withdrawal, or other credit.
    (h) Post-retirement health. A post-retirement health plan (PRHP) 
refers to the costs of health insurance or health services not included 
in a pension plan covered by paragraph (g) for retirees and their 
spouses, dependents, and survivors. PRHP costs may be computed using a 
pay-as-you-go method or an actuarial cost method recognized by GAAP and 
following the recipient's or subrecipient's established written 
policies.
    (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 for a given fiscal year if they are funded for 
that year within six months after the end of that year. Costs funded 
after six months (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 if an appropriate 
adjustment is made to compensate for the timing of the charges to the 
Federal Government and related Federal reimbursement and the 
recipient's or subrecipient's contributions to the PRHP fund. 
Adjustments may be made by cash refund, reduction in the 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 by the recipient or subrecipient in excess of 
the costs calculated using an actuarial cost-based method recognized by 
GAAP for a fiscal year may be used as the recipient's or subrecipient's 
contribution in future periods.
    (4) If a recipient or subrecipient establishes or converts to an 
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) Payments for unfunded PRHP costs must be charged in accordance 
with the allocation principles of this subpart. Specifically, the 
recipient or subrecipient may not charge unfunded PRHP costs directly 
to a Federal award if those unfunded PRHP costs are related to 
compensation not allocable to that award. In all cases, the payments 
for unfunded PHRP costs may not exceed the contribution rate of the 
employee's current health benefit costs. Payments for unfunded PRHP 
costs may only be charged to a Federal award with the prior approval of 
the awarding Federal agency or cognizant agency for indirect costs if 
included as part of an approved negotiated indirect cost rate 
agreement. The recipient or subrecipient must notify the awarding 
Federal agency or cognizant agency for indirect costs, as applicable, 
if unfunded PHRP costs are re-amortized.
    (6) 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 that will maintain a trust fund or 
reserve for the sole purpose of providing post-

[[Page 69473]]

retirement benefits to retirees and other beneficiaries.
    (7) The recipient or subrecipient must provide the Federal 
Government an equitable share of any previously allowed post-retirement 
benefit costs (including subsequent earnings) that the recipient or 
subrecipient receives through 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 recipients and subrecipients to workers whose employment is 
being terminated. Severance pay is 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 recipient's or subrecipient's part; or
    (iv) Circumstances of the particular employment.
    (2) Costs of severance payments are divided into two categories as 
follows:
    (i) Actual severance payments for normal turnover must be allocated 
to all activities; or, where the recipient or subrecipient provides for 
a reserve for normal severances, such method is acceptable if the 
charge to current operations is reasonable in light of payments made 
for normal severances over a representative past period, and if amounts 
charged are allocated to all activities of the recipient or 
subrecipient.
    (ii) Measuring the costs of abnormal or mass severance pay by means 
of an accrual method will not achieve equity for both parties. 
Therefore, accruals are not allowable. However, the Federal Government 
recognizes its responsibility to contribute its fair share toward a 
specific payment. Prior approval by the Federal agency or cognizant 
agency for indirect cost, as appropriate, is required.
    (3) Costs incurred in severance pay packages that are in excess of 
the standard severance pay provided by the recipient or subrecipient to 
an employee upon termination of employment and that are paid to the 
employee contingent upon a change in management control over, or 
ownership of, the recipient's or subrecipient's assets, are 
unallowable.
    (4) Severance payments to foreign nationals employed by the 
recipient or subrecipient outside the United States, to the extent that 
the amount exceeds the customary or prevailing practices for the 
recipient or subrecipient in the United States, are unallowable unless 
they are required by applicable foreign law or necessary for the 
performance of Federal programs and approved by the Federal agency.
    (5) Severance payments to foreign nationals employed by the 
recipient or subrecipient 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 recipient or subrecipient in that 
country, are unallowable unless they are required by applicable foreign 
law or necessary for the performance of Federal programs and approved 
by the Federal agency.
    (j) For IHEs only. (1) Fringe benefits in the form of undergraduate 
and graduate tuition or tuition remission for individual employees are 
allowable, provided such benefits are granted in accordance with 
established written policies of the IHE and are distributed to all IHE 
activities on an equitable basis. Tuition benefits for family members 
other than the employee are unallowable.
    (2) Fringe benefits in the form of undergraduate and graduate 
tuition or tuition remission for individual employees not employed by 
the IHE are limited to the tax-free amount allowed by the Internal 
Revenue Code as amended (26 U.S.C. 127).
    (3) IHEs may offer employees tuition waivers or 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 a State or local government, fringe benefit programs 
(such as pension costs and FICA) and any other benefits costs incurred 
specifically on behalf of, and in direct benefit to, the IHE, are 
allowable. These costs do not need to be recorded in the accounting 
records of the IHE but are 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.


Sec.  200.432  Conferences.

    A conference means an event whose primary purpose is to disseminate 
technical information beyond the recipient or subrecipient and is 
necessary and reasonable for successful performance under the Federal 
award. Allowable conference costs paid by the recipient or subrecipient 
as a sponsor or host of the conference may include rental of 
facilities, speakers' fees, costs of meals and refreshments, local 
transportation, and other incidental items to such conferences unless 
further restricted by the terms and conditions of the Federal award. 
The costs of identifying and providing locally available dependent-care 
resources for participants are allowable as needed. Conference hosts/
sponsors must exercise discretion and judgment in ensuring that 
conference costs are appropriate, necessary, and managed to minimize 
costs to the Federal award. The Federal agency may authorize exceptions 
for programs including Indian Tribes, children, and the elderly. See 
also Sec. Sec.  200.438, 200.456, and 200.475.


Sec.  200.433  Contingency provisions.

    (a) Contingency provisions are part of a budget estimate of future 
costs (typically of large construction projects, IT systems, or other 
items approved by the Federal agency) which are associated with 
possible events or conditions arising from causes for which the precise 
outcome is indeterminable at the time of estimate and that are likely 
to result, in the aggregate, in additional costs for the approved 
activity or project. Contingency costs for major project scope changes, 
unforeseen risks, or extraordinary events are not allowable.
    (b) It is permissible for contingency costs other than those 
excluded in paragraph (a) of this section to be explicitly included in 
budget estimates to the extent necessary to improve their precision. 
Contingency costs must be estimated using broadly-accepted cost 
estimating methodologies, specified in the budget documentation of the 
Federal award, and accepted by the Federal 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 of this part (see Sec. Sec.  200.300 
and 200.403), be necessary and reasonable for proper and efficient 
accomplishment of project or program objectives, and be verifiable from 
the recipient's or subrecipient's records.
    (c) Payments to a recipient's or subrecipient'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.

[[Page 69474]]

Sec.  200.434  Contributions and donations.

    (a) Costs of contributions and donations, including cash, property, 
and services, from the recipient or subrecipient to other entities are 
unallowable.
    (b) The value of services and property donated (including in-kind) 
to the recipient or subrecipient may not be charged to the Federal 
award either as a direct or indirect cost. The value of donated 
services and property may be used to meet cost sharing requirements 
(see Sec.  200.306). Depreciation on donated assets is permitted so 
long as the donated property is not counted towards meeting cost 
sharing requirements (see Sec.  200.436).
    (c) Services donated or volunteered to the recipient or 
subrecipient may be provided by professional and technical personnel, 
consultants, and other skilled and unskilled labor. The value of these 
services may not be charged to the Federal award as a direct or 
indirect cost. However, the value of donated services may be used to 
meet cost sharing requirements in accordance with the provisions of 
Sec.  200.306.
    (d) To the extent feasible, services donated to the recipient or 
subrecipient will be supported by the same methods used to support the 
allocability of regular personnel services.
    (e) The following provisions apply to nonprofit organizations. The 
value of services donated to a nonprofit organization and used in the 
performance of a direct cost activity must be considered in the 
determination of the recipient's or subrecipient's indirect cost 
rate(s) and, accordingly, must be allocated a proportionate share of 
applicable indirect costs when the following circumstances exist:
    (1) The aggregate value of the services is material;
    (2) The services are supported by a significant amount of the 
indirect costs incurred by the recipient or subrecipient;
    (i) In those instances where there is no basis for determining the 
fair market value of the services rendered, the recipient or 
subrecipient and the cognizant agency for indirect costs must negotiate 
an appropriate allocation of indirect cost to the services.
    (ii) Where donated services directly benefit a project supported by 
the Federal award, the indirect costs allocated to the services will be 
considered as a part of the project's total costs. Such indirect costs 
may be reimbursed under the Federal award or used to meet cost sharing 
requirements.
    (f) Fair market value of donated services must be computed as 
described in Sec.  200.306.
    (g) Personal Property and Use of Space.
    (1) Donated personal property and use of space may be furnished to 
a recipient or subrecipient. The value of the personal property and 
space may not be charged to the Federal award either as a direct or 
indirect cost.
    (2) The value of the donations may be used to meet cost sharing 
requirements described in Sec.  200.300. The recipient or subrecipient 
must value the donations in accordance with Sec.  200.300. Where the 
recipient or subrecipient treats donations as indirect costs, indirect 
cost rates must separate the value of the donations so that 
reimbursement is not made.


Sec.  200.435  Defense and prosecution of criminal and civil 
proceedings, claims, appeals and patent infringements.

    (a) Definitions for this section--(1) Conviction means a judgment 
or conviction of a criminal offense by any court of competent 
jurisdiction, whether entered upon verdict or a plea, including a 
conviction due to a plea of nolo contendere.
    (2) Costs include the services of in-house or private counsel, 
accountants, consultants, or others engaged to assist the recipient or 
subrecipient before, during, and after the commencement of a judicial 
or administrative proceeding that bears a direct relationship to the 
proceeding.
    (3) Fraud means:
    (i) Acts of fraud or corruption or attempts to defraud the Federal 
Government or to corrupt its agents,
    (ii) Acts that constitute a cause for debarment or suspension (as 
specified in agency regulations), and
    (iii) Acts that violate the False Claims Act (31 U.S.C. 3729-3732) 
or the Anti-kickback Act (42 U.S.C. 1320a-7b(b)).
    (4) Penalty does not include restitution, reimbursement, or 
compensatory damages.
    (5) Proceeding includes an investigation.
    (b) Costs. (1) Except as otherwise described herein, costs incurred 
in connection with any criminal, civil, or administrative proceeding 
(including the filing of a false certification) commenced by the 
Federal Government, a State, local government, or foreign government, 
or joined by the Federal Government (including a proceeding under the 
False Claims Act), against the recipient or subrecipient, (or commenced 
by third parties or a current or former employee of the recipient or 
subrecipient who submits a whistleblower complaint of reprisal in 
accordance with 10 U.S.C. 4701 or 41 U.S.C. 4712), are not allowable if 
the proceeding:
    (i) Relates to a violation of, or failure to comply with, a 
Federal, State, local or foreign statute, regulation, or the terms and 
conditions of the Federal award by the recipient or subrecipient 
(including its agents and employees); and
    (ii) Results in any of the following dispositions:
    (A) In a criminal proceeding, a conviction.
    (B) In a civil or administrative proceeding involving an allegation 
of fraud or similar misconduct, a determination of recipient or 
subrecipient liability.
    (C) In the case of any civil or administrative proceeding, the 
disallowance of costs, the imposition of a monetary penalty, or an 
order issued by the Federal agency head or delegate to the recipient or 
subrecipient to take corrective action under 10 U.S.C. 4701 or 41 
U.S.C. 4712.
    (D) A final decision by an appropriate Federal official to debar or 
suspend the recipient or subrecipient, to rescind or void a Federal 
award, or to terminate a Federal award because of a violation or 
failure to comply with a statute, regulation, or the terms and 
conditions of the Federal award.
    (E) A disposition by consent or compromise if the action could have 
resulted in any of the dispositions described in paragraphs 
(b)(1)(ii)(A) through (D) of this section.
    (2) If more than one proceeding involves the same alleged 
misconduct, the costs of all such proceedings are unallowable if any 
results in one of the dispositions shown in paragraph (b) of this 
section.
    (c) Allowability of costs for proceeding commenced by Federal 
Government. If a proceeding referred to in paragraph (b) of this 
section is commenced by the Federal Government and is resolved by 
consent or compromise pursuant to an agreement by the recipient or 
subrecipient and the Federal Government, then the costs incurred may be 
allowed to the extent expressly authorized in the agreement.
    (d) Allowability of costs for proceeding commenced by State, local, 
or foreign government. If a proceeding referred to in paragraph (b) of 
this section is commenced by a State, local or foreign government, then 
the costs incurred may be allowed if the authorized Federal official 
determines that the costs were incurred as a result of:
    (1) A specific term or condition of the Federal award, or
    (2) Specific written direction of an authorized official of the 
Federal agency.

[[Page 69475]]

    (e) Allowability of costs in general. Costs incurred in connection 
with proceedings described in paragraph (b), and that are not 
unallowable, may be allowable to the extent that:
    (1) The costs are reasonable and necessary for the administration 
of the Federal award and activities required to deal with the 
proceeding and the underlying cause of action;
    (2) Payment of the reasonable, necessary, allocable and otherwise 
allowable costs incurred is not prohibited by any other provision(s) of 
the Federal award;
    (3) The costs are not recovered from the Federal Government or a 
third party, either directly as a result of the proceeding or 
otherwise; and,
    (4) An authorized Federal official must determine the percentage of 
costs allowed considering the complexity of litigation, generally 
accepted principles governing the award of legal fees in civil actions 
involving the United States, and other factors that may be appropriate. 
This percentage must not exceed 80 percent unless the agreement under 
paragraph (c) has explicitly considered this limitation and permitted a 
higher percentage. In that case, the total amount of costs incurred may 
be allowable.
    (f) Major Fraud Act. Costs incurred by the recipient or 
subrecipient in connection with the defense of suits brought by its 
employees or ex-employees under section 2 of the Major Fraud Act of 
1988 (18 U.S.C. 1031), including the cost of all relief necessary to 
make the employee whole, where the recipient or subrecipient was found 
liable or settled, are unallowable.
    (g) Un-allowability of costs for prosecuting claims against Federal 
Government. Costs for prosecuting claims against the Federal 
Government, including appeals of final Federal agency decisions, are 
unallowable.
    (h) Costs of legal, accounting, consultant services. Costs of 
legal, accounting, consultant services, and related costs incurred in 
connection with patent infringement litigation, are unallowable unless 
otherwise provided for in the Federal award.
    (i) Potentially unallowable costs. Costs that may be unallowable 
under this section, including directly associated costs, must be 
segregated and accounted for separately. During the pendency of any 
proceeding covered by paragraphs (b) and (f) of this section, the 
Federal Government must generally withhold payment of such costs. 
However, if in its best interests, the Federal Government may provide 
for conditional payment upon a provision of adequate security, or other 
adequate assurance, and agreement to repay all unallowable costs, plus 
interest, if the costs are subsequently determined to be unallowable.


Sec.  200.436  Depreciation.

    (a) Depreciation is the method for allocating the cost of fixed 
assets to periods benefitting from asset use. The recipient or 
subrecipient may be compensated for the use of its buildings, capital 
improvements, equipment, and software projects capitalized in 
accordance with GAAP provided that they are needed and used in the 
recipient's or subrecipient's activities and correctly allocated to 
Federal awards. The compensation must be made by computing the proper 
depreciation.
    (b) The allocation for depreciation must be made in accordance with 
Appendices III through IX of this part.
    (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 recipient or 
subrecipient 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 cost sharing but not both. When computing 
depreciation charges, the acquisition cost will exclude:
    (1) The cost of land;
    (2) Any portion of the cost of buildings and equipment borne by or 
donated by the Federal Government, irrespective of where the title was 
originally vested or is presently located;
    (3) Any portion of the cost of buildings and equipment contributed 
by or for the recipient or subrecipient that is already claimed as cost 
sharing or where law or agreement prohibits recovery; and
    (4) Any asset acquired solely for the performance of a non-Federal 
award.
    (d) When computing depreciation charges, the following must be 
observed:
    (1) The period of useful service or useful life established in each 
case for usable capital assets must take into consideration such 
factors as the type of construction, nature of the equipment, 
technological developments in the particular area, historical data, and 
the renewal and replacement policies followed for the individual items 
or classes of assets involved.
    (2) The depreciation method used to charge the cost of an asset (or 
group of assets) to accounting periods must reflect the pattern of 
consumption of the asset during its useful life. In the absence of 
clear evidence indicating that the expected consumption of the asset 
will be significantly greater in the early portions than in the later 
portions of its useful life, the straight-line method must be presumed 
to be the appropriate method. Depreciation methods once used may not be 
changed unless approved in advance by the cognizant agency for indirect 
costs. The depreciation methods used to calculate the depreciation 
amounts for indirect cost rate purposes must be the same methods used 
by the recipient or subrecipient for its financial statements.
    (3) The entire building, including the shell and all components, 
may be treated as a single asset and depreciated over a single useful 
life. A building may also be divided into multiple components. Each 
component may be depreciated over its estimated useful life in this 
case. The building components must be grouped into three general 
components: building shell (including construction and design costs), 
building services systems (for example, elevators, HVAC, and plumbing 
system), and fixed equipment (for example, sterilizers, casework, fume 
hoods, cold rooms, and glassware/washers). A cognizant agency for 
indirect costs may authorize a recipient or subrecipient to use more 
than these three groupings in exceptional cases. When a recipient or 
subrecipient elects to depreciate its buildings by their components, 
the same depreciation method must be used for indirect and financial 
statements purposes, as described in paragraphs (d)(1) and (2).
    (4) No depreciation may be allowed on assets that have outlived 
their depreciable lives.
    (5) Where the depreciation method is introduced to replace the use 
allowance method, depreciation must be computed as if the asset had 
been depreciated over its entire life meaning, from the date the asset 
was acquired and ready for use to the date of disposal or withdrawal 
from service). The total amount of use allowance and depreciation for 
an asset (including imputed depreciation applicable to periods before 
the conversion from the use allowance method and depreciation after the 
conversion) may not exceed the total acquisition cost of the asset.
    (e) Adequate property records must support depreciation charges, 
and physical inventories must be taken at least once every two years to 
ensure that the assets exist and are usable, used, and needed. The 
recipient or subrecipient may use statistical sampling techniques when 
taking these inventories. In addition, the recipient or subrecipient 
must maintain adequate depreciation records showing the amount of 
depreciation.

[[Page 69476]]

Sec.  200.437  Employee health and welfare costs.

    (a) Costs incurred in accordance with the recipient's or 
subrecipient's established written policies for improving working 
conditions, employer-employee relations, employee health, and employee 
performance are allowable.
    (b) These costs must be equitably apportioned to all activities of 
the recipient or subrecipient. Income generated from these activities 
must be credited to the cost thereof unless such income has been 
irrevocably sent to employee welfare organizations.
    (c) Losses resulting from operating food services are allowable 
only if the recipient's or subrecipient's objective is to operate food 
services on a break-even basis. Losses sustained because of operating 
objectives other than the above are allowable only when:
    (1) The recipient or subrecipient can demonstrate unusual 
circumstances; and
    (2) Approved by the cognizant agency for indirect costs.


