Guidance for Federal Financial Assistance, 30046-30208 [2024-07496]

Agencies

• Management and Budget Office

[Federal Register Volume 89, Number 78 (Monday, April 22, 2024)]
[Rules and Regulations]
[Pages 30046-30208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07496]



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Vol. 89

Monday,

No. 78

April 22, 2024

Part IV





Office of Management and Budget





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2 CFR Parts 1, 25, 170, et al.





Guidance for Federal Financial Assistance; Final Rule

Federal Register / Vol. 89, No. 78 / Monday, April 22, 2024 / Rules 
and Regulations

[[Page 30046]]


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OFFICE OF MANAGEMENT AND BUDGET

2 CFR Parts 1, 25, 170, 175, 180, 182, 183, 184, 200


Guidance for Federal Financial Assistance

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

ACTION: Final rule; notification of final guidance.

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SUMMARY: The Office of Management and Budget (OMB) is revising the OMB 
Guidance for Grants and Agreements, which is now called the OMB 
Guidance for Federal Financial Assistance. The final guidance reflects 
public comments received in response to the OMB Notification of 
Proposed Guidance published in October 2023 and comments received from 
Federal agencies. In response to comments, OMB is revising and updating 
the guidance to incorporate recent OMB policy priorities related to 
Federal financial assistance and to reduce agency and recipient burden. 
OMB is also incorporating certain statutory requirements and clarifying 
certain sections of the prior version of the guidance that recipients 
or agencies have interpreted in different ways. OMB is also making 
revisions to use plain language, improve flow, and address inconsistent 
use of terms within the guidance text. Finally, OMB is making revisions 
to improve Federal financial assistance management, transparency, and 
oversight through more accessible and readily comprehensible guidance.

DATES: The effective date for the final guidance is October 1, 2024. 
Federal agencies may elect to apply the final guidance to Federal 
awards issued prior to October 1, 2024, but they are not required to do 
so. For agencies applying the final guidance before October 1, 2024, 
the effective date of the final guidance must be no earlier than June 
21, 2024.

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) is revising several parts 
of the OMB Guidance for Grants and Agreements, now called the OMB 
Guidance for Federal Financial Assistance, located in title 2 of the 
Code of Federal Regulations (CFR). These revisions provide clarity and 
updated guidance to Federal agencies regarding the consistent and 
efficient use of Federal financial assistance. This document includes 
revisions to Part 1 (About Title 2 of the Code of Federal Regulations 
and Subtitle A); Part 25 (Unique Entity 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 Government-Wide Debarment and 
Suspension (Non-procurement); Part 182 (Government-Wide Requirements 
for Drug-Free Workplace (Financial Assistance); Part 183 (Never 
Contract with the Enemy); Part 184 (Buy America Preferences for 
Infrastructure Projects); and Part 200 (Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards).
    As explained in further detail below, OMB is revising its guidance 
in 2 CFR for the purpose of: (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 within the guidance. OMB's revisions are intended to improve 
Federal financial assistance management, transparency, and oversight 
through more accessible and easily understandable guidance.
    OMB summarizes its 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 in this final version. For example, OMB generally 
maintained the structure of parts, subparts, and sections of the 
guidance. Except in cases where OMB made 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 included 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 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 revisions are set forth below. Many of 
OMB's proposed revisions reflected 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). In the final revisions 
provided through this document, OMB responds to public comments 
received in response to the OMB Notification of Proposed Guidance 
published in the Federal Register in October 2023. See 88 FR 69390 
(Oct. 5, 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 Federal financial assistance 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 periodically reviews the Uniform Guidance in accordance with 2 
CFR 200.109. For example, 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 performance to assist Federal awarding agencies and 
non-Federal entities to improve program goals and objectives, share 
lessons learned, and adopt promising performance practices.
    On February 9, 2023, OMB issued a Notice of Request for Information 
in the Federal Register, which explained that OMB was beginning the 
process of

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seeking public input for its proposed revisions to OMB's guidance in 2 
CFR. See 88 FR 8480 (Feb. 9, 2023).
    On October 5, 2023, OMB issued a Notification of Proposed Guidance 
in the Federal Register, which explained that OMB was proposing 
revisions to parts 1, 25, 170, 175, 180, 182, 183, and 200 in 2 CFR, 
subtitle A. 88 FR 69390 (Oct. 5, 2023). OMB established these parts of 
the 2 CFR guidance 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).
    Based on OMB's review of the many public comments received and 
ongoing engagement with Federal agencies, OMB finds that revisions are 
warranted to subtitle A of 2 CFR--including parts 1, 25, 170, 175, 180, 
182, 183, 184, and 200--to further streamline, clarify, and update the 
guidance, including raising certain thresholds, where permissible under 
law, in recognition of inflation and other contributing factors. 
Further information on OMB's objectives for the revisions is provided 
below.

OMB Objectives

    OMB's objectives for the current round of 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 revisions to the Uniform Guidance in part 200 and other parts 
of 2 CFR generally support these four objectives. In support of 
objective (1)--incorporating statutory requirements and administration 
priorities--OMB made changes throughout the Uniform Guidance and other 
parts of 2 CFR to ensure consistency with statutory authorities. For 
example, OMB revised Parts 25, 170, and 175 to ensure its guidance 
properly aligns with underlying statutes, as amended. These revisions 
further align OMB's guidance with the authorizing statutes to ensure 
proper implementation. OMB 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)--reducing agency and recipient burden--
OMB increased several monetary thresholds that have not been updated 
for many years. For example, OMB increased the single audit threshold 
from $750,000 to $1,000,000 and also increased the threshold for 
determining items that are considered to be equipment from $5,000 to 
$10,000. OMB reviewed previous increases to the thresholds and 
considered current economic data in making these determinations. In 
further support of reducing burden, OMB provided 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 to 
applying for Federal financial assistance.
    In support of objective (3)--clarifying sections that recipients or 
agencies have interpreted in different ways--OMB made revisions to 2 
CFR to clarify areas of misinterpretation. Many of these clarifications 
do not represent a change in policy but are intended to eliminate 
ambiguity and clarify the intent of specific sections of the Uniform 
Guidance in part 200, and other parts in 2 CFR. In issuing its proposed 
revisions, OMB had incorporated feedback from Federal agencies and the 
public stating that Federal agencies and the recipient community 
interpret many sections inconsistently. After reviewing comments 
received in response to its proposed revisions, OMB is now implementing 
many of these changes.
    In support of objective (4)--rewriting applicable sections in plain 
language, improving flow, and addressing inconsistent use of terms--OMB 
revised the guidance to better follow plain language principles. OMB 
focused on using simple words and phrases, avoiding jargon, using terms 
consistently, and being concise.
    As a result, throughout subparts A through E of part 200, OMB now 
uses the terms ``recipient,'' ``subrecipient,'' or both in place of 
``non-Federal entity.'' OMB found that using the term ``non-Federal 
entity'' in subparts A through E of the prior version of part 200 
presented challenges to readers and made it difficult to quickly 
understand which entity was 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 now 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 replaced ``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.
    Revisions in the final guidance relating to use of the terms ``non-
Federal entity,'' ``recipient,'' and ``subrecipient'' do not change the 
existing scope or applicability of the guidance. The applicability 
provision for part 200, at section 200.101, continues to provide 
Federal agencies 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, the final 
guidance encourages 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 final guidance 
now further clarifies how the guidance applies to those entities as 
either recipients or subrecipients.
    Another example of plain language revisions is replacing 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 the final guidance OMB now 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 revisions was to make the 
Uniform Guidance more accessible to the general public and ensure more 
equitable access to Federal funding opportunities by making the 
guidance easier to understand. OMB does not specifically discuss each 
plain language revision in this preamble unless a revision represents a 
material change to the Uniform Guidance or is otherwise connected to 
OMB's response to a public comment.

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

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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 Single Audit Act); the Federal Funding Accountability 
and Transparency Act of 2006 (FFATA or the Transparency Act) \1\ (Pub. 
L. 109-282), as amended (31 U.S.C. 6101 note); 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.''
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    \1\ All references to FFATA or the Transparency Act in this 
document refer to the Act as most recently amended by the 
Congressional Budget Justification Transparency Act of 2021 (Pub. L. 
117-40).
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Summary of Comments

    On October 5, 2023, OMB solicited feedback from the public through 
proposed guidance published in the Federal Register. See 88 FR 69390 
(Oct. 5, 2023). The period for public comments closed on December 4, 
2023. OMB received comments via Regulations.gov at Docket No. OMB-2023-
0017. OMB received approximately 829 public comments from a broad range 
of interested stakeholders, such as States, local governments, Indian 
Tribes, labor organizations, industry associations, nonprofit 
organizations, for-profit organizations, colleges, universities, and 
individuals.

Section-by-Section Discussion

    OMB developed the revisions for this final guidance following 
review and consideration of comments received on the notification of 
proposed guidance published in October 2023. In this document, OMB 
summarizes significant comments received in response to its proposal 
and substantive changes made to each section of the final guidance. 
Generally, minor changes to the language of the guidance--such as minor 
plain language revisions--are not discussed. Sections of the guidance 
that OMB did not propose to revise in significant ways are also not 
discussed in many cases, except in response to commenters. For sections 
where no substantive changes or comments are discussed, the guidance 
from the notification of proposed guidance was adopted.

2 CFR Subtitle A--General

    In the proposed guidance, OMB proposed revising the headings of: 
(i) title 2 of CFR; (ii) subtitle A of 2 CFR; and (iii) chapter I of 
subtitle A of 2 CFR. In the case of each heading, OMB proposed to 
replace ``Grants and Agreements'' with ``Federal Financial 
Assistance.'' OMB explained that this revision would help to ensure 
that 2 CFR is understood to be applicable beyond just grants and 
cooperative agreements--unless provided otherwise in the applicability 
provisions in the body of the guidance, such as section 200.101.
    OMB received one comment questioning the proposal to revise the 
headings. The commenter stated that the reference to grants in the 
original heading was important to preserve the distinction between 
grants and contracts. OMB also received several comments supporting the 
revised headings. One commenter also questioned the inconsistent use of 
``government-wide'' versus ``governmentwide.''
    OMB Response: OMB finds that revising the headings to reference 
``Federal financial assistance'' will not cause undue confusion or 
change the specific applicability of parts and sections of the 
guidance. The headings merely reflect the overall scope of 2 CFR. The 
specific applicability of parts and sections of the guidance is 
addressed within the body of the guidance, such as at 2 CFR 200.101. 
OMB made several revisions in the final guidance to change 
``governmentwide'' to ``government-wide'' for consistency.

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

Section 1.200--Purpose of Chapters I and II

    OMB proposed 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 the status of the OMB guidance in 
part 200. OMB did not receive significant comments on this section and 
included the proposed revisions in the final version.

Section 1.205--Applicability to Federal Financial Assistance

    OMB did not propose significant revisions to section 1.205. OMB 
received two comments indicating that paragraph (b) contained an error 
regarding applicability to procurements under Federal awards. OMB also 
received one comment inquiring if section 1.205 means that agencies 
using Other Transaction Authority (OTA) instruments are permitted to 
make an award to a de-barred or suspended entity.
    OMB Response: In the final guidance, OMB removed both paragraphs 
(a) and (b) from section 1.205. The applicability of specific parts and 
sections of the guidance are best addressed in the relevant areas of 
the guidance--such as in Part 180 and at 200.101. Paragraphs (a) and 
(b) only provided a partial list of examples of the applicability of 
specific parts of 2 CFR. OMB finds that the remaining text in the 
introductory paragraph sufficiently addresses the topic of 
applicability overall, with more specific information provided in 
relevant parts and sections. The two examples in this section are not 
necessary.
    The guidance in part 200 does not specifically address OTA 
instruments. Federal agencies using such authority are in the best 
position to answer questions and provide guidance on what specific 
requirements apply to OTA instruments--and under what circumstances any 
parts, subparts, or sections of 2 CFR may apply. The commenter seeking 
information on the applicability of 2 CFR part 180 to OTA instruments 
may also consider the definition of ``nonprocurment transaction'' at 2 
CFR 180.970.

Section 1.215--Relationship to Previous Issuances

    OMB proposed to provide a more succinct statement in section 1.215

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explaining that some of the guidance was organized differently within 
previous OMB Circulars or other guidance documents, before the 
establishment of title 2 of the CFR. Because 2 CFR has now existed for 
almost 20 years in its current format and location, OMB did not find it 
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. For example, the Federal Register notice establishing part 
200 in 2013 explained that it superseded and streamlined requirements 
from OMB Circulars A-21, A-87, A-110, and A-122; Circulars A-89, A-102, 
and A-133; and the guidance in Circular A-50 on Single Audit Act 
follow-up. See 78 FR 78590 (Dec. 26, 2013). OMB did not receive 
significant comments on this section and incorporated the proposed 
revisions.

Section--1.220 Federal Agency Implementation of This Subtitle

    OMB did not propose significant revisions to section 1.220. OMB 
received one comment seeking clarification on the implementation of the 
2 CFR revisions by Federal agencies, particularly in situations when a 
Federal agency has not specifically referenced the OMB 2 CFR guidance 
in the terms and conditions of a Federal award.
    OMB Response: OMB did not make substantial changes to the long-
standing structure of agency implementation of OMB's 2 CFR guidance. 
OMB did not find it necessary to make additional revisions, but is 
issuing a memorandum to Federal agencies with implementation guidance 
concurrently with this document. OMB also provides some additional 
responsive information in other parts of the guidance text and within 
this preamble. In the case of individual Federal awards, the Federal 
agency making the award is the best source of information on agency 
implementation of 2 CFR and applicable agency regulations and 
requirements. Federal agencies are responsible for implementing the 
guidance for their Federal awards. The government-wide effective date 
of the final guidance is October 1, 2024, but Federal agencies may also 
elect to apply the final guidance to their Federal awards issued prior 
to October 1, 2024. For agencies applying the final guidance before 
October 1, 2024, the effective date must be no earlier than 60 days 
from the date of publication in the Federal Register--as specified 
above.

Section 1.231--Severability

    OMB proposed to add section 1.231 to clarify its intent that if any 
provision of the final guidance were held to be invalid or 
unenforceable, such provision, or combination of provisions, are 
severable from the remaining provisions of the guidance. OMB did not 
receive significant comments on this section and made the change in the 
final guidance. OMB made a minor revision to replace the word ``part'' 
with ``subtitle'' in the final sentence of this section, which is 
consistent with other language in this section as both proposed and 
finalized. This change reflects how OMB intends this provision to 
apply.
    In the final guidance provided through this document, OMB adopts a 
unified scheme addressing how Federal agencies will consistently and 
efficiently use Federal financial assistance in their programs across 
the Federal government. While the final guidance best serves OMB's 
objectives if left intact as adopted by OMB, the benefits of the 
guidance related to coordination across the Federal government do not 
hinge on any single provision. Accordingly, OMB considers individual 
provisions adopted in the final guidance to be separate and severable 
from one another. In the event of a stay or invalidation of any 
provision, or any provision as it applies to a particular person or 
circumstance, OMB's intent is to otherwise preserve the final guidance 
to the fullest possible extent. The provisions that remain in effect 
will continue to provide essential guidance and information to Federal 
agencies on consistently applying requirements for Federal financial 
assistance across the Federal government.

Section 1.300--OMB Responsibilities

    OMB did not propose significant revisions to section 1.300. OMB 
received a comment requesting that OMB establish a policy and process 
for pass-through entities to submit questions to OMB. Another comment 
requested additional technical assistance in support of Federal 
financial assistance.
    OMB Response: Pass-through entities should direct all comments and 
questions pertaining to the implementation of specific Federal awards 
to the appropriate Federal agency making the award. Federal agencies 
are the best resource for questions related to specific Federal awards.

Section 1.305--Federal Agency Responsibilities

    OMB proposed 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 received one comment expressing support for the proposed 
revisions, such as including reference to the QSMO. OMB received 
another comment suggesting OMB require Federal agencies to report on 
subawards under their Federal awards. Another commenter recommended the 
inclusion of additional language with respect to tribal sovereignty and 
self-determination in this section.
    OMB Response: In response to comments, the pass-through entity, not 
the Federal agency, is responsible for subaward reporting. See 2 CFR 
part 170, appendix A. OMB does not consider section 1.305, on Federal 
agency responsibilities, to be an appropriate place to address issues 
related to tribal sovereignty. Guidance related to tribal rights is 
included in other sections of the 2 CFR guidance such as section 
200.101(d). OMB incorporated the proposed revisions in this section 
without additional changes.

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

    Part 25 of 2 CFR provides guidance on requirements for applicants, 
recipients, and subrecipients to obtain a unique entity identifier 
(UEI), as required by statute in the Transparency Act, and for 
applicants and recipients to register in the System for Award 
Management (SAM.gov) website of the General Services Administration, 
which is the repository for standard information about applicants and 
recipients of Federal awards. OMB proposed to revise part 25 to ensure 
it properly aligns with the authorizing statutes, as amended, including 
the Transparency Act and the DATA Act of 2014. OMB also proposed to 
revise the title of part 25 to replace ``universal identifier'' with 
``unique entity identifier.'' OMB received no significant comments on 
these proposals. OMB incorporated these changes in the final guidance.

Part 25--General Comments

    OMB received several general comments on 2 CFR part 25 that did not 
apply to a specific section. One commenter recommended that the U.S.

[[Page 30050]]

government develop a national strategy on the use of persistent 
identifiers (PIDs) to articulate how they can be leveraged in the U.S. 
research ecosystem and globally to support American science leadership. 
Another commenter remarked that clarification is needed under part 25 
that pass-through entities and others should not require a UEI of 
second-tier contractors. Another commenter asked OMB to remove barriers 
to access for newer and smaller organizations for low-dollar subawards, 
such as by removing UEI requirements.
    OMB Response: The suggestion to develop a national strategy on the 
use of PIDs is beyond the scope of OMB's proposed revisions. Section 
25.300 requires a UEI for first-tier subrecipients receiving a subaward 
from a recipient, as defined at section 25.400, but does not impose a 
requirement for a second-tier subrecipient to obtain a UEI before 
receiving a subaward from a subrecipient. OMB finds that additional 
clarification is not needed within the text of the guidance on this 
point.
    On the final comment regarding removing additional barriers for 
newer and smaller organizations: statutory requirements under the 
Transparency Act and other laws put firm limits on OMB's ability to 
provide additional flexibility. The exceptions provided in section 
25.110 generally reflect the flexibilities permitted under controlling 
statutory law.

Subpart A--General

Section 25.100--Purposes of This Part

    OMB proposed only minor plain language revisions to section 25.100. 
One commenter asked OMB to align the terminology used to describe 
``direct'' subawards in 2 CFR part 25 with the ``first-tier'' subaward 
terminology used in 2 CFR part 170 Appendix A. Specifically, the 
commenter asked OMB to amend this section by replacing ``direct 
subrecipients'' with ``first-tier subrecipients.'' The commenter also 
asked OMB to change the reference to ``subawards'' at section 170.100 
to ``first-tier subawards.''
    OMB Response: In response to comments, OMB added first-tier 
subrecipients in a parenthetical following direct subrecipients. OMB 
otherwise made changes in this section as proposed.

Section 25.105--Applicability

    In this section OMB proposed to clarify that the requirement to 
obtain a UEI does not apply to second-tier subrecipients or 
contractors. OMB also proposed to clarify that recipients of loan 
guarantees must obtain a UEI and register in SAM.gov. OMB also proposed 
to state that a Federal agency may use discretion when determining to 
apply the requirements to beneficiary borrowers.
    In response to OMB's proposed changes, some commenters expressed 
concern that not requiring second-tier subrecipients to obtain a UEI 
could potentially put certain recipients at risk because those 
recipients have ultimate responsibility for monitoring all 
subrecipients. Some commenters stated that obtaining a UEI should be a 
universal requirement for subrecipients at any tier. OMB also received 
multiple comments expressing concern that the new proposed language, 
while exempting second-tier subrecipients from obtaining an UEI, did 
not address audit requirements, which a commenter stated may require 
subrecipients to have a UEI for submission. Other commenters also asked 
OMB to further clarify language in this section.
    OMB Response: In response to comments asking OMB to make obtaining 
a UEI a universal requirement for all tiers of subrecipients, OMB 
disagrees and did not make a change. The requirements for obtaining a 
UEI do not flow down beyond the first-tier subawards of a Federal 
award. This is consistent with prior OMB guidance on this topic in the 
``2 CFR Frequently Asked Questions'' (2 CFR FAQ) published on May 3, 
2021.
    In response to the comment regarding audit requirements: OMB is not 
requiring second-tier subrecipients to obtain a UEI under this section 
of the final guidance, but if a UEI is needed or likely to be needed 
for other purposes, second-tier subrecipients may still obtain one. If 
second-tier subrecipients are likely to need a UEI for other purposes, 
it would be best to obtain a UEI at the very start of the Federal award 
process. It may be infeasible to retroactively apply a UEI to awards 
made prior to obtaining one. After consideration of other comments 
requesting further clarification in this section, OMB did not make 
additional changes. OMB finds that this section, as revised, is 
sufficiently clear.