Sec.  200.438  Entertainment and prizes.

    (a) Entertainment costs. Costs of entertainment, including 
amusement, diversion, and social activities and any associated costs 
(such as gifts), are unallowable unless they have a specific and direct 
programmatic purpose and are included in a Federal award.
    (b) Prizes. Costs of prizes or challenges are allowable if they 
have a specific and direct programmatic purpose and are included in the 
Federal award. Federal agencies should refer to OMB guidance in M-10-11 
``Guidance on the Use of Challenges and Prizes to Promote Open 
Government,'' issued March 8, 2010, or its successor.


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) The following rules of allowability must apply to equipment and 
other capital expenditures:
    (1) Capital expenditures for general-purpose equipment, buildings, 
and land are unallowable as direct charges, except with the prior 
written approval of the Federal agency or pass-through entity.
    (2) Capital expenditures for special purpose equipment are 
allowable as direct costs, provided that items with a unit cost of 
$10,000 or more have the prior written approval of the Federal agency 
or pass-through entity.
    (3) Capital expenditures for improvements to land, buildings, or 
equipment that materially increase their value or useful life are 
unallowable as a direct cost except with the prior written approval of 
the Federal agency or pass-through entity. See Sec.  200.436 on the 
allowability of depreciation on buildings, capital improvements, and 
equipment. See Sec.  200.465 on the allowability of real property and 
equipment rental costs.
    (4) When approved as a direct charge in accordance with paragraphs 
(b)(1) through (3), capital expenditures must be charged in the period 
in which the expenditure is incurred or as otherwise determined 
appropriate and negotiated with the Federal agency.
    (5) The recipient or subrecipient may claim the unamortized portion 
of any equipment written off as a result of a change in capitalization 
levels by continuing to claim the otherwise allowable depreciation on 
the equipment or by amortizing the amount to be written off over a 
period of years negotiated with the cognizant agency for indirect cost.
    (6) Cost of equipment disposal. If the Federal agency instructs the 
recipient or subrecipient to otherwise dispose of or transfer the 
equipment, the costs of disposal or transfer are allowable.
    (7) Equipment and other capital expenditures are unallowable as 
indirect costs. See Sec.  200.436.


Sec.  200.440  Exchange rates.

    Cost increases for fluctuations in the exchange rate are allowable 
costs subject to funding availability. The recipient or subrecipient 
must conduct reviews of fluctuations in the exchange rate to determine 
if there is the need for additional Federal funding before the end date 
of the Federal award. Subsequent adjustments for currency increases may 
be allowed only when the recipient or subrecipient provides the Federal 
agency or pass-through entity with adequate source documentation from a 
commonly used source in effect when the cost was incurred and to the 
extent that sufficient Federal funds are available.


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

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


Sec.  200.442  Fundraising and investment management costs.

    (a) Costs of organized fundraising, including financial campaigns, 
endowment drives, solicitation of gifts and bequests, and similar 
expenses incurred to raise capital or obtain contributions, are 
unallowable. Fundraising costs for meeting the Federal program 
objectives are allowable with the prior written approval of the Federal 
agency.
    (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 fundraising and investment 
activities must be allocated as an appropriate share of indirect costs 
in accordance with Sec.  200.413.


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

    (a) The recipient or subrecipient must include gains and losses on 
the sale, retirement, or other disposition of depreciable property in 
the year they occur as credits or charges to the asset cost grouping(s) 
of the property. The amount of the gain or loss is the difference 
between the amount realized on the property and the undepreciated basis 
of the property.
    (b) Gains and losses from the disposition of depreciable property 
must not be recognized as a separate credit or charge under the 
following conditions:
    (1) The gain or loss is processed through a depreciation account 
and is reflected in the depreciation allowable under Sec. Sec.  200.436 
and 200.439.
    (2) The property is given in exchange as part of the purchase price 
of a similar item, and the gain or loss is taken into account in 
determining the depreciation cost basis of the new item.
    (3) A loss results from failing to maintain proper insurance, 
except as provided in Sec.  200.447.
    (4) Compensation for the use of the property was provided through 
use allowances instead of depreciation.
    (5) Gains and losses arising from extraordinary or bulk sales, 
retirements, or other dispositions must be considered on an individual 
basis.
    (c) Gains or losses of any nature arising from the sale or exchange 
of property other than the property covered in paragraph (a) of this 
section

[[Page 69477]]

must be excluded in computing Federal award costs.
    (d) When assets acquired with Federal funds, in part or wholly, are 
disposed of, the distribution of the proceeds must be made in 
accordance with Sec. Sec.  200.310 through 200.316.


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:
    (1) Salaries and expenses of the Office of the Governor of a State 
or the chief executive of a local government or the chief executive of 
an Indian Tribe;
    (2) Salaries and other expenses of a State legislature, tribal 
council, or similar local governmental body, such as a county 
supervisor, city council, or school board, whether incurred for 
purposes of legislation or executive direction;
    (3) Costs of the judicial branch of a government;
    (4) Costs of prosecutorial activities unless treated as a direct 
cost to a specific program if authorized by statute or regulation. 
However, this does not preclude the allowability of other legal 
activities of the Attorney General as described in Sec.  200.435; and
    (5) Costs of other general types of government services normally 
provided to the general public, such as fire and police, unless 
provided as a direct cost under a program statute or regulation.
    (b) Indian Tribes and Councils of Governments (COGs) (see 
definition for Local government in Sec.  200.1) may include up to 50 
percent of salaries and expenses directly attributable to managing and 
operating Federal programs by the chief executive and their staff in 
the indirect cost calculation without documentation.


Sec.  200.445  Goods or services for personal use.

    (a) Costs of goods or services for the personal use of the 
recipient's or subrecipient's employees are unallowable regardless of 
whether the cost is reported as taxable income to the employees.
    (b) Housing costs (for example, depreciation, maintenance, 
utilities, furnishings, rent), housing allowances, and personal living 
expenses are only allowable as direct costs regardless of whether 
reported as taxable income to the employees. In addition, these costs 
must be approved in advance by a Federal agency to be allowable.


Sec.  200.446  Idle facilities and idle capacity.

    (a) Definitions for the purpose of this section:
    (1) Facilities means land and buildings or any portion thereof, 
equipment individually or collectively, or any other tangible capital 
asset, wherever located, and whether owned or leased by the recipient 
or subrecipient.
    (2) Idle facilities mean completely unused facilities that exceed 
the recipient's or subrecipient's current needs.
    (3) Idle capacity means the unused capacity of partially used 
facilities. It is the difference between:
    (i) That which a facility could achieve under 100 percent operating 
time on a one-shift basis less operating interruptions resulting from 
time lost for repairs, setups, unsatisfactory materials, and other 
normal delays and;
    (ii) The extent to which the facility was actually used to meet 
demands during the accounting period. A multi-shift basis should be 
used if it can be shown that this amount of usage would normally be 
expected for the type of facility involved.
    (4) Cost of idle facilities or idle capacity means maintenance, 
repair, housing, rent, and other related costs (for example, insurance, 
interest, and depreciation). These costs could include the costs of 
idle public safety emergency facilities, telecommunications, or 
information technology system capacity that is built to withstand major 
fluctuations in load (for example, consolidated data centers).
    (b) The costs of idle facilities are unallowable except to the 
extent that:
    (1) They are necessary to meet workload requirements which may 
fluctuate, and are allocated appropriately to all benefiting programs; 
or
    (2) Although not necessary to meet fluctuations in workload, they 
were necessary when acquired and are now idle because of changes in 
program requirements, efforts to achieve more economical operations, 
reorganization, termination, or other causes which could not have been 
reasonably foreseen. Under this exception, costs of idle facilities are 
allowable for a reasonable period, ordinarily not to exceed one year, 
depending on the initiative taken to use, lease, or dispose of such 
facilities.
    (c) The costs of idle capacity are normal costs of doing business 
and are a factor in the normal fluctuations of usage or indirect cost 
rates from period to period. These costs are allowable, provided that 
the capacity is reasonably anticipated to be necessary to carry out the 
purpose of the Federal award or was originally reasonable and is not 
subject to reduction or elimination by use on other Federal awards, 
subletting, renting, or sale, in accordance with sound business, 
economic, or security practices. Widespread idle capacity throughout an 
entire facility or among a group of assets having substantially the 
same function may be considered idle facilities.


Sec.  200.447   Insurance and indemnification.

    (a) Costs of insurance required or approved and maintained by the 
terms and conditions of the Federal award are allowable.
    (b) Costs of other insurance in connection with the general conduct 
of activities are allowable subject to the following limitations:
    (1) The types, extent, and cost of coverage are in accordance with 
the recipient's or subrecipient's established written policy and sound 
business practices.
    (2) Costs of insurance or contributions to any reserve covering the 
risk of loss of, or damage to, Federal Government property are 
unallowable except to the extent that the Federal agency has approved 
the costs.
    (3) Costs allowed for business interruption or other similar 
insurance must exclude coverage of management fees.
    (4) Insurance costs on the lives of trustees, officers, or other 
employees holding positions of similar responsibilities are allowable 
only when the insurance represents additional compensation (see Sec.  
200.431). This insurance is unallowable when the recipient or 
subrecipient is identified as the beneficiary.
    (5) Insurance costs to correct defects in the recipient's or 
subrecipient's materials or workmanship are unallowable.
    (6) Medical liability (malpractice) insurance. Medical liability 
insurance is an allowable cost of a Federal research program only when 
the program involves human subjects or training of participants in 
research techniques. Medical liability insurance costs must be treated 
as a direct cost and assigned to individual projects based on how the 
insurer allocates the risk to the population covered by the insurance.
    (c) Actual losses which could have been covered by permissible 
insurance (through a self-insurance program or otherwise) are 
unallowable unless expressly authorized in the Federal award. However, 
costs incurred because of losses not covered under nominal deductible 
insurance coverage provided in keeping with sound management practice, 
and minor losses not covered by insurance, such as spoilage, breakage, 
and disappearance of small

[[Page 69478]]

hand tools, which occur in the ordinary course of operations, are 
allowable.
    (d) Contributions to a reserve for a self-insurance program, 
including workers' compensation, unemployment compensation, and 
severance pay, are allowable subject to the following requirements:
    (1) The type, extent, and cost of coverage and the rates and 
premiums would have been allowed had the insurance (including 
reinsurance) been purchased to cover the risks. However, a provision 
for known or reasonably estimated self-insured liabilities, which do 
not become payable for more than one year after the provision is made, 
must not exceed the discounted present value of the liability. The rate 
used for discounting the liability must be determined by considering 
factors such as the recipient's or subrecipient's settlement rate for 
those liabilities and its investment rate of return.
    (2) Earnings or investment income on reserves must be credited to 
those reserves.
    (3)(i) Contributions to reserves must be based on sound actuarial 
principles using historical experience and reasonable assumptions. 
Reserve levels must be analyzed and updated at least biennially for 
each major risk being insured and take into account any reinsurance, 
coinsurance, and other relevant factors or information. Reserve levels 
related to employee-related coverages must normally be limited to the 
value of claims:
    (A) Submitted and adjudicated but not paid;
    (B) Submitted but not adjudicated; and
    (C) Incurred but not submitted.
    (ii) Reserve levels exceeding the above-mentioned value must be 
identified and justified in the cost allocation plan or indirect cost 
rate proposal.
    (4) Accounting records, actuarial studies, and cost allocations (or 
billings) must recognize any significant differences due to the types 
of insured risk and losses generated by the various insured activities 
or agencies of the recipient or subrecipient. If individual departments 
or agencies of the recipient or subrecipient experience significantly 
different levels of claims for a particular risk, those differences 
must be recognized by using separate allocations or other techniques 
resulting in an equitable allocation.
    (5) Whenever funds are transferred from a self-insurance reserve to 
other accounts (for example, general fund or unrestricted account), 
refunds must be made to the Federal Government for its share of funds 
transferred, including earned or imputed interest from the date of 
transfer and debt interest, if applicable, chargeable in accordance 
with the claims collection regulations of the cognizant agency for 
indirect cost.
    (e) Insurance refunds must be credited against insurance costs in 
the year the refund is received.
    (f) Indemnification includes securing the recipient or subrecipient 
against liabilities to third persons and other losses not compensated 
by insurance or otherwise. The Federal Government is obligated to 
indemnify the recipient or subrecipient only to the extent expressly 
provided for in the Federal award, except as provided in paragraph (c).


Sec.  200.448   Intellectual property.

    (a) Patent and copyright costs. (1) The following costs related to 
securing patents and copyrights are allowable:
    (i) Costs of preparing disclosures, reports, and other documents 
required by the Federal award and of searching the art to the extent 
necessary to make such disclosures;
    (ii) Costs of preparing documents and any other patent costs in 
connection with the filing and prosecution of a United States patent 
application where the Federal Government requires that a title or a 
royalty-free license be conveyed to the Federal Government; and
    (iii) General counseling services relating to patent and copyright 
matters, such as advice on patent and copyright laws, regulations, 
clauses, and employee intellectual property agreements (See Sec.  
200.459).
    (2) The following costs related to securing patents and copyrights 
are unallowable:
    (i) Costs of preparing disclosures, reports, and other documents 
and of searching the art to make disclosures not required by the 
Federal award;
    (ii) Costs in connection with filing and prosecuting any foreign 
patent application, or any United States patent application, where the 
Federal award does not require conveying title or a royalty-free 
license to the Federal Government.
    (b) Royalties and other costs for the use of patents and 
copyrights. (1) Royalties on a patent or copyright or amortization of 
the cost of acquiring by purchase a copyright, patent, or rights 
thereto, necessary for the proper performance of the Federal award are 
allowable unless:
    (i) The Federal Government already has a license or the right to 
free use of the patent or copyright.
    (ii) The patent or copyright has been adjudicated to be invalid or 
administratively determined to be invalid.
    (iii) The patent or copyright is considered to be unenforceable.
    (iv) The patent or copyright is expired.
    (2) Special care should be exercised in determining reasonableness 
when the royalties may have been obtained as a result of less-than-
arm's-length bargaining, such as:
    (i) Royalties paid to persons, including corporations, affiliated 
with the recipient or subrecipient.
    (ii) Royalties paid to unaffiliated parties, including 
corporations, under an agreement entered into in contemplation that a 
Federal award would be made.
    (iii) Royalties paid under an agreement entered into after a 
Federal award is made to a recipient or subrecipient.
    (3) In any case involving a patent or copyright formerly owned by 
the recipient or subrecipient, the amount of royalty allowed must not 
exceed the cost which would have been allowed had the recipient or 
subrecipient retained the title.


Sec.  200.449   Interest.

    (a) General. Costs incurred for interest on borrowed capital, 
temporary use of endowment funds, or the use of the recipient's or 
subrecipient's own funds are unallowable. Financing costs (including 
interest) to acquire, construct, or replace capital assets are 
allowable, subject to the requirements of this section.
    (b) Capital assets. (1) Capital assets is defined in Sec.  200.1. 
An asset cost includes (as applicable) acquisition costs, construction 
costs, and other costs capitalized in accordance with GAAP.
    (2) For recipient or subrecipient fiscal years beginning on or 
after January 1, 2016, intangible assets include patents and computer 
software. For software development projects, only interest attributable 
to the portion of the project costs capitalized in accordance with GAAP 
is allowable.
    (c) Conditions for all recipients and subrecipients. (1) The 
recipient or subrecipient uses the capital assets in support of Federal 
awards;
    (2) The allowable asset costs to acquire facilities and equipment 
are limited to a fair market value available to the recipient or 
subrecipient from an unrelated (arm's length) third party.
    (3) The recipient or subrecipient obtains the financing via an 
arm's-length transaction (meaning, a transaction with an unrelated 
third party); or claims reimbursement of actual interest cost at a rate 
available via such a transaction.

[[Page 69479]]

    (4) The recipient or subrecipient 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.
    (5) The recipient or subrecipient expenses or capitalizes allowable 
interest cost in accordance with GAAP.
    (6) Earnings generated by the investment of borrowed funds pending 
their disbursement for the asset costs are used to offset the current 
period's allowable interest cost, whether that cost is expensed or 
capitalized. Earnings subject to being reported to the Federal Internal 
Revenue Service under arbitrage requirements are excludable.
    (7) The following conditions must apply to debt arrangements over 
$1 million to purchase or construct facilities unless the recipient or 
subrecipient makes an initial equity contribution to the purchase of 25 
percent or more. For this purpose, ``initial equity contribution'' 
means the amount or value of contributions made by the recipient or 
subrecipient for the acquisition of facilities prior to occupancy.
    (i) The recipient or subrecipient must reduce claims for 
reimbursement of interest cost by an amount equal to imputed interest 
earnings on excess cash flow attributable to the portion of the 
facility used for Federal awards.
    (ii) The recipient or subrecipient must impute interest on excess 
cash flow as follows:
    (A) Annually, the recipient or subrecipient must prepare a 
cumulative (from the project's inception) report of monthly cash 
inflows and outflows, regardless of the funding source. For this 
purpose, inflows consist of Federal reimbursement for depreciation, 
amortization of capitalized construction interest, and annual interest 
cost. Outflows consist of initial equity contributions, debt principal 
payments (less the pro-rata share attributable to the cost of land), 
and interest payments.
    (B) To compute monthly cash inflows and outflows, the recipient or 
subrecipient must divide the above-mentioned annual amounts by the 
months in the year (usually 12) that the building is in service.
    (C) For any month in which cumulative cash inflows exceed 
cumulative outflows, interest must be calculated on the excess inflows 
for that month and be treated as a reduction to allowable interest 
cost. The interest rate to be used must be the three-month Treasury 
bill closing rate as of the last business day of that month.
    (8) Interest attributable to a fully depreciated asset is 
unallowable.
    (d) Additional conditions for states, local governments and Indian 
Tribes. For interest costs to be allowable for states, local 
governments, and Indian Tribes, the recipient or subrecipient must have 
incurred the interest costs for buildings after October 1, 1980, or 
after September 1, 1995, for land and equipment.
    (1) The requirement to offset the interest earned on borrowed funds 
against allowable interest cost (paragraph (c)(5) of this section) also 
applies to earnings on debt service reserve funds.
    (2) The recipient or subrecipient must negotiate the amount of 
allowable interest cost related to the acquisition of facilities with 
asset costs of $1 million or more, as described in paragraph (c)(7) of 
this section. For this purpose, a recipient or subrecipient must 
consider only cash inflows and outflows attributable to that portion of 
the real property used for Federal awards.
    (e) Additional conditions for IHEs. For interest costs to be 
allowable, the IHE must have incurred the interest costs after July 1, 
1982, in connection with acquisitions of capital assets that occurred 
after that date.
    (f) Additional condition for nonprofit organizations. For interest 
costs to be allowable, the nonprofit organization must have incurred 
the interest costs after September 29, 1995, in connection with 
acquisitions of capital assets that occurred after that date.
    (g) The interest allowability provisions of this section do not 
apply to a nonprofit organization subject to ``full coverage'' under 
the Cost Accounting Standards (CAS), as defined at 48 CFR 9903.201-
2(a). The nonprofit organization's Federal awards are instead subject 
to 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.''


Sec.  200.450   Lobbying.

    (a) Lobbying costs associated with obtaining Federal assistance 
awards. The costs of certain influencing activities associated with 
obtaining grants, cooperative agreements, contracts, or loans are 
unallowable. Lobbying with respect to certain grants, cooperative 
agreements, contracts, and loans is governed by relevant statutes, 
including 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 
``Government-wide Guidance for New Restrictions on Lobbying'' and 
notices published on December 20, 1989, June 15, 1990, January 15, 
1992, and January 19, 1996.
    (b) Executive lobbying costs. Costs incurred in attempting to 
improperly influence, either directly or indirectly, an employee or 
officer of the executive branch of the Federal Government to give 
consideration or to act regarding a Federal award or a regulatory 
matter are unallowable. Improper influence means any influence that 
induces or tends to induce a Federal employee or officer to give 
consideration or to act regarding a Federal award or regulatory matter 
on any basis other than the merit.
    (c) Restrictions on nonprofit organizations and IHEs. In addition, 
the following restrictions apply to nonprofit organizations and IHEs:
    (1) Costs associated with the following activities are unallowable:
    (i) Attempts to influence the outcomes of any Federal, State, or 
local election, referendum, initiative, or similar procedure through 
in-kind or cash contributions, endorsements, publicity, or similar 
activity;
    (ii) Establishing, administering, contributing to, or paying the 
expenses of a political party, campaign, political action committee, or 
other organization established to influence the outcomes of elections 
in the United States;
    (iii) Any attempt to influence:
    (A) The introduction of Federal or State legislation;
    (B) The enactment or modification of any pending Federal or State 
legislation through communication with any member or employee of the 
Congress or State legislature (including efforts to influence State or 
local officials to engage in similar lobbying activity);
    (C) The enactment or modification of any pending Federal or State 
legislation by preparing, distributing, or using publicity or 
propaganda or by urging members of the general public, or any segment 
thereof, to contribute to or participate in any mass demonstration, 
march, rally, fundraising drive, lobbying campaign or letter writing or 
telephone campaign; or
    (D) Any government official or employee in connection with a 
decision to sign or veto enrolled legislation;
    (iv) Legislative liaison activities, including attendance at 
legislative sessions or committee hearings, gathering information 
regarding legislation, and analyzing the effect of legislation, when 
such activities are

[[Page 69480]]

carried on in support of or in knowing preparation for an effort to 
engage in unallowable lobbying.
    (2) The following activities are excepted from the coverage of 
paragraph (c)(1) of this section:
    (i) Technical and factual presentations on topics directly related 
to the performance of a grant, contract, or other agreement (through 
hearing testimony, statements, or letters to the Congress or a State 
legislature, or subdivision, member, or cognizant staff member 
thereof), in response to a documented request (including a 
Congressional Record notice requesting testimony or statements for the 
record at a regularly scheduled hearing) made by the recipient's or 
subrecipient's member of congress, legislative body, subdivision, or a 
cognizant staff member thereof, provided such information is readily 
obtainable and can be readily put in deliverable form, and further 
provided that costs under this section for travel, lodging or meals are 
unallowable unless incurred to offer testimony at a regularly scheduled 
Congressional hearing pursuant to a written request for such 
presentation made by the Chairman or Ranking Minority Member of the 
Committee or Subcommittee conducting such hearings;
    (ii) Any lobbying made unallowable by paragraph (c)(1)(iii) of this 
section to influence State legislation to directly reduce the cost, or 
to avoid material impairment of the recipient's or subrecipient's 
authority to perform the grant, contract, or other agreement; or
    (iii) Any activity specifically authorized by statute to be 
undertaken with funds from the Federal award.
    (iv) Any activity excepted from the definitions of ``lobbying'' or 
``influencing legislation'' by the Internal Revenue Code provisions 
that require nonprofit organizations to limit their participation in 
direct and ``grass roots'' lobbying activities to retain their 
charitable deduction status and avoid punitive excise taxes, 26 U.S.C. 
(I.R.C.) 501(c)(3), 501(h), 4911(a), including:
    (A) Nonpartisan analysis, study, or research reports;
    (B) Examinations and discussions of broad social, economic, and 
similar problems; and
    (C) Information provided upon request by a legislator for technical 
advice and assistance, as defined by I.R.C. 4911(d)(2) and 26 CFR 
56.4911-2(c)(1) through (c)(3).
    (v) When a recipient or subrecipient seeks reimbursement for 
indirect costs, total lobbying costs must be identified separately in 
the indirect cost rate proposal and thereafter be treated as other 
unallowable activity costs in accordance with Sec.  200.413.
    (vi) The recipient or subrecipient must submit a certification that 
the requirements and standards of this section have been complied with 
as part of its annual indirect cost rate proposal. (See 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 a 
particular calendar month when:
    (1) The employee engages in lobbying (as defined in paragraphs 
(c)(1) and (c)(2) of this section) for 25 percent or less of the 
employee's compensated hours of employment during that calendar month; 
and
    (2) Within the preceding five-year period, the recipient or 
subrecipient has not materially misstated allowable or unallowable 
costs of any nature, including legislative lobbying costs.
    (B) When conditions in paragraph (c)(2)(vii)(A)(1) and (2) of this 
section are met, recipients and subrecipients are not required to 
establish records to support the allowability of claimed costs in 
addition to records already required or maintained. Also, when 
conditions in paragraphs (c)(2)(vii)(A)(1) and (2) of this section are 
met, the absence of time logs, calendars, or similar records will not 
serve as a basis for disallowing costs by contesting estimates of 
lobbying time spent by employees during a calendar month.
    (viii) In consultation with OMB, the Federal agency must establish 
procedures for resolving, in advance, any significant questions or 
disagreements concerning the interpretation or application of this 
section. Any such advance resolutions must be binding in any subsequent 
settlements, audits, or investigations with respect to that grant or 
contract for purposes of interpretation of this part, provided, 
however, that this must not be construed to prevent a contractor or 
recipient or subrecipient from contesting the lawfulness of such a 
determination.


Sec.  200.451  Losses on other awards or contracts.

    Any excess costs over income under any other award or contract of 
any nature is unallowable. This includes, but is not limited to, the 
recipient's or subrecipient's contributed portion by reason of cost 
sharing agreements or any under-recoveries through negotiation of flat 
amounts for indirect costs. Also, any excess of costs over authorized 
funding levels transferred from any award or contract to another is 
unallowable. All losses are not allowable indirect costs and must be 
included in the appropriate indirect cost rate base for allocating 
indirect costs.


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 
that 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.


Sec.  200.453  Materials and supplies costs, including costs of 
computing devices.

    (a) Costs incurred for materials, supplies, and fabricated parts 
necessary for the performance of a Federal award are allowable.
    (b) Purchased materials and supplies must be charged at their 
actual prices, net of applicable credits. Withdrawals from general 
stores or stockrooms must be charged at their actual net cost under any 
recognized method of pricing inventory withdrawals, consistently 
applied. Incoming transportation charges are an allowable part of 
materials and supplies costs.
    (c) Materials and supplies used for the performance of a Federal 
award may be charged as direct costs. Charging computing devices as 
direct costs is allowable for devices that are essential and allocable, 
but not solely dedicated, to the performance of a Federal award.
    (d) Where Federally-donated or furnished materials are used in 
performing the Federal award, the materials will be used without 
charge.


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

    (a) Costs of the recipient's or subrecipient's membership in 
business, technical, and professional organizations are allowable.
    (b) Costs of the recipient's or subrecipient's subscriptions to 
business, professional, and technical periodicals are allowable.
    (c) Costs of membership in any civic or community organization are 
allowable.
    (d) Costs of membership in any country club or social or dining 
club or organization are unallowable.

[[Page 69481]]

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


Sec.  200.455  Organization costs.

    (a) Costs such as incorporation fees, brokers' fees, fees to 
promoters, organizers or management consultants, attorneys, 
accountants, or investment counselors, whether or not employees of the 
recipient or subrecipient in connection with the establishment or 
reorganization of an organization, are unallowable except with prior 
approval of the Federal agency.
    (b) The costs of any activities undertaken to persuade employees of 
the recipient or subrecipient, or any other entity, to exercise or not 
to exercise, or concerning the manner of exercising, the right to 
organize and bargain collectively through representatives of the 
employees' own choosing, are unallowable.
    (c) The costs related to data and evaluation are allowable and 
include (but are not limited to) the expenditures needed to gather, 
store, track, manage, analyze, disaggregate, secure, share, publish, or 
otherwise use data to administer or improve the program, such as data 
systems, personnel, data dashboards, cyber security, and related items. 
Data costs may also include direct or indirect costs associated with 
building integrated data systems--data systems that link individual-
level data from multiple State and local government agencies for 
purposes of management, research, and evaluation.


Sec.  200.456   Participant support costs.

    Participant support costs are allowable (see Sec.  200.1). The 
classification of items as participant support costs must be documented 
in the recipient's or subrecipient's written policies and procedures 
and treated consistently across all Federal awards.


Sec.  200.457   Plant and security costs.

    Necessary and reasonable expenses incurred for the 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.


Sec.  200.458  Pre-award costs.

    Pre-award costs are those incurred before the start 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. These costs are 
allowable only to the extent that they would have been allowed if 
incurred after the start date of the Federal award and only with the 
prior written approval of the Federal agency. If approved, these costs 
must be charged to the initial budget period of the Federal award 
unless otherwise specified by the Federal agency or pass-through 
entity.


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 recipient or 
subrecipient 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.
    (b) In determining the allowability of costs in a particular case, 
no single factor or any combination of factors is necessarily 
determinative. However, the following factors are relevant:
    (1) The nature and scope of the service rendered in relation to the 
service required.
    (2) The necessity of contracting for the service, considering the 
recipient's or subrecipient's capability in the particular area.
    (3) The past pattern of such costs, particularly in the years prior 
to receiving a Federal award(s).
    (4) The impact of Federal awards on the recipient's or 
subrecipient's business (meaning, what new problems have arisen).
    (5) Whether the proportion of Federal work to the recipient's or 
subrecipient's total business influences the recipient or subrecipient 
in favor of incurring the cost, particularly where the services 
rendered are not of a continuing nature and have little relationship to 
work under Federal awards.
    (6) Whether the service can be performed more economically by 
direct employment rather than contracting.
    (7) The qualifications of the individual or entity providing the 
service and the customary fees charged, especially on non-federally 
funded activities.
    (8) Adequacy of the contractual agreement for the service (for 
example, description of the service, estimate of the time required, 
rate of compensation, and termination provisions).
    (c) To be allowable, retainer fees must be supported by evidence of 
bona fide services available or rendered in addition to the factors in 
paragraph (b) of this section.


Sec.  200.460  Proposal costs.

    Proposal costs are the costs of preparing bids, proposals, or 
applications on potential Federal and non-Federal awards or projects, 
including developing data necessary to support the recipient's or 
subrecipient's bids or proposals. Proposal costs of the current 
accounting period of both successful and unsuccessful bids and 
proposals normally should be treated as indirect costs and allocated to 
all current activities of the recipient or subrecipient. No proposal 
costs of past accounting periods may be allocated to the current 
period.


Sec.  200.461   Publication and printing costs.

    (a) Publication costs for electronic and print media, including 
distribution, promotion, and general handling, are allowable. These 
costs should be allocated as indirect costs to all benefiting 
activities of the recipient or subrecipient if they are not 
identifiable with a particular cost objective.
    (b) Page charges, article processing charges, or similar open 
access fees for professional journal publications and other peer-
reviewed publications developed under a Federal award are allowable 
where:
    (1) The publications report work supported by the Federal 
Government; and
    (2) The charges are levied impartially on all items published by 
the journal, whether or not under a Federal award.
    (3) The recipient or subrecipient may charge the Federal award 
during closeout for the costs of publication or sharing of research 
results if the costs were not incurred during the period of performance 
of the Federal award. If incurred, these costs must be charged to the 
final budget period of the award unless otherwise specified by the 
Federal agency.


Sec.  200.462  Rearrangement and reconversion costs.

    (a) Costs incurred for ordinary and normal rearrangement and 
alteration of facilities are allowable as indirect costs. Special 
arrangements and alterations are allowable as a direct cost if the 
costs are incurred specifically for a Federal award and with the prior 
approval of the Federal agency or pass-through entity.
    (b) Costs incurred in restoring or rehabilitating the recipient's 
or subrecipient's facilities to approximately the same condition

[[Page 69482]]

existing immediately before the commencement of a Federal award(s), 
less costs related to normal wear and tear, are allowable.


Sec.  200.463   Recruiting costs.

    (a) Subject to paragraphs (b) and (c) of this section, and provided 
that the size of the staff recruited and maintained is in keeping with 
workload requirements, costs of ``help wanted'' advertising, operating 
costs of an employment office necessary to secure and maintain adequate 
staff, costs of operating an aptitude and educational testing program, 
travel costs of employees while engaged in recruiting personnel, travel 
costs of applicants for interviews for prospective employment, and 
relocation costs incurred incident to recruitment of new employees, are 
allowable to the extent that such costs are incurred pursuant to the 
recipient's or subrecipient's standard recruitment program. When the 
recipient or subrecipient uses employment agencies, costs not in excess 
of standard commercial rates for such services are allowable.
    (b) Special emoluments, fringe benefits, and salary allowances 
incurred to attract professional personnel that do not meet the test of 
reasonableness or do not conform with the established practices of the 
recipient or subrecipient, are unallowable.
    (c) If relocation costs incurred incident to recruitment of a new 
employee have been funded in whole or in part by a Federal award, and 
the newly hired employee resigns for reasons within the employee's 
control within 12 months after hire, the recipient or subrecipient must 
refund or credit the Federal Government for its share of the cost. See 
Sec.  200.464.
    (d) Short-term visa costs (as opposed to longer-term immigration 
visas) are generally allowable expenses that may be proposed as a 
direct cost. Since short-term visas are issued for a specific period 
and purpose and can be clearly identified as directly connected to work 
performed on a Federal award. For these costs to be directly charged to 
a Federal award, they must:
    (1) Be critical and necessary for the conduct of the project;
    (2) Be allowable under the applicable cost principles;
    (3) Be consistent with the recipient's or subrecipient's cost 
accounting practices and established written policy; and
    (4) Meet the definition of ``direct cost'' as described in the 
applicable cost principles.


Sec.  200.464  Relocation costs of employees.

    (a) Relocation costs are costs incident to the permanent change of 
duty assignment (for an indefinite period or a stated period of not 
less than 12 months) of an existing employee or upon recruitment of a 
new employee. Relocation costs are allowable, subject to the 
limitations described in paragraphs (b), (c), and (d) of this section, 
provided that:
    (1) The move is for the benefit of the employer.
    (2) Reimbursement to the employee is in accordance with an 
established written policy consistently followed by the employer.
    (3) The reimbursement does not exceed the employee's actual (or 
reasonably estimated) expenses.
    (b) Allowable relocation costs for current employees are limited to 
the following:
    (1) The costs of transportation of the employee, members of their 
immediate family and their household, and personal effects to the new 
location.
    (2) The costs of finding a new home, such as advance trips by 
employees and spouses to locate living quarters and temporary lodging 
during the transition period, up to a maximum period of 30 calendar 
days.
    (3) Closing costs, such as brokerage, legal, and appraisal fees, 
incidental to the disposition of the employee's former home. These 
costs, together with those described in paragraph (b)(4) of this 
section, are limited to eight percent of the sales price of the 
employee's former home.
    (4) The continuing costs of ownership (for up to six months) of the 
vacant former home after the settlement or lease date of the employee's 
new permanent home, such as maintenance of buildings and grounds 
(exclusive of fixing-up expenses), utilities, taxes, and property 
insurance.
    (5) Other necessary and reasonable expenses normally incident to 
relocation, such canceling an unexpired lease, transportation of 
personal property, and purchasing insurance against loss of or damages 
to personal property. The cost of canceling an unexpired lease is 
limited to three times the monthly rental.
    (c) Allowable relocation costs for new employees are limited to 
those described in paragraphs (b)(1) and (2) of this section. If 
relocation costs incurred incident to the recruitment of a new employee 
have been funded in whole or in part by a Federal award, and the newly 
hired employee resigns for reasons within the employee's control within 
12 months after hire, the recipient or subrecipient must refund or 
credit the Federal Government for its share of the cost. If a new 
employee is relocating to an overseas location and dependents are not 
permitted for any reason, and the costs do not include transporting 
household goods, the costs must be considered travel costs in 
accordance with Sec.  200.474, not relocation costs under Sec.  
200.464).
    (d) The following costs related to relocation are unallowable:
    (1) Fees and other costs associated with acquiring a new home.
    (2) A loss on the sale of a former home.
    (3) Continuing mortgage principal and interest payments on a home 
being sold.
    (4) Income taxes paid by an employee related to reimbursed 
relocation costs.


Sec.  200.465   Rental costs of real property and equipment.