Section 25.110--Exceptions to This Part

    In section 25.110, OMB proposed to clarify that, even if an 
exception is granted, a Federal agency remains responsible for 
reporting data to comply with the Transparency Act, except that it may 
use a generic entity identifier in the circumstances described.
    Although not included in the text of the proposed revisions, OMB 
also stated in the preamble that it was considering other ways of 
reducing the administrative burden associated with obtaining a UEI and 
registering in SAM.gov for foreign organizations or foreign public 
entities. OMB described two potential revisions allowing expanded 
exceptions for these entities. The first expanded exception would have 
allowed 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. This would have increased the threshold in use under the prior 
version of the guidance for this exception. The second exception would 
have expanded the existing exigent circumstances exception to provide 
recipients with additional time to obtain a UEI and complete SAM.gov 
registration if exigent circumstances persisted beyond 30 days. 
Specifically, OMB proposed to allow Federal agencies with the option to 
provide recipients an additional 90 days if exigent circumstances 
persisted. For both proposed exceptions, the preamble explained that 
the exceptions would only be finalized in a way that would allow 
agencies to continue following Transparency Act reporting requirements.
    OMB received many comments in response to the proposed changes in 
this section. One commenter simply noted that the process to obtain a 
UEI number and maintain active SAM.gov registration is excessively 
complicated. Another commenter recommended that OMB grant Federal 
agencies the authority to exempt subrecipients from the requirement to 
obtain a UEI under this section. Another commenter requested OMB to 
allow recipients, rather than the Federal agencies, to make 
determinations on providing exceptions for subrecipients. Other 
commenters noted that obtaining a UEI and registering in SAM.gov are 
major barriers for many foreign entities.
    OMB also received many comments supporting the modified exceptions 
for obtaining a UEI and registering in SAM.gov described in the 
preamble to the proposed guidance. In general, commenters were 
supportive of both the modified exception that would have allowed a 
higher threshold of $250,000 for a project or program performed outside 
the U.S., and the proposed expansion of the ``exigent circumstances'' 
exception, which would have allowed recipients additional time beyond 
30 days.
    Commenters also provided many alternative suggestions related to 
raising the threshold for an exception above

[[Page 30051]]

$25,000. For example, some commenters requested clarification on why a 
threshold of $25,000 is established in this section while a threshold 
of $30,000 is used in 2 CFR part 170 for reporting subawards. Some 
commenters suggested using a threshold of $30,000 for subawards in both 
parts for consistency. Many commenters also requested a blanket or 
class exemption to the UEI requirement for all entities receiving an 
award or subaward valued under a specified amount, with many citing 
$30,000 as the appropriate amount. Other commenters suggested 
increasing the threshold for subawards to $50,000, which they stated 
was the applicable threshold for subawards in certain programs under 
the American Rescue Plan Act of 2021 (Pub. L. 117-2).
    Other commenters also requested a variety of minor clarifications 
and revisions to this section. For example, one commenter requested a 
citation be changed from ``25.110(a)(2)(ii)(A)(5)'' to 
``25.110(a)(2)(ii)(A)(4).'' Another commenter requested certain 
language to be further clarified in paragraph (a)(1)(i). A different 
commenter suggested adding ``by section 6202 of Public Law 110-252'' 
after ``as amended'' in paragraph (a)(1)(i) to provide more information 
to readers. One commenter requested clarification that the requirement 
to obtain a UEI does not apply to contractors that have a procurement 
relationship with a recipient.
    Lastly, a commenter asked for a complete exception from obtaining a 
UEI for all foreign organizations or foreign public entities applying 
for or receiving a subaward below the Transparency Act threshold of 
$25,000 for a project or program performed outside the U.S. The 
commenter explained that establishing a SAM.gov user account and 
requesting a UEI is often extremely challenging for small foreign 
organizations with limited internet access or limited English 
proficiency.
    OMB Response: In response to these comments, OMB policy on this 
topic is constrained by the Transparency Act, which limits what 
exceptions and deviations OMB can allow regarding the requirement to 
obtain a UEI and the timeframe in which a UEI must be obtained. In the 
final guidance, OMB allowed exceptions only within the parameters 
permitted under the statute.
    Within these statutory limits, OMB made some adjustments to the 
proposed guidance in this section. First, OMB agrees with the comment 
asking OMB to allow Federal agencies to exempt subrecipients from the 
requirement to obtain a UEI in the circumstances described in paragraph 
(a)(2). Recognizing that OMB already refers to subawards in the 
proposed text at paragraph (a)(2)(ii), OMB made this revision to the 
introductory paragraph. The exceptions in this section are based on the 
statutory exceptions and other limited flexibilities under the 
Transparency Act, which generally applies in similar ways to awards and 
subawards.
    Regarding the request to allow recipients rather than Federal 
agencies to make determinations on granting exceptions under this 
section, OMB did not make this change. OMB finds that Federal agencies 
are able to apply a risk-based approach more consistently across their 
programs when evaluating exceptions.
    In response to comments requesting clarification on why a threshold 
of $25,000 is used in this section for obtaining a UEI, while a 
threshold of $30,000 is used in part 170 for reporting subawards, OMB 
previously increased the reporting threshold for subawards under part 
170 to $30,000 based on the pilot authority in section 5(b) of the 
Transparency Act, as amended by the Data Act of 2014. See Public Law 
113-101; see also 85 FR 49506 (Aug. 13, 2020); 2 CFR 170.220. However, 
when OMB used that limited pilot authority in 2020 to revise part 170, 
it did not alter the separate requirement for subrecipients to obtain a 
UEI under section 25.300. The part 25 UEI requirement continues to use 
the baseline threshold for a Federal award from the Transparency Act of 
$25,000. The pilot authority used in part 170 is no longer active and 
OMB did not identify alternative statutory authority that would allow 
increasing the threshold above $25,000 in part 25 in the final 
guidance. Thus, subrecipients receiving subawards of $25,000 or more 
must continue to obtain a UEI before receiving an award.
    In response to the many comments about UEI and SAM.gov registration 
being a barrier to foreign organizations and foreign public entities, 
OMB cannot allow all of the requested exceptions related to UEIs. OMB 
must ensure that part 25 remains aligned with statutory requirements in 
the Transparency Act, which place limits on what exceptions are 
allowable. Section 2(b) of the Transparency Act requires a unique 
identifier or UEI for any entity receiving a Federal award above 
$25,000. To comply with Section 2(c) of the Transparency Act, the UEI 
must be obtained, at the latest, within 30 days of the Federal award. 
Thus, the final guidance does not allow expanded UEI exceptions for 
foreign organizations beyond those that appeared in the text of the 
proposed guidance in October 2023. OMB did not finalize either of the 
expanded exceptions described in the preamble to the proposed guidance 
because OMB has not found a way for the exceptions to be implemented 
consistently with the Transparency Act. The Federal award threshold in 
paragraph (a)(2)(ii) remains $25,000 and OMB does not expand the 
``exigent circumstances'' exception to provide recipients additional 
time beyond 30 days. The ``exigent circumstances'' exception was 
paragraph (a)(2)(iii) in the proposed guidance and is now paragraph 
(a)(2)(iv) in the final guidance.
    OMB also did not provide a complete exception from obtaining a UEI 
for all foreign organizations or foreign public entities applying for 
or receiving a subaward below the Transparency Act threshold of $25,000 
for a project or program performed outside the U.S. OMB maintains the 
existing level of transparency for this class of Federal awards and 
disagrees with the commenter's suggestion. Federal agencies are 
provided flexibility in this section to provide UEI exceptions for 
these organizations in specifically defined circumstances.
    For SAM.gov registration only, which is not specifically required 
by the Transparency Act, OMB provided an expanded exception applicable 
to foreign organizations and foreign public entities in the final 
guidance at paragraph (a)(2)(iii). This new exception provides that, 
for applicants or recipients, the Federal agency may exempt foreign 
organizations or foreign public entities from completing full 
registration in SAM.gov for a Federal award less than $500,000 that 
will be performed outside the U.S. Similar to the exception at 
paragraph (a)(2)(ii), this exception may be used when the Federal 
agency deems it impractical for the entity to comply with the 
requirement for completing full registration in SAM.gov. Foreign 
organizations or foreign public entities exempted from registering in 
SAM.gov under this provision must still obtain a UEI. In addition, 
Federal agencies remain responsible for reporting under the 
Transparency Act in connection with the award. The Federal agency must 
determine this exemption on a case-by-case basis while utilizing a 
risk-based approach. Only OMB has authority to provide class exceptions 
under part 25. See 2 CFR 25.110(b) (as revised). To help ensure 
continued alignment with the Clean Contracting Act of 2008 (codified at 
41 U.S.C. 2313),

[[Page 30052]]

OMB uses a threshold of $500,000 for this exception. This exception 
narrows the exception proposed by OMB in the October 2023 preamble to 
only include SAM.gov registration, but increases the maximum threshold 
from $250,000 as initially proposed.
    Regarding comments requesting that OMB allow UEI exceptions granted 
under part 25 to apply to subaward reporting requirements under part 
170: the fact that a subrecipient is not required to obtain a UEI under 
part 25, does not necessarily affect reporting requirements under part 
170, except that section 25.110 may allow use of a generic identifier 
for that reporting in certain circumstances. The ability to report 
using a generic identifier does not mean that reporting is not 
required. Specifically, section 25.110(a)(i) explains that if a Federal 
agency grants an exception, the Federal agency must use a generic 
entity identifier in the data it reports to USAspending.gov if 
reporting is required by the Transparency Act. The same principle would 
apply to required subaward reporting in circumstances in which an 
exception is granted to a subrecipient. Granting an exception under 
part 25 does not impact responsibility for reporting under the 
Transparency Act, except that a generic entity identifier may be used 
in the circumstances described.
    The Transparency Act, at section 7 (Classified and Protected 
Information), provides that the Act does not ``require the disclosure 
to the public'' of information that would be exempt from disclosure 
under the Freedom of Information Act (codified at 5 U.S.C. 552) or 
protected under the Privacy Act (codified at 5 U.S.C. 552a) or section 
6103 of the Internal Revenue Code of 1986 (codified at 26 U.S.C. 6103). 
See 31 U.S.C. 6101, statutory note. In cases of direct conflict between 
OMB's guidance and section 7 of the Transparency Act, the statutory 
text in the Transparency Act would prevail. See, for example, 2 CFR 
25.105(a) and 170.105(a).
    OMB did not find it necessary to explicitly state in part 25 that 
contractors with a procurement relationship with a recipient are not 
required to obtain UEI. The applicability section at 25.105 explains 
what entities must obtain a UEI. See also 2 CFR 25.200(b) and 25.300.
    OMB accepted the suggestion to renumber paragraph (a)(2)(ii)(A)(5) 
as paragraph (a)(2)(ii)(A)(4). OMB made minor clarifying edits in 
paragraph (a)(1)(i). OMB did not find it necessary to specify which act 
amended the Transparency Act, which has been amended multiple times. 
Lastly, OMB renumbered paragraphs in this section based on the addition 
of a new exception at paragraph (a)(2)(iii) as discussed above. Except 
as noted, OMB otherwise included revisions in this section as proposed.

Subpart B--Policy

Section 25.200--Requirements for Notice of Funding Opportunities, 
Regulations, and Application Instructions

    OMB did not propose significant updates to section 25.200. OMB 
rearranged some language to provide clarity and made plain language 
revisions. OMB received a comment requesting clarification on whether 
the requirement that a recipient be registered in SAM.gov prior to 
application is passed through to sub-recipients. This commenter also 
stated that sub-recipients need to register in SAM.gov to allow States 
and territories to complete reporting for Transparency Act purposes. 
Another commenter asked OMB to provide guidance that low-risk auditees 
only need to update their SAM.gov registrations once every three years, 
instead of annually, unless there is a material change that causes the 
auditee's SAM.gov registration to become outdated or otherwise 
inaccurate.
    OMB also received comments requesting other minor clarifying edits 
in paragraph (c), which caused confusion for some commenters as 
initially proposed by OMB. For example, OMB received a recommendation 
to delete the first sentence of paragraph (c) and strike certain 
language from the second sentence.
    OMB Response: Regarding comments requesting clarification on 
applicability to subrecipients, OMB finds that revisions are not needed 
in the guidance text. As a subrecipient does not directly apply to a 
Federal agency for an award, it is sufficiently clear that this 
provision is not addressing subrecipients. A subrecipient must only 
provide a UEI to the recipient in accordance with subpart C. Next, OMB 
does not agree with the comment stating that updating SAM.gov 
registration on an annual basis presents excessive burden and made no 
change to this policy. Finally, OMB agrees with commenters that 
paragraph (c) should be clarified. OMB made minor edits in the guidance 
text to clarify intent.

Section 25.205--Effect of Noncompliance With a Requirement To Obtain a 
UEI or Register in SAM.gov

    OMB made plain language revisions and minor clarifications to this 
section in the proposed guidance. Specifically, OMB explained that the 
requirement to have an active UEI does not apply to amendments to 
terminate or close a Federal award. OMB received a comment requesting 
clarification on whether the annual SAM.gov registration requirement is 
through project closeout or the record retention period.
    OMB Response: OMB finds that additional clarification is not needed 
in the guidance text. Section 25.200 explains that the registration 
requirement applies while a Federal award is ``active'' or ``an 
application [is] under consideration by a Federal agency.'' OMB added 
clarifying language unrelated to the comment received, but otherwise 
made revisions in the final guidance as proposed.

Section 25.215--Requirements for Agency Information Systems

    OMB made plain language revisions to this section and updated 
citations to other 2 CFR sections. OMB received a comment recommending 
that OMB and Federal agencies ensure that the UEI required by part 25 
can be linked with global registries for PIDs.
    OMB Response: OMB did not link UEIs with PIDs at this time. To do 
so would go beyond the scope of the changes proposed and is not 
necessary for this update.

Subpart C--Recipient Requirements of Subrecipients

Section 25.300--Requirement for Recipients To Ensure Subrecipients Have 
a Unique Entity Identifier

    OMB made plain language revisions to this section in the proposed 
guidance. OMB received several comments on section 25.300. First, a 
commenter requested OMB define ``full registration'' in paragraph (a), 
stating that there is confusion over levels of registration. Next, OMB 
received multiple comments on the notification requirement in paragraph 
(b) and Appendix A. For example, one commenter stated that the 
requirement that recipients must notify any potential subrecipients 
that the recipient cannot make a subaward unless the subrecipient 
obtains and provides a UEI to the recipient, is unnecessary given the 
requirements of paragraph (a). The commenter stated this requirement 
imposed an unnecessary administrative burden on recipients. OMB also 
received a comment stating that paragraph (b) is unclear regarding 
whether this notification requirement applies during both the pre-award 
and post-award phases and to whom the

[[Page 30053]]

notification should be provided in each case.
    OMB Response: On the comment regarding defining ``full 
registration'' in paragraph (a), OMB did not find it necessary to 
further define this term in this update. With the exception of minor 
plain language revisions, this section remains similar to guidance as 
it existed before this update and OMB finds the meaning is sufficiently 
clear. The paragraph explains that subrecipients must obtain a UEI 
prior to receiving a subaward, but are not required to register in 
SAM.gov. Similarly, on the comments regarding the notification 
requirement in paragraph (b), this section remains similar to guidance 
as it existed before this update. OMB did not find it unclear or overly 
burdensome.

Subpart D--Definitions

Section 25.400--Definitions

    In the proposed October 2023 revisions, OMB combined definitions 
from multiple sections within a single section at 25.400. OMB provided 
a definition for entity, updated and removed several other definitions, 
and made additional clarifying and plain language edits. Many of the 
revisions to this section aimed to more closely follow statutory 
language in the Transparency Act. OMB received comments requesting 
clarification on the definitions of ``entity'' and ``Federal financial 
assistance.'' For the definition of entity, commenters specifically 
raised questions about the applicability of the definition to tribes, 
consortium organizations, and individual recipients of Federal 
financial assistance. Another commenter asked OMB to add a definition 
for ``internal recipient'' for situations where a government recipient, 
such as a State, passes funds to another agency within the government 
recipient. OMB also received questions asking about this section's 
applicability to fixed award amounts and OTA instruments. Finally, a 
commenter suggested that OMB consider combining the definition sections 
for parts 25 and part 200.
    OMB Response: OMB made minor revisions to the definition of the 
term ``entity'' to more closely align with the statutory definition in 
the Transparency Act. Specifically, at paragraph (1)(x), OMB added 
``any subcontractor or subgrantee that is not excluded by paragraph 
(2).'' Section 2 of the Transparency Act provides that this element of 
the definition applies on and after January 1, 2009. Other guidance in 
part 25 provides more specific information on which entities must 
obtain UEIs or register in SAM.gov in the context of this part, 
including the provisions at sections 25.105, 25.200(b), and 25.300. OMB 
also made minor technical edits to the definition of the term 
``entity'' in the final guidance.
    OMB did not add a definition for the term ``internal recipient.'' 
This is beyond the scope of OMB's proposed changes for this version of 
the guidance, but Federal agencies may be able to provide further 
guidance on this question in the context of specific awards if 
appropriate. On the question about applicability to fixed amounts 
awards: a fixed amount award is a form of Federal financial assistance 
and subject to this part.
    OMB did not combine the definitions from section 25.400 and section 
200.1. Some of the definitions in section 25.400 are specifically 
tailored to align with the Transparency Act, while some definitions in 
part 200 have a broader range of applications. Regarding the definition 
of Federal financial assistance, OMB did not find it necessary to 
explicitly address whether section 25.400 applies to OTA instruments. 
As discussed above, Federal agencies using such authority are in the 
best position to answer questions and provide guidance on what specific 
requirements apply to OTA instruments used by that agency--including to 
address whether part 25 applies to them. OTA instruments, and the 
authorities for such instruments, provide for unique flexibilities that 
might not be the same across all Federal agencies.

Appendix A to Part 25--Award Term

    OMB proposed plain language revisions and minor clarifying edits to 
Appendix A to Part 25. Multiple commenters questioned OMB's usage of 
second-person pronouns (``you'') and second-person possessive 
adjectives (``your'') in the Appendix.
    OMB Response: OMB agrees with the commenters that further 
clarifying edits should be made to Appendix A. Because ``you'' and 
``your'' generally referred to the award recipient in the proposed 
Appendix, OMB now uses the term ``recipient'' in place of both. OMB 
also made other conforming edits as necessary in the final guidance. 
OMB is also correcting a citation for the definition of entity.

Part 170--Reporting Subaward and Executive Compensation Information

    In the proposed revisions, OMB proposed to revise the guidance in 
this part to ensure it properly aligns with authorizing statutes 
including the Transparency Act and the DATA Act of 2014. OMB proposed 
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 proposed to revise certain sections to 
clarify their intended meaning. For example, OMB proposed to move 
certain requirements currently contained in section 170.110 to section 
170.105, which OMB proposed to rename ``Applicability.''

Part 170--General Comments

    OMB received multiple comments on this part that did not focus on a 
particular section. First, OMB received comments stating that reporting 
requirements should be clarified to distinguish between reporting the 
amount obligated by a single award, which was referred to as an 
``action'' in Appendix A, and the new total obligated amount. Second, 
another commenter noted certain difficulties encountered with the FFATA 
Subaward Reporting System (FSRS).
    OMB Response: Regarding the first comment, OMB added language in 
Appendix A to clarify that the total subaward amount under a Federal 
award must be reported for all reported subawards. Regarding the second 
comment, OMB can only update policy on reporting requirements in this 
part. OMB did not propose changes to FSRS through this update. This 
guidance is not the appropriate vehicle to address system challenges 
with FSRS or make changes to that system.

Subpart A--General

Section 170.100--Purpose of This Part

    OMB proposed plain language revisions and minor technical edits to 
this section. OMB did not receive any significant comments. In the 
final guidance, OMB made a minor technical edit, but otherwise updated 
the guidance as proposed.

Section 170.105--Applicability

    OMB proposed to move certain requirements contained in section 
170.110 to section 170.105, which OMB proposed to rename 
``Applicability.'' OMB also proposed plain language revisions and other 
clarifying edits. OMB further updated citations to other sections 
within the 2 CFR guidance.
    OMB received multiple comments requesting that the guidance 
explicitly allow exceptions to the UEI requirement granted under 2 CFR 
part 25 to apply to first-tier subaward reporting requirements under 2 
CFR part 170. The commenters stated that any exception to the 
requirement for a subrecipient to

[[Page 30054]]

obtain a UEI under part 25 should equate to an exception to report 
under part 170. Similarly, OMB received a comment requesting the 
addition of an exception in 2 CFR part 25 for awards and subawards less 
than $30,000, which would align with the threshold for first-tier 
subaward reporting under 2 CFR part 170.
    OMB Response: Regarding comments requesting OMB to allow UEI 
exceptions granted under part 25 to apply to subaward reporting 
requirements under part 170: OMB's response is provided in the section 
of the preamble on part 25 above. In general, the fact that a recipient 
or subrecipient is not required to obtain a UEI under part 25 does not 
necessarily affect reporting requirements under part 170, except that 
generic identifiers may be used in defined circumstances. Certain 
disclosure exceptions may also be available under the statutory text of 
the Transparency Act, which are discussed above. See 31 U.S.C. 6101, 
statutory note. In cases of direct conflict between OMB's guidance and 
section 7 of the Transparency Act, the statutory text would prevail. 
Paragraph (a) of section 170.105 recognizes that such statutory 
exemptions for subaward reporting may be available in some 
circumstances. For example, when information is formally classified 
under criteria established by an Executive Order, 5 U.S.C. 552(b)(1), 
the statutory authority in section 7 of the Transparency Act would 
warrant withholding publication of information under part 170.
    Regarding comments requesting that OMB create an exception in part 
25 for awards and subawards less than $30,000, see discussion in this 
preamble above. OMB did not identify statutory authority that would 
allow increasing the threshold above $25,000 in part 25 in the final 
guidance.

Subpart B--Policy

Section 170.200--Federal Agency Reporting Requirements

    OMB proposed plain language revisions to this section and other 
clarifying edits. OMB did not receive any comments on this section. In 
the final guidance, OMB updated the prior reference to the DATA Act 
Information Model Schema (DAIMS). The revised reference is to the 
Government-wide Spending Data Model (GSDM).

Section 170.210--Requirements for Notices of Funding Opportunities, 
Regulations, and Application Instructions

    OMB proposed plain language revisions to this section and added a 
definition for ``notice of funding opportunity.'' OMB did not receive 
any comments on this section and revised the guidance as proposed.

Section 170.220--Use of Award Term

    OMB proposed plain language revisions to this section and added 
certain clarifying language. A commenter suggested that it would be 
helpful to insert an example to illustrate the revised language in this 
subsection.
    OMB Response: OMB made changes to clarify that the total subaward 
amount must be reported. OMB otherwise revised the guidance as 
proposed.

Subpart C--Definitions

Section 170.300--Definitions

    In the proposed October 2023 revisions, OMB combined definitions 
from multiple sections within a single section at 170.300. OMB also 
proposed plain language revisions within this section, added the 
definition of entity, and updated or removed other definitions from the 
prior version of the guidance. OMB received a comment that the CFR 
citation in the definition for ``Total Compensation'' was incorrect.
    OMB Response: OMB corrected the citation in the definition for 
``Total Compensation.'' OMB otherwise revised the guidance in this 
section as proposed.

Appendix A to Part 170--Award Term

    In Appendix A to Part 170, OMB proposed changes including 
reordering text, revising for plain language, removing definitions or 
citing to relevant 2 CFR sections, and adding the definition of entity. 
OMB received multiple comments on the Appendix. One commenter requested 
that OMB provide clear guidance on certain inconsistencies the 
commenter perceived between the FSRS system and USAspending.gov. 
Another commenter suggested that rather than subrecipients reporting 
executive compensation to and through the pass-through entity, when 
applicable, the subrecipient report this data directly into FSRS.
    Another commenter noted this Appendix requires reporting executive 
total compensation of first-tier subrecipients unless the subrecipient 
is exempt as provided in Section I, paragraph (d). The commenter stated 
that this exemption--using a threshold of $300,000 in gross income--is 
not necessary because a higher threshold is established elsewhere in 
the Appendix. Specifically, the commenter pointed to Section I, 
paragraph (c)(1)(ii)(B), which uses a threshold of $25,000,000 or more 
in annual gross revenues in the subrecipient's preceding fiscal year. 
The commenter further noted Section I, paragraph (d), addresses the 
reader directly as ``you,'' which is inconsistent with paragraphs (b) 
and (c) being applicable to both recipients and subrecipients. Lastly, 
this commenter suggested that in Section I, paragraph (d), if OMB 
continues to apply the exemption to subrecipients, it should modify the 
language to clarify that it applies to both recipients and first-tier 
subrecipients.
    Next, another commenter suggested adding an example to the Appendix 
for clarity. A commenter also requested clarification on what specific 
action triggers the requirement for Transparency Act subaward 
reporting, which requires the recipient to report a subaward action. 
OMB received another comment requesting a clearer definition of 
subaward to recognize different reporting timeframes. An additional 
commenter suggested that there is a lack of clarity about the amount of 
time recipients have to report a subrecipient's compensation 
information to FSRS and stated that this may lead to recipients issuing 
unsigned subawards.
    One commenter requested further clarification in Section I, 
paragraph (d), noting that the proposed language appeared to indicate 
that the prime recipient and the first-tier subrecipient are exempt 
from reporting executive compensation if their gross income from all 
sources is under $300,000. However, the commenter noted that paragraph 
(d) is referring to the reporting of subawards and executive 
compensation.
    OMB also received a question on the significance of the changes 
regarding reporting subawards. The commenter noted that the current 
version of the Award Term required reporting ``each obligating action'' 
or ``obligation'' that equals or exceeds $30,000, while the proposed 
Award Term deleted those words and substituted ``subaward'' in their 
place.
    OMB Response: Throughout Appendix A, in the final guidance OMB 
replaces ``you'' and ``your'' with references to the ``recipient'' to 
which the award term is addressed. OMB also made other conforming edits 
as necessary throughout Appendix A.
    OMB also made certain clarifying edits in Section I, paragraph (d) 
of Appendix A in response to comments. Consistent with the rest of the 
Appendix, OMB clarifies that ``you'' refers to the recipient. 
Consistent with the Transparency Act, OMB also clarified that the 
relevant period for gross income is ``the previous tax year.''

[[Page 30055]]

OMB did not add an example to this paragraph and finds the revised text 
is now sufficiently clear.
    In response to commenters: first, regarding the question about FSRS 
and USAspending.gov, instructions on using FSRS are provided on 
FSRS.gov. Next, the comment about subrecipients reporting executive 
compensation directly to FSRS is beyond the scope of changes proposed 
by OMB. OMB did not make this change in the final guidance.
    Regarding the comment maintaining that there is a discrepancy 
between the thresholds in Section I, paragraph (c)(1)(ii)(B) and 
paragraph (d) for reporting subaward information: the threshold in 
paragraph (c)(1)(ii)(B) refers to certain annual gross revenues in the 
subrecipient's preceding fiscal year, while the threshold in paragraph 
(d) refers to the recipient's gross income in the previous tax year. 
Because each threshold has a different subject, neither is superfluous. 
Both thresholds are provided by the Transparency Act.
    On the question regarding the trigger for subaward reporting under 
the Transparency Act, OMB did not make additional changes. OMB finds 
the clarifying edits made throughout Appendix A sufficient to explain 
its intent.
    On comments regarding specific Federal financial assistance 
programs, OMB did not make changes in part 170. OMB is unable to 
accommodate all requests for individual programs. The Federal agencies 
implementing these programs are in the best position to address 
program-specific questions and concerns.
    Regarding the comment requesting further clarity on the timeframe 
recipients have to report a subrecipient's compensation information to 
FSRS, OMB did not make revisions to the guidance text. OMB understands 
that some variation may exist in the actions by which recipients 
obligate subawards, and that delays may occur in some circumstances. 
However, the Transparency Act requires reporting within 30 days of a 
Federal award. As a result, part 170 sets the expectation on when this 
information must be submitted. The recipient must determine when an 
action constituting a legal obligation of the subaward has occurred, 
which begins the reporting clock.
    Finally, in response to questions about the significance of the 
changes in terminology regarding the reporting of subawards under the 
Award Term, OMB finds that the references to ``subawards'' are 
sufficiently clear when read in the context of this part and other 
clarifying edits in the Appendix. As noted in the preceding paragraph, 
recipients must still use some discretion and reasonable judgement to 
determine when an action constituting a legal obligation of the 
subaward has occurred. OMB did not find it necessary to specifically 
address this topic in part 170.

Part 175--Award Term for Trafficking in Persons

    OMB proposed 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 Trafficking Victims Protection Act 
(TVPA) of 2000, as codified at 22 U.S.C. 7101 to 7115. OMB proposed to 
update the policy and Award Term to ensure alignment with the current 
statute and to further align with the format of the guidance. For 
example, at section 175.105, OMB proposed adding provisions related to 
a compliance plan and requiring notification to Inspectors Generals 
under certain circumstances to further align with the TVPA.
    Several commenters questioned the inclusion of the compliance plan 
and annual certification requirements. One commenter noted that the 
certification threshold is inconsistent with the threshold in the 
Federal Acquisition Regulation (FAR).
    OMB Response: OMB appreciates the comments received on this part. 
The compliance plan and annual certification requirements are required 
by law. OMB does not have the same authority in the context of Federal 
financial assistance as exists under the FAR, in the context of Federal 
procurement, to increase statutory thresholds. See 41 U.S.C. 1908. OMB 
retained the certification threshold at $500,000, which is set by 
statute.
    In the final guidance, OMB revised the compliance plan and 
certification requirements in section 175.105(b) to clarify, consistent 
with law, that the requirements apply to subrecipients, contractors, 
and subcontractors. 22 U.S.C. 7104a. OMB also made conforming changes 
to the notification requirement at section 175.105(b). Next, OMB also 
revised section 175.105(c)(1) to clarify that a recipient must 
immediately inform the Federal agency, in addition to the Inspector 
General of the Federal agency, of any information it receives from any 
source that alleges credible information that the recipient, or any 
subrecipient, contractor, or subcontractor of the recipient, has 
engaged in conduct that is prohibited in this part.
    OMB revised section 175.200(b) to clarify that a Federal agency may 
include the compliance plan and certification requirements in the award 
term when applicable--or other information consistent with statutory 
requirements. Finally, OMB also added a reference to the compliance 
plan and certification requirements in the award term. Federal agencies 
may decide to expand or relocate this information in the award term in 
appendix A to part 175 consistent with the guidance in 175.200(b).

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

    OMB proposed 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 did not propose extensive plain language 
revisions in part 180. Sections in part 180 that OMB proposed to revise 
included sections 180.635 and 180.640 to clarify available 
administrative actions in lieu of debarment. OMB proposed 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 proposed 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 proposed to add 
text onto ``whether your business, technical, or professional 
license(s) has been suspended, terminated, or revoked.'' OMB proposed 
changes to this part generally in response to an ISDC recommendation to 
provide additional clarifications to 2 CFR to reflect current practice. 
OMB did not propose to establish new policy in part 180 that would 
negatively impact the ability of Federal agencies or recipients to 
adhere to this guidance.
    OMB received a variety of comments and suggestions on part 180. For 
example, a commenter requested revisions on what individuals may be 
eligible to serve as ``the suspending official or designee'' and ``the 
debarring official or designee.'' OMB also received requests to modify 
notice requirements, revise definitions, increase thresholds, expand 
the list of enumerated causes for debarment, fix references, make 
grammatical changes, and include other changes in this part.
    OMB Response: OMB appreciates the comments it received on this 
part, but generally considers them beyond the limited scope of the 
clarifying changes

[[Page 30056]]

that OMB proposed for this update. More substantive changes will 
require additional engagement with the ISDC in accordance with section 
180.40 to develop appropriate language. At this time, OMB finds that 
the changes requested by commenters are not necessary to understand the 
policy under part 180. Except for a minor grammatical change, OMB made 
revisions in this section as proposed. OMB will consider whether 
additional changes to Part 180 are warranted in the future, and may 
consider the comments received in response to the proposed guidance.

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

    OMB proposed limited plain language and technical revisions to this 
part. A commenter pointed out a minor typographical error, which OMB 
fixed in the final guidance. Another commenter suggested changes to how 
workplaces are identified in section 182.230, which OMB did not find it 
necessary to incorporate at this time. Other than the typographical 
error, OMB incorporated the proposed revisions in the final guidance.

Part 183--Never Contract With the Enemy

    OMB proposed limited plain language and technical revisions to this 
part. OMB did not receive significant comments regarding the proposed 
changes. OMB revised its guidance in this part as proposed.

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 did not propose changes to part 184 through the proposed 
guidance. However, in the final guidance, OMB made minor technical 
edits to align Part 184 with the definitions in Part 200 as revised. 
Specifically, OMB replaced the term ``Federal awarding agency'' with 
``Federal agency.''
    OMB received several comments relating to the applicability of the 
Build America, Buy America Act (BABA), including questions on its 
application to for-profit recipients. Commenters also raised concerns 
about the equitable application of Part 184 to different types of 
entities. As explained in the preamble to OMB's proposed revisions, OMB 
did not propose any substantive changes to BABA applicability or part 
184 through this guidance-making process, and OMB did not make any 
substantive changes through this update on those topics.
    For reasons unrelated to part 184, OMB replaced ``non-Federal 
entity'' with ``recipients or subrecipients'' in the revised definition 
of Federal financial assistance in section 200.1 discussed below. 
Section 70912(4) of BABA incorporates the definition of Federal 
financial assistance from the Uniform Guidance at 2 CFR 200.1 or 
successor regulations. In cases in which Federal agencies apply 
subparts A through E of part 200 to for-profit organizations, this 
revision may provide further clarity on the applicability of BABA to 
Federal awards made to for-profit organizations. OMB did not materially 
change the sentence in the applicability section of the Uniform 
Guidance at 200.101(a)(2) providing Federal agencies with discretion on 
whether to apply the guidance in part 200 to for-profit organizations. 
Thus, OMB did not substantively change the status quo on applicability 
of BABA to for-profit recipients as described in the preamble for the 
part 184 guidance at 88 FR 57774 and in OMB Memorandum M-24-02, 
Implementation Guidance on Application of Buy America Preference in 
Federal Financial Assistance Programs for Infrastructure (Oct. 25, 
2023). As explained in Memorandum M-24-02, Federal agencies may 
consider applying BABA requirements to for-profit entities consistent 
with their legal authorities, but are not required by OMB to do so. For 
additional information on BABA and OMB's guidance in 2 CFR part 184, 
see also 88 FR 55750 (Aug. 23, 2023).

Subpart A--Acronyms and Definitions

Section 200.0--Acronyms

    OMB proposed to update section 200.0 to remove acronyms that either 
appeared only once or were used infrequently in the guidance. At the 
same time, OMB proposed to add several acronyms that were used more 
frequently, but have been omitted from this section in past updates, 
such as UEI. OMB received a few comments that suggested incorporating 
acronyms excluded from this section in the proposed guidance.
    OMB Response: OMB did not find it necessary to expand on the list 
of acronyms. OMB only included in this section if used in multiple 
sections throughout the guidance. However, if multiple uses of an 
acronym were confined to a single section of the guidance, OMB did not 
find it necessary to include the acronym in this section. With the 
exception of simplifying the citation for FFATA (the Transparency Act), 
OMB included acronyms in this section in the final guidance as 
proposed.

Section 200.1--Definitions

    In section 200.1, OMB proposed to remove several definitions that 
were used only once or on a limited basis and instead moved such 
definitions to the appropriate section of the guidance where they 
appear. OMB also proposed deleting the definition of Federal awarding 
agency, which OMB incorporated within the definition of Federal agency. 
OMB also proposed adding several new definitions of commonly used terms 
including continuation funding, for-profit organization, key personnel, 
participant, and prior approval. OMB also proposed 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 supplies to $10,000, and the definition of modified total 
direct costs, under which OMB proposed to exclude subaward costs above 
$50,000, as compared to $25,000 in the prior version of the guidance. 
OMB also proposed to revise several definitions for other reasons, 
including cost sharing, Federal agency, Federal award date, Federal 
financial assistance, financial obligations, improper payment, Indian 
Tribe, intangible property, participant support costs, period of 
performance, prior approval, questioned costs, real property, 
recipient, special purpose equipment, subaward, and termination.
    OMB received many comments on the definitions in this section, 
including some suggestions for new definitions and other potential 
changes for future updates. OMB also received a few comments 
recommending the deletion of definitions and moving them to applicable 
sections of the guidance. Comments received on specific definitions and 
OMB's responses are provided below. OMB attempted to incorporate public 
comments where appropriate.
    Advance Payment: OMB received one comment suggesting that this 
definition exclude the reference to subrecipients as a disburser of 
funds. OMB disagrees with the commenter. Like recipients, subrecipients 
also disburse funds for program purposes. For example, subrecipients 
disburse cash for property and services. Accordingly, OMB finds this 
change is unwarranted and revised the definition as proposed.
    Advisory Council: OMB received a suggestion to include a definition 
for advisory council in this section, which is only defined in section 
200.422. OMB

[[Page 30057]]

did not add a definition for this term. OMB is limiting the definitions 
to those terms used consistently throughout the guidance.
    Bad Debt: OMB received a suggestion to include a definition for bad 
debt in this section, which is only defined in section 200.426. OMB did 
not add a definition for this term. OMB is limiting the definitions to 
those terms used consistently throughout the guidance.
    Beneficiary: OMB received several comments suggesting that OMB 
define the term beneficiary. OMB did not propose to define the term, 
the meaning of which can vary widely between Federal agencies as well 
as within agencies between assistance programs. OMB defers to Federal 
agencies to determine who is or is not a beneficiary under their 
respective programs consistent with law. The definition of participant 
and participant support costs in this guidance is not intended to 
include beneficiaries. For the reasons summarized here, OMB defers to 
Federal agencies on the use and meaning of this term consistent with 
law for their programs.
    Cognizant Agency for Audit: One commenter asked OMB to clarify 
whether there is a list of cognizant agencies for audit. The commenter 
noted that this information is not available on the Federal Audit 
Clearinghouse (FAC) website. OMB revised the definition to clarify that 
the FAC website provides a list of Federal agency Single Audit contacts 
and not a list of cognizant agencies for audit.
    Conditional Title: A commenter asked OMB to include the definition 
of conditional title in section 200.1, which is currently defined in 
section 200.313. OMB did not add a definition for this term. OMB is 
limiting the definitions to those terms used consistently throughout 
the guidance.
    Conference: Another commenter asked OMB to define the term 
conference in section 200.1 because it is only defined in section 
200.313. OMB did not add a definition for this term. OMB is limiting 
the definitions to those terms used consistently throughout the 
guidance.
    Construction: OMB received two comments requesting a definition of 
the term construction. OMB did not add a definition for this term. OMB 
is limiting the definitions to those terms used consistently throughout 
the guidance. OMB also did not define this term in part 200 because OMB 
did not want to inadvertently impact the implementation of Buy America 
requirements under part 184, which incorporate definitions from part 
200, but which are not the focus of this update.
    Contingency Provisions: One commenter asked OMB to include the 
definition of contingency provisions or costs in section 200.1. OMB did 
not add a definition for this term. OMB is limiting the definitions to 
those terms used consistently throughout the guidance.
    Continuation Funding: One comment expressed concern that the 
proposed definition of continuation funding did not adequately capture 
the distinction between an agency's exercise of its discretion when 
making an award and subsequent determinations by the agency, pursuant 
to terms and conditions of the award, to provide funding for additional 
budget periods for that same award. In the final guidance, OMB revised 
the definition of continuation funding to simply mean ``the second or 
subsequent budget period within an identified period of performance.'' 
The proposed reference to a ``discretionary decision by a Federal 
agency'' is no longer included in the definition. Depending on the 
assistance program and the terms and conditions of the Federal award, 
agency discretion may be involved or legally available on whether to 
provide continuation funding. However, considering the potential for 
variation among Federal agencies and programs, OMB did not find it 
necessary to address this topic directly in the final definition of 
continuation funding.
    Contract: OMB made a minor revision to this term to clarify that 
contracts are utilized for conducting ``procurement transactions'' in 
general and are not limited to only purchasing ``property and 
services.''
    Conviction: A commenter asked OMB to harmonize the definition of 
conviction across the guidance. The commenter noted that the definition 
of this term varies in different sections. For example, different 
definitions are used in sections 200.435(a)(1), 180.920, and 182.615. 
OMB did not add a definition for this term in part 200. OMB is limiting 
the definitions in section 200.1 to those terms used consistently 
throughout the part 200 guidance. For the purposes of this update, OMB 
did not find it necessary to provide a single definition of this term 
applicable across all parts of the OMB guidance in 2 CFR.
    Cooperative Agreement: OMB received several comments requesting 
clarification on the relationship between parties under both grants and 
cooperative agreements. OMB agrees with commenters that additional 
clarity is warranted and made minor clarifying revisions in the final 
guidance.
    Cooperative audit resolution: As proposed, OMB moved this 
definition to section 200.513(c), which outlines Federal agency 
responsibilities for audits. Considering its limited use in the 
guidance, OMB found it easier for the reader in this case if the 
definition is included in the same section where the responsibilities 
are outlined.
    Cost of Idle Facilities: One commenter asked OMB to insert a 
definition of cost of idle facilities in section 200.1 because a 
definition is provided in section 200.466(a)(4). OMB did not add a 
definition for this term. OMB is limiting the definitions to those 
terms used consistently throughout the guidance.
    Cost objective: OMB made a minor revision to this term by removing 
``((Facilities and Administration (F&A))'' after ``indirect'' cost. The 
more general term ``indirect costs'' is not necessarily limited in all 
cases to the more specific F&A category. The definition of indirect 
cost now explains that the term facilities and administrative (F&A) 
cost is often used to refer to indirect costs by Institutions of Higher 
Education.
    Cost sharing: In the proposed guidance, OMB proposed minor 
revisions to this term, including clarifying that cost sharing includes 
matching. OMB made changes to the definition as proposed.
    Credible Evidence: At least one commenter asked OMB to provide a 
definition of credible evidence. OMB did not find it necessary to 
define the term in section 200.1. OMB intends to generally align the 
meaning of credible evidence under the Uniform Guidance in part 200 
with the existing meaning under the FAR. See 73 FR 67064 (Nov. 12, 
2008) (explaining reasons for selecting the term ``credible evidence'' 
including discussion of alternatives considered). This topic is 
discussed further in the context of section 200.113 below.
    Data Management and Sharing Costs: One commenter asked OMB to add a 
definition of data management and sharing costs, which appears in 
section 200.455. OMB did not add a definition for this term. OMB is 
limiting the definitions to those terms used consistently throughout 
the guidance.
    Depreciation: One commenter asked OMB to add a definition of 
depreciation, which is used in section 200.436(a). OMB did not add a 
definition for this term. OMB is limiting the definitions to those 
terms used consistently throughout the guidance.
    Disallowed Cost: Six commenters asked OMB to restore the version of 
disallowed cost under the prior version of the guidance, which is 
limited to costs determined to be unallowable in