    (a) Subject to the limitations described in paragraphs (b) through 
(d) of this section, rental costs are allowable to the extent that the 
rates are reasonable in light of such factors as costs of comparable 
rental properties; market conditions in the area; alternatives 
available; and the type, life expectancy, condition, and value of the 
property leased. Rental arrangements should be reviewed periodically to 
determine if circumstances have changed and if other options are 
available.
    (b) Rental costs under ``sale and lease back'' arrangements are 
allowable only up to the amount allowed if the recipient or 
subrecipient had continued to own the property. This amount would 
include expenses such as depreciation, maintenance, taxes, and 
insurance.
    (c) Rental costs under ``less-than-arm's-length'' leases are 
allowable only up to the amount described in paragraph (b) of this 
section. For this purpose, a less-than-arm's-length lease is one under 
which one party to the lease agreement can control or substantially 
influence the actions of the other. Such leases include, but are not 
limited to, those between:
    (1) Divisions of the recipient or subrecipient;
    (2) The recipient or subrecipient under common control through 
common officers, directors, or members; and
    (3) The recipient or subrecipient and a director, trustee, officer, 
or key employee of the recipient or subrecipient or an immediate family 
member, either directly or through corporations, trusts, or similar 
arrangements in which they hold a controlling interest. For example, 
the recipient or subrecipient may establish

[[Page 69483]]

a separate corporation to own property and lease it back to the 
recipient or subrecipient.
    (4) Family members include one party with any of the following 
relationships to another party:
    (i) Spouse and parents thereof;
    (ii) Children and spouses thereof;
    (iii) Parents and spouses thereof;
    (iv) Siblings and spouses thereof;
    (v) Grandparents and grandchildren and spouses thereof;
    (vi) Domestic partner and parents thereof, including domestic 
partners of any individual in 2 through 5 of this definition; and
    (vii) Any individual related by blood or affinity whose close 
association with the employee is the equivalent of a family 
relationship.
    (d) Rental costs under leases which are required to be accounted 
for as a financed purchase under GASB standards or a finance lease 
under GAAP are allowable only up to the amount (described in paragraph 
(b) of this section) allowed if the recipient or subrecipient had 
purchased the property on the date the lease agreement was executed. 
Interest costs related to these leases are allowable if they meet the 
criteria in Sec.  200.449. Unallowable costs include costs that would 
not have been incurred if the recipient or subrecipient had purchased 
the property, such as amounts paid for profit, management fees, and 
taxes.
    (e) Rental or lease payments are allowable under lease contracts 
where the recipient or subrecipient is required to recognize an 
intangible right-to-use lease asset under GASB standards or right-of-
use operating lease workspace asset under GAAP for purposes of 
financial reporting in accordance with GAAP.
    (f) The rental of any property owned by any individuals or entities 
affiliated with the recipient or subrecipient, including commercial or 
residential real estate, for purposes such as the home office is 
unallowable.


Sec.  200.466   Scholarships and student aid costs.

    (a) Costs of scholarships, fellowships, and student aid programs at 
IHEs are allowable only when the purpose of the Federal award is to 
provide training to participants, and the Federal agency approves the 
cost. However, tuition remission and other forms of compensation paid 
as, or instead of, wages to students performing necessary work are 
allowable provided that:
    (1) The individual is conducting activities necessary to the 
Federal award;
    (2) Tuition remission and other support are provided in accordance 
with the established written policy of the IHE and consistently 
provided in a like manner to students in return for similar activities 
conducted under Federal awards as well as other activities; and
    (3) The student is enrolled in an advanced degree program at the 
IHE or an affiliated institution during the academic period and the 
student's activities under the Federal award are related to their 
degree program;
    (4) The tuition or other payments are reasonable compensation for 
the work performed and are conditioned explicitly upon the performance 
of necessary work; and
    (5) The IHE compensates students under Federal awards as well as 
other activities in similar manners.
    (b) Charges for tuition remission and other forms of compensation 
paid to students as, or instead of, salaries and wages are subject to 
the reporting requirements in Sec.  200.430. The charges must be 
treated as a direct or indirect cost in accordance with the actual work 
performed. Tuition remission may be charged on an average rate basis. 
See Sec.  200.431.


Sec.  200.467  Selling and marketing costs.

    Costs of selling and marketing any products or services of the 
recipient or subrecipient are unallowable unless they are allowed under 
Sec.  200.421 and are necessary to meet the requirements of the Federal 
award.


Sec.  200.468  Specialized service facilities.

    (a) The costs of services provided by highly complex or specialized 
facilities operated by the recipient or subrecipient are allowable 
provided the charges for the services meet the conditions of either 
paragraph (b) or (c) of this section and take into account any items of 
income or Federal financing that qualify as applicable credits under 
Sec.  200.406. These costs include charges for facilities such as 
computing facilities, wind tunnels, and reactors.
    (b) The costs of such services, when material, must be charged 
directly to the applicable Federal awards based on actual usage of the 
services on the basis of a schedule of rates or established methodology 
that:
    (1) Does not discriminate between activities under Federal awards 
and other activities of the recipient or subrecipient, including usage 
by the recipient or subrecipient for internal purposes; and
    (2) Is designed to recover only the aggregate costs of the 
services. Each service's costs must normally consist of its direct 
costs and an allocable share of all indirect costs. Rates must be 
adjusted at least biennially and must consider any over or under-
applied costs of the previous period(s).
    (c) Where the costs incurred for a service are not material, they 
may be allocated as indirect costs.
    (d) Under extraordinary circumstances, the cognizant agency for 
indirect costs and the recipient or subrecipient may negotiate and 
establish an alternative costing arrangement if it is in the Federal 
Government's best interest.


Sec.  200.469  Student activity costs.

    Costs incurred for intramural activities, student publications, 
student clubs, and other student activities are unallowable unless 
expressly authorized in the Federal award.


Sec.  200.470  Taxes (including Value Added Tax).

    (a) For States, local governments, and Indian Tribes. (1) Taxes 
that a governmental unit is legally required to pay are allowable, 
except for self-assessed taxes that disproportionately affect Federal 
programs or changes in tax policies that disproportionately affect 
Federal programs.
    (2) Gasoline taxes, motor vehicle fees, and other taxes that are, 
in effect, user fees for benefits provided to the Federal Government 
are allowable.
    (3) This provision does not restrict the authority of the Federal 
agency to identify taxes where Federal participation is inappropriate. 
The cognizant agency for indirect costs may accept a reasonable 
approximation in circumstances where determining the amount of 
unallowable taxes would require an excessive amount of effort.
    (b) For nonprofit organizations and IHEs. (1) Taxes that the 
recipient or subrecipient is required to pay and which are paid or 
accrued in accordance with GAAP are generally allowable. These costs 
include payments made to local governments instead of taxes and that 
are commensurate with the local government services received. The 
following taxes are unallowable:
    (i) Taxes for which exemptions are available to the recipient or 
subrecipient directly or which are available to the recipient or 
subrecipient based on an exemption afforded the Federal Government and, 
in the latter case, when the Federal agency makes available the 
necessary exemption certificates;
    (ii) Special assessments on land which represent capital 
improvements; and
    (iii) Federal income taxes.
    (2) Any refund of taxes and interest thereon, which were allowed as 
Federal

[[Page 69484]]

award costs, must be credited to the Federal Government as a cost 
reduction or cash refund, as appropriate. However, any interest paid or 
credited to a recipient or subrecipient incident to a refund of tax, 
interest, and penalty will be paid or credited to the Federal 
Government only to the extent that such interest accrued over the 
period during which the Federal Government has reimbursed the recipient 
or subrecipient for the taxes, interest, and penalties.
    (c) Value Added Tax (VAT). Foreign taxes charged for procurement 
transactions that a recipient or subrecipient is legally required to 
pay in a country is allowable. Foreign tax refunds or applicable 
credits under Federal awards refer to receipts or reduction of 
expenditures, which operate to offset or reduce expense items that are 
allocable to Federal awards as direct or indirect costs. To the extent 
that such credits accrued or received by the recipient or subrecipient 
relate to allowable cost, these costs must be credited to the Federal 
agency as a cost reduction or cash refunds, as appropriate. In cases 
where the costs are credited back to the Federal award, the recipient 
or subrecipient may reduce the Federal share of costs by the amount of 
the foreign tax reimbursement, or where Federal award has not expired, 
the Federal agency may allow the recipient or subrecipient to use the 
foreign government tax refund for approved activities under the Federal 
award.


Sec.  200.471   Telecommunication and video surveillance costs.

    (a) Costs incurred for telecommunications and video surveillance 
services or equipment such as phones, internet, video surveillance, and 
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.


Sec.  200.472   Termination and standard closeout costs.

    (a) Termination Costs. Termination of a Federal award generally 
gives rise to the incurrence of costs or the need for special treatment 
of costs, which would not have arisen had the Federal award not been 
terminated. Cost principles covering these items are set forth in this 
section. They must be used in conjunction with the other termination 
requirements of this part.
    (1) The cost of items reasonably usable on the recipient's or 
subrecipient's other work is unallowable unless the recipient or 
subrecipient submits evidence that it would not retain such items 
without sustaining a loss. In deciding whether such items are 
reasonably usable on other work of the recipient or subrecipient, the 
Federal agency or pass-through entity should consider the recipient's 
or subrecipient's plans and orders for current and scheduled activity. 
Contemporaneous purchases of common items by the recipient or 
subrecipient must be considered evidence that the items are reasonably 
usable on the recipient's or subrecipient's other work. Any acceptance 
of common items as allocable to the terminated portion of the Federal 
award must be limited to the extent that the quantities of such items 
on hand, in transit, and on order do not exceed the reasonable 
quantitative requirements of other work.
    (2) If the recipient or subrecipient cannot discontinue certain 
costs immediately after the effective termination date, despite making 
all reasonable efforts, then the costs are generally allowable within 
the limitations of this part. Any costs continuing after termination 
due to the negligent or willful failure of the recipient or 
subrecipient to immediately discontinue the costs are unallowable.
    (3) Loss of useful value of special tooling, machinery, and 
equipment is generally allowable if:
    (i) Such special tooling, special machinery, or equipment is not 
reasonably capable of use in the other work of the recipient or 
subrecipient;
    (ii) The interest of the Federal Government is protected by 
transfer of title or by other means deemed appropriate by the Federal 
agency (see Sec.  200.313 (d)); and
    (iii) The loss of useful value for one terminated Federal award is 
limited to the portion of the acquisition cost which bears the same 
ratio to the total acquisition cost as the terminated portion of the 
Federal award bears to the entire terminated Federal award and other 
Federal awards for which the special tooling, machinery, or equipment 
was acquired.
    (4) Rental costs under unexpired leases are generally allowable 
where clearly shown to have been reasonably necessary for the 
performance of the terminated Federal award less the residual value of 
such leases, if:
    (i) The amount of claimed rental costs does not exceed the 
reasonable use value of the property leased for the period of the 
Federal award and a further period as may be reasonable; and
    (ii) The recipient or subrecipient makes all reasonable efforts to 
terminate, assign, settle, or otherwise reduce the cost of the lease. 
The cost of alterations of the leased property provided they were 
necessary for the performance of the Federal award, and the cost of 
reasonable restoration required by the lease may be included.
    (5) The following settlement expenses are generally allowable.
    (i) Accounting, legal, clerical, and similar costs that are 
reasonably necessary for:
    (A) The preparation and presentation to the Federal agency or pass-
through entity of settlement claims and supporting data with respect to 
the terminated portion of the Federal award, unless the termination is 
for cause (see Sec. Sec.  200.339-200.343); and
    (B) The termination and settlement of subawards.
    (ii) Reasonable costs for the storage, transportation, protection, 
and disposition of property provided by the Federal Government or 
acquired or produced for the Federal award.
    (6) Claims under subawards, including the allocable portion of 
claims common to the Federal award and other work of the recipient or 
subrecipient, are generally allowable. An appropriate share of the 
recipient's or subrecipient's indirect costs may be allocated to the 
amount of settlements with contractors and subrecipients, provided that 
the amount allocated is consistent with the requirements of Sec.  
200.414. These allocated indirect costs must exclude the same and 
similar costs claimed directly or indirectly as settlement expenses.
    (b) Closeout Costs. Administrative costs associated with the 
closeout activities of a Federal award are allowable. The recipient or 
subrecipient may charge the Federal award during the closeout for the 
necessary administrative costs of that Federal award (for example, 
salaries of personnel preparing final reports, publication and printing 
costs, and the costs associated with the disposition of equipment and 
property). These costs may be incurred until the due date of the final 
report(s). If incurred, these costs must be liquidated prior to the due 
date of the final report(s) and charged to the final budget period of 
the award unless otherwise specified by the Federal agency.

[[Page 69485]]

Sec.  200.473  Training and education costs.

    The cost of training and education provided for employee 
development is allowable.


Sec.  200.474  Transportation costs.

    Costs incurred for freight, express, cartage, postage, and other 
transportation services relating to goods purchased, in process, or 
delivered, are allowable. When the costs can be readily identified with 
the items involved, they may be charged directly as transportation 
costs or added to the cost of such items. When identification with the 
materials received cannot be readily identified, the inbound 
transportation cost may be charged to the appropriate indirect cost 
accounts if the recipient or subrecipient follows a consistent, 
equitable procedure in this respect. If reimbursable under the terms 
and conditions of the Federal award, outbound freight should be treated 
as a direct cost.


Sec.  200.475   Travel costs.

    (a) General. Travel costs include the transportation, lodging, 
subsistence, and related items incurred by employees who are in travel 
status on official business of the recipient or subrecipient. These 
costs may be charged on an actual cost basis, a per diem or mileage 
basis, 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. The 
method used must be consistent with those normally allowed in like 
circumstances in the recipient's or subrecipient's other activities and 
in accordance with the recipient's or subrecipient's established 
written 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 agency or pass-through entity 
when they are specifically related to the Federal award.
    (b) Lodging and subsistence. Costs incurred by employees and 
officers for travel, including costs of lodging, other subsistence, and 
incidental expenses, must be considered reasonable and otherwise 
allowable only to the extent such costs do not exceed charges normally 
allowed by the recipient or subrecipient in its regular operations as 
the result of the recipient's or subrecipient's established written 
policy. In addition, if these costs are charged directly to the Federal 
award documentation must justify that:
    (1) Participation of the individual is necessary for the Federal 
award; and
    (2) The costs are reasonable and consistent with the recipient's or 
subrecipient's established written policy.
    (c) Dependent costs. (1) Temporary dependent care costs (dependent 
is defined in 26 U.S.C. 152) above and beyond regular dependent care 
that directly results from travel to conferences is allowable provided 
that:
    (i) The costs are a direct result of the individual's travel for 
the Federal award;
    (ii) The costs are consistent with the recipient's or 
subrecipient's established written policy for all travel; and
    (iii) Are only temporary during the travel period.
    (2) Travel costs for dependents are unallowable, except for travel 
of six months or more with prior approval of the Federal agency. See 
Sec.  200.432.
    (d) Establishing rates and amounts. In the absence of an 
established written policy regarding travel costs, the rates and 
amounts established under 5 U.S.C. 5701-11 (``Travel and Subsistence 
Expenses; Mileage Allowances''), by the Administrator of General 
Services, or by the President (or their designee) pursuant to any 
provisions of such subchapter must apply to travel under Federal awards 
(48 CFR 31.205-46(a)).
    (e) Commercial air travel. (1) Airfare costs in excess of the basic 
least expensive unrestricted accommodations class offered by commercial 
airlines are unallowable except when such accommodations would:
    (i) Require circuitous routing;
    (ii) Require travel during unreasonable hours;
    (iii) Excessively prolong travel;
    (iv) Result in additional costs that would offset the 
transportation savings; or
    (v) Offer accommodations not reasonably adequate for the traveler's 
medical needs. The recipient or subrecipient must justify and document 
these conditions on a case-by-case basis for the use of first-class or 
business-class airfare to be allowable in such cases.
    (2) Unless a pattern of avoidance is detected, the Federal 
Government will generally not question a recipient's or subrecipient's 
determinations that customary standard airfare or other discount 
airfare is unavailable for specific trips if the recipient or 
subrecipient can demonstrate that such airfare was not available in the 
specific case.
    (f) Air travel by other than commercial carrier. Travel costs by 
recipient or subrecipient-owned, -leased, or -chartered aircraft 
include the cost of the lease, charter, operation (including personnel 
costs), maintenance, depreciation, insurance, and other related costs. 
The portion of these costs that exceed the cost of airfare, as provided 
for in paragraph (d), is unallowable.


Sec.  200.476   Trustees.

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

Subpart F--Audit Requirements

General


Sec.  200.500   Purpose.

    This part sets forth standards for obtaining consistency and 
uniformity among Federal agencies for the audit of non-Federal entities 
expending Federal awards.

Audits


Sec.  200.501  Audit requirements.

    (a) Audit required. A non-Federal entity that expends $1,000,000 or 
more during the non-Federal entity's fiscal year in Federal awards must 
have a single or program-specific audit conducted for that year in 
accordance with the provisions of this part.
    (b) Single audit. A non-Federal entity that expends $1,000,000 in 
Federal awards during its fiscal year 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) or (d) of this section.
    (c) Program-specific audit election (in general). A non-Federal 
entity may elect to have a program-specific audit conducted in 
accordance with Sec.  200.507 if the following conditions are met:
    (1) The non-Federal entity expends Federal awards under only one 
Federal program (excluding research and development); and
    (2) The Federal program's statutes or regulations, or terms and 
conditions of the Federal award, do not require a financial statement 
audit of the non-Federal entity.
    (d) Program-specific audit election for research and development. A 
non-Federal entity may elect to have a program-specific audit for 
research and development conducted in accordance with Sec.  200.507, 
but only if all of the following conditions are met:
    (1) The non-Federal entity expends Federal awards only from the 
same Federal agency, or the same Federal agency and the same pass-
through entity; and
    (2) The Federal agency, or pass-through entity in the case of a 
subrecipient, approves a program-specific audit in advance.

[[Page 69486]]

    (e) Exemption when Federal awards expended are less than 
$1,000,000. A non-Federal entity that expends less than $1,000,000 in 
Federal awards during its fiscal year is exempt from Federal audit 
requirements for that year, except as noted in Sec.  200.503. However, 
in all instances, the records of the non-Federal entity must be 
available for review or audit by appropriate officials of the Federal 
agency, pass-through entity, and the Government Accountability Office 
(GAO).
    (f) Federally Funded Research and Development Centers (FFRDC). 
Management of an auditee that owns or operates a FFRDC may elect to 
treat the FFRDC as a separate entity for purposes of this part.
    (g) 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. 
Payments received for goods or services provided as a contractor under 
a Federal award (see Sec.  200.331) are not subject to audit under this 
part.
    (h) Compliance responsibility for contractors. In most cases, the 
auditee's compliance responsibility for contractors is to ensure that 
the procurement, receipt, and payment for goods and services comply 
with Federal statutes, regulations, and the terms and conditions of a 
Federal award. Federal award compliance requirements normally do not 
flow down to contractors. However, the auditee is responsible for 
ensuring compliance for procurement transactions that require a 
contractor to be responsible for program compliance and the 
contractor's records must be reviewed to determine program compliance. 
Also, when these procurement transactions relate to a major program, 
the scope of the audit must include a determination that these 
transactions comply with Federal statutes, regulations, and the terms 
and conditions of a Federal award.
    (i) For-profit subrecipient. This part does not apply to for-profit 
organizations. As necessary, the pass-through entity is responsible for 
establishing requirements to ensure compliance by for-profit 
subrecipients. The subaward with a 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 throughout the performance of the subaward, 
and post-award audits (see Sec.  200.332).


Sec.  200.502  Basis for determining Federal awards expended.