[[Page 30058]]

accordance with applicable Federal statutes, regulations, or the terms 
and conditions of the Federal award. OMB agrees with commenters and 
restored that language in the final guidance.
    Encumbrance: Several commenters asked OMB to add a definition of 
encumbrance in section 200.1 in place of the proposed definitions in 
sections 200.311, 200.313, and 200.315. OMB discusses this topic 
further in those sections. Other commenters noted certain deficiencies 
with OMB's proposed definition included in sections 200.311, 200.313, 
and 200.315. For example, a commenter asked OMB to address the 
difference between encumbrances and ``pre-existing encumbrances.''
    OMB did not add a definition of encumbrance in section 200.1. OMB 
also removed its proposed definition from the later sections of the 
preamble. Like the prior version of the guidance, the term 
``encumbrance'' is not formally defined in the final guidance text. 
OMB's decision was based in part on comments expressing concern that 
the proposed definition may not fit equally well in all contexts under 
part 200 in which it could be applied. For the present, OMB did not 
attempt to revise its definition to effectively address all scenarios 
and potential concerns.
    For future updates, OMB will again consider exploring this topic 
and providing a definition. OMB may consider providing a single 
definition of this term or providing separate definitions in the 
specific sections in which it is used. OMB cautions, however, that its 
decision not to provide a definition of this term should not be 
interpreted to indicate any particular policy intent in the sections in 
which the terms ``encumber'' or ``encumbrance'' are used. For example, 
OMB's decision to remove the proposed definition is not based on any 
single comment received in response to the proposed guidance. Removing 
the definition also does not indicate that OMB now disagrees with its 
proposed definition, which may be reasonable to use in many contexts. 
OMB will continue to evaluate what definition, if any, should be 
provided in future updates to the Uniform Guidance.
    Equipment: OMB received three comments requesting that the 
threshold for equipment be raised above $10,000. OMB proposed to raise 
the threshold to $10,000 in the proposed guidance. OMB finds that an 
additional increase is not warranted at this time and revised the 
guidance as proposed.
    Expenditures: OMB proposed to revise this definition. One commenter 
asked OMB to restore a definition closer to the original, including 
restoring the reference to a ``project or program'' under a Federal 
award. OMB agrees with the comment and restored the use of ``project or 
program'' to the definition.
    Facilities: A commenter asked OMB to include a definition of 
facilities, which is used in section 200.446(a)(1). OMB did not add a 
definition for this term. OMB is limiting the definitions to those 
terms used consistently throughout the guidance.
    Federal Agency: OMB received two comments indicating that the new 
definition of Federal Agency was unclear. OMB agrees with commenters 
that the structure of the proposed definition could cause confusion. To 
simplify, OMB now defines the term to mean an ``agency'' as defined at 
5 U.S.C. 551(1) and further clarified by 5 U.S.C. 552(f). The 
definition further explains that the term generally refers to the 
agency that provides a Federal award directly to a recipient unless the 
context indicates otherwise. OMB incorporated these revisions in the 
final guidance. Based on this change, OMB eliminated the term ``Federal 
awarding agency,'' which no longer appears in the guidance text.
    Federal Award: One commenter suggested revising paragraphs (1)(i) 
and (1)(ii) using both the terms recipient and subrecipient, rather 
than just recipient in (1)(i) and non[hyphen]Federal entity in (1)(ii). 
The commenter stated that this would more clearly identify the types of 
entities covered as well as provide flexibility should an agency wish 
to make subparts A through E applicable to other types of entities. OMB 
disagrees with the commenter that further clarification is needed for 
paragraph (1)(i) at this time. OMB retained the language from the 
proposed and prior versions of the guidance, which is widely known and 
understood in the Federal financial assistance community. OMB also did 
not further revise paragraph (1)(ii) from the proposed or prior version 
of the guidance, which refers to a cost-reimbursement contract under 
the FAR. In this case, OMB retained the original term non-Federal 
entity.
    Another commenter asked OMB to clarify the distinction between a 
grant and contract based on ambiguity presented in paragraphs (1) and 
(3). Paragraph (3) of the definition of Federal award refers to 
contracts that a ``Federal agency uses to buy goods or services,'' 
which generally would be governed by the FAR. However, paragraph 
(1)(ii) of the definition helps to clarify that a cost-reimbursement 
contract awarded under the FAR to a non-Federal entity may be subject 
to certain specified provisions under part 200. This is more 
specifically described in section 200.101, which is referenced in 
paragraph (1)(ii). This is a long-standing feature of the definition of 
Federal award and section 200.101, which is not newly proposed by OMB 
in this update. OMB did not propose changes to this element of the 
definition and does not make any further changes in the final guidance.
    Another commenter recommended that the definitions of Federal 
award, Federal financial assistance, Federal program, and grant 
agreement all be revised to specifically exclude funds and activities 
associated with self-determination compacts between Indian Tribes and 
the Federal government. The existing definitions do not provide the 
requested exclusion, nor did OMB propose to add the exclusion in the 
proposed guidance. OMB may consider this comment for future updates, 
but made no change in the final guidance. Section 200.101(d) provides 
that statutes or Federal agency regulations may govern in circumstances 
where they conflict with the provisions of part 200. This existing 
provision of the guidance recognizes that the provisions of the Indian 
Self-Determination and Education and Assistance Act (ISDEAA), as 
amended (see 25 U.S.C. 5301-5423) may govern in some circumstances.
    Federal awarding agency: See discussion of the term Federal agency.
    Federal award date: OMB proposed minor revisions to this term, 
which it mostly included in the final guidance. In the final version, 
OMB deleted ``binding agreement'' following the word alternative in 
recognition that 31 U.S.C. 1501 does not require this in all cases. The 
relevant alternatives are listed in 31 U.S.C. 1501.
    Federal financial assistance: OMB proposed a minor change to the 
definition of the term ``Federal financial assistance.'' As with other 
provisions in subparts A through E, OMB proposed 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 prior version of the guidance. OMB included this change in the 
final guidance.
    Another commenter recommended that the definitions of Federal 
award, Federal financial assistance, Federal program, and grant 
agreement all be revised to specifically exclude funds and activities 
associated with self-determination compacts between Indian Tribes and 
the Federal government. See

[[Page 30059]]

OMB's response above under Federal award.
    Federal program: One commenter recommended that the definitions of 
Federal award, Federal financial assistance, Federal program, and grant 
agreement all be revised to specifically exclude funds and activities 
associated with self-determination compacts between Indian Tribes and 
the Federal government. See OMB's response above under Federal award.
    Financial obligations: A commenter asked OMB further clarify the 
definition of financial obligations by adding a table. OMB did not find 
this necessary or critical to understand the meaning of this term. In 
the final guidance, before the word ``result,'' OMB added the word 
``will.'' This change simply recognizes that expenditures are not 
always contemporaneous with the financial obligation. Rather, an 
obligation will often require a future--but not immediate--expenditure 
or outlay of funds.
    Fixed amount award: A commenter asked OMB to incorporate policy 
requirements for fixed amount awards into the definition. OMB disagrees 
that this is necessary in the definition section and did not make a 
change. Specific requirements for fixed amount awards are addressed 
later in the guidance.
    For-profit organization: OMB proposed to add a definition of this 
term in the proposed guidance. That definition is included in the final 
guidance.
    Fraud: A commenter asked OMB to include the definition of fraud in 
section 200.1 based on use of that term in 200.435. OMB did not add a 
definition for this term. OMB is limiting the definitions to those 
terms used consistently throughout the guidance.
    General Support Services: A commenter asked OMB to add a definition 
for general support services. OMB did not add a definition for this 
term. OMB is limiting the definitions to those terms used consistently 
throughout the guidance.
    Grant agreement: OMB received a couple of comments requesting 
further clarity on the relationship between parties under the 
definitions of grants and cooperative agreements. OMB agrees with the 
commenters and made minor clarifying revisions in the final guidance.
    Another commenter recommended that the definitions of Federal 
award, Federal financial assistance, Federal program, and grant 
agreement all be revised to specifically exclude funds and activities 
associated with self-determination compacts between Indian Tribes and 
the Federal government. See OMB's response above under Federal award.
    Idle Capacity: A commenter suggested including a definition for 
idle capacity based on its use in 200.446. OMB did not add a definition 
for this term in section 200.1. OMB is limiting the definitions to 
those terms used consistently throughout the guidance.
    Idle Facilities: A commenter suggested including a definition for 
idle facilities based on its use in 200.446(a)(2). OMB did not add a 
definition for this term in section 200.1. OMB is limiting the 
definitions to those terms used consistently throughout the guidance.
    Improper Influence: A commenter suggested including a definition 
for improper influence based on its use in section 200.450(b). OMB did 
not add a definition for this term in section 200.1. OMB is limiting 
the definitions to those terms used consistently throughout the 
guidance.
    Improper payment: A few commenters asked OMB to reinstate the 
previous definition of improper payment. OMB disagrees. As stated in 
the preamble for the proposed guidance, OMB proposed to shorten the 
definition of ``improper payment'' to ensure better alignment with in 
Appendix C to OMB Circular A-123, Requirements for Payment Integrity 
Improvement. OMB made changes to the definition as proposed. See also 
the definition of questioned costs, in which OMB clarifies that 
questioned costs are not considered improper until they are confirmed 
to be improper under A-123.
    Indian Tribe: OMB proposed minor revisions to this term. It 
includes the revised definition in the final guidance.
    Indirect cost: In the final guidance, OMB revised the definition of 
indirect cost to no longer include reference to facilities and 
administrative (F&A) cost directly in the name of the term itself. 
OMB's revision to the defined term has no substantive impact on how the 
term is applied under the final guidance relative to how it was applied 
under the prior version of the guidance. The term ``indirect cost'' 
continues to align with ``F&A costs.'' OMB explains within the 
definition that F&A costs and indirect costs are often used 
interchangeably at Institutions of Higher Education (IHE). OMB received 
multiple comments requesting this revision. OMB also received one 
comment that recommended amending the definition of indirect cost to 
note that the duplication of costs is unallowable. OMB did not find the 
latter change necessary in the context of this definition. Allowability 
is addressed later in the guidance.
    Indirect cost rate proposal: OMB received three comments that 
recommended adding ``or subrecipient'' to the definition of indirect 
cost rate proposal because indirect costs apply to both recipients and 
subrecipients. OMB acknowledges that one can be both a recipient and 
subrecipient and have a Federally negotiated rate. However, only 
recipients prepare proposals in accordance with the appendices. An 
organization that is exclusively a subrecipient would not negotiate a 
rate with a Federal agency under the appendices to this part.
    Information technology systems: One commenter requested inclusion 
of cybersecurity in the definition of information technology systems. 
Cybersecurity may already be included in the definition if provided 
through listed items such as software or firmware or a related 
procedure or service. OMB did not find it necessary to specifically 
list cybersecurity in this definition.
    Initial equity contribution: A commenter asked for a definition of 
initial equity contribution to be included in section 200.1 based on 
its use in 200.449(c)(7). OMB did not add a definition for this term in 
section 200.1. OMB is limiting the definitions to those terms used 
consistently throughout the guidance.
    Intangible property: A commenter expressed concern that the 
proposed inclusion of data under the definition of intangible property 
would make data subject to the requirements of section 200.315. OMB 
responds that data is included as an example under the definition of 
intangible property. Even under the prior definition, certain data 
could already have been considered intangible property and subject to 
section 200.315 if it met the criteria under the guidance. For example, 
section 200.315 refers to intangible property developed, or for which 
ownership was acquired, under a Federal award. With the exception of 
minor edits, OMB revised the definition as proposed.
    Key personnel: OMB proposed to add a definition for this term in 
the proposed guidance. OMB received several comments suggesting that 
the new definition caused confusion or was unclear. In the final 
guidance, OMB removes its proposed definition of this term in response 
to those comments. In section 200.308(f)(2), OMB clarified that, at 
least in the context of that provision, key personnel includes 
employees and contractors.

[[Page 30060]]

    Less-than-arm's-length: One commenter suggested including a 
definition of less-than-arm's-length in section 200.1 based on its use 
in 200.465(c). OMB did not add a definition for this term in section 
200.1. OMB is limiting the definitions to those terms used consistently 
throughout the guidance.
    Loan: In the final guidance, OMB added ``or subrecipient'' 
following recipient to recognize that subrecipients may also receive or 
administer loans.
    Local Partner: One commenter suggested including a definition of 
local partner. OMB did not add a definition for this term in section 
200.1. OMB is limiting the definitions to those terms used consistently 
throughout the guidance.
    Micro-purchase: A commenter asked OMB to revise the definition of a 
micro-purchase to aggregate the purchase of supplies needed over the 
life of a Federal award. Another commenter asked OMB to remove the 
language referring to an individual procurement transaction. OMB found 
that neither of these changes are necessary and revised the definition 
as proposed.
    Micro-purchase threshold: In the final guidance, OMB revised the 
definition of this term by revising language on the ceiling for the 
micro-purchase threshold. OMB received several comments noting that the 
definition of the micro-purchase threshold failed to recognize 
different ways of establishing higher rates under section 200.320. OMB 
agrees with commenters and revised the definition accordingly.
    Modified total direct costs (MTDC): A commenter suggested revising 
the definition to not require exclusion of the portion of each subaward 
above the threshold. Two commenters asked whether subcontracts would be 
included in the modified total direct costs definition based on earlier 
versions of the guidance. Several commenters sought clarification on 
the intended application of rental costs and patient care costs in the 
modified total direct cost definition and suggested that OMB define 
these terms. Another commenter suggested that OMB revise the definition 
of modified total direct cost to include the threshold amount for each 
year during the period of performance that the subaward is in effect. 
Several commenters also asked OMB to increase the threshold for each 
subaward to above $50,000.
    In the final guidance, OMB revised the definition as proposed. Many 
of the suggestions are beyond the scope of OMB's proposed revision to 
this definition, which was limited to increasing the threshold for the 
portion of each subaward that may be included from $25,000 to $50,000. 
As proposed, OMB retained the exclusion of the portion of each subaward 
above the threshold. OMB does not include subcontracts in the revised 
definition, which were removed in earlier versions of the guidance. OMB 
leaves this policy unchanged.
    Under the revised definition, only the first $50,000 of each 
subaward may be included--regardless of the period of performance of 
that subaward. OMB disagrees that recipients should be able to apply 
this threshold on an annual basis for subawards with longer periods of 
performance. OMB also disagrees with the proposal to further increase 
the threshold for each subaward. OMB finds that doubling the threshold, 
as proposed, is an appropriate increase for this update.
    Notice of Funding Opportunity: A commenter asked for clarity on 
what a pass-through entity should call a notice of funding opportunity 
(NOFO) as the definition does not include pass-through entities. 
Another commenter stated that the reference to subrecipient in the 
definition should be removed because Federal agencies do not select 
subrecipients.
    Regarding the first comment: a pass-through entity is not required 
to call a solicitation of subaward proposals by a specific name. On the 
second comment, although OMB agrees that Federal agencies do not 
directly select subrecipients under a NOFO, some NOFOs do provide 
guidance or information on how recipients should select subrecipients 
for a particular assistance program. For this reason, OMB retained the 
reference to subrecipient in the definition. OMB made changes to the 
definition as proposed.
    Participant: OMB proposed to add a definition of participant in the 
proposed guidance. OMB made a few revisions to the final definition to 
provide further clarification of its intent. For example, OMB 
restructured the definition to begin with an affirmative definition of 
a participant generally, before providing a negative definition of what 
a participant is not. The order was reversed in the proposed guidance. 
Other revisions are addressed below.
    Initially, the definition of participant cannot account for all 
variations on how participants are treated or defined by different 
Federal agencies or under specific assistance programs. For this 
reason, section 200.456 of the guidance specifies that the recipient 
must document its policies and procedures for making participant 
determinations. That section also provides that participant support 
costs must be treated consistently across all Federal awards. See also 
participant support costs below.
    One commenter suggested changing the reference to ``exchange 
students'' in the definition to just ``students.'' The commenter stated 
this would be simpler and, in most cases, more appropriate for Federal 
programs. The reference to exchange students was just one potential 
example of a participant, but OMB made this change in the final 
guidance.
    Another commenter stated the definition was unclear and overly 
broad. One commenter specifically pointed to the phrase ``playing a 
role in the overall program activities'' as overly broad and confusing. 
In addition to restructuring the definition, as explained above, OMB 
attempted to provide further clarity in the final definition. For 
example, OMB now begins the definition by stating that a participant is 
an individual participating in or attending program activities--but not 
an individual responsible for implementing those activities under the 
Federal award.
    Next, a commenter stated the definition should specify that 
individuals who attend trainings and conferences may be treated as 
participants. OMB agrees and included such individuals as examples of 
participants.
    Another commenter stated that the definition should exclude project 
personnel and those who commit effort on the implementation of the 
Federal award. OMB agrees and revised the definition. Another commenter 
asked OMB to replace ``staff member'' in the proposed definition with 
``employee.'' OMB did not find this change was necessary.
    One commenter stated the definition should provide that 
beneficiaries are also participants. OMB disagrees that this would 
always be true and does not consider the two terms to be equivalent or 
synonymous. Identification of beneficiaries is at the discretion of the 
Federal agency making the award to the extent consistent with 
authorizing law. See also discussion under the term ``beneficiary'' 
above, which is discussed in this preamble but not defined in section 
200.1.
    A commenter also asked OMB to clarify that the examples are 
provided for illustrative purposes only and that the classification is 
at the discretion of the recipient. Partially in response to this 
comment, OMB revised and restructured the definition to better identify 
where it is providing definitional elements of a participant and where 
it is just providing examples

[[Page 30061]]

that may fit those elements. OMB also revised some of the examples 
provided.
    Other commenters asked OMB to provide additional examples of 
participants within the definition. OMB finds that an exhaustive list 
of examples is not necessary. For example, although examples such as 
teachers, scholars, or scientists may be participants in some cases, 
they could also be employees, consultants, or beneficiaries in others. 
OMB sought an appropriate balance in the final definition by providing 
a few illustrative examples but not providing--or attempting to 
provide--an exhaustive list.
    Participant Support Costs: One commenter asked OMB to revert to the 
prior definition of participant support costs. Another commenter sought 
clarification on whether the inclusion of stipends as an example in the 
definition indicates that stipends are considered participant support 
costs. Another comment asked OMB to provide examples of types of 
participants, associated with typical participant support costs. 
Another commenter asked for clarification on the inclusion of temporary 
dependent care in the participant definition. Specifically, the 
commenter questioned whether the use in this definition was intended to 
be synonymous with the use of the same term in section 200.475(c)(1).
    OMB finds the proposed text for this definition was sufficiently 
clear and did not make significant changes. Only stipends paid to 
participants are considered participant support costs. OMB found that 
it was not necessary to specifically mention training and conferences 
in the definition as the costs may also be incurred in other contexts 
when allowed under the guidance. Participant support costs are any 
costs that are paid directly to or on behalf of a participant. OMB 
clarified the reference to ``temporary'' dependent care. Section 
200.475 applies to dependent care for employees, not participants.
    Pass-through entity: OMB received several comments indicating that 
the definitions of recipient, subrecipient, and pass-through entity 
were unclear. OMB proposed only minor revisions to the definition of 
pass-through entity and disagrees with commenters that the term is 
unclear. While traditionally pass-through entity specifically referred 
to a non-Federal entities under earlier versions of the guidance, other 
entities may also be considered pass-through entities based on how a 
Federal agency implements the guidance for its programs.
    In the final guidance, to address potential confusion on how the 
term will be applied, OMB added language to clarify that the authority 
of the pass-through entity under part 200 flows through the subaward 
agreement between the pass-through entity and subrecipient. OMB added 
this language to ensure that a pass-through entity will not erroneously 
apply the authorities available to the Federal agency under part 200. 
For example, if a provision in part 200 allows ``the Federal agency or 
pass-through entity'' to provide an approval or authorization for a 
``recipient or subrecipient,'' the pass-through entity only has 
authority to provide the approval or authorization to its subrecipient. 
In this situation, the pass-through entity cannot provide the approval 
or authorization to itself, but rather would need to obtain approval or 
authorization from the Federal agency. For a more specific example, 
under section 200.343, the pass-through entity is not permitted to 
authorize its own costs for its own primary Federal award. The pass-
through entity may expressly authorize these costs for subawards only.
    Performance Based Payment: One commenter asked OMB to include a 
definition of performance based payment. OMB did not add a definition 
for this term in section 200.1. OMB is limiting the definitions to 
those terms used consistently throughout the guidance.
    Period of performance: OMB proposed revisions to this term, but now 
provides a simplified definition in the final guidance. The final 
definition reinstates some familiar language from the definition in the 
prior version of the guidance, which OMB had proposed to remove. As now 
revised, period of performance means the time interval between the 
start and end date of a Federal award, which may include one or more 
budget periods. The final definition also recognizes that 
identification of the period of performance in the Federal award 
consistent with section 200.211(b)(5) does not commit the Federal 
agency to fund the award beyond the currently approved budget period. 
The period of performance is also sometimes referred to by Federal 
agencies as the performance period.
    Personally Identifiable Information (PII): Within the definition of 
Personally Identifiable Information (PII), in the final guidance OMB 
deleted the text defining Public PII. The term ``Public PII'' is never 
used in the guidance text. OMB seeks to avoid confusion by defining a 
term in section 200.1 that is never used in the body of the guidance--
which could potentially prompt questions on whether Public PII should 
be treated differently than normal PII. The deletion of this text on 
Public PII does not represent a substantive change to the policy in the 
guidance. The remaining text in the definition continues to explain 
that some PII can be available in public sources.
    Post-retirement health plan: One commenter asked OMB to include a 
definition of post-retirement health plan in section 200.1 based on its 
use in 200.431(h). OMB did not add a definition for this term in 
section 200.1. OMB is limiting the definitions to those terms used 
consistently throughout the guidance.
    Prior approval: Several commenters asked OMB to clarify the 
definition of prior approval by adding the words ``obtained in 
advance.'' Some commenters also asked OMB to clarify and specify when 
ratification (after the fact approval) would be permissible. One 
comment requested that OMB specify that approval of the project 
narrative or budget constitutes prior written approval. A different 
comment requested that the guidance limit Federal agency or pass-
through entity review of requests for budget or program revisions to 15 
days. Several comments questioned whether the definition may cause 
misunderstanding for pass-through entities and subrecipients on who can 
approve which action.
    OMB added the words ``obtained in advance'' to the definition to 
clarify that, generally, obtaining approval in advance is a 
definitional element of prior approval, which is required where stated 
in the guidance. However, this change is not intended to prohibit 
Federal agencies from using appropriate procedures to retroactively 
provide prior approval, if necessary, under a Federal award in specific 
cases. OMB does not directly address this topic in the definition of 
the term, but Federal agencies may exercise reasonable discretion in 
providing ``after the fact'' prior approval when warranted on a case-
by-case basis under Federal awards and otherwise consistent with law.
    Guidance provided in section 200.308 is already responsive to the 
comment regarding circumstances in which approval of the project 
narrative or budget may constitute prior written approval. In response 
to another commenter, OMB is not establishing a specific timeframe in 
which an agency should provide prior approval, but may consider the 
recommendation of a 15-day period in future updates. Regarding 
commenters expressing confusion on when pass-through entities may 
provide prior approval, in many instances the guidance text 
specifically states whether