    (a) Determining Federal awards expended. The determination of when 
a Federal award is expended must be based on when the activity related 
to the Federal award occurs. Generally, the activity related to the 
Federal award pertains to events that require the non-Federal entity to 
comply with Federal statutes, regulations, and the terms and conditions 
of Federal awards, such as:
    (1) Expenditure/expense transactions associated with grants, 
cooperative agreements, cost-reimbursement contracts under the FAR, 
compacts with Indian Tribes, and direct appropriations;
    (2) The disbursement of funds to subrecipients;
    (3) The use of loan proceeds under loan and loan guarantee 
programs;
    (4) The receipt of property (including surplus property);
    (5) The receipt or use of program income;
    (6) The distribution or use of food commodities;
    (7) The disbursement of amounts entitling the non-Federal entity to 
an interest subsidy; and
    (8) The period when insurance is in force.
    (b) Loan and loan guarantees (loans). Loan and loan guarantees 
retain their Federal character through the end of the Federal award 
period of performance unless otherwise specified in statute or Federal 
agency regulations. The Federal Government is at risk for loans until 
the debt is repaid. Therefore, the following guidelines must be used to 
calculate the value of Federal awards expended under loan programs 
(except as noted in paragraphs (c) and (d)):
    (1) The value of new loans made or received during the audit 
period; plus
    (2) The balance of loans from previous years at the beginning of 
the audit period for which the Federal Government imposes continuing 
compliance requirements; plus
    (3) Any interest subsidy, cash, or administrative cost allowance 
received.
    (c) Loan and loan guarantees (loans) at Institutions of Higher 
Education (IHE). When loans are made to students of an IHE, but the IHE 
itself does not have continuing compliance requirements for the loans, 
then only the value of loans made during the audit period are 
considered Federal awards expended in that audit period. The balance of 
loans for previous audit periods is not included as Federal awards 
expended because the lender accounts for the prior balances.
    (d) Prior loan and loan guarantees (loans). Loans, the proceeds of 
which were received and expended in prior years, are not considered 
Federal awards expended under this part when Federal statutes, 
regulations, and the terms and conditions of Federal awards pertaining 
to such loans impose no continuing compliance requirements other than 
to repay the loans.
    (e) Endowment funds. The cumulative balance of Federal awards for 
endowment funds that are federally restricted is considered Federal 
awards expended in each audit period in which the funds are still 
restricted.
    (f) Free rent. Free rent received by itself is not considered a 
Federal award expended under this part. However, free rent received as 
part of a Federal award to carry out a Federal program must be included 
in determining Federal awards expended and is subject to audit under 
this part.
    (g) Valuing non-cash assistance. Federal non-cash assistance (such 
as free rent, food commodities, donated property, or donated surplus 
property that is received as part of a Federal award to carry out a 
Federal program) must be valued at fair market value at the time of 
receipt or the assessed value provided by the Federal agency and must 
be included in determining Federal awards expended under this part
    (h) Medicare. Medicare payments to a non-Federal entity for 
providing patient care services to Medicare-eligible individuals are 
not considered Federal awards expended under this part.
    (i) Medicaid. Medicaid payments to a subrecipient for providing 
patient care services to Medicaid-eligible individuals are not 
considered Federal awards expended under this part unless a State 
requires the funds to be treated as Federal awards expended because 
reimbursement is on a cost-reimbursement basis.
    (j) Certain loans provided by the National Credit Union 
Administration. For purposes of this part, loans from the National 
Credit Union Share Insurance Fund and the Central Liquidity Facility 
funded by contributions from insured non-Federal entities are not 
considered Federal awards expended.


Sec.  200.503   Relation to other audit requirements.

    (a) Other financial audits. An audit conducted in accordance with 
this part must be in lieu of any financial audit of Federal awards 
which a non-Federal entity is required to undergo under any other 
Federal statute or regulation. To the extent that such an audit 
provides a Federal agency with the information it requires to carry out 
its responsibilities under Federal statute or regulation, a

[[Page 69487]]

Federal agency must rely upon and use that information.
    (b) Conducting additional audits. Notwithstanding paragraph (a) of 
this section, a Federal agency, Inspectors General, or GAO may conduct 
or arrange additional audits to carry out its responsibilities under 
Federal statute or regulation. The provisions of this part do not 
authorize any non-Federal entity to constrain, in any manner, such 
Federal agency from carrying out or arranging for such additional 
audits, except that the Federal agency must plan such audits not to be 
duplicative of other audits of Federal awards. Prior to commencing such 
an audit, the Federal agency or pass-through entity must review the FAC 
for recent audits submitted by the non-Federal entity, and to the 
extent such audits meet a Federal agency or pass-through entity's 
needs, the Federal agency or pass-through entity must rely upon and use 
such audits. Any additional audits must be planned and performed in 
such a way as to build upon work performed, including the audit 
documentation, sampling, and testing already performed by other 
auditors.
    (c) Authority to conduct additional audits. The provisions of this 
part do not limit the authority of Federal agencies to conduct, or 
arrange for the conduct of, audits and evaluations of Federal awards, 
nor limit the authority of any Federal agency Inspector General or 
other Federal officials. For example, requirements that may be 
applicable under the FAR or CAS and the terms and conditions of a cost-
reimbursement contract may include additional applicable audits to be 
conducted or arranged for by Federal agencies.
    (d) Federal agency to pay for additional audits. A Federal agency 
that conducts or arranges for additional audits must, consistent with 
other applicable Federal statutes and regulations, arrange for funding 
the full cost of such additional audits.
    (e) Request for a program to be audited as a major program. A 
Federal agency may request that an auditee have a particular Federal 
program audited as a major program in lieu of the Federal agency 
conducting or arranging for the additional audits. Such requests should 
be made at least 180 calendar days prior to the end of the fiscal year 
to be audited to allow for planning. After consultation with its 
auditor, the auditee should promptly respond to such a request by 
informing the Federal 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 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 agency request, and 
the Federal agency agrees to pay the full incremental costs, then the 
auditee must have the program audited as a major program. With approval 
of the Federal agency, a pass-through entity may use the provisions of 
this paragraph for a subrecipient.


Sec.  200.504  Frequency of audits.

    Audits required by this part must be performed annually except as 
provided in paragraphs (a) and (b) of this section:
    (a) A State, local government, or Indian Tribe that is required by 
constitution or statute, in effect on January 1, 1987, to undergo its 
audits less frequently than annually, is permitted to undergo biennial 
(every other year) audits pursuant to this part. This requirement must 
still be in effect for the biennial period.
    (b) Any nonprofit organization that had biennial audits for all 
biennial periods ending between July 1, 1992, and January 1, 1995, is 
permitted to undergo biennial audits pursuant to this part. Biennial 
audits must cover both fiscal years within the biennial period.


Sec.  200.505   Remedies for noncompliance.

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


Sec.  200.506   Audit costs.

    See Sec.  200.425.


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 concerning 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 (Appendix VI, Program-Specific Audit 
Guides). When a current program-specific audit guide is available, the 
auditor must follow Generally Accepted Government Auditing Standards 
(GAGAS) and the guide when performing a program-specific audit.
    (b) Program-specific audit guide not available. (1) When a current 
program-specific audit guide is not available, the auditee and auditor 
must basically have the same responsibilities for the Federal program 
as they would have for an audit of a major program in a single audit.
    (2) The auditee must prepare the financial statement(s) for the 
Federal program that includes a schedule of expenditures of Federal 
awards for the program and notes that 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) The auditor must:
    (i) Perform an audit of the financial statement(s) for the Federal 
program in accordance with GAGAS;
    (ii) Obtain an understanding of internal controls and perform tests 
of internal controls over the Federal program consistent with the 
requirements for a major program in accordance withSec.  200.514(c);
    (iii) 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 for a major program under Sec.  
200.514(d);
    (iv) Follow up on prior audit findings and 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 When the auditor concludes that the summary schedule of 
prior audit findings materially misrepresents the status of any prior 
audit finding, the auditor must report this condition as a current-year 
audit finding.; and
    (v) Report any audit findings consistent with the requirements of 
Sec.  200.516.
    (4) The auditor's report(s) may be in the form of either combined 
or separate reports. It may be organized differently from the manner 
presented in this section. The auditor's report(s) must state that the 
audit was conducted in accordance with this part and include the 
following:
    (i) An opinion (or disclaimer of opinion) as to whether the 
financial statement(s) of the Federal program is presented fairly in 
all material respects in accordance with the stated accounting 
policies;
    (ii) A report on internal control related to the Federal program, 
which must describe the scope of testing of internal control and the 
results of the tests;
    (iii) A report on compliance that includes an opinion (or 
disclaimer of opinion) as to whether the auditee complied with laws, 
regulations, and the terms and conditions of Federal

[[Page 69488]]

awards which could have a direct and material effect on the Federal 
program; and
    (iv) A schedule of findings and questioned costs for the Federal 
program that includes a summary of the auditor's results relative to 
the Federal 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) Report submission for program-specific audits. (1) Audit 
period. The audit must be completed and submitted in accordance with 
paragraph (c)(2) or (c)(3) of this section. Unless a different period 
is specified in the program-specific audit guide, the audit must be 
submitted within 30 calendar days after receiving the auditor's 
report(s) or nine months after the end of the audit period (whichever 
is earlier). The reporting package is due the next business day when 
the due date falls on a Saturday, Sunday, or Federal holiday. Unless 
restricted by Federal law or regulation, the auditee must make copies 
of the report(s) available for public inspection. Auditees and auditors 
must ensure that their respective parts of the reporting package do not 
include protected personally identifiable information.
    (2) Program-specific audit guide available. When a program-specific 
audit guide is available, the auditee must electronically submit the 
data collection form prepared in accordance with Sec.  200.512(b), as 
applicable to the program-specific audit, to the Federal Audit 
Clearinghouse (FAC). The submission must also include the reporting 
required by the program-specific audit guide.
    (3) Program-specific audit guide not available. When a program-
specific audit guide is not available, the auditee must electronically 
submit the data collection form prepared in accordance with Sec.  
200.512(b) to the FAC. The submission must consist of the financial 
statement(s) of the Federal program, a summary schedule of prior audit 
findings, a corrective action plan as described in paragraph (b)(2), 
and the auditor's report(s) described in paragraph (b)(4).
    (d) Other sections of this part may apply. Program-specific audits 
are subject to:
    (1) 200.500 Purpose through 200.503 Relation to other audit 
requirements, paragraph (d);
    (2) 200.504 Frequency of audits through 200.506 Audit costs;
    (3) 200.508 Auditee responsibilities through 200.509 Auditor 
selection;
    (4) 200.511 Audit findings follow-up;
    (5) 200.512 Report submission, paragraphs (e) through (h);
    (6) 200.513 Responsibilities;
    (7) 200.516 Audit findings through 200.517 Audit documentation;
    (8) 200.521 Management decision; and
    (9) Other referenced provisions of this part unless contrary to the 
provisions of this section, a program-specific audit guide, or program 
statutes and regulations.

Auditees


Sec.  200.508  Auditee responsibilities.

    The auditee must:
    (a) Arrange for the audit required by this part in accordance with 
Sec.  200.509, and ensure it is properly performed and submitted in 
accordance with Sec.  200.512.
    (b) Prepare 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. This includes preparing a summary schedule of prior audit 
findings and a corrective action plan in accordance with Sec.  
200.511(b) and (c), respectively.
    (d) Provide the auditor access to personnel, accounts, books, 
records, supporting documentation, and any other information needed for 
the auditor to perform the audit required by this part.


Sec.  200.509   Auditor selection.

    (a) Auditor procurement. When procuring audit services, the auditee 
must follow the procurement standards in Sec. Sec.  200.317 through 
200.327 of subpart D or the FAR (48 CFR part 42), as applicable. When 
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 
must 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 efforts to contract with businesses as 
stated in Sec.  200.321 or the FAR (48 CFR part 42), as applicable.
    (b) Restriction on auditor preparing indirect cost proposals. An 
auditor who prepares the indirect cost proposal or cost allocation plan 
may not be selected to perform the audit required by this part when the 
indirect costs recovered by the auditee during the prior year exceed $1 
million. This restriction applies to the base year used to prepare the 
indirect cost proposal or cost allocation plan and any subsequent years 
in which the resulting indirect cost agreement or cost allocation plan 
is used to recover costs.
    (c) Use of Federal auditors. Federal auditors may perform all or 
part of the work required under this part if they fully comply with the 
requirements of this part.


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 chosen to meet this part's 
requirements. However, organization-wide financial statements of the 
non-Federal entity 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. The schedule must 
include the total Federal awards expended as determined in accordance 
with Sec.  200.502. The auditee may choose to provide information 
requested by Federal agencies or pass-through-through entities to make 
the schedule easier to use. For example, when a Federal program has 
multiple Federal award years, the auditee may separately list the 
amount of Federal awards expended for each year of a Federal award. The 
schedule must:
    (1) List individual Federal programs by Federal agency using the 
applicable Assistance Listing number(s). For a cluster of programs, the 
non-Federal entity must provide the cluster name, a list of individual 
Federal programs within the cluster, and provide the Federal agency 
name and the applicable Assistance Listing number(s). For research and 
development, total Federal awards expended must be shown either by 
individual Federal award or by Federal agency and major subdivision 
within the Federal agency. For example, the National Institutes of 
Health is a major subdivision within the Department of Health and Human 
Services.
    (2) For audits covering multiple recipients (such as departments, 
agencies, IHEs, and other organizational

[[Page 69489]]

units), identify the recipient of the Federal award.
    (3) For Federal awards received as a subrecipient, the name of the 
pass-through entity and identifying number assigned by the pass-through 
entity must be included.
    (4) 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 unavailable. For a 
cluster of programs, the auditee must also provide the total for the 
cluster.
    (5) Include the total amount provided to subrecipients from each 
Federal program.
    (6) 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 requirement is in 
addition to including the total Federal awards expended for loan or 
loan guarantee programs in the schedule.
    (7) Include notes describing the significant accounting policies 
used in preparing the schedule and whether the auditee elected to use 
the 15 percent de minimis indirect cost rate (see Sec.  200.414).


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 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 must be reported in accordance with GAGAS.
    (b) Summary schedule of prior audit findings. The summary schedule 
of prior audit findings must report the status of all audit findings 
included in the prior audit's schedule of findings and questioned 
costs. The summary schedule must also include audit findings reported 
in the prior audit's summary schedule of prior audit findings except 
audit findings listed as corrected in accordance with paragraph (b)(1) 
of this section or no longer valid or not warranting further action in 
accordance with paragraph (b)(3) of this section.
    (1) When audit findings were fully corrected, the summary schedule 
need only list the audit findings and state that corrective action was 
taken.
    (2) When audit findings were not corrected or only partially 
corrected, the summary schedule must describe the reasons for the 
finding's recurrence, planned corrective action, and any partial 
corrective action taken. When the corrective action taken significantly 
differs from the corrective action previously reported in a corrective 
action plan or the Federal agency's or pass-through-through entity's 
management decision, the summary schedule must provide an explanation.
    (3) When the auditee believes the audit findings are no longer 
valid or do not warrant further action, the reasons for this position 
must be described in the summary schedule. A valid reason for 
considering an audit finding as not warranting further action is that 
all of the following have occurred:
    (i) Two years have passed since the audit report in which the 
finding occurred was submitted to the FAC;
    (ii) The Federal agency or pass-through entity is not currently 
following up with the auditee on the audit finding; and
    (iii) A management decision was not issued.
    (c) Corrective action plan. At the completion of the audit, the 
auditee must prepare a corrective action plan to address each audit 
finding included in the auditor's report for the current year. The 
corrective action plan must be a document separate from the auditor's 
findings described in Sec.  200.516. The corrective action plan must 
also provide the name(s) of the contact person(s) responsible for the 
corrective action, the corrective action to be taken, and the 
anticipated completion date. When the auditee does not agree with the 
audit findings or believes corrective action is not required, the 
corrective action plan must include a detailed explanation of the 
reasons.


Sec.  200.512   Report submission.

    (a) General. (1) The audit must be completed and include the data 
collection form described in paragraph (b) of this section and the 
reporting package described in paragraph (c) of this section. The audit 
must be submitted within 30 calendar days after receiving the auditor's 
report(s) or nine months after the end of the audit period (whichever 
is earlier). If the due date falls on a Saturday, Sunday, or Federal 
holiday, the reporting package is due the next business day.
    (2) The auditee must make copies available for public inspection 
unless restricted by Federal statute or regulation. Auditees and 
auditors must ensure that their respective parts of the reporting 
package do not include protected personally identifiable information.
    (b) Data collection. The FAC is the repository of record for 
subpart F 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 the required data collection form (SF-
SAC) described in Appendix X of this part. This form provides 
information about the auditee, its Federal programs, the results of the 
audit, and whether the audit was completed in accordance with this 
part. The form must include all information required by this part that 
is necessary for Federal agencies to use the audit to ensure the 
integrity of Federal programs. The form includes data elements and a 
format that OMB must approve, is available from the FAC, and include 
collections of information from the reporting package described in 
paragraph (c).
    (2) A senior-level representative of the auditee (for example, a 
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 form stating that the auditee complied with the 
requirements of this part, including that:
    (i) The data collection form was prepared in accordance with this 
part (and the instructions accompanying the form);
    (ii) The reporting package does not include protected personally 
identifiable information;
    (iii) The information included in its entirety is accurate and 
complete; and
    (iv) The FAC is authorized to make the reporting package and the 
form publicly available on a website.
    (3) An auditee that is an Indian Tribe or a tribal organization (as 
defined in the Indian Self-Determination, Education and Assistance Act 
(ISDEAA), 25 U.S.C. 450b(l)) may opt not to authorize the FAC to make 
the reporting package publicly available on a website. To opt-out, an 
Indian Tribe or tribal organization must exclude the authorization 
described in paragraph (b)(2)(iv) of this section. In these instances, 
the Indian Tribe is responsible for submitting the reporting package 
directly to any pass-through entities through which it has received a 
Federal award and to pass-through

[[Page 69490]]

entities for which the summary schedule of prior audit findings 
reported the status of any findings related to those Federal awards 
that the pass-through entity provided. Unless restricted by Federal 
statute or regulation, if the auditee opts not to authorize 
publication, the Indian Tribe must make copies of the reporting package 
available for public inspection.
    (4) The auditor must complete the applicable data elements of the 
data collection form using the information included in the reporting 
package described in paragraph (c) of this section. The auditor must 
sign a statement to be included as part of the data collection form 
stating:
    (i) The source of information included in the data collection form;
    (ii) The auditor's responsibility for the information;
    (iii) The data collection form is not a substitute for the 
reporting package described in paragraph (c); and
    (iv) The content of the form is limited to the collection of 
information prescribed by OMB.
    (c) Reporting package. The reporting package must include the 
following:
    (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).
    (d) Submission to FAC. The auditee must electronically submit the 
data collection form described in paragraph (b) of this section and the 
reporting package described in paragraph (c) of this section to the 
FAC.
    (e) Requests for management letters issued by the auditor. Auditees 
must submit a copy of any management letters issued by the auditor when 
requested by a Federal agency or pass-through entity.
    (f) Report retention requirements. Auditees must keep a copy of the 
data collection form described in paragraph (b) of this section and a 
copy of the reporting package described in paragraph (c) on file for 
three years from the date of submission to the FAC. Copies of audit 
records must be maintained in accordance with Sec.  200.336.
    (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 paragraph (b)(3) of this section, and maintain a database of 
completed audits, provide appropriate information to Federal agencies, 
and follow up with known auditees that the FAC knows have not submitted 
the required data collection forms and reporting packages.
    (h) Electronic filing. Nothing in this part must preclude 
electronic submissions to the FAC in such a manner as may be approved 
by OMB.