[[Page 30062]]

the Federal agency or pass-through entity may provide the approval. In 
circumstances in which pass-through entities may provide prior 
approval, they have the same responsibility for monitoring and 
oversight as a Federal agency does. In some circumstances a change 
under a subaward will be significant enough to also require a change to 
the recipient's Federal award, which would also require prior approval 
by the Federal agency.
    Program Evaluation: Two commenters asked OMB to define the term 
program evaluation to align with OMB Circular A-11. OMB did not add a 
definition for this term directly in section 200.1. OMB is limiting the 
definitions to those terms used consistently throughout the guidance.
    Program Income: A commenter observed that usage of the phrase 
``under a Federal award'' in the illustrative examples of program 
income was confusing and needed clarification. The phrase was used for 
some examples but not others. In response to the comment: the key 
definitional elements of program income are provided in the first 
sentence of the definition, including explaining its connection to a 
Federal award. But the repetition of ``Federal award'' in certain 
examples helps to provide context. For example, in relation to certain 
items, the examples identify program income ``acquired'' under Federal 
awards, ``fabricated'' under a Federal award, and ``made with'' Federal 
award funds. Deleting this language would make the examples less clear. 
Thus, OMB retains reference to ``Federal award'' in the case of some 
example, but not all, when it helps to provide context and explain what 
OMB means by the example.
    Protected Personally Identifiable Information (Protected PII): In 
the final guidance, OMB made minor revisions to the definition of 
Protected Personally Identifiable Information (Protected PII) to more 
accurately reflect the meaning of this term.
    Questioned Cost: Multiple commenters objected to the deletion of 
the statement that questioned costs are not improper payments until 
reviewed and confirmed to be improper payments. No policy change was 
intended by the deletion. OMB restored the original statement within 
the definition of questioned cost at paragraph (6).
    Two comments expressed concern about situations in which an auditor 
identifies questioned costs, the auditee locates additional 
documentation, and the auditor reports the questioned costs without 
considering the documentation. This comment recommended stating more 
specifically when adequacy of documentation should be assessed. OMB 
finds that it is not necessary to specifically address in the guidance 
the point in time at which this would occur.
    Several commenters expressed concern that introducing the concept 
of ``likely questioned costs'' could put auditees at risk from 
speculative or unsubstantiated audit findings. OMB responds that the 
concept of likely questioned costs is not new. The definition now 
appearing at section 200.1 is from section 200.516 in prior versions of 
OMB's guidance. It is also based on AU-C 935.11 in the auditing 
standards of the American Institute of Certified Public Accountants 
(AICPA). The requirements associated with this concept are not new, 
including the requirement for auditors to consider the likely 
questioned costs in formulating their opinion on compliance. OMB merely 
moved the existing language from section 200.516 to section 200.1. 
Speculative or unsubstantiated audit findings would not align with the 
AICPA's auditing standards.
    Several commenters recommended that ``known questioned cost,'' 
rather than ``questioned cost,'' should be the defined term and used as 
a basis for defining the related term, ``likely questioned cost.'' OMB 
is not adopting this recommendation at this time. OMB did not find 
reason to restructure the definition in this way through this update, 
but may consider the suggestion in the future.
    Several commenters suggested categorizing the compliance 
requirements in the compliance supplement (see definition in section 
200.1) as monetary or non-monetary to facilitate consistent reporting 
of questioned costs. In paragraph (3)(ii) of the definition, OMB 
clarified that there is no questioned cost solely because of 
noncompliance with the ``reporting type of compliance requirement'' (as 
described in the compliance supplement) if this noncompliance does not 
affect the amount expended or received from the Federal award.
    Several commenters also suggested clarifying that there is no 
questioned cost solely because of a misclassification of costs. OMB 
agrees that in some cases this may be consistent with the intent of 
paragraph (3)(ii), as revised, but also observes that misclassified 
costs may sometimes affect the amount expended and thus be considered 
questioned costs. This may occur, for example, if the misclassification 
resulted in noncompliance with matching requirements.
    Real Property: OMB received a comment on proposed revisions to the 
definition of real property. The commenter questioned the proposed 
addition of ``legal interests in land.'' The commenter stated these 
would only be considered intangible rights or intangible property, but 
not real property. In response to the comment, many Federal agency 
regulations recognize that ``real property'' may include legal 
interests in land.\2\ Black's Law Dictionary also recognizes that real 
property ``can be either corporeal (soil and buildings) or incorporeal 
(easements).'' (11th ed. 2019). In the final guidance, OMB decided to 
retain the reference to ``legal interests in land'' followed by a short 
list of examples. Relative to the proposed guidance, OMB only made 
minor technical edits. As applied to other sections of the guidance, 
the revised definition clarifies, for example, that if an easement is 
acquired under a Federal award, the recipient must not dispose of the 
easement while it is being used for the originally-authorized purpose 
except as provided by the Federal agency--or as otherwise allowed under 
relevant sections of the guidance. See 2 CFR 200.311(b). It is possible 
that not all provisions in the Uniform Guidance that apply to real 
property will equally apply to all legal interests in land. For 
example, section 200.310 on insurance coverage may have limited 
applicability in certain cases if insurance coverage would not 
ordinarily apply to a particular legal interest in land. Federal 
agencies may exercise discretion in appropriate application of the 
revised definition consistent with law.
---------------------------------------------------------------------------

    \2\ See, e.g., the General Services Administration (GSA) 
regulation applicable to GSA's real property policies at 41 CFR 102-
71.20 (Real property means ``[a]ny interest in land, together with 
the improvements, structures, and fixtures located thereon . . . and 
appurtenances thereto . . .''). See also, e.g., 43 CFR 423.2 (``Real 
property means any legal interest in land . . .''); 23 CFR 710.105 
(``Real property . . . means any interest in land and any 
improvements thereto . . .''); 10 CFR 770.4 (``Real Property means 
all interest in land . . .''); 25 CFR 900.6 (``Real property means 
any interest in land together with the improvements, structures, and 
fixtures and appurtenances thereto''); 25 CFR 170.5 (``Real property 
means any interest in land together with the improvements, 
structures, fixtures and appurtenances''); 26 CFR 1.856-10 
(identifying ``intangible assets that are real property or interests 
in real property'').
---------------------------------------------------------------------------

    Recipient: Some commenters asked OMB to amend the proposed 
definition of recipient (and subrecipient) to explain specifically 
which entities are recipients (or subrecipients). OMB also received 
requests to further define the word entity in this and other 
definitions. These changes are not necessary. Applicability of the 
guidance is addressed separately in section 200.101. Subparts A through 
F always

[[Page 30063]]

apply to Federal agencies that make Federal awards to non-Federal 
entities. Federal agencies may also apply subparts A through E to 
certain other entities as provided in section 200.101. Because the 
applicability will not always be the same for all Federal agencies and 
programs, OMB is not specifically listing which entities are recipients 
(or subrecipients) within the definition section. More detailed 
discussion on section 200.101--and the meaning of applying the guidance 
to certain entities--is provided in this preamble below. OMB disagrees 
that further definition of the word ``entity'' is needed to understand 
the meaning of the terms recipient and subrecipient under part 200. 
Section 200.101, on applicability, is the appropriate place to find 
information on the entities to which part 200 may be applied by Federal 
agencies.
    Renewal award: OMB proposed minor revisions to the definition of 
this term. In the final guidance, OMB revised the definition to remove 
language specifying that a renewal award is made ``after the expiration 
of'' a Federal award. In practice, renewal awards can be executed prior 
to the actual expiration of the award that they follow. The revised 
definition explains that the start date for a renewal award 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.
    Simplified acquisition threshold: A commenter requested clarity on 
whether the capitalization of this term in sections outside of section 
200.1 was intentional and indicated a different meaning. OMB did not 
intend for capitalization to indicate different meanings for this term 
within part 200. OMB removed the inconsistent capitalization in other 
sections of the guidance.
    Special Purpose Equipment: OMB received a comment suggesting that 
the use of ``other technical activities'' is overly broad and could be 
interpreted to be overly inclusive of items that would otherwise be 
considered general purpose equipment. OMB changed the text to read 
``other similar technical activities.'' OMB considered referring to 
``other unique and specific activities'' but decided that language 
could be too narrow because it would not necessarily apply to the 
listed examples of special purpose equipment, including microscopes. 
OMB finds the general definition and listed examples provide the 
information needed to exercise appropriate discretion on distinguishing 
between items that constitute ``special purpose'' and ``general 
purpose'' equipment.
    Strategic Sourcing: A commenter suggested including a definition of 
strategic sourcing in section 200.1 because it appears in section 
200.318. OMB did not add a definition for this term in section 200.1. 
OMB is limiting the definitions to those terms used consistently 
throughout the guidance.
    Subaward: A commenter expressed confusion regarding the statement 
that a subaward ``may be provided through any legal agreement, 
including an agreement the pass-through entity considers a contract.'' 
In the final definition, OMB further clarifies its intent. OMB explains 
that criteria for distinguishing between subawards and contracts is 
provided at section 200.331. Some of this language just restored 
language from the prior version of the guidance.
    OMB also received several comments recommending the definition of 
subaward clarify if payments to beneficiaries that are not individuals 
are also excluded. OMB agrees the language was potentially misleading 
and clarified that subawards do ``not include payments to a contractor, 
beneficiary, or participant.''
    Subcontract and Subcontractor: Two commenters asked OMB to add 
definitions for subcontract and subcontractor. OMB did not add a 
definition for these terms in section 200.1. OMB finds that the terms 
are clear from the context in which they are used in the guidance and 
extend logically from the definition of ``contract'' and 
``contractor.'' Thus, additional definitions are not needed at this 
time.
    Subrecipient: OMB received a request to clarify if only individual 
beneficiaries are excluded in the term subrecipient. OMB agrees this 
feature of the definition was potentially confusing and amended the 
final language to simply explain that the term ``does not include a 
beneficiary or participant.'' Consistent with the definition of 
recipient, OMB did not add further information on the meaning of the 
word entity. On this topic, see further discussion in this preamble 
above on the meaning of recipient.
    Supply: OMB proposed revisions to this term, including an increased 
threshold of $10,000. OMB included the revised definition in the final 
guidance.
    Telecommunications cost: A commenter requested OMB to clarify if 
telecommunications cost includes the cost of using other types of 
devices including satellites, radio, TV, telegraphs, and others. OMB 
responds that the examples provided in the guidance are illustrative 
and not exhaustive. OMB is not adding other examples to the definition, 
but recognizes that other communication technologies may also fit under 
the definition.
    Temporary dependent care cost: A commenter asked OMB to defined 
temporary dependent care cost in section 200.1 because it is defined in 
section 200.475(c)(1). OMB did not add a definition for this term in 
section 200.1. OMB is limiting the definitions to those terms used 
consistently throughout the guidance.
    Termination: A few commenters asked OMB to further clarify the 
meaning of ``discontinue'' and ``discontinuing'' in the proposed 
definition of ``termination,'' which they stated OMB had used in 
different and conflicting ways. OMB simplified the definition in the 
final guidance. As now revised, 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. The final guidance also explains that termination does 
not include discontinuing a Federal award due to a lack of available 
funds. See also discussion in this preamble below on changes OMB made 
to the termination provision at section 200.340 in the final guidance.
    Third-party in-kind contribution: One commenter asked OMB to revise 
paragraph (1) of the definition by either removing ``Federal award'' 
from the sentence or adding ``that is funded by a'' before Federal 
award. Another commenter asked OMB to revise paragraph (1) to state: 
``Benefit a federally-assisted project or program or Federal award.'' 
OMB revised the definition based on consideration of these comments to 
clarify its intent.
    Total cost: A commenter asked OMB to include a definition of total 
cost in section 200.1 because it is defined in section 200.402. OMB did 
not add a definition for this term in section 200.1. OMB is limiting 
the definitions to those terms used consistently throughout the 
guidance.
    Unliquidated financial obligation: A commenter stated that this 
definition should be further clarified. OMB agrees and clarified the 
final sentence addressing reports prepared on an accrual basis. For 
reports prepared on an accrual basis, the final guidance now clarifies 
that these are financial obligations incurred by the recipient or 
subrecipient but for which expenditures have not been recorded.

[[Page 30064]]

Subpart B--General Provisions

Section 200.100--Purpose

    OMB proposed multiple clarifying and plain language revisions in 
this section. OMB received multiple comments requesting reinstatement 
of the word ``inconsistent'' in paragraph (a) and the ``fair share'' 
language in paragraph (c).
    OMB Response: OMB does not find the changes requested by these 
commenters to be necessary in this section. OMB disagrees that the word 
``inconsistent'' is needed to understand its intended policy in 
paragraph (a)(1). Additional requirements are only allowed as described 
in this paragraph. The fair share language in paragraph (c) of the 
prior version of the guidance recognized a general background principle 
used in the design of the cost principles in subpart E. This language, 
on its own, did not require agencies to actually take specific actions. 
By removing this language, OMB did not intend to indicate that Federal 
awards no longer need to bear their fair share of cost. Rather, OMB 
decided to simplify the guidance text in this section and allow the 
more specific and substantive cost principles in subpart E to speak for 
themselves on this topic. This general principle used in the design of 
the cost principles does not need to be stated explicitly in subpart B. 
In paragraph (d) of section 200.100, OMB made a minor edit to change 
``administering'' to ``expending.''

Section 200.101--Applicability

    In section 200.101, OMB proposed to clarify the applicability of 
the guidance. In OMB's proposal, all subparts of part 200 continued to 
apply to Federal agencies that make Federal awards to ``non-Federal 
entities.'' Federal agencies also retained discretion under OMB's 
proposal 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 proposed 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. 
Additionally, OMB proposed to convert the applicability table in 
paragraph (b) of section 200.101 into narrative form.
    OMB received several comments that expressed support for proposed 
changes in this section and a few provided suggestions for future 
updates. Other commenters provided a variety of suggestions for further 
revisions to OMB's current update of this section. Two commenters asked 
whether OMB will list every program considered exempt from the 2 CFR 
guidance. Additionally, OMB received a comment asking if paragraph 
(a)(2)--calling for Federal agencies to apply the requirements to all 
recipients in a consistent and equitable manner--should be revised to 
also include subrecipients. OMB also received some questions on the 
application of subparts A through E by an awarding Federal agency to 
other Federal agencies.
    One commenter sought clarification regarding whether subpart E or 
FAR 31.2 is the primary guide of cost principles for for-profit 
entities. Another commenter recommended that subpart F should not apply 
to fixed amount awards based on the commenter's interpretation that 
subparts C, D, and E do not apply to these awards. OMB received one 
comment suggesting that some sections should not be applied to foreign 
public entities or foreign organizations considering that some 
exemptions from the guidance are necessary for these entities. OMB 
received a few comments suggesting restoration of an applicability 
table instead of presenting this information in narrative form.
    OMB also received a comment inquiring about FAR contracts and how 
they would be included within the scope of a single audit under the 
current guidance. The commenter asked if this point could be clarified 
in section 200.101. OMB received one comment that requested the 
movement of the statement, ``rules flow down to recipients and 
subrecipients'' to General Applicability instead of Types of Awards. 
OMB received several questions inquiring as to when agencies should 
determine exceptions to the guidance and the date for which adoption of 
the guidance is enforced. OMB received a recommendation to remove the 
language ``and procurement contracts under the FAR and subcontracts 
under those contracts'' in paragraph (b), which the commenter stated 
could imply that procurement contracts are a type of Federal financial 
assistance. Another commenter recommended that the 2 CFR guidance be 
expanded to cover loans and benefits and that the title of references 
be changed from ``Grants and Agreements'' to ``Federal Financial 
Assistance.'' OMB received one comment inquiring if the guidance is 
applicable to inter-agency agreements.
    OMB Response: In the final guidance, paragraph (a) of section 
200.101 generally indicates how the guidance applies to Federal 
agencies making awards, and paragraph (a)(2) generally indicates which 
entities those Federal agencies may apply the guidance to. OMB first 
revised paragraph (a)(1) of section 200.101 to add a sentence 
clarifying the applicability of the final guidance to Federal agencies 
making awards. In paragraph (a)(2), OMB added a sentence to clarify the 
broad applicability of the guidance to non-Federal entities receiving 
awards. The remainder of paragraph (a)(2), which explains other 
entities that Federal agencies may apply the guidance to, was mostly 
included in the final guidance as proposed. OMB did strike one sentence 
on automatic application of the cost principles under the FAR to for-
profit organizations if the Federal agency does not apply the cost 
principles in subpart E to that entity. This change does not imply that 
Federal agencies making awards to for-profit organizations do not need 
to apply cost principles to those awards--or that for-profit 
organizations are not subject to cost principles in this scenario. 
Rather, instead of relying on the FAR to apply automatically in this 
case, the Federal agency will specify which cost principles apply in 
the terms and conditions of the award.
    OMB disagrees that further changes are needed to paragraph (a)(2). 
A commenter questioned whether the final sentence of that paragraph on 
consistent and equitable application of the guidance to all recipients 
should also reference subrecipients. OMB responds that the reference to 
recipients is sufficient for the purposes of the policy in this 
paragraph. In general, Federal agencies do not apply requirements in 
part 200 directly to subrecipients. Although OMB acknowledges Federal 
agencies apply the guidance indirectly to subrecipients--for example, 
through information contained in NOFOs, agency regulations or guidance, 
and the terms and conditions of Federal awards, which flow down to 
subrecipients--OMB did not find it necessary to include reference to 
subrecipients in this provision. See 2 CFR 200.101(b)(1) (as revised). 
The requested change could create confusion about the nature of the 
relationship between Federal agencies and subrecipients.
    OMB also received questions on the statement in paragraph (a)(2) 
that Federal agencies may apply subparts A through E to other Federal 
agencies. This is an existing feature of the prior version of the 
guidance, which was added by OMB in 2020. See 85 FR 49506 (Aug. 13, 
2020), at 49520. OMB's current plain language revisions throughout 
subparts A through E of part 200--replacing the term ``non-Federal

[[Page 30065]]

entity'' with ``recipient,'' ``subrecipient,'' or both--may present 
additional questions on how specific provisions apply or may apply to 
Federal agencies.
    In response to questions on this topic, OMB first reiterates, as 
explained above, that the revisions related to the use of the terms 
``non-Federal entity,'' ``recipient,'' and ``subrecipient'' do not 
directly change the existing scope or applicability of the guidance. 
Section 200.101 continues to provide Federal agencies discretion on 
whether to apply subparts A through E of part 200 to other Federal 
agencies. Next, OMB's 2020 preamble did not affirmatively require 
application of part 200 to Federal agencies; rather, it clarified that 
the Federal agencies ``may apply the requirements of . . . part 200 to 
other Federal agencies . . . to the extent permitted by law'' and ``as 
appropriate.'' 85 FR 49506 (Aug. 13, 2020), at 49520 (emphasis added). 
To the extent that applying part 200 as a whole, or a particular 
provision of part 200, to a Federal agency would conflict with 
applicable Federal law, those provisions should not be applied to the 
Federal agency. For example, applying both part 200 and provisions of 
the FAR would present certain conflicts.
    OMB also clarifies that its plain language revisions replacing 
``non-Federal entity'' with ``recipient,'' ``subrecipient,'' or both, 
are not intended to indicate that a Federal agency is a recipient of 
Federal financial assistance in any formal sense under Federal law when 
provisions of part 200 are applied to it.\3\ Just as a Federal agency 
did not become a ``non-Federal entity'' when the prior version of the 
guidance was applied to it, a Federal agency does not actually become a 
recipient of Federal financial assistance when the revised version of 
the guidance is applied. Unlike other entities--such as non-Federal 
entities and for-profit organizations--Federal agencies carrying out 
Federal program activities with Federal funds cannot fairly be 
described as ``recipients'' of Federal assistance.\4\
---------------------------------------------------------------------------

    \3\ See United States DOT v. Paralyzed Veterans of Am., 477 U.S. 
597, 612 (1986) (finding that program ``owned and operated'' by the 
United States ``is not `federal financial assistance' at all.''). 
See also Jacobson v. Delta Airlines, 742 F.2d 1202, 1213 (9th Cir. 
1984) (air traffic control and national weather service programs are 
owned and operated by the Federal government and therefore they are 
not recipients of federal financial assistance).
    \4\ Paralyzed Veterans, 477 U.S. at 612.
---------------------------------------------------------------------------

    OMB understands commenters' desire to seek additional guidance on 
the applicability of various section to foreign public entities and 
foreign organizations. However, the application of the guidance to such 
entities is at the discretion of Federal agencies.
    OMB also added a new paragraph (a)(4) in the final guidance. This 
new paragraph explains that throughout subparts A through E, when the 
word ``or'' is used between the terms ``recipient'' and 
``subrecipient,'' any requirements or recommendations in the relevant 
provisions of this part apply to the recipient, the subrecipient, or 
both, as applicable. The use of ``or'' between recipient and 
subrecipient does not mean that applicable requirements or 
recommendations only apply to one of these entities unless the context 
clearly indicates otherwise. OMB determined that this change was 
warranted to clarify its more extensive usage of these terms in part 
200 in this update. In final guidance, OMB relocated the proposed 
paragraph (b)(1) on use of ``must,'' ``should,'' and ``may,'' to a new 
location as paragraph (a)(3).
    Regarding the applicability table in the prior version of the 
guidance at paragraph (b), OMB disagrees that the table provided 
greater clarity. OMB made some technical edits to the narrative 
description of applicability under this section, but did not restore 
the table from the prior version of the guidance in the final version.
    In the final guidance, paragraphs (b) and (c) are now structured to 
address the applicability of part 200 to Federal financial assistance 
under paragraph (b) and contracts awarded under the FAR in paragraph 
(c). In both paragraphs, OMB generally sought to maintain alignment 
with the content of the prior version of the guidance, but did make 
some changes to clarify the prior guidance in some cases. The removal 
of the applicability table from the prior version of the guidance 
resulted in this restructuring. Paragraph (b) also continues to include 
language on requirements flowing down to recipients and subrecipients. 
In response to some commenters, OMB did not find the need to move this 
language to a different paragraph.
    OMB agreed with commenters on making changes to paragraph (b) to 
eliminate references to procurement contracts under the FAR, which were 
referenced in the applicability table in the prior version of the 
guidance. Except on the topic of audits, OMB struck language in 
paragraph (b) related to procurement contracts under the FAR and 
relocated this guidance to paragraph (c). Paragraph (c) in the prior 
version of the guidance already contained cost-reimbursement contracts 
under the FAR, but OMB now also incorporates the guidance from the 
applicability table on fixed-price contracts under the FAR in slightly 
modified form. OMB also clarified and streamlined some of the guidance 
in this paragraph. The guidance provides that in cases of conflict 
between the requirements of applicable portions of part 200 and the 
terms and conditions of the contract, the terms and conditions of the 
contract and the FAR prevail.
    In paragraph (b), OMB added guidance on applicability of the cost 
principles to fixed amount awards. Section 200.101(b)(4)(ii) now 
explains that only sections 200.400(g), 200.402 through 200.405, and 
200.407(d) from subpart E apply to fixed amount awards. This topic is 
discussed in more detail below. In response to the comment that subpart 
F should not apply to fixed amount awards based on applicability of 
other subparts to these awards, OMB disagrees. The audit requirement 
under subpart F continue to apply. The commenter's interpretation that 
subparts C, D, and E do not apply to fixed amount awards is also 
incorrect--although subpart E only has limited applicability to these 
awards as explained in the guidance text. Fixed amount awards must 
comply with applicable Federal statutes (including the Single Audit 
Act), regulations, and applicable provisions of part 200, as well as 
with the terms and conditions of the Federal award.
    Regarding comments seeking clarification of the applicability of 
part 200 to specific Federal assistance programs, OMB cannot list every 
program that may have a statutory exception to the guidance. Federal 
agencies can provide information to applicants and recipients on this 
topic.

Section 200.102--Exceptions

    In section 200.102, OMB proposed multiple clarifying revisions to 
improve agency and recipient understanding of the availability and use 
of exceptions to, or deviations from, OMB's Uniform Guidance in part 
200. A few commenters expressed support for the proposed changes.
    OMB received a request to explicitly create an exception to the 
competition requirements and Federal clause requirements for adhesion 
contracts. Additionally, two commenters noted concern about explicit 
authority for deviations where there is no statutory prohibition. They 
suggested that this could make the Federal award process more 
challenging.
    One commenter expressed concern over the removal of the requirement 
of maximum uniformity. Also, another commenter suggested that OMB 
clarify that the exception provision does not

[[Page 30066]]

apply to Project Labor Agreement (PLA) utilization, local hire 
preferences, scoring methods, organizing efforts, and employee 
misclassification.
    One commenter suggested OMB restore the text for this section from 
the prior version of the guidance. Another commenter suggested 
enhancing OMB's authority as the primary oversight entity.
    OMB Response: In the proposed guidance, OMB did not intend to 
change the policy in section 200.102 in a significant way. In the final 
version of the guidance OMB restored some language from the prior 
version of the guidance, but did not make a significant change on the 
policy for exceptions. The final version of the guidance in this 
section is structured in three paragraphs: OMB class exceptions are 
addressed in paragraph (a), statutory and regulatory exceptions are 
addressed in paragraph (b), and Federal agency exceptions are addressed 
in paragraph (c).
    OMB removed references to ``deviations'' in this section from the 
final version of the guidance. In the proposed guidance, OMB explained 
that a deviation would mean applying more or less restrictive 
requirements to Federal awards, recipients, or subrecipients. In 
circumstances in which OMB or a Federal agency have authority under 
this section to allow an exception, they also generally have authority 
to allow a deviation if otherwise permitted by law. In other words, an 
exception allowed under section 200.102 can take the form of deviation 
as OMB used that term--which has no official definition or meaning in 
the final guidance.

Section 200.103--Authorities

    OMB proposed minor changes to this section to clarify authorities 
for the guidance. OMB revised this section in the final guidance as 
proposed.

Section 200.104--Supersession

    In section 200.104, OMB proposed 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 did not find it 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. A commenter noted that a 
reference to chapter I should be changed to chapter II. Another 
commenter requested clarity on the meaning of the revised supersession 
provision.
    OMB Response: In the final guidance, OMB corrected the mistake on 
the chapter number. OMB also revised the language in this section to 
clarify that part 200 superseded prior OMB guidance previously found in 
2 CFR and OMB Circulars in the past. OMB is not again superseding the 
already-superseded guidance through this specific update. The 
supersession occurred through OMB's earlier updates. For example, OMB 
previously provided guidance in parts 215, 220, 225, and 230 of this 
title, which were superseded by part 200. See also discussion in 
section 1.215 in this preamble above.

Section 200.105--Effect on Other Issuances

    OMB did not propose significant changes to this section. A 
commenter asked OMB to prohibit the incorporation of handbooks, 
manuals, and similar documents that are required to go through the 
rulemaking process. Another commenter suggested establishing a Research 
Policy Board at OMB to address implementation challenges of the 
guidance in 2 CFR and provide the research community with consistent 
and efficient policies. One commenter requested a change to the 
phrasing of the paragraph (a) on superseding inconsistent requirements. 
In particular, the commenter thought use of the words ``those 
subparts'' was unclear.
    OMB Response: OMB did not significantly change the policy in this 
section based on the comments. OMB made a minor correction to the 
language in paragraph (a) to replace ``those subparts'' with ``this 
part.''

Section 200.106--Agency Implementation

    OMB did not propose significant changes to this section. One 
commenter recommended OMB further emphasize the need for Federal 
agencies to update their regulations to align with the Uniform 
Guidance. OMB provided further discussion of agency implementation 
elsewhere in this preamble, such as under section 1.220 above.

Section 200.107--OMB Responsibilities

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that the role of stakeholder engagement 
and inclusion be dedicated to either the Research Policy Board or the 
Council on Federal Financial Assistance. Another commenter suggested 
establishing a Research Policy Board at OMB to address implementation 
challenges and provide the research community with consistent and 
efficient policies. Two commenters recommended OMB include language 
providing that it would act as a neutral arbitrator to resolve disputes 
and provide oversight for the research administrative system. Lastly, 
another commenter suggested that section 200.107 address scenarios when 
recipients have concerns with agency implementation.
    OMB Response: OMB did not make changes to the policy in this 
section. OMB considered the comments, but found they went beyond the 
scope of its policy aims for the current update. OMB revised this 
section as proposed. OMB provided further discussion of agency 
implementation elsewhere in this preamble, such as under section 1.220 
above.

Section 200.108--Inquiries

    OMB did not propose significant changes to this section. OMB 
received two comments regarding challenges for subrecipients in 
addressing the relevant Federal agency when a dispute arises between a 
subrecipient and pass-through entity. The comments suggested that OMB 
could play a more formal role in resolving conflicts between 
subrecipients and pass-through entities; or between recipients and 
Federal agencies.
    OMB Response: OMB appreciates the concern raised by the commenters. 
However, OMB finds that establishing a formal role for itself as an 
arbiter of these types of disputes is not warranted at this time. 
Federal agencies are better suited to address the concerns raised by 
the commenters.

Section 200.109--Review Date

    OMB did not propose significant changes to this section. OMB 
received several comments seeking clarification regarding the removal 
of language indicating that OMB would review the guidance every five 
years.
    OMB Response: OMB's intent is to review and update 2 CFR when 
changes are warranted, which could be more frequently than every five 
years depending on the circumstances. OMB finds that inclusion of a 
specific number of years is not necessary.

Section 200.110--Effective Date

    OMB did not propose significant changes to this section. OMB 
received several comments that generally addressed agency adoption of 2 
CFR overall or included specific implementation questions. For example, 
one commenter proposed that all

[[Page 30067]]

Federal agencies commit to one date for adoption. Another commenter 
proposed that agencies be required to develop and make transparent any 
differences between a Federal agency's and OMB's published guidance.
    OMB Response: OMB recognizes challenges potentially impacting 
Federal financial assistance recipients, including their concerns about 
the timeliness of implementation of the 2 CFR guidance by Federal 
agencies and potential variations in their approaches. OMB finds that 
issuing implementation guidance within this section is not warranted at 
this time. OMB provided further discussion of agency implementation 
elsewhere in this preamble, such as under section 1.220 above.

Section 200.111--English Language

    In the proposed guidance, OMB proposed to permit Federal agencies 
to allow a language other than English, when it is appropriate for a 
specific program or Federal award, for example in program reports, 
proposals, or official communication. The intent of this policy change 
was to allow for more flexibility when working in international 
environments or in communities where English is the not the primary 
language. OMB received over 30 comments in support of these proposed 
changes. OMB also received several comments requesting that the 
guidance not only allow for languages other than English, but rather 
that agencies be required to translate materials. Another commenter 
questioned whether translation costs in support of proposals be allowed 
under a Federal award.
    OMB Response: OMB appreciates the numerous comments of support and 
also understands potential benefits of advancing the policy even 
further. However, OMB finds that requiring translation more broadly 
would place an administrative burden on Federal agencies and programs. 
At this time, allowing Federal agencies discretion is more appropriate. 
The range of Federal programs, recipient types, and program activities 
is diverse and not all Federal programs would warrant or benefit from 
such mandatory translation requirements. Regarding translation costs, 
OMB did not find it necessary to address these costs in the guidance. 
Translation costs may be allowable if they are allocable to the Federal 
award and are reasonable for the effective administration of the award; 
however, the allowability of such costs may depend upon the program.

Section 200.112--Conflict of Interest

    OMB did not propose significant changes to this section. OMB 
received several comments requesting that the policy be moved to 
subpart D of part 200. Other commenters noted that the elements of the 
conflict of interest policy align with those established in the 
procurement standards.
    OMB Response: OMB finds that the conflict of interest section is 
appropriately located in subpart B. OMB revised this section as 
proposed.

Section 200.113--Mandatory Disclosures

    In the proposed guidance, based on feedback from the oversight 
community, OMB proposed to revise the section on mandatory disclosure 
to clarify that recipients and subrecipients must promptly disclose 
credible evidence of a violation of Federal criminal law potentially 
affecting the Federal award or a violation of the civil False Claims 
Act (FCA) (31 U.S.C. 3729-3733). OMB also proposed to revise this 
section to require recipients and subrecipients to provide written 
disclosure to the agency's Office of Inspector General. In the proposed 
guidance, OMB found the proposed ``credible evidence'' standard more 
appropriate because it would not require recipients, subrecipients, and 
applicants to make a firm legal determination that a criminal law had 
been violated before they were 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.
    OMB received many comments in response to the proposed policy 
changes. For example, one commenter suggested that no changes should be 
made and noted that the policy would result in an increased number of 
frivolous claims. Some commenters suggested that the policy should 
continue to refer to only a ``violation'' of law, rather than of 
``credible evidence of violation.'' Other commenters questioned 
misalignment of the disclosure requirement in this section of part 200 
with the parallel disclosure requirement in the FAR applicable to 
Federal procurement. OMB also received several comments seeking 
clarification on the responsibility of subrecipients to report such 
information. For example, a commenter questioned whether a subrecipient 
has to report to all three entities (Federal agency, pass-through 
entity, and Office of the Inspector General) or just to the pass-
through entity. OMB also received a few comments suggesting the 
addition of a definition of credible evidence along with examples. 
Finally, several commenters asked OMB to revert to language from the 
prior version of the guidance requiring disclosure ``in a timely 
manner,'' rather than ``promptly.''
    OMB Response: In the final guidance, OMB revised this requirement 
to better align with the disclosure requirement under the FAR. See 48 
CFR 3.1003 and 52.203-13. Requiring timely disclosure of ``credible 
evidence'' of relevant violations is important to provide assurance of 
the integrity of applicants for, and recipients and subrecipients of, 
Federal financial assistance, and to protect the Federal government 
from fraud, waste, and abuse.
    In the final guidance, the revised provision requires an applicant, 
recipient, or subrecipient of a Federal award to promptly disclose 
whenever, in connection with the Federal award (including any 
activities or subawards thereunder), it has credible evidence of the 
commission of a violation of Federal criminal law involving fraud, 
conflict of interest, bribery, or gratuity violations found in Title 18 
of the United States Code or a violation of the civil False Claims Act 
(31 U.S.C. 3729-3733). The disclosure must be made in writing to the 
Federal agency, the agency's Office of Inspector General, and pass-
through entity (if applicable).
    Based on the existing use of the term ``credible evidence'' in the 
FAR, OMB did not find it necessary to provide a definition of this term 
in part 200. Black's Law Dictionary defines this term to mean evidence 
``that is worthy of belief; trustworthy evidence.'' (11th ed. 2019). 
When the term was added to the FAR, the FAR Council explained that the 
``term indicates a higher standard [than reasonable grounds to 
believe], implying that the contractor will have the opportunity to 
take some time for preliminary examination of the evidence to determine 
its credibility before deciding to disclose to the Government.'' 73 FR 
67064, 67073 (Nov. 12, 2008). OMB intends the meaning of the term in 
the Uniform Guidance in part 200 to generally align with its meaning in 
the FAR.
    Relatedly, the FAR preamble also provides some additional insight 
on the timing of disclosure requirements. Applied to the Uniform 
Guidance, the standard of ``credible evidence'' implies that the 
applicant, recipient, or subrecipient ``will have the opportunity to 
take some time for preliminary examination of the evidence to determine 
its credibility before deciding to disclose to the Government.'' Id. at 
67074. This does not impose ``an

[[Page 30068]]

obligation to carry out a complex investigation, but only to take 
reasonable steps that the [applicant, recipient, or subrecipient] 
considers sufficient to determine that the evidence is credible.'' Id. 
The use of the word ``promptly'' in the Uniform Guidance indicates that 
any such preliminary investigation should not be open-ended or extend 
over a longer period of time than is necessary to make a preliminary 
assessment of credibility. However, the use of the word ``promptly'' 
was not intended to otherwise affect this general principle on timing 
discussed in the FAR preamble.
    Finally, a couple of commenters questioned other ways that OMB's 
proposed disclosure requirement misaligned with the parallel disclosure 
requirement in the FAR, such as failing to refer to the ``commission'' 
of a crime or specify what OMB intended by a violation ``potentially 
affecting'' the Federal award. In the final guidance, in response to 
such comments, OMB made two additional revisions to better align the 
disclosure requirement with the disclosure requirement at FAR 52.203-
13.
    First, OMB added the phrase ``the commission of'' before ``a 
violation.'' Similar to the FAR, on receipt of such evidence, the 
preliminary examination by an applicant, recipient, or subrecipient 
will involve a diligent (and reasonably prompt) internal effort to 
determine whether a violation has, in fact, occurred.
    In addition, OMB replaced ``potentially affecting the Federal 
award'' with ``in connection with the Federal award (including any 
activities or subawards thereunder).'' Like the FAR, the disclosure 
requirement is broad, but there must be some nexus to the Federal 
award. The proposed text did not necessarily require disclosure of all 
criminal laws, as suggested by one commenter, but ``violation of a 
Federal criminal law potentially affecting the Federal award.'' The 
final guidance, in alignment with the FAR, now refers to violations 
that have a ``connection with'' a Federal award. In many cases this 
will encompass relevant violations ``potentially affecting the Federal 
award,'' but does not necessarily encompass all such violations with 
only a tenuous potential effect or connection. The term ``activities'' 
in the parenthetical includes, but is not necessarily limited to, 
activities described throughout OMB's guidance in part 200.
    Establishing a specific mechanism for anonymous reporting is beyond 
the scope of the proposed changes in section 200.113, which places the 
responsibility on the ``applicant, recipient, or subrecipient of a 
Federal award'' to promptly make the disclosure. Anonymous reporting 
may also be available, but this type of reporting would not necessarily 
satisfy the mandatory disclosure requirement under this section if the 
applicant, recipient, or subrecipient could not verify that it made the 
required disclosure. In the new provision at section 200.217, OMB 
endeavored to better recognize certain legal protections for 
whistleblowers.

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

Section 200.200--Purpose

    One commenter noted that the sections referenced in the proposed 
guidance did not include the new section 200.217 on whistleblower 
protections.
    OMB Response: OMB modified the final guidance to include reference 
to the new section 200.117.