Federal Agencies


Sec.  200.513   Responsibilities.

    (a) Cognizant agency for audit responsibilities. (1) A non-Federal 
entity expending more than $50 million a year in Federal awards must 
have a cognizant agency for audit. The cognizant agency for audit must 
be the Federal agency that provides the largest amount of direct 
funding to a non-Federal entity (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 after that.
    (3) Notwithstanding how audit cognizance is determined, a Federal 
agency may reassign cognizance to another Federal agency that provides 
substantial funding to an auditee if it agrees to be the cognizant 
agency for audit. Within 30 calendar days after any reassignment, both 
the old and the new cognizant agency for audit must notify the change 
to the FAC, the auditee, and, if known, the auditor.
    (4) The cognizant agency for audit must:
    (i) Provide technical audit advice and assistance to auditees and 
auditors.
    (ii) Obtain or conduct quality control reviews on selected audits 
made by non-Federal auditors and provide the results to other 
interested organizations.
    (iii) Cooperate and support the Federal agency designated by OMB to 
lead a government-wide analysis to assess the quality of single audits. 
The government-wide analysis may rely on the current and ongoing 
quality control review work performed by Federal agencies, State 
auditors, and professional audit associations. This government-wide 
audit analysis must be performed at an interval determined by OMB, and 
the results must be posted publicly. In providing support to the 
government-wide analysis, a Federal agency must provide the following:
    (A) An assessment of the extent to which single audits conform to 
the requirements, standards, and procedures of this part; and
    (B) Recommendations to address audit quality issues, including 
recommendations for any changes to this part's requirements, standards, 
and procedures.
    (iv) Promptly inform the appropriate Federal law enforcement 
officials and impacted Federal agencies of any direct reporting by the 
auditee or its auditor required by GAGAS, Federal statute, or 
regulation.
    (v) Advise the community of independent auditors of any noteworthy 
or important factual trends related to the quality of audits stemming 
from quality control reviews. Significant problems or quality issues 
consistently identified through quality control reviews of audit 
reports must be referred to appropriate State licensing agencies and 
professional bodies.
    (vi) Advise the auditor, Federal awarding agencies, and, where 
appropriate, the auditee of any deficiencies found in the audits when 
the deficiencies require corrective action by the auditor. When advised 
of deficiencies, the auditee must work with the auditor to take 
corrective action. If corrective action is not taken, the cognizant 
agency for audit must notify the auditor, the auditee, and applicable 
Federal awarding agencies and pass-through entities of the facts and 
make recommendations for follow-up action. Major inadequacies or 
repetitive substandard performance by auditors must be referred to 
appropriate State licensing agencies and professional bodies for 
disciplinary action.
    (vii) Coordinate, to the extent practical, audits or reviews made 
by or for Federal agencies that are in addition to the audits made 
pursuant to this part, so that the additional audits or reviews build 
upon, rather than duplicate, audits performed in accordance with this 
part.
    (viii) Coordinate a management decision for cross-cutting audit 
findings 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. Cross-cutting audit finding means an 
audit finding where the same underlying condition or issue affects all 
Federal awards (including Federal

[[Page 69491]]

awards of more than one Federal agency or pass-through entity).
    (ix) Coordinate the audit work and reporting responsibilities among 
auditors to achieve the most cost-effective audit.
    (x) Provide advice to auditees as to how to handle changes in 
fiscal year.
    (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:
    (1) Must provide technical advice and assistance to auditees and 
auditors.
    (2) May assume all or some of the responsibilities normally 
performed by a cognizant agency for audit.
    (c) Awarding Federal agency responsibilities. In addition to all 
other requirements of this part, the awarding Federal agency must:
    (1) Ensure that audits are completed, and reports are received in a 
timely manner in accordance with the requirements of this part.
    (2) Provide technical advice and assistance to auditees and 
auditors.
    (3) Follow-up on audit findings to ensure that non-Federal entities 
take appropriate and timely corrective action. Follow-up includes:
    (i) Issuing a management decision in accordance with Sec.  200.521;
    (ii) Monitoring the non-Federal entity's progress implementing a 
corrective action;
    (iii) Using a cooperative audit resolution approach to improve 
Federal program outcomes through better audit resolution, follow-up, 
and corrective action, which means the use of audit follow-up 
techniques promoting 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:
    (A) A strong commitment by Federal agency and non-Federal entity 
leadership to Federal program integrity;
    (B) Federal agencies strengthening partnerships and working 
cooperatively with non-Federal entities and their auditors; non-Federal 
entities and their auditors working cooperatively with Federal 
agencies;
    (C) A focus on current conditions and corrective action going 
forward;
    (D) Federal agencies offering appropriate relief for past 
noncompliance when audits show prompt corrective action has occurred; 
and
    (E) Federal agency leadership sending a clear message that 
continued failure to correct conditions identified by audits likely to 
cause improper payments, fraud, waste, or abuse is unacceptable and 
will result in sanctions.
    (iv) Tracking the effectiveness of the Federal agency's follow-up 
processes, the effectiveness of single audits in improving non-Federal 
entity accountability, and the use of single audits in making Federal 
award decisions. The Federal agency should develop a baseline, metrics, 
and targets to track, over time, the effectiveness of the Federal 
agency's process to follow up on audit findings.
    (4) Provide OMB with annual updates to the compliance supplement. 
These updates include working with OMB to ensure that the compliance 
supplement focuses the auditor on testing the compliance requirements 
most likely to cause improper payments, fraud, waste, abuse, or 
generate audit findings for which the Federal agency with take action 
in accordance with Sec.  200.505. Federal agencies are encouraged to 
engage with external audit stakeholders and the Federal agency's Office 
of Inspector General's National Single Audit Coordinator (NSAC) prior 
to submitting compliance supplement drafts to OMB.
    (5) Provide OMB with the name of a single audit accountable 
official from among the senior policy officials of the Federal agency. 
The accountable official must be:
    (i) Responsible for ensuring that the Federal agency fulfills the 
requirements of this section and effectively uses the single audit 
process to reduce improper payments and improve Federal program 
outcomes.
    (ii) Accountable for improving the effectiveness of the Federal 
agency's single audit processes in accordance with paragraph 
(c)(3)(iv).
    (iii) Responsible for designating the Federal agency's key 
management single audit liaison.
    (6) Provide OMB with the name of a key management single audit 
liaison. The liaison must:
    (i) Serve as the Federal agency's point of contact for the single 
audit process within and outside the Federal Government.
    (ii) Promote interagency coordination, consistency, and information 
sharing. This includes coordinating audit follow-up, identifying high-
risk non-Federal entities, providing input on single audit and follow-
up policy, enhancing the utility of the FAC, and identifying ways to 
use single audit results to improve Federal award accountability and 
best practices.
    (iii) Oversee training for the Federal agency's program management 
personnel related to the single audit process.
    (iv) Promote the Federal agency's use of a cooperative audit 
resolution approach as described in paragraph (c)(3)(iii) of this 
section.
    (v) Coordinate the Federal agency's audit follow-up processes and 
ensure non-Federal entities implement corrective actions for audit 
findings.
    (vi) Manage the Federal agency's audit follow-up processes for the 
cognizant agency for an audit if there are cross-cutting audit 
findings. Cross-cutting audit findings means an audit finding where the 
same underlying condition or issue affects all Federal awards 
(including Federal awards of more than one Federal agency or pass-
through entity).
    (vii) Ensure the Federal agency provides OMB with annual updates to 
the compliance supplement consistent with the compliance supplement 
preparation guide.
    (viii) Support the mission of the Federal agency's single audit 
accountable official and coordinate with the Federal agency's Office of 
Inspector General's National Single Audit Coordinator (NSAC).

Auditors


Sec.  200.514  Scope of audit.

    (a) General. The audit must be conducted in accordance with GAGAS. 
The audit must also cover the entire operations of the auditee, or, at 
the option of the auditee, such audit must include a series of audits 
that cover departments, agencies, and other organizational units that 
expended or otherwise administered Federal awards during the audit 
period. In these instances, the audit must include the financial 
statements and schedule of expenditures of Federal awards for each such 
department, agency, and other organizational unit, which must be 
considered to be a non-Federal entity. The financial statements and 
schedule of expenditures of Federal awards must be for the same audit 
period.
    (b) Financial statements. The auditor must determine whether the 
auditee's financial statements are presented fairly

[[Page 69492]]

in all material respects in accordance with generally accepted 
accounting principles. The auditor must also determine whether the 
schedule of expenditures of Federal awards is stated fairly in all 
material respects in relation to the auditee's financial statements as 
a whole.
    (c) Internal control. (1) The compliance supplement provides 
guidance on internal controls over Federal programs based upon the 
guidance in Standards for Internal Control in the Federal Government 
issued by the Comptroller General of the United States and the Internal 
Control-Integrated Framework, issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (COSO).
    (2) In addition to the requirements of GAGAS, the auditor must 
perform procedures to obtain an understanding of internal control over 
Federal programs sufficient to plan the audit to support a low assessed 
level of control risk of noncompliance for major programs.
    (3) Except as provided in paragraph (c)(4) of this section, the 
auditor must:
    (i) Plan the testing of internal control over compliance for major 
programs to support a low assessed level of control risk for assertions 
relevant to the compliance requirements for each major program; and
    (ii) Perform testing of internal control as planned in paragraph 
(c)(3)(i) of this section.
    (4) When internal control over some or all of the compliance 
requirements for a major program are likely to be ineffective in 
preventing or detecting noncompliance, the planning and performing of 
testing described in paragraph (c)(3) of this section are not required 
for those compliance requirements. However, the auditor must report a 
significant deficiency or material weakness in accordance with Sec.  
200.516, assess the related control risk at the maximum, and consider 
whether additional compliance tests are required because of ineffective 
internal control.
    (d) Compliance. (1) In addition to the requirements of GAGAS, the 
auditor must determine whether the auditee has complied with Federal 
statutes, regulations, and the terms and conditions of Federal awards 
that may have a direct and material effect on each of its major 
programs.
    (2) The principal compliance requirements applicable to most 
Federal programs and the compliance requirements of the largest Federal 
programs are included in the compliance supplement.
    (3) For the compliance requirements related to Federal programs 
contained in the compliance supplement, an audit of these compliance 
requirements will meet the requirements of this part. Where there have 
been changes to the compliance requirements, and the changes are not 
reflected in the compliance supplement, the auditor must determine the 
current compliance requirements and modify the audit procedures 
accordingly. For those Federal programs not covered in the compliance 
supplement, the auditor must follow the compliance supplement's 
guidance for programs not included.
    (4) The compliance testing must include tests of transactions and 
other auditing procedures necessary to provide the auditor with 
sufficient audit evidence to support an opinion on compliance.
    (e) Audit follow-up. The auditor must follow up on prior audit 
findings regardless of whether a prior audit finding is related to a 
major program in the current year. Audit follow-up includes performing 
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. When the auditor concludes that the 
summary schedule of prior audit findings materially misrepresents the 
status of any prior audit finding, the auditor must report this 
condition as a current-year audit finding.
    (f) Data collection form. As required in Sec.  200.512(b)(4), the 
auditor must complete and sign specified sections of the data 
collection form.


Sec.  200.515  Audit reporting.

    The auditor's report(s) may be in the form of either combined or 
separate reports. It may be organized differently from the manner 
presented in this section. The auditor's report(s) must state that the 
audit was conducted in accordance with this part and include the 
following:
    (a) An opinion (or disclaimer of opinion) from the auditor 
determining whether the financial statement(s) of the auditee is 
presented fairly in all material respects in accordance with generally 
accepted accounting principles (or a special purpose framework such as 
cash, modified cash, or regulatory 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.
    (b) A report on internal control over financial reporting and 
compliance with provisions of laws, regulations, contracts, and award 
agreements, noncompliance with which could have a material effect on 
the financial statements. This report must describe the scope of 
internal control and compliance testing and the results of the tests. 
Where applicable, the report must refer to the separate schedule of 
findings and questioned costs described in paragraph (d) of this 
section.
    (c) A report on compliance for each major program and a report on 
internal control over compliance. This report must describe the scope 
of testing of internal control over compliance and include an opinion 
(or disclaimer of opinion) as to whether the auditee complied with 
Federal statutes, regulations, and the terms and conditions of Federal 
awards that could have a direct and material effect on each major 
program and refer to the separate schedule of findings and questioned 
costs described in paragraph (d) of this section.
    (d) A schedule of findings and questioned costs which must include 
the following three components:
    (1) A summary of the auditor's results, which must include:
    (i) The type of report the auditor issued (unmodified opinion, 
qualified opinion, adverse opinion, or disclaimer of opinion) on 
whether the audited financial statements were prepared in accordance 
with GAAP;
    (ii) A statement about whether significant deficiencies or material 
weaknesses in internal control were disclosed by the audit of the 
financial statements, if applicable;
    (iii) A statement as to whether the audit disclosed any 
noncompliance that is material to the financial statements of the 
auditee;
    (iv) A statement about whether significant deficiencies or material 
weaknesses in internal control over major programs were disclosed by 
the audit, if applicable;
    (v) The type of report the auditor issued (unmodified opinion, 
qualified opinion, adverse opinion, or disclaimer of opinion) on 
compliance for major programs;
    (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 cluster name as shown on the schedule of 
expenditures of Federal Awards is required for a cluster of programs;
    (viii) The dollar threshold used to distinguish between Type A and 
Type B programs, as described in Sec.  200.518(b)(1) or (3) when a

[[Page 69493]]

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 underSec.  200.520.
    (2) Findings relating to the financial statements required to be 
reported in accordance with GAGAS.
    (3) Findings and questioned costs for Federal awards which must 
include audit findings as defined in Sec.  200.516(a) and be reported 
in the following manner:
    (i) Audit findings (for example, internal control findings, 
compliance findings, questioned costs, or fraud) that relate to the 
same issue must be presented as a single audit finding. Where 
practical, audit findings should be organized by Federal agency or 
pass-through entity.
    (ii) Audit findings that relate to both the financial statements 
(paragraph (d)(2) of this section) and Federal awards (this paragraph 
(d)(3)) must be reported in both sections of the schedule. However, the 
reporting in one section of the schedule may be in summary form and 
reference a detailed reporting in the other section.
    (e) Nothing in this part precludes combining the reporting required 
by this section with the reporting required by Sec.  200.512(b) when 
allowed by GAGAS and Appendix X of this part.


Sec.  200.516  Audit findings.

    (a) Audit findings reported. The auditor must report the following 
as an audit finding in the schedule of findings and questioned costs:
    (1) Significant deficiencies and material weaknesses in internal 
control over 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.
    (2) Material noncompliance with the provisions of Federal statutes, 
regulations, or the terms and conditions of Federal awards related to a 
major program. The auditor's determination of whether noncompliance 
with the provisions of Federal statutes, regulations, or the terms and 
conditions of Federal awards is material for the purpose of reporting 
an audit finding is in relation to a type of compliance requirement for 
a major program identified in the compliance supplement.
    (3) Known questioned costs when either known or likely questioned 
costs are greater than $25,000 for a type of compliance requirement for 
a major program. When reporting questioned costs, the auditor must 
include information to provide proper perspective for evaluating the 
prevalence and consequences of the questioned costs.
    (4) Known questioned costs greater than $25,000 for a Federal 
program that is not audited as a major program. Except for audit 
follow-up, the auditor is not required to perform audit procedures for 
such a Federal program; therefore, the auditor will normally not find 
questioned costs for a program that is not audited as a major program. 
However, if the auditor does become aware of questioned costs for a 
Federal program that is not audited as a major program (for example, as 
part of audit follow-up or other audit procedures) and the known 
questioned costs are greater than $25,000, the auditor must report this 
as an audit finding.
    (5) The circumstances concerning why the auditor's report on 
compliance for each major program is other than an unmodified opinion. 
This must be included unless the circumstances are otherwise reported 
as audit findings in the schedule of findings and questioned costs.
    (6) Known or likely fraud affecting a Federal award, unless the 
fraud is otherwise reported as an audit finding in the schedule of 
findings and questioned costs. This paragraph does not require the 
auditor to publicly report information that could compromise 
investigative or legal proceedings or to make an additional reporting 
when the auditor confirms that the fraud was reported outside the 
auditor's reports under the direct reporting requirements of GAGAS.
    (7) Instances where the results of audit follow-up procedures 
disclosed that the summary schedule of prior audit findings prepared by 
the auditee in accordance with Sec.  200.511(b) materially 
misrepresents the status of any prior audit finding.
    (b) Audit finding detail and clarity. Audit findings must be 
presented with sufficient detail and clarity for both the auditee to 
prepare a corrective action plan and take corrective action and for 
Federal agencies or pass-through-through entities to arrive at a 
management decision. As applicable, the following information must be 
included in audit findings:
    (1) The Federal program and specific Federal award identification, 
including the Assistance Listings title and number, Federal award 
identification number and year, the name of the 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 unavailable, the auditor must provide the 
best information available to describe the Federal award.
    (2) The criteria or specific requirement for the audit finding (for 
example, the specific Federal statute, regulation, or term and 
condition of the Federal award). The criteria or specific requirement 
provides a context for evaluating evidence and understanding findings. 
As a result, the criteria should generally identify the required or 
desired state or expectation with respect to the program or operation.
    (3) The condition found, including facts that support the 
deficiency identified in the audit finding.
    (4) A statement of cause that identifies the reason or explanation 
for the condition or the factors responsible for the difference between 
the situation that exists (condition) and the required or desired state 
(criteria), which may also serve as a basis for recommendations for 
corrective action.
    (5) The possible asserted effect to provide sufficient information 
to the auditee and Federal agency or pass-through entity to permit them 
to determine the cause and effect to facilitate prompt and proper 
corrective action. A statement of the effect or potential effect should 
provide a clear, logical link to establish the impact or potential 
impact of the difference between the condition and the criteria.
    (6) The identification of known questioned costs, by applicable 
Assistance Listing number(s) and Federal award identification 
number(s), and how these questioned costs were computed.
    (7) When there are known questioned costs but the dollar amount is 
undetermined or not reported, a description of why the dollar amount 
was undetermined or otherwise could not be reported.
    (8) Information to provide proper perspective for evaluating the 
prevalence and consequences of the audit finding. For example, whether 
the audit finding represents an isolated instance or a systemic 
problem. Where appropriate, instances identified must be related to the 
universe and the number of cases examined and be quantified in terms of 
dollar value. In addition, the audit should indicate whether the 
sampling was a statistically valid sample.
    (9) The identification of whether the audit finding is a repeat of 
a finding in the immediately prior audit. The audit must identify the 
applicable prior year

[[Page 69494]]

audit finding numbers in these instances.
    (10) Recommendations to prevent future occurrences of the 
deficiency identified in the audit finding.
    (11) Views of the responsible officials of the auditee.
    (c) Reference numbers. Each audit finding in the schedule of 
findings and questioned costs must include a reference number in the 
format meeting the requirements of the data collection form submission 
(see Sec.  200.512(b)).