Section 200.201--Use of Grants, Cooperative Agreements, Fixed Amount 
Awards, and Contracts

    In the proposed guidance, OMB revised this section to clarify 
certain requirements for fixed amount awards. For example, OMB 
clarified 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. OMB also 
clarified record retention and post award certification requirements. 
In addition--although no specific language was proposed--OMB sought 
comments on requiring additional pre-award certifications for fixed 
amount awards to address the potential increased risk of fraud under 
fixed amount awards. OMB also invited comments on appropriate pre-award 
certifications for fixed amount awards and noted that it may include a 
requirement for such certifications in the final guidance document. OMB 
also proposed to more specifically identify certain prior approval 
requirements that specifically relate to fixed amount awards.
    OMB received many comments on proposed revisions related to fixed 
amount awards. Several comments expressed appreciation for the many 
clarifications OMB proposed in the draft revisions, including the 
clarification that program income could be generated under a fixed 
amount award, but would not be subject to the requirements on use of 
program income specified in section 200.307. Commenters also approved 
of the clarification that recipients of fixed amount awards are 
entitled to any unexpended funds if the required activities were 
completed in accordance with the terms and conditions of the award.
    OMB received comments requesting clarification on how budgets for 
fixed amount awards are negotiated with recipients. A commenter asked 
for clarification that no review of actual costs incurred by the 
recipient would be required. The commenter also sought clarification on 
whether fixed cost awards are subject to audit. Other comments 
requested clarification of the recordkeeping requirements for fixed 
amount awards. One commenter questioned the necessity of reporting 
activities that were not completed at the end of the award.
    OMB also received several comments requesting clarification on 
which subparts and sections of the guidance apply to fixed amount 
awards. For example, several commenters requested removal of the 
reference to section 200.403 (on factors affecting allowability of 
costs) under the certification requirement. Some of these commenters 
observed that the section 200.101 on applicability stated that subpart 
E does not apply to fixed amount awards. Commenters stated this 
requirement in section 200.201 could substantially hinder the use of 
fixed amount awards and subawards by requiring reimbursement of 
specific items of cost.
    Next, OMB also received several comments requesting clarification 
on when fixed amount awards may not be used. Specifically, the 
commenters asked for clarity on the meaning of the statement that 
``fixed amount awards may not be used for programs with mandatory cost 
sharing requirements.'' OMB also received several comments regarding 
the applicability of the guidance to OTA instruments.
    Other commenters provided a variety of additional suggestions. Some 
commenters suggested OMB require a tiered risk assessment; that OMB 
encourage the use of fixed amount awards; that OMB remove the prior 
approval requirement for fixed amount subawards; and that OMB allow for 
fixed amount awards when the recipient will make performance-based 
payments. Clarification of the prior approval requirements was 
requested by some commenters. Some commenters also requested the 
guidance maintain the language of on ``the level of effort . . . 
expended'' in the final certification requirement.
    OMB also received several suggestions for future revisions in

[[Page 30069]]

response to the preamble of the proposed guidance. Regarding the 
possibility of requiring additional pre-award certifications for fixed 
amount awards, one commenter cautioned that risk mitigation measures 
should be designed not to pose an insurmountable burden on smaller 
organizations and impede timely award processing. Another commenter 
noted that pre-award certifications are already completed as part of 
the UEI registration process and that due diligence is already 
conducted for a responsibility determination. Rather than another set 
of certifications, one commenter suggested that OMB should consider 
explicitly expanding section 200.205, on Federal agency review of risk 
posed by applicants, to fixed amount awards.
    OMB Response: OMB made several changes in the final version of 
section 200.201. Relative to the proposed guidance, OMB revised 
paragraph (b)(1) to replace the word ``adequate'' with ``accurate'' 
with respect to cost, historical, or unit pricing data for determining 
budgets for fixed amount awards. This change was made to provide more 
specificity as to the quality of information informing the final 
amounts of fixed amount awards.
    Paragraph (b)(1) was also revised in the final guidance to clarify 
that budgets for fixed amount awards are negotiated with the recipient. 
The final guidance also clarifies that the total amount of Federal 
funding is determined using information from the recipient's proposal, 
pricing data, and subpart E. This new language supplements the first 
sentence of this paragraph, which had only referenced pricing 
information and cost principles.
    OMB further revised paragraph (b)(1) in the final guidance to 
clarify that ``routine monitoring'' of the actual costs incurred is not 
expected--rather than ``no review'' as proposed. No ``review'' may have 
suggested that fixed amount awards are not subject to audit, which is 
not accurate.
    OMB also revised the final guidance to clarify that recipients and 
subrecipients of fixed amount awards are subject to record keeping 
requirements. Paragraph (b)(1) was revised to include additional 
language emphasizing that records should be maintained and made 
available for audits. This change clarifies that fixed amount awards do 
not absolve the recipient of the responsibilities of making records 
available for review during an audit. Lastly in paragraph (b)(1), OMB 
added cross references to sections 200.101(b)(4)(ii) and 
200.101(b)(5)(i) for clarity on how other subparts in part 200 apply to 
fixed amount awards, including the cost principles.
    Regarding limitations on using fixed amount awards in programs that 
have mandatory cost sharing, OMB clarified the intent of this statement 
by removing the word ``mandatory'' before cost sharing in paragraph 
(b)(2). The final guidance simply states that fixed amount awards must 
not be used in programs that require cost sharing. To the extent cost 
sharing is required, this implies that the Federal agency or pass-
through entity would be responsible for monitoring the recipient's or 
subrecipient's contributions of cost share for the purposes of 
verification. Therefore, financial reporting would be required, which 
would conflict with the provisions applicable to fixed amount awards.
    OMB revised paragraph (b)(4) to require, upon conclusion of a fixed 
amount award, the identification of activities that were not completed. 
This is necessary to reduce the appropriate amount of award funding if 
the original scope of the project was not completed. Although the 
recipient is entitled to any remaining funds at the end of the award 
that were not used to carry out a completed program, if a recipient did 
not complete certain program activities, the recipient must inform the 
Federal agency of this. Any funds associated with costs of activities 
that were not completed must be returned.
    OMB revised paragraph (b)(6) to apply additional prior approval 
requirements for revisions to fixed amount awards with regards to 
subaward activities and cost sharing. This change was made to more 
accurately capture the list of prior approvals that should be required 
for fixed amount awards. OMB also added additional prior approval 
requirements for fixed amount awards enumerated in section 200.308(f) 
in response to a comment seeking clarification on this topic.
    The prior version of the guidance specified that budgets for fixed 
amount awards should be negotiated ``using the cost principles . . . as 
a guide.'' 2 CFR 200.201(b)(1) (prior version). The final guidance 
retains the reference to negotiating fixed amount awards using the cost 
principles in paragraph (b)(1), but also now clarifies in the 
applicability section that fixed amount awards and expenses under a 
fixed amount award are subject to certain cost principles in sections 
200.400(g), 200.402 through 200.405, and 200.407(d). See 2 CFR 
200.101(b)(4)(ii) (as revised). Considering that fixed amount awards 
are negotiated using the cost principles, unallowable costs should not 
be included in fixed amount award budgets. In addition, audit 
requirements in subpart F have always applied to fixed amount awards. 
See 2 CFR 200.101(b)(5)(i) (as revised; included in ``Table 1 to 
paragraph (b)'' in the prior version). The lack of reference to 
maintaining records in section 200.201 created the false impression for 
some that the recipient and subrecipient would not be required to 
maintain records or to make them available during an audit. The final 
guidance now clarifies that this impression is incorrect in paragraph 
(b)(1) of section 200.201.
    OMB finds that application of some of the basic considerations of 
the cost principles at sections 200.402 through 200.405--particularly 
during the budget negotiation process--remains consistent with the use 
and general meaning of fixed amount awards. For example, one reason the 
cost principles have not historically applied to fixed amount awards is 
that various prior approval requirements are contained in the general 
provisions for selected items of cost. Requiring prior approval for 
selected items of cost throughout the performance period would 
interfere with the efficiencies provided by this type of award. OMB did 
not add such prior approval requirements in the final guidance. Section 
200.400(g) of the final guidance also now expressly recognizes that 
when the required program activities are completed in accordance with 
the terms and conditions of the fixed amount award, the unexpended 
funds retained by the recipient or subrecipient are not considered 
profit. Thus, the final guidance continues to recognize that 
accountability for fixed amount awards is based primarily on 
performance and results--as stated directly in the definition of the 
term.
    Many commenters asked OMB to clarify which provisions of part 200 
apply--and do not apply--to fixed amount awards. Fixed amount awards, 
per the definition of that term in section 200.1, are a type of grant 
or cooperative agreement with a fixed budget. These awards are not 
subject to all of the same requirements as other grants, such as 
certain reporting and prior approval requirements, but do not relieve 
recipients and subrecipients of all compliance requirements. As 
explained in 200.101, as a type of grant or cooperative agreement, 
fixed amount awards are subject to multiple subparts of 2 CFR part 200, 
including subparts A through D. Fixed amount awards are also subject to 
certain cost principles in subpart E and the audit requirements in 
subpart F. Section 200.101(b) (as revised) now provides more specific 
detail. Under section 200.102, Federal

[[Page 30070]]

agencies also retain flexibility to apply less restrictive requirements 
when issuing fixed amount awards, except for those requirements imposed 
by statute or in subpart F related to audit. Thus, certain questions 
posed by commenters on what requirements apply to fixed amount awards 
may depend on the implementation of specific Federal financial 
assistance programs by Federal agencies and the discretion exercised by 
Federal agencies under section 200.102.
    In response to a question from one commenter, procurements 
standards in subpart D generally apply to fixed amount awards unless a 
Federal agency applies less restrictive requirements under section 
200.102. In response to a question from another commenter: although 
less restrictive requirements may apply to fixed amount awards, they 
should not be used for unallowable activities. However, under section 
200.400(g) in the final guidance, unexpended funds may be retained 
after satisfactory completion of the fixed amount award. In addition, 
under section 200.405(b), unallowable activities may receive an 
appropriate allocation of indirect costs in some circumstances.
    Federal agencies are responsible for determining when a fixed 
amount award is or is not appropriate, and are also responsible for 
agency risk assessment procedures. Federal agencies should also 
exercise proper oversight of pass-through entities. For these reasons, 
OMB also finds that prior approval of fixed amount subawards remains 
appropriate. See 2 CFR 200.333 (as revised). In the final guidance, OMB 
did not completely remove a threshold for fixed amount subawards, but 
raised the threshold to $500,000. Id. (as revised). See also discussion 
of fixed amount subawards in section 200.333 below. OMB's policies on 
UEI and subaward reporting requirements are addressed separately in 
parts 25 and 170.
    Finally, even if performance-based payments are elected, a fixed 
amount award must only be used if there are measurable goals and 
objectives and enough data is available to determine costs up front. 
With regards to amending the certification language to include 
reference to ``level of effort . . . expended,'' OMB disagrees that it 
is necessary to amend the certification in this way relative to the 
proposed guidance. In the final guidance, the recipient is required to 
certify, among other things, that it carried out the program activities 
in accordance with the terms of the award without reference to a 
specific level of effort.

Section 200.202--Program Planning and Design

    In the proposed guidance, OMB expanded section 200.202 on program 
planning and design. For example, OMB added language encouraging 
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 underscored that Federal agencies should consider 
all available data, evidence, and evaluation results from past programs 
and coordinate with other agencies during program planning and design.
    The majority of comments that OMB received requested revisions to 
section 200.202 that could be more appropriate for Federal agencies to 
implement and cannot be broadly required or implemented through OMB 
guidance under this update. For example, these comments requested that 
OMB further strengthen the policy to address program sustainability, 
invest in capacity building, promote partnerships, reduce requirements 
for nonprofits, and support ``continuous improvement.'' One comment 
encouraged ``participatory grant-making,'' which would allow community 
members to be involved in funding decisions.
    OMB also received one comment requesting OMB to require 
recipients--as opposed to the Federal agency--to engage members of the 
community that would benefit from a program. OMB received several 
comments recommending that OMB streamline the grants process for 
organizations receiving Congressional earmarks. OMB received several 
additional comments noting that the RESTORE Act already sets forth a 
program design. One commenter requested that OMB encourage Federal 
agencies to publish results and performance frameworks and, wherever 
applicable, pay recipients for achievement of results against them.
    OMB Response: The purpose of section 200.202 is to establish key 
requirements and communicate the principles or best practices 
associated with proper program design. However, agencies are ultimately 
responsible for the design, innovation, and long-term development and 
sustainability of these programs. The final guidance encourages 
community engagement, but OMB finds it unnecessary to specify one 
method over another for all Federal agencies and Federal financial 
assistance programs.
    With regard to Congressional earmarks, even though funding is 
directed by Congress, Federal agencies still have the responsibility to 
ensure there is proper oversight of taxpayer dollars. Thus, a different 
approach specific to earmarks is not appropriate. In addition, the 
intent of part 200 is to provide more uniform requirements. However, 
OMB acknowledges that specific programs often have specific, statutory 
requirements. Paragraph (a)(1) recognizes that program design must be 
``consistent with the Federal authorizing legislation of the program.''
    OMB disagrees with the suggestion to require Federal agencies to 
publish performance results at this time. This proposed agency 
requirement would require greater coordination across the Federal 
government prior to OMB implementing a policy change. OMB disagrees 
with the suggestion to pay recipients specifically for results 
achieved, as payments under grants and cooperative agreements should 
only support actual costs incurred and not serve as a reward for 
achieving results, which would constitute a profit.
    OMB revised section 200.202(a)(5) to specify that ``applicants,'' 
and not ``recipients,'' should engage with members of the community 
when practicable during the design phase to encourage community 
engagement.
    Relative to the proposed guidance, section 202.202(b) was also 
revised to add that Federal agencies should consider ``evidence,'' in 
addition to available data and evaluation results. This change was made 
to align with the Evidence Act and capture more accurately the relevant 
considerations during the program design phase.

Section 200.203--Requirement To Provide Public Notice of Federal 
Financial Assistance Programs

    In the proposed guidance, OMB revised section 200.203 on Assistance 
Listings to reinforce the importance of communicating in plain language 
and highlighting any program-related customer service initiatives.
    OMB received several comments emphasizing the importance of data 
standards and suggesting the inclusions of data standards in this 
section in general. OMB also received several comments requesting that 
OMB require agencies to break out the program description into elements 
of Project Goals, Project Objectives, and Project Performance 
Measurements. Another commenter questioned whether ``customer service 
initiatives'' differs from ``customer service experience initiatives'' 
used elsewhere in Federal programs.
    OMB Response: OMB continues to work in concert with Federal 
agencies on the development of data standards.

[[Page 30071]]

The guidance in part 200, however, is not an appropriate vehicle for 
mandating agency adoption of data standards at this time, which is an 
ongoing and iterative process that requires continued interagency 
coordination. In addition, section 200.203 provides information that is 
essential for Assistance Listings, but agencies have the authority to 
break out the information into more distinct categories if there is a 
need or benefit in doing so. OMB also revised ``customer service 
initiatives'' to ``customer service experience initiatives'' to align 
with standard Federal terminology on this topic.

Section 200.204--Notices of Funding Opportunities

    In the proposed guidance, OMB revised section 200.204 on NOFOs 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 proposed to include an 
Executive Summary requirement and to encourage agencies to use plain 
language when publishing opportunities. OMB also stipulated that 
Federal agencies should communicate program requirements specifically 
and clearly, as well as limit the length of program announcements. This 
is particularly important in consideration of applicants with less 
experience applying for Federal financial assistance, such as 
applicants from underserved communities.
    OMB also revised this section in the proposed guidance by 
encouraging 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 the 
proposed guidance, OMB sought to make NOFOs more consistent and 
transparent. OMB aimed to ensure that applicants are not 
unintentionally excluded from funding opportunities. Additionally, OMB 
proposed 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.
    OMB received one comment requesting that agencies assess 
opportunities to further remove barriers for partnership with tribal 
entities. For example, OMB received several comments recommending 
requiring NOFOs to state the anticipated award date and agencies to 
adhere to the anticipated timeline. OMB also received several comments 
requesting that OMB break out the program description into elements of 
Project Goals, Project Objectives, and Project Performance 
Measurements. Some commenters emphasized the importance and inclusion 
of data standards in NOFOs as well.
    OMB also received several comments regarding the Federal financial 
assistance application process. For example, several commenters 
requested that opportunities be available for 90 days rather than 60 
days. Some commenters recommended that opportunities that are available 
for less than 30 days be approved by an agency head or delegate and 
that NOFOs posted for fewer than 60 days be accompanied by supporting 
documentation justifying the reason for the abbreviated period. Several 
commenters recommended that agencies offer technical assistance for the 
grant application process.
    OMB Response: OMB did not revise the guidance substantially in 
response to comments received. As noted, many comments and suggestions 
were not entirely applicable to all Federal programs. For example, 
adding a required ``anticipated award date'' would not be feasible in 
all cases. Its feasibility may depend on the funding status and other 
factors. Federal agencies can break out the information, such as 
Project Goals and Objectives, if it is necessary for the program, but 
OMB disagrees that this should be required in all NOFOs at this time.
    Beyond establishing the elements of a NOFO, this guidance also does 
not require any specific application process. While OMB strives to 
encourage more uniformity and consistency in grants processes, Federal 
agencies may also identify opportunities to simplify their own agency 
process.
    OMB disagrees that revisions are necessary regarding the time for 
posting NOFOs and finds that the recommendation of at least 60 days is 
sufficient. Ultimately, it is the responsibility of the Federal agency 
to determine its process for approving opportunities that will be 
available for less than 30 days based on exigent circumstances.
    OMB continues to support the removal of barriers for all 
organizations. The final guidance provides that Federal agencies may 
offer pre-application technical assistance or provide clarifying 
information for funding opportunities. Federal agencies must also 
ensure these resources are made accessible and widely available to all 
potential applicants. For example, agencies may post answers to 
questions and requests on Grants.gov.
    Relative to the proposed guidance, paragraph (b) of section 202.204 
was revised to state that the Federal agency may ``modify'' the 
availability period--as opposed to ``extend.'' This change was made to 
capture scenarios in which it may be necessary to shorten the 
availability period of a NOFO.
    OMB also revised section 202.204 to add ``tribal organizations'' as 
an additional example of potentially eligible applicants. This change 
is relevant to removing barriers for tribal organizations. See, for 
example, E.O. 14112, Reforming Federal Funding and Support for Tribal 
Nations To Better Embrace Our Trust Responsibilities and Promote the 
Next Era of Tribal Self-Determination. With this change, the final 
guidance provides that the Federal agency should make every effort to 
identify in the NOFO all eligible applicants including tribal 
organizations.

Section 200.205--Federal Agency Review of Merit of Proposals

    In section 200.205 of the proposed guidance, OMB clarified that a 
Federal agency should consider diversity when developing policies and 
procedures for merit review panels. OMB received several comments on 
the composition of merit review panels. One comment requested that the 
requirements of a NOFO and merit review be extended to recipients and 
not just for Federal peer review panelists. Commenters also suggested 
that the guidance require agencies to utilize external reviewers when 
the award involves technology development or acquisition. One commenter 
requested Federal agencies provide sufficient funding to support 
equitable merit review processes that truly compensate review panelists 
for their time and expertise. Finally, OMB received one comment 
suggesting that OMB require agencies to consider diversity when 
developing policies and procedures for merit review panels.
    OMB Response: Section 200.205 was revised to apply standards more 
uniformly to merit review panels in general, and not simply to those 
panels that employ ``external peer reviewers.'' Therefore, the language 
limiting some of the guidance in this section to external peer 
reviewers was removed. Mandating external peer reviewers, as requested 
by some commenters, would be overly burdensome and not necessarily 
applicable to all Federal financial assistance programs. Federal agency 
discretion, consistent with law, will determine when it is appropriate 
to utilize external reviewers. On requiring compensation for review 
panelists, OMB disagreed with making this proposed change. The 
circumstances under which compensation could be

[[Page 30072]]

provided for this purpose would need to be evaluated by Federal 
agencies for individual assistance programs. Thus, this decision may 
vary between Federal agencies and programs. OMB disagrees that this 
should be a universal requirement.

Section 200.206--Federal Agency Review of Risk Posed by Applicants

    In the proposed guidance, in section 200.206 OMB revised 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 clarified 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 clarified that an agency may modify 
its risk assessment at any time during the lifecycle of an award.
    One commenter suggested a modification to paragraph (d) that 
referenced the exclusion of parties from ``receiving Federal awards 
[and] participating in Federal awards.'' OMB also received several 
comments on risk assessment factors in paragraph (b) and whether fraud 
risks are to be considered. These comments suggested that risk 
assessments should be limited to determining whether the recipient can 
adequately manage the award and not include criteria such as impacts on 
local jobs and communities or history of performance. Other commenters 
suggested that Federal agencies should be required to consider 
diversity when developing policies and procedures for conducting risk 
assessment.
    OMB Response: Paragraph (b) of section 202.206 was revised to add 
``fraud risks'' to the list of examples of elements of a risk 
assessment to expand on the examples provided. OMB also agrees with the 
suggestion to clarify language in paragraph (d). OMB added a missing 
``or'' to the final sentence, which now states ``receiving Federal 
awards or participating in Federal awards.''
    OMB disagrees that section 202.206 should be revised to require 
agencies to consider diversity when developing policies and procedures 
for risk assessment. Criteria provided in section 200.206 on job 
impacts and history of performance are only suggestions of what may be 
considered and not a comprehensive list of requirements.

Section 200.207--Standard Application Requirements

    OMB received several comments that were not relevant to proposed 
changes in section 200.207. The comments stated that applications often 
request information that is required on other forms or systems and is 
therefore redundant. Commenters requested that OMB simplify the 
application process and make it more inclusive, as well as establish a 
single online grant application system.
    OMB Response: OMB recognizes that there may be need for improvement 
in the application process for some assistance programs. Generally, 
this section of the 2 CFR guidance does not specify a particular 
application process, but only provides information on high-level 
standard application requirements. OMB added examples of standard 
forms, such as the SF-424 or the recently approved Biographical Sketch 
Common Form.
    This update to the guidance is not the appropriate place for 
establishing a unified application system, which would go beyond the 
scope of OMB's proposed revisions in October 2023, and may not be 
feasible to implement through this section of part 200. Grants.gov is 
the primary Federal system to seek funding opportunities, but many 
Federal agencies, at this point in time, also have unique systems 
through which applicants may apply.

Section 200.208--Specific Conditions

    OMB received several comments inquiring whether the guidance in 
section 200.208 on determinations that a recipient does not have 
adequate financial resources only applies if an award has a cost 
sharing requirement. Some commenters questioned whether financial 
resources as a condition is too limiting.
    OMB Response: A Federal agency may make such a determination and 
apply specific conditions regardless of whether there is a cost sharing 
requirement. For example, specific conditions may be necessary to 
safeguard Federal funds if a recipient does not have sufficient funds 
to cover unforeseen expenses that are not related to the Federal 
program. OMB also changed ``a determination that a recipient or 
subrecipient has adequate financial resources'' to ``a determination of 
whether a recipient or subrecipient has inadequate financial 
capability,'' to address scenarios that may not be limited to 
inadequate resources.