Sec.  200.517   Audit documentation.

    (a) Retention of audit documentation. The auditor must retain audit 
documentation and reports for a minimum of three years after the date 
of issuance of the auditor's report(s) to the auditee. The cognizant 
agency for audit, oversight agency for audit, cognizant agency for 
indirect costs, or pass-through entity may extend the retention period 
by providing written notification to the auditor. When the auditor is 
aware that the Federal agency, pass-through entity, or auditee is 
contesting an audit finding, the auditor must contact the parties 
contesting the audit finding for guidance prior to the destruction of 
the audit documentation and reports.
    (b) Access to audit documentation. Audit documentation must be made 
available upon request to the cognizant or oversight agency for audit 
or its designee, cognizant agency for indirect cost, a Federal agency, 
or GAO at the completion of the audit, as part of a quality review, to 
resolve audit findings, or to carry out oversight responsibilities 
consistent with the purposes of this part. Access to audit 
documentation includes the right of Federal agencies to obtain copies 
of audit documentation as is reasonable and necessary.


Sec.  200.518  Major program determination.

    (a) General. The auditor must use a risk-based approach to 
determine which Federal programs are major programs. This risk-based 
approach must consider current and prior audit experience, oversight by 
Federal agencies and pass-through entities, and the inherent risk of 
the Federal program. The process described in paragraphs (b) through 
(h) of this section must be followed.
    (b) Step one. (1) The auditor must identify and label the larger 
Federal programs as Type A programs. Type A programs are defined as 
Federal programs with Federal awards expended during the audit period 
exceeding the levels outlined in the table 1:

                        Table to Paragraph (b)(1)
------------------------------------------------------------------------
       Total Federal awards expended              Type A threshold
------------------------------------------------------------------------
Equal to or exceed $1,000,000 but less      $750,000.
 than or equal to $25 million.
Exceed $25 million but less than or equal   Total Federal awards
 to $100 million.                            expended times .03.
Exceed $100 million but less than or equal  $3 million.
 to $1 billion.
Exceed $1 billion but less than or equal    Total Federal awards
 to $10 billion.                             expended times .003.
Exceed $10 billion but less than or equal   $30 million.
 to $20 billion.
Exceed $20 billion........................  Total Federal awards
                                             expended times .0015.
------------------------------------------------------------------------

    (2) Federal programs not labeled Type A under paragraph (b)(1) of 
this section must be labeled Type B programs.
    (3) Including large loans and loan guarantees (loans) must not 
result in the exclusion of other programs as Type A programs. A Federal 
program providing loans is considered a large loan program when it 
exceeds four times the largest non-loan program. For these large loan 
programs, the auditor must consider the 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 this paragraph, a program is 
only considered a Federal program providing loans if the value of 
Federal awards expended for loans within the program comprises 50 
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 
Sec.  200.502.
    (4) For biennial audits (see Sec.  200.504), the determination of 
Type A and Type B programs must be based on the Federal awards expended 
during the two-year audit period.
    (c) Step two. (1) The auditor must identify Type A programs that 
are low-risk. In making this determination, the auditor must consider 
whether the requirements in Sec.  200.519(c), the results of audit 
follow-up, or any changes in personnel or systems affecting the program 
indicate significantly increased risk and therefore 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 not have had:
    (i) Internal control deficiencies that were identified as material 
weaknesses in the auditor's report on internal control for major 
programs as required under Sec.  200.515(c);
    (ii) A modified opinion on the program in the auditor's report on 
major programs as required under Sec.  200.515(c); or
    (iii) Known or likely questioned costs that exceed five percent of 
the total Federal awards expended for the program.
    (2) Notwithstanding paragraph (c)(1) of this section, OMB may 
approve a Federal agency request that a Type A program not be 
considered low-risk for a specific recipient. For example, it may be 
necessary for a large Type A program to be audited as a major program 
each year for a particular recipient for the Federal agency to comply 
with 31 U.S.C. 3515. The Federal agency must notify the auditee and, if 
known, the auditor of OMB's approval at least 180 calendar days prior 
to the end of the fiscal year to be audited.
    (d) Step three. (1) The auditor must identify high-risk Type B 
programs using professional judgment and the criteria in Sec.  200.519. 
However, the auditor is not required to identify more high-risk Type B 
programs than at least one-fourth of the number of low-risk Type A 
programs identified as low-risk under step two. Except for known 
material weakness in internal control or compliance problems as 
discussed in Sec.  200.519(b)(1), (2), and (c)(1), a single criterion 
in risk would rarely cause a Type B program to be considered high-risk. 
When identifying which Type B programs to assess for risk, the auditor 
is encouraged to use an approach that provides an opportunity for 
different high-risk Type B programs to be audited as major programs 
over a period of time.
    (2) The auditor is not expected to perform risk assessments on 
relatively small Federal programs. Therefore, the auditor is only 
required to perform risk assessments on Type B programs that

[[Page 69495]]

exceed 25 percent (0.25) of the Type A threshold determined in step 
one.
    (e) Step four. At a minimum, the auditor must audit all of the 
following as major programs:
    (1) All Type A programs not identified as low-risk under step two.
    (2) All Type B programs identified as high-risk under step three.
    (3) Additional programs as necessary to comply with the percentage 
of coverage rule described in paragraph (f). This rule may require the 
auditor to audit more programs as major programs than the number of 
Type A programs.
    (f) Percentage of coverage rule. When the auditee meets the 
criteria in Sec.  200.520, the auditor only needs to audit the major 
programs identified in paragraphs (e)(1) and (2) of this section and 
such additional Federal programs with Federal awards expended that, in 
the 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 paragraphs (e)(1) and (2) of this section 
and such additional Federal programs with Federal awards expended that, 
in the aggregate, all major programs encompass at least 40 percent 
(0.40) of total Federal awards expended.
    (g) Documentation of risk. The auditor must include in the audit 
documentation the risk analysis used for determining major programs.
    (h) Auditor's judgment. The auditor's judgment in applying the 
risk-based approach to determine major programs must be presumed 
correct when the determination was performed and documented in 
accordance with this part. Challenges by a Federal agency or pass-
through entity must only be for clearly improper use of the 
requirements in this part. However, a Federal agency or pass-through 
entity may provide auditors guidance about the risk of a particular 
Federal program. The auditor must consider this guidance in determining 
major programs in audits not yet completed.


Sec.  200.519  Criteria for Federal program risk.

    (a) General. The auditor's determination should be based on an 
overall evaluation of the risk of noncompliance occurring that could be 
material to the Federal program. The auditor must consider criteria, 
such as those described in paragraphs (b), (c), and (d) of this 
section, to identify risk in Federal programs. Also, as part of the 
risk analysis, the auditor may wish to discuss a particular Federal 
program with auditee management and the Federal agency or pass-through 
entity.
    (b) Current and prior audit experience. (1) Weaknesses in internal 
control over Federal programs would indicate higher risk. Therefore, 
consideration should be given to the control environment over Federal 
programs. This includes considering factors such as the expectation of 
management's adherence to Federal statutes, regulations, and the terms 
and conditions of Federal awards, and the competence and experience of 
personnel who administer the Federal programs.
    (i) A Federal program administered under multiple internal control 
structures may have higher risk. When assessing risk in a large single 
audit, the auditor must consider whether weaknesses are isolated in a 
single operating unit (for example, one college campus) or pervasive 
throughout the entity.
    (ii) A weak system for monitoring subrecipients would indicate 
higher risk when significant parts of a Federal program are passed to 
subrecipients through subawards.
    (2) Prior audit findings would indicate higher risk, especially 
when the situations identified in the audit findings could 
significantly impact a Federal program or have not been corrected.
    (3) Federal programs not recently audited as major programs may be 
of higher risk than those recently audited as major programs without 
audit findings.
    (c) Oversight exercised by Federal agencies and pass-through 
entities. (1) The oversight exercised by Federal agencies or pass-
through-through entities may be used to assess risk. For example, 
recent monitoring or other reviews performed by an oversight entity 
that disclosed no significant problems would indicate lower risk, 
whereas monitoring that disclosed significant problems would indicate 
higher risk.
    (2) With the concurrence of OMB, a Federal agency may identify 
Federal programs that are higher risk. OMB will identify these Federal 
programs in the compliance supplement.
    (d) Inherent risk of the Federal program. (1) The nature of a 
Federal program may indicate risk. Consideration should be given to the 
complexity of the program and the extent to which the Federal program 
contracts for goods and services. For example, Federal programs that 
disburse funds through third-party contracts or have eligibility 
criteria may be higher risk. Federal programs primarily involving staff 
payroll costs may be at high risk for noncompliance with the 
requirements of Sec.  200.430 but otherwise be at low risk.
    (2) The phase of a Federal program in its lifecycle at the Federal 
agency may indicate risk. For example, a new Federal program with new 
or interim regulations may have higher risk than an established program 
with time-tested regulations. Also, significant changes in Federal 
programs, statutes, regulations, or the terms and conditions of Federal 
awards may increase risk.
    (3) The phase of a Federal program in its lifecycle at the auditee 
may indicate risk. For example, during the first and last years that an 
auditee participates in a Federal program, the risk may be higher due 
to the start-up or closeout of program activities and staff.
    (4) Type B programs with larger Federal awards expended would be of 
higher risk than programs with substantially smaller Federal awards 
expended.


Sec.  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 Sec.  
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 Sec.  200.512. A non-Federal entity that has 
biennial audits does not qualify as a low-risk auditee.
    (b) The auditor issued unmodified opinions on both the schedule of 
expenditures of Federal awards and whether the financial statements 
were prepared in accordance with GAAP (or a basis of accounting 
required by State law).
    (c) No internal control deficiencies were identified as material 
weaknesses under the requirements of GAGAS.
    (d) The auditor did not report a substantial doubt about the 
auditee's ability to continue as a going concern.
    (e) None of the Federal programs had audit findings from any of the 
following in either of the preceding two audit periods in which they 
were classified as Type A programs:
    (1) Internal control deficiencies that were identified as material 
weaknesses in the auditor's report on internal control for major 
programs as required under Sec.  200.515(c);
    (2) A modified opinion on a major program in the auditor's report 
on major programs as required under Sec.  200.515(c); or

[[Page 69496]]

    (3) Known or likely questioned costs that exceeded five percent 
(.05) of the total Federal awards expended for a Type A program during 
the audit period.

Management Decisions


Sec.  200.521  Management decisions.

    (a) General. The management decision must clearly state whether or 
not the audit finding is sustained, the reasons for the decision, and 
the expected auditee action to repay disallowed costs, make financial 
adjustments or take other action. If the auditee has not completed 
corrective action, a timetable for follow-up should be given. Prior to 
issuing the management decision, the Federal agency or pass-through 
entity may request additional information or documentation from the 
auditee, including a request for auditor assurance related to the 
documentation, as a way of mitigating disallowed costs. The management 
decision should describe any appeal process available to the auditee. 
While not required, the Federal agency or pass-through entity may also 
issue a management decision on findings relating to the financial 
statements, which are required to be reported in accordance with GAGAS.
    (b) Federal agency. The cognizant agency for audit is responsible 
for coordinating a management decision for audit findings that affect 
the programs of more than one Federal agency (see Sec.  
200.513(a)(4)(vii)). The awarding Federal agency is responsible for 
issuing a management decision for audit findings that affect the 
Federal awards it makes to a non-Federal entity (see Sec.  
200.513(c)(3)(i)).
    (c) Pass-through entity. The pass-through entity is responsible for 
issuing a management decision for audit findings that affect subawards 
it issues to subrecipients under a Federal award (see Sec.  
200.332(d)).
    (d) Time requirements. The Federal agency or pass-through entity 
responsible for issuing a management decision must do so within six 
months of the FAC's acceptance of the audit report. The auditee must 
initiate and proceed with corrective action as rapidly as possible and 
corrective action should begin no later than upon receipt of the audit 
report.
    (e) Reference numbers. Management decisions must include the 
reference numbers the auditor assigned to each audit finding in 
accordance with Sec.  200.516(c).
0
12. Revise appendix I to part 200 to read as follows:

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

    (a) General Requirements.
    (1) In developing a notice of funding opportunity (NOFO), 
Federal agencies must:
    (i) Be concise and use plain language per the guidance at 
PlainLanguage.gov wherever possible.
    (ii) For electronic NOFOs and other information about them, 
comply with Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 
794d).
    (2) Federal agencies may:
    (i) Link to standard content to include required information 
rather than including the full language in the NOFO. The NOFO should 
make clear if linked information is critical--for example, standard 
terms and conditions, administrative and national policy 
requirements, and standard templates.
    (ii) Include links to relevant regulations and other sources.
    (iii) Use cross-references between the sections, including 
hyperlinks in electronic versions.
    (3) Required Consistency. Potential applicants must be able to 
find similar information across all Federal NOFOs. To that end, 
Federal agencies must include the same or similar section headings 
and a table of contents with at least these sections:

(i) Basic Information
(ii) Eligibility
(iii) Program Description
(iv) Application Contents and Format
(v) Submission Requirements and Deadlines
(vi) Application Review Information
(vii) Award Notices
(viii) Post-Award Requirements and Administration

    (b) Required Sections and Information.
    As required below, the Federal agency must include the following 
sections and information in the text of a NOFO and a table of 
contents.
    (1) Basic Information.
    This section provides sufficient information to help an 
applicant make an informed decision about whether to submit a 
proposal.
    (i) This section must include the following:
    (A) Federal Agency Name.
    (B) Funding Opportunity Title.
    (C) Announcement Type (whether the funding opportunity is the 
initial announcement or a modification of a previously announced 
opportunity).
    (D) Funding Opportunity Number (required, if the Federal agency 
has assigned a number to the funding opportunity announcement).
    (E) Assistance Listing Number(s).
    (F) Funding Details. The total amount of funding that the 
Federal agency expects to award, the anticipated number of awards, 
and the expected dollar values of individual awards, which may be a 
range.
    (G) Key Dates. Key dates include due dates for submitting 
applications or Executive Order 12372 submissions, as well as for 
any letters of intent or preapplications. 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 Federal agency. If possible, the Federal agency should 
provide an anticipated award date. If the NOFO is evaluated on a 
``rolling'' basis, the Federal agency should provide an estimate of 
the time needed to process an application and notify the applicant 
of the Federal agency's decision.
    (H) Executive Summary. A brief description that is written in 
plain language and summarizes the goals and objectives of the 
program, the target audience, and eligible recipients. The text of 
the executive summary should not exceed 500 words.
    (I) Agency contact information.
    (ii) This section could include the following:
    (A) The amount of funding per Federal award, on average, 
experienced in previous years.
    (B) Whether this is a new program or a one-time initiative.
    (2) Eligibility.
    This section addresses the factors that determine applicant or 
application eligibility.
    (i) Eligible Applicants. This subsection must identify the 
following:
    (A) A complete and specific list of entity types eligible to 
apply.
    (B) Any additional restrictions on eligibility beyond the type 
of entity.
    (C) Eligibility factors for the principal investigator or 
project director, if any.
    (D) Criteria that would make any particular projects ineligible.
    (E) A reference to any funding restriction elsewhere in the NOFO 
that could affect an applicant's or project's eligibility.
    (F) A reference or link to any other factors that would 
disqualify an applicant or application, such as the responsiveness 
criteria in 6a.
    (G) Any limit on the number of applications an applicant may 
submit under the announcement. Make clear whether the limitation is 
on the submitting organization, individual investigator or program 
director, or both.
    (ii) Cost Sharing. This subsection must state:
    (A) Whether there is required cost sharing. This statement must 
be clear that not committing to the required cost sharing will make 
the application ineligible. If cost sharing is not required, the 
announcement must say so.
    (B) An explanation of the calculation for the required cost 
sharing. Required cost sharing may be a certain percentage or amount 
or in the form of contributions of specified items or activities 
(for example, provision of equipment).
    (C) Any restrictions on the types of cost, such as in-kind 
contributions, acceptable as cost sharing.
    (D) Any requirement to commit to cost sharing. This section 
should refer to the appropriate portions of section D stating any 
pre-award requirements for the submission of letters or other 
documentation to verify commitments to meet cost-sharing 
requirements if a Federal award is made.
    (3) Program Description.
    This section contains the full program description of the 
funding opportunity.
    (i) This section must include the following:

[[Page 69497]]

    (A) The general purpose of the funding and what it is expected 
to achieve for the public good.
    (B) The Federal agency's funding priorities or focus areas, if 
any.
    (C) Program goals and objectives.
    (D) A description of how the award will contribute to achieving 
the program's goals and objectives.
    (E) The expected performance goals, indicators, targets, 
baseline data, data collection, and other outcomes the Federal 
agency expects recipients to achieve.
    (F) For cooperative agreements, the ``substantial involvement'' 
that the Federal agency expects to have or should reference where 
the potential applicant can find that information.
    (G) Information on program specific unallowable costs so that 
the applicant can develop an application and budget consistent with 
program requirements and any limits on indirect costs.
    (H) Any eligibility criteria for beneficiaries or program 
participants other than Federal award recipients.
    (I) Citations for authorizing statutes and regulations for the 
funding opportunity.
    (ii) This section could also include the following:
    (A) Any program history, such as whether it is a new program or 
a new or changed area of program emphasis.
    (B) Examples of successful projects funded in the past.
    (C) Other information the Federal agency finds necessary.
    (4) Application Contents and Format.
    This subsection must identify the required content of an 
application and the forms or formats an applicant must use. If any 
requirements are stated elsewhere, this section should refer to 
where those requirements may be found. This section also should 
include required forms or formats as part of the announcement or 
state where the applicant may obtain them.
    (i) This subsection must specifically address content and form 
or format requirements for:
    (A) Pre-applications, letters of intent, or white papers are 
required or encouraged if they apply.
    (B) The application as a whole.
    (C) Component pieces of the application.
    (D) Information that successful applicants must submit after 
notification of intent to make a Federal award but prior to a 
Federal award. For example, this could include evidence of 
compliance with requirements relating to human subjects or 
information needed to comply with the National Environmental Policy 
Act (NEPA) (42 U.S.C. 4321 et seq.).
    (ii) Within each of the categories above, this subsection must 
include, where relevant:
    (A) Limitations on page numbers.
    (B) Formatting requirements, including font and font size, 
margins, paper size, and color limitations.
    (C) Any requirements for file naming, file size limitations, or 
file format such as PDF.
    (D) The number of copies required if paper submissions are 
allowed.
    (E) The sequence required for application sections or 
components.
    (F) Signature requirements, including those for electronic 
submissions.
    (G) Any requirements for third-party information such as 
references, letters of support, or letters of commitment to the 
project or to contribute to cost sharing.
    (H) A reference to any requirements in Section 6 to provide 
documentation to support an eligibility determination, such as proof 
of 501(c)(3) status or an authorizing tribal resolution.
    (I) Instructions needed to develop the narrative portions of the 
application. Include any requirements for its order, format, or 
required headings.
    (J) If applicable, the need to identify proprietary information. 
Include how to do so and how the Federal agency will handle it.
    (5) Submission Requirements and Deadlines.
    (i) Address to Request Application Package. This subsection must 
include the following:
    (A) How to get application forms, kits, or other materials 
needed to apply. If the announcement contains everything needed, 
this section needs only say so. If not, the guidance must include:
    (1) An internet address where the materials can be accessed.
    (2) An email address.
    (3) A U.S. Postal Service mailing address.
    (4) Telephone number.
    (5) Telephone Device for the Deaf (TDD), Text Telephone (TTY) 
number, or other appropriate telecommunication relay service.
    (ii) Unique entity identifier and System for Award Management 
(SAM.gov). This subsection must state the requirements for unique 
entity identifiers and registration in SAM.gov. It must include the 
following:
    (A) Each applicant must:
    (1) Be registered in SAM.gov before submitting its application;
    (2) Provide a valid unique entity identifier in its application; 
and
    (3) Continue to maintain an active registration in SAM.gov with 
current information at all times during which it has an active 
Federal award or an application or plan under consideration by a 
Federal agency.
    (B) If individuals are eligible to apply, they are exempt from 
this requirement under 2 CFR 25.110(b).
    (C) If the Federal agency exempts any applicants from this 
requirement under 2 CFR 25.110(c) or (d), a statement to that 
effect.
    (iii) Submission Instructions. This subsection addresses how the 
applicant will submit the application. It must include the 
following:
    (A) Actions needed prior to applying:
    (1) Instructions on any registrations required to access 
electronic submission systems or links to them. Where possible, 
provide the expected time frames needed to complete the registration 
process.
    (B) The methods for submitting the application:
    (1) Whether the applicant must submit in electronic or paper 
form or whether the applicant has an option. Applicants should not 
be required to submit in more than one format.
    (2) Instructions on how to submit electronically or links to 
them. Must include the URL to the electronic submission system and 
information on or links to information about the system or software 
requirements needed by the system.
    (3) If the Federal agency allows paper submissions, the process 
used to approve this option if it is not automatically allowed.
    (4) If the Federal agency allows paper submissions, the method 
for submitting the application. This information must include a 
postal address and ``care of'' information needed to route the 
application to the appropriate person, office, or email address, if 
the Federal agency allows such submissions.
    (C) If applicable, this subsection also must say how applicants 
must submit pre-applications, letters of intent, third-party 
information, or other information required before the award. It must 
include the following:
    (1) Instructions on how to submit electronically or links to 
them.
    (2) Whether the applicant must submit in electronic or paper 
form or whether the applicant has an option.
    (3) If the Federal agency allows paper submissions, the method 
for submitting the required information. This information must 
include a postal address and ``care of'' information needed to route 
the application to the appropriate person, office, or email address.
    (D) This subsection must also include what to do in the event of 
system problems and a point of contact who will be available if the 
applicant experiences technical difficulties.
    (iv) Submission Dates and Times. This subsection must include 
due dates and times for all submissions. If they are different for 
electronic and paper submissions, be clear about the differences. 
This includes the following:
    (A) Full applications.
    (B) Any preliminary submissions, such as letters of intent, 
white papers, or pre-applications.
    (C) Any other submissions required before Federal award separate 
from the full application.
    (D) 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.
    (v) Intergovernmental Review. This section must include the 
following:
    (A) Whether or not the funding opportunity is subject to 
Executive Order 12372, ``Intergovernmental Review of Federal 
Programs''.
    (B) If it is applicable, include the following:
    (1) A short description of this requirement.
    (2) Where applicants can find their State's Single Point of 
Contact, learn whether their State has an intergovernmental review 
process, and if so, get information on their State's process. The 
list of SPOCs is on the Office of Management and Budget's website.
    (6) Application Review Information.
    (i) Responsiveness Review. This section includes information on 
the criteria that make an application or project ineligible. These 
are sometimes referred to as

[[Page 69498]]

``responsiveness'' criteria, ``go-no-go'' criteria, or ``threshold'' 
criteria. Federal agencies may change the title of this section as 
appropriate. This section must include the following:
    (A) A brief understanding of the Federal agency responsiveness 
review process.
    (B) A list and enough detail to understand the criteria or 
disqualifying factors to be reviewed.
    (C) A reference to the regulation or requirement that describes 
the restriction, if applicable. For example, if entities that have 
been found to be in violation of a particular Federal statute are 
ineligible, say so.
    (ii) Review Criteria. This section must address the review 
criteria that the Federal agency will use to evaluate applications 
for merit. This information includes the merit and other review 
criteria evaluators will use to judge applications, including any 
statutory, regulatory, or other preferences that will be applied in 
the review process. These criteria are distinct from eligibility 
criteria that are addressed before an application is accepted for 
review and any program policy or other factors that are applied 
during the selection process, after the review process is completed.
    The intent is to make the application process transparent so 
applicants can make informed decisions when preparing their 
applications to maximize the fairness of the process.
    (A) This section must include the following:
    (1) A clear description of each criterion and sub-criterion 
used.
    (2) If criteria vary in importance, the relative percentages, 
weights, or other means used to distinguish between them.
    (3) For statutory, regulatory, or other preferences, an 
explanation of those preferences with an explicit indication of 
their effect, for example, if they result in additional points being 
assigned.
    (4) How an applicant's proposed cost sharing will be considered 
in the review process if it is not an eligibility criterion in 
Section 2b. For example, to assign a certain number of additional 
points to applicants who offer cost sharing or to break ties among 
applications with equivalent scores after evaluation against all 
other factors. If cost sharing will not be considered in the 
evaluation, the announcement should say so. Do not include 
statements that cost sharing is encouraged without providing clarity 
about what that means.
    (5) The relevant information if the Federal agency permits 
applicants to nominate reviewers of their applications or suggest 
those, they feel may be inappropriate due to a conflict of interest.
    (B) This section could include the following:
    (1) The types of people responsible for evaluation against the 
merit criteria. For example, peers external to the Federal agency or 
Federal agency personnel.
    (2) The number of people on an evaluation panel and how it 
operates, how reviewers are selected, reviewer qualifications, and 
how conflicts of interest are avoided.
    (iii) Review and Selection Process.
    This section may vary in the level of detail provided.
    (A) It must include the following:
    (1) Any program policy, factors, or elements that the selecting 
official may use in selecting applications for the award. For 
example, geographical dispersion, program balance, or diversity.
    (2) A brief description of the merit review process, including 
how the Federal agency uses merit review outcomes in final decision-
making. For example, whether they are advisory only.
    (B) It could also include the following:
    (1) Who makes the final selections for awards.
    (2) Any multi-phase review methods. For example, an external 
panel that advises on, makes, or approves final recommendations to 
the deciding official.
    (iv) Risk Review.
    (A) This section must include the following:
    (1) A brief description of the factors used for the Federal 
agency's risk review as required by Sec.  200.206.
    (2) If the Federal agency expects that any award under the NOFO 
will be more than the simplified acquisition threshold during its 
period of performance, include the following information:
    (i) That before making a Federal award with a total amount of 
Federal share greater than the simplified acquisition threshold, the 
Federal agency must review and consider any information about the 
applicant that is in the responsibility/qualification records 
available in SAM.gov (see 41 U.S.C. 2313).
    (ii) That an applicant can review and comment on any information 
in the responsibility/qualification records available in SAM.gov.
    (iii) That before making decisions in the risk review required 
by Sec.  200.206 the Federal agency will consider any comments by 
the applicant, along with information available in the 
responsibility/qualification records in SAM.gov.
    (7) Award Notices.
    This section must address what a successful applicant can expect 
to receive following selection.
    (i) It must include the following:
    (A) If the Federal agency's practice is to provide a separate 
notice stating that an application has been selected before it makes 
the Federal award, indicate that the letter is not an authorization 
to begin performance and that the Federal award is the authorizing 
document.
    (B) If pre-award costs are allowed, beginning performance is at 
the applicant's own risk.
    (C) This section should indicate that the notice of Federal 
award signed by the grants officer, or equivalent, is the official 
document that obligates funds, and whether it is provided through 
postal mail or by electronic means and to whom.
    (D) The timing, form, and content of notifications to 
unsuccessful applicants. See also Sec.  200.211.
    (8) Post-Award Requirements and Administration.
    (i) Administrative and National Policy Requirements. Providing 
information on administrative and policy requirements lets a 
potential applicant identify any requirements with which it would 
have difficulty complying. This section must include the following:
    (A) A statement related to the ``general'' terms and conditions 
of the award, including requirements that the Federal agency 
normally includes.
    (B) Any relevant special terms and conditions.
    (C) Any special requirements that could apply to specific awards 
after the review of applications and other information based on the 
particular circumstances of the effort to be supported. For example, 
if human subjects were to be involved or if some situations may 
justify special terms on intellectual property, data sharing, or 
security requirements.
    (D) As in other sections, the announcement need not include all 
terms and conditions of the award but may refer to documents with 
details on terms and conditions.
    (ii) Reporting.
    This section includes information needed to understand the post-
award reporting requirements. Highlight any special reporting 
requirements for Federal awards under this funding opportunity that 
differ from what the Federal agency's Federal awards usually 
require. For example, differences in report type, frequency, form, 
format, or circumstances for use. This section must include the 
following:
    (A) The type of reporting required, such as financial or 
performance.
    (B) The reporting frequency.
    (C) The means of submission, such as paper or electronic.
    (D) References to all relevant requirements, such as those at 2 
CFR 180.335 and 180.350.
    (E) 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 
requirements reflected in appendix XII to this part.
    (9) Other Information--Optional.
    This section may include any additional information to help 
potential applicants. For example, the section could include the 
following:
    (i) Related programs or other upcoming or ongoing Federal agency 
funding opportunities for similar activities.
    (ii) Current internet addresses for Federal agency websites that 
may be useful to an applicant in understanding the program.
    (iii) Routine notices to applicants. For example, the Federal 
Government is not obligated to make any Federal award as a result of 
the announcement, or only grants officers can bind the Federal 
Government to the expenditure of funds.

0
13. Amend appendix III to part 200 by revising the heading of section 
A.1. and paragraph C.2 to 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

* * * * *

[[Page 69499]]

1. Major Functions/Activities of an IHE

* * * * *

C. Determination and Application of Indirect (F&A) Cost Rate or 
Rates

* * * * *

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 
$50,000 of each subaward (regardless of the period covered by the 
subaward). MTDC is defined in Sec.  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.

0
14. Amend appendix IV to part 200 by revising paragraphs B.2.c. and 
B.4.a.iii to read as follows:

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

* * * * *

B. Allocation of Indirect Costs and Determination of Indirect Cost 
Rates

* * * * *
    2. * * *
    c. The distribution base may be total direct costs (excluding 
capital expenditures and other distorting items, such as subawards 
for $50,000 or more), direct salaries and wages, or other base which 
results in an equitable distribution. The distribution base must 
exclude participant support costs as defined in Sec.  200.1.
* * * * *
    4. * * *
    a. * * *
    (iii) other direct functions (including projects performed under 
Federal awards). Joint costs, such as depreciation, rental costs, 
operation and maintenance of facilities, telephone expenses, 
information technology and the like are prorated individually as 
direct costs to each category and to each Federal award or other 
activity using a base most appropriate to the particular cost being 
prorated.
0
15. Amend appendix VII to part 200 by
0
a. Revising paragraphs C.2.c.(1), C.3.e.(1), and D.1.b.;
0
b. Redesignating paragraphs D.1.c. and D.1.d. as D.1.d. and D.1.e; and
0
c. Adding a new paragraph D.1.c.
    The revisions and addition read as follows:

C. Allocation of Indirect Costs and Determination of Indirect Cost 
Rates

* * * * *
    2. * * *
    c. * * *
    (1) total direct costs (excluding capital expenditures and other 
distorting items, such as pass-through funds, subcontracts in excess 
of $50,000, and participant support costs),
* * * * *
    3. * * *
    e. * * *
    (1) total direct costs (excluding capital expenditures and other 
distorting items such as pass-through funds, subawards in excess of 
$50,000, and participant support costs),
* * * * *

D. Submission and Documentation of Proposals

* * * * *
    1. * * *
    b. A governmental department or agency (such as a state or local 
Department of Health, Department of Transportation, or Department of 
Housing) that receives more than $35 million in direct Federal 
funding during its fiscal year must submit its indirect cost rate 
proposal to its cognizant agency for indirect costs.
    c. If a governmental department or agency (such as a state or 
local Department of Health, Department of Transportation, or 
Department of Housing) receives $35 million or less in direct 
Federal funding during its fiscal year, it must develop an indirect 
cost proposal in accordance with the requirements of this part and 
maintain the proposal and related supporting documentation for 
audit. This established rate must be accepted by any Federal agency 
to which the governmental department or agency applies for funding. 
Federal agencies must not compel the governmental department or 
agency to accept the de minimis rate or some other rate established 
by the Federal agency. These governmental departments or agencies 
are not required to submit their proposals unless they are 
specifically requested to do so by the cognizant agency for indirect 
costs. Where a non-Federal entity only receives funds as a 
subrecipient, the pass-through entity will be responsible for 
negotiating and/or monitoring the subrecipient's indirect costs.
* * * * *
0
16. Revise appendix X to part 200 to read as follows:

Appendix X to Part 200--Data Collection Form (Form SF-SAC)

    The Data Collection Form SF-SAC is available as a webform on the 
Federal Audit Clearinghouse (FAC). Form and submission instructions 
can be found at https://www.fac.gov/.

0
25. Revise appendix XII to part 200 to read as follows:

Appendix XII to Part 200--Award Term and Condition for Recipient 
Integrity and Performance Matters

I. Reporting of Matters Related to Recipient Integrity and Performance

    (a) General Reporting Requirement.
    (1) If the total value of your active grants, cooperative 
agreements, and procurement contracts from all Federal agencies 
exceeds $10,000,000 for any period of time during the period of 
performance of this Federal award, then you as the recipient must 
ensure the information available in the responsibility/qualification 
records through the System for Award Management (SAM.gov), about 
civil, criminal, or administrative proceedings described in 
paragraph (b) of this award term is current and complete. This is a 
statutory requirement under section 872 of Public Law 110-417, as 
amended (41 U.S.C. 2313). As required by section 3010 of Public Law 
111-212, all information posted in responsibility/qualification 
records in SAM.gov on or after April 15, 2011 (except past 
performance reviews required for Federal procurement contracts) will 
be publicly available.
    (b) Proceedings About Which You Must Report.
    (1) You must submit the required information about each 
proceeding that--
    (i) Is in connection with the award or performance of a grant, 
cooperative agreement, or procurement contract from the Federal 
Government;
    (ii) Reached its final disposition during the most recent five-
year period; and
    (iii) Is one of the following--
    (A) A criminal proceeding that resulted in a conviction;
    (B) A civil proceeding that resulted in a finding of fault and 
liability and payment of a monetary fine, penalty, reimbursement, 
restitution, or damages of $5,000 or more;
    (C) An administrative proceeding that resulted in a finding of 
fault and liability and your payment of either a monetary fine or 
penalty of $5,000 or more or reimbursement, restitution, or damages 
in excess of $100,000; or
    (D) Any other criminal, civil, or administrative proceeding if--
    (1) It could have led to an outcome described in paragraph 
(b)(1)(iii)(A) through (C);
    (2) It had a different disposition arrived at by consent or 
compromise with an acknowledgment of fault on your part; and
    (3) The requirement in this award term to disclose information 
about the proceeding does not conflict with applicable laws and 
regulations.
    (c) Reporting Procedures.
    Enter the required information in SAM.gov for each proceeding 
described in paragraph (b) of this award term. You do not need to 
submit the information a second time under grants and cooperative 
agreements that you received if you already provided the information 
in SAM.gov because you were required to do so under Federal 
procurement contracts that you were awarded.
    (d) Reporting Frequency.
    During any period of time when you are subject to the 
requirement in paragraph (a) of this award term, you must report 
proceedings information in SAM.gov for the most recent five-year 
period, either to report new information about a proceeding that you 
have not reported previously or affirm that there is no new 
information to report. If you have Federal contract, grant, and 
cooperative agreement awards with a cumulative total value greater 
than $10,000,000, you must disclose semiannually any information 
about the criminal, civil, and administrative proceedings.

[[Page 69500]]

    (e) Definitions.
    For purposes of this award term--
    Administrative proceeding means a non-judicial process that is 
adjudicatory in nature to make a determination of fault or liability 
(for example, Securities and Exchange Commission Administrative 
proceedings, Civilian Board of Contract Appeals proceedings, and 
Armed Services Board of Contract Appeals proceedings). This includes 
proceedings at the Federal and State level but only in connection 
with the performance of a Federal contract or grant. It does not 
include audits, site visits, corrective plans, or inspection of 
deliverables.
    Conviction means a judgment or conviction of a criminal offense 
by any court of competent jurisdiction, whether entered upon a 
verdict or a plea, and includes a conviction entered upon a plea of 
nolo contendere.
    Total value of currently active grants, cooperative agreements, 
and procurement contracts includes the value of the Federal share 
already received plus any anticipated Federal share under those 
awards (such as continuation funding).

II. [Reserved]

Deidre A. Harrison,
Deputy Controller, performing the delegated duties of the Controller 
Office of Federal Financial Management.
[FR Doc. 2023-21078 Filed 9-28-23; 4:15 pm]
BILLING CODE 3110-01-P