Section 200.209--Certifications and Representations

    In the proposed guidance, OMB clarified 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 received two comments 
objecting to the draft language stating that a pass-through entity is 
authorized to require a subrecipient to submit certifications and 
representations annually in SAM.gov.
    OMB Response: OMB revised section 202.209 to clarify that 
subrecipients do not submit certifications and representations as part 
of the award process. Subrecipients are neither required to register in 
SAM.gov nor submit an SF-424B. OMB agrees with the comments on this 
point. This was an error and OMB updated the language of the final 
guidance accordingly. OMB also revised the guidance to reflect that 
certifications and representations are updated on an annual basis.

Section 200.211--Information Contained in a Federal Award

    In the proposed guidance, OMB made plain language and clarifying 
edits to this section. OMB also added that the archive of previous 
versions of the general terms and conditions, with effective dates, 
should be located on the Federal agency's website in the same place 
where current terms and conditions are available. OMB received several 
comments requesting that this section include a requirement that 
agencies provide information in Federal awards for loan and loan 
guarantee programs that specify whether or not the award has continuing 
compliance requirements. OMB also received several comments requesting 
OMB revise sections 200.211 and 200.301 to require Federal agencies to 
include more information in the Federal award about how performance 
will be assessed as well as the timing and scope of the expected 
performance and measurement. One of these commenters requested that OMB 
add language related to progress and performance as well as the timing 
and scope of continuing improvement efforts.
    OMB Response: OMB revised paragraph (d) of section 200.211 to 
specify that the terms and conditions of loans and loan guarantee 
programs must specify whether there are continuing compliance 
requirements. This change was made to provide more specific information 
to auditors. OMB agrees that information on continuing compliance 
requirements in this context is necessary and should be required, as 
compliance requirements may differ depending on the structure or type 
of loan.
    Regarding comments asking OMB to require more information on how a 
Federal program will be assessed, paragraph (a) of section 200.211 
already

[[Page 30073]]

provides the basic requirements for what information must be included 
in a Federal award on performance goals. The topic of performance 
measurement is addressed further in section 200.301. OMB did not expand 
the information requirements in section 200.211 at this time, which 
could potentially increase administrative burden on Federal agencies or 
their recipients.

Section 200.212--Public Access to Federal Award Information

    In the proposed guidance, OMB proposed mostly plain language 
revisions to section 200.212. In the final guidance, section 200.212 
was revised to reflect a change in the name of the DATA Act Information 
Model Schema (DAIMS) to Government-wide Spending Data Model (GSDM). OMB 
otherwise made revisions in this section as proposed.

Section 200.213--Reporting a Determination That an Applicant Is Not 
Qualified for a Federal Award

    In the proposed guidance, OMB proposed mostly plain language 
revisions to section 200.213. OMB received one comment requesting a 
change to the revised text, noting that the revision implied that the 
notification in SAM.gov should also include an explanation.
    OMB Response: This was not OMB's intent. OMB's policy is that the 
explanation need only be communicated in the notification to the 
recipient--not in SAM.gov itself. OMB revised the text to ensure the 
language aligns with existing policy, which is that the notification 
from the Federal agency should provide an explanation of the 
determination.

Section 200.214--Suspension and Debarment

    In the proposed guidance, OMB proposed mostly plain language 
revisions to section 200.214. One commenter observed that OMB used 
``non-procurement'' in this section and ``nonprocurement'' in 2 CFR 
part 180.
    OMB Response: OMB revised the spelling of ``nonprocurement'' to 
align with 2 CFR part 180.

Section 200.215--Never Contract With the Enemy

    In the proposed guidance, OMB proposed mostly plain language 
revisions to section 200.215. OMB also revised the text to explicitly 
state that this section applies to ``subrecipients'' as well. OMB 
received one comment requesting a revision to the applicability of 
requirements in 2 CFR part 183. The commenter suggested that smaller 
organizations serving as pass-through entities do not have the capacity 
to discern which parties actively oppose the U.S.
    OMB Response: OMB disagrees that checking the excluded parties list 
contained in SAM.gov is overly burdensome for subrecipients, especially 
considering that SAM.gov must be checked in accordance with 2 CFR part 
180 to ensure the party is not suspended or debarred. This was not a 
policy change, but rather a clarification to the existing use of the 
term ``non-Federal entity.''

Section 200.216--Prohibition on Certain Telecommunications and Video 
Surveillance Equipment or Services

    In the proposed guidance, OMB included several additions to section 
200.216 on the prohibition of certain telecommunications and video 
surveillance equipment or services. OMB's proposed revisions expanded 
the guidance by incorporating additional information from OMB's earlier 
``2 CFR Frequently Asked Questions'' guidance document on this topic. 
For example, OMB revised the text with the intent of clarifying how the 
guidance applies to program income, indirect costs, and cost sharing.
    OMB received a comment indicating the certification requirement in 
this section stated that, upon signing an award, a recipient is 
certifying that funds ``were not expended for prohibited costs.'' The 
commenter stated that the certification should read that funds ``will 
not be expended'' for that purpose. Some commenters found that newly 
proposed paragraph (c) imposed a ``use'' restriction--not just a 
purchase restriction--on covered telecommunications equipment or 
services. Commenters requested clarification that covered 
telecommunications and covered services may be used in program 
activities as long as they are not procured with Federal funds.
    OMB received several comments on paragraph (d). Some commenters 
said the proposed revision was causing confusion on how the statutory 
prohibition applies to funds generated as program income, indirect cost 
recoveries, and funds used to satisfy cost share requirements.
    One commenter requested inclusion of guidance on waivers in section 
200.216. OMB also received several comments requesting that the 
guidance include the names of prohibited telecommunication and video 
surveillance equipment or services.
    OMB Response: OMB revised paragraph (a) of section 200.216 to 
better align with the definition of ``covered telecommunications 
equipment or services'' in section 889 of the John S. McCain National 
Defense Authorization Act (NDAA) for Fiscal Year (FY) 2019 (Pub. L. 
115-232). To achieve this, OMB first restored alignment with the prior 
version of the guidance on the types of Federal financial assistance 
the prohibition applies to under the statute in paragraph (a). Next, 
OMB made a few technical and structural changes to provide further 
clarity. OMB also moved the language on ``systems that use covered 
telecommunications equipment or services'' down to a new paragraph 
(c)--but maintained alignment with the prior version of the guidance on 
this topic.
    In the final guidance, OMB deleted the proposed paragraph (c), 
which caused concern that OMB was imposing a ``use'' restriction. This 
change clarifies that OMB is not imposing a new ``use'' restriction 
through the final guidance. Rather, the emphasis of the policy is that 
such items cannot be purchased with Federal funds. Loan or grant funds 
may be provided to a recipient that uses the covered telecommunications 
equipment or services, but the Federal award must not pay for the 
covered telecommunications equipment or services that the recipient 
uses. If the Federal agency suspects that the goods or services being 
procured under the award may in fact be prohibited, it must take 
appropriate action, consistent with its policies and procedures, and in 
accordance with the guidance in 2 CFR part 200.
    In the final guidance, OMB also removed the proposed paragraph (d). 
However, by not including this paragraph in the 2 CFR text, OMB is not 
modifying the policy contained in the earlier 2 CFR FAQ published in 
May 2021 on this topic. That document established that costs associated 
with covered telecommunications equipment or services are ``unallowable 
costs'' under the Federal award. As such, although not expressly stated 
in the text of the final guidance, for awards involving loan or grant 
funds, the prohibition described in the guidance text applies to funds 
generated as program income. The 2 CFR FAQ also provides further 
information on application of this provision to indirect cost rates and 
funds used to satisfy cost share requirements. Because the proposed 
paragraph (d) was confusing to commenters, and lacked context, OMB 
finds that the 2 CFR FAQ is a better resource to address these topics.
    OMB made a few additional clarifying edits in paragraph (e) in the 
final guidance in response to comments. For

[[Page 30074]]

example, that paragraph now states that ``funds will not be expended'' 
instead of ``were not expended.'' OMB also revised this paragraph to 
clarify that there is no stand-alone certification on the prohibition 
of telecommunications, but that other certifications that recipients or 
subrecipients submit throughout the life-cycle of the Federal award 
will serve as certifications that they understand and accept the ban on 
the covered telecommunications equipment and services. These existing 
certifications--such as those made when submitting payment requests and 
reports--are sufficient.
    The subject of waivers is covered in paragraph (d) of section 889 
of the NDAA for FY 2019 (Pub. L. 115-232). However, unlike Federal 
procurement, the statutory prohibition cannot be waived by Federal 
agencies for Federal financial assistance such as grants and loans. 
Finally, in response to another comment, the prohibited parties are 
included in the guidance text. They are also listed as excluded parties 
in SAM.gov.

Section 200.217--Whistleblower Protections

    In the proposed guidance, OMB included a new section 200.217 to 
expand on the whistleblower protections and requirements recognized in 
part 200 for recipients of Federal financial assistance, which had 
previously been referenced in section 200.300. In the final guidance, 
section 200.217 was revised to add a requirement that recipients and 
subrecipients must inform their employees in writing of Federal 
whistleblower protections provided by law.

Subpart D--Post Federal Award Requirements

Section 200.300--Statutory and National Policy Requirements

    Section 200.300 has consistently explained that Federal agencies 
must administer Federal awards consistent with applicable Federal law, 
including the provisions of the Constitution and Federal statutes and 
regulations that apply to any given award. Section 200.300 does not 
impose any new legal obligations. OMB's proposed revisions to section 
200.300 were consistent with that longstanding approach. Specifically, 
OMB proposed to streamline section 200.300 and to reference existing 
nondiscrimination requirements under applicable law, including in light 
of the Supreme Court's decision in Bostock v. Clayton County, 140 S. 
Ct. 1731 (2020).
    OMB received numerous comments on the proposed revisions to section 
200.300. Many supported OMB's proposal. For example, commenters 
commended OMB for proposing to maintain section 200.300's guidance 
that, in administering Federal financial assistance programs, agencies 
must adhere to applicable legal requirements, including 
nondiscrimination requirements. Commenters highlighted the importance 
of applicable nondiscrimination requirements to specific populations, 
including LGBTQI+ populations, even while emphasizing that all people 
can experience discrimination. And commenters observed that OMB's 
proposal was consistent with Executive Order 13988 of January 20, 2021 
(Preventing and Combating Discrimination on the Basis of Gender 
Identity or Sexual Orientation).
    Some supportive commenters also recommended additional revisions. 
For example, commenters recommended that OMB require agencies to 
specifically enumerate the statutes that prohibit discrimination in 
implementing OMB's guidance. Others suggested that section 200.300 
should clarify that, consistent with Bostock's reasoning, Federal 
awards must be implemented in a way that would prohibit discrimination 
based on sex characteristics, including intersex traits. Finally, 
commenters urged OMB to ensure that nondiscrimination requirements are 
maintained uniformly through the performance of all foreign assistance 
contracts, grants, and cooperative agreements provided by Federal 
agencies.
    OMB also received many comments opposing OMB's proposed revisions 
to section 200.300. Some commenters maintained that Bostock applies 
only to employment decisions under Title VII of the Civil Rights Act 
and does not apply to other laws that prohibit sex discrimination. 
Another commenter maintained that because the Court in Bostock used the 
terms ``transgender'' or ``transgender status,'' the Court's holding 
does not extend to ``gender identity.'' This commenter requested that 
OMB clarify what constitutes discrimination under section 200.300. 
Several commenters also disagreed with Bostock.
    With respect to proposed section 200.300(c), some commenters 
observed that the Fourteenth Amendment's Equal Protection Clause does 
not apply to the Federal government, and maintained that it neither 
applies to non-governmental actors nor applies heightened 
constitutional scrutiny to differential treatment based on sexual 
orientation or gender identity. On this topic, one commenter also 
asserted that the proposed section 200.300(c) ``cherry picks'' one 
constitutional provision and only as it concerns scrutiny with respect 
to sexual orientation and gender identity.
    Some commenters also questioned the authority of OMB and Federal 
agencies implementing part 200 to impose the policy reflected in 
section 200.300 as a condition of the Federal award. For example, one 
commenter questioned whether agencies have legal authority to impose 
the proposed paragraphs (b) and (c) as a condition in the case of 
Federal statutes that do not prohibit discrimination on the basis of 
sexual orientation and gender identity. This commenter also maintained 
that agencies are prohibited from imposing substantive requirements 
under the Housekeeping Statute, 5 U.S.C. 301. Another commenter claimed 
that, under the major questions doctrine, Congress has not clearly 
delegated authority to OMB to impose nondiscrimination requirements 
with respect to all Federal financial assistance programs.
    OMB also received many comments asserting that the proposed section 
200.300 would inadequately protect free speech and religious liberty. 
For example, commenters criticized OMB for proposing to delete language 
noting that, among other illustrative examples, in administering 
Federal awards consistent with applicable law Federal agencies must 
adhere to laws protecting free speech and religious liberty. One 
commenter suggested that OMB's proposed revisions were ``singling out'' 
or ``favoring'' only certain constitutional protections. Another 
maintained that the proposed section 200.300 would ``threaten[ ] 
compulsory speech upon creative professionals.''
    On the topic of religious liberty, commenters expressed concern 
that OMB's proposed revisions may violate the Constitution's First 
Amendment or the Religious Freedom Restoration Act (RFRA), 42 U.S.C. 
2000bb et seq. Related to this concern, commenters noted that Bostock 
recognized religious liberty protections that can be relevant to claims 
of sex discrimination under Title VII. Additional commenters suggested 
that the proposed section 200.300 would make it more difficult for 
faith-based organizations to receive Federal financial assistance, and 
others suggested adding a new paragraph to section 200.300 recognizing 
constitutional protections for religious liberty.
    OMB Response: OMB appreciates all of the comments received on the 
proposed section 200.300 and is

[[Page 30075]]

finalizing it with clarifying revisions. Because many commenters, 
supportive and otherwise, misperceived the effect of section 200.300 
and the proposed revisions, OMB emphasizes two points at the outset. 
First, the structure of 2 CFR part 200 generally requires Federal 
agencies to implement all of its provisions, including section 200.300, 
consistent with their legal authority and the particular statutes and 
regulations governing each of their Federal financial assistance 
programs. See 2 CFR 200.106. 200.101(d); see also 78 FR 78590, 78619 
(Dec. 26, 2013). Second, section 200.300 in particular does not impose 
any new legal requirements. Rather, its scope is limited to explaining 
that Federal agencies must implement their Federal financial assistance 
programs consistent with other, existing legal requirements that apply 
of their own force to the agency's programs. See 88 FR 69395; see also 
88 FR 69391. For example, paragraph (a) refers to ``applicable Federal 
statutes'' (emphasis added); paragraph (b) refers to ``Federal awards 
that are subject to Federal statutes prohibiting discrimination based 
on sex'' and to ``administer[ing]'' programs ``in a way that does not 
unlawfully discriminate based on sexual orientation or gender 
identity'' (emphases added); and paragraph (c) refers to ``the 
heightened constitutional scrutiny that may apply'' in certain contexts 
(emphasis added)--all references to preexisting legal requirements.
    The fact that agencies will implement section 200.300 consistent 
with their authorities and that section 200.300 imposes no new legal 
requirements is responsive to a wide range of comments, including those 
urging OMB to revise section 200.300 so as to extend nondiscrimination 
requirements to foreign assistance; maintaining that OMB lacks legal 
authority to impose a nondiscrimination policy with respect to all 
Federal financial assistance programs; requesting that OMB clarify what 
constitutes discrimination under section 200.300; questioning agencies' 
authority to impose provisions of section 200.300 as specific 
conditions in programs that are not subject to a statute prohibiting 
discrimination based on sexual orientation and gender identity; arguing 
that agencies may not impose substantive requirements pursuant to the 
Housekeeping Statute; and asserting that the Constitution does not 
protect against differential treatment based on sexual orientation or 
gender identity. All of these comments are premised on the 
misimpression that section 200.300 creates or imposes new 
nondiscrimination requirements. It does not. The determination of 
whether any kind of discrimination is prohibited in any individual 
Federal financial assistance program depends on the laws applicable to 
that program, not section 200.300(b), and agencies will make relevant 
assessments on a program-by-program basis.
    Thus, contrary to some comments, section 200.300(b)'s reference to 
discrimination based on sexual orientation and gender identity does not 
impose any new nondiscrimination requirements. Section 200.300(b) 
merely explains that, if a statute prohibits discrimination based on 
sex, and if the statute's prohibition on sex discrimination encompasses 
discrimination based on sexual orientation and gender identity 
consistent with the Supreme Court's reasoning in Bostock, then 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 and gender identity. OMB has revised section 
200.300(b) to make the scope of the section clearer in this respect.
    Comments asserting that Bostock was wrongly decided are outside the 
scope of these revisions, but OMB disagrees with those arguing that 
Bostock's reasoning applies only to employment decisions under Title 
VII, or to ``transgender status'' and not ``gender identity.'' Several 
courts of appeals have held, and the Department of Justice's Civil 
Rights Division has concluded, that under Bostock's reasoning a number 
of sex discrimination statutes prohibit discrimination on the basis of 
gender identity, sexual orientation, and sex characteristics.\5\ Again, 
though, given the structure of part 200 and the scope of section 
200.300, for any particular Federal financial assistance program 
subject to a law prohibiting discrimination based on sex, the agency 
administering the program will assess the law as appropriate to 
determine whether, consistent with Bostock's reasoning, the law 
prohibits discrimination based on gender identity and sexual 
orientation. In section 200.300, OMB is not purporting to interpret any 
particular sex discrimination statute.
---------------------------------------------------------------------------

    \5\ See, e.g., A.C. by M.C. v. Metro. Sch. Dist. of 
Martinsville, 75 F.4th 760, 769 (7th Cir. 2023); Grabowski v. 
Arizona Bd. of Regents, 69 F.4th 1110, 1116-17 (9th Cir. 2023); Doe 
v. Snyder, 28 F.4th 103, 113-14 (9th Cir. 2022); Grimm v. Gloucester 
Cnty. Sch. Bd., 972 F.3d 586, 616 (4th Cir. 2020), as amended (Aug. 
28, 2020), cert. denied, 141 S. Ct. 2878 (2020) (mem.); Department 
of Justice, Civil Rights Division, Interpretation of Bostock v. 
Clayton County regarding the nondiscrimination provisions of the 
Safe Streets Act, the Juvenile Justice and Delinquency Prevention 
Act, the Victims of Crime Act, and the Violence Against Women Act, 
(Mar. 10, 2022), https://www.justice.gov/crt/page/file/1481776/download; Department of Justice, Civil Rights Division, Memorandum 
on Application of Bostock v. Clayton County to Title IX of the 
Education Amendments of 1972 (Mar. 26, 2021), https://www.justice.gov/crt/page/file/1383026/download; Department of 
Justice, Civil Rights Division, Title IX Legal Manual, https://www.justice.gov/crt/title-ix (Editor's Note). But see, e.g., L.W. by 
& through Williams v. Skrmetti, 83 F.4th 460 (6th Cir. 2023); Pelcha 
v. MW Bancrop, Inc., 988 F.3d 318, 324 (6th Cir. 2021); but cf. 
Adams v. School Bd. of St. Johns Cnty, 57 F.4th 791, 811-15 (11th 
Cir. 2022) (en banc).
---------------------------------------------------------------------------

    Regarding comments observing that OMB proposed to explicitly 
reference certain protections while removing explicit examples of 
others, including free speech and religious liberty, OMB intended to 
streamline and is not deemphasizing laws establishing those latter 
protections. Rather, paragraph (a) states that Federal financial 
assistance programs must comply with all applicable Federal laws. 
Concerns that particular applications of section 200.300 would run 
afoul of protections for free speech or religious liberty in the 
Constitution and other Federal laws, including RFRA, cannot be squared 
with paragraph (a)'s text. But to eliminate any confusion and allay 
concerns that OMB was singling out certain protections, in paragraph 
(a) OMB has retained the references to free speech, religious liberty, 
and other examples of potentially relevant and applicable protections, 
all of which are illustrative only. Relatedly, with respect to 
paragraph (b), OMB acknowledges that in Bostock the Court noted that it 
was not addressing how certain ``doctrines protecting religious liberty 
interact with Title VII,'' leaving those questions ``for future 
cases,'' 140 S. Ct. at 1754; agencies will apply the law on these 
issues at it develops. And OMB has revised paragraph (c) to refer to 
all characteristics that may give rise to heightened constitutional 
scrutiny under equal protection principles, including race, religion, 
sex, sexual orientation, gender identity, sex characteristics, and 
others.
    Comments asserting that section 200.300 will make it more difficult 
for faith-based organizations to receive Federal financial assistance 
and requesting that OMB provide a mechanism for those organizations to 
seek religious accommodations are misplaced given the structure of part 
200 and scope of section 200.300, as explained above. Because section 
200.300 does not impose any new legal obligations, it will not affect 
faith-based organizations' participation in agencies' Federal financial 
assistance programs, and any requests for accommodations are 
appropriately addressed to the agency administering the particular

[[Page 30076]]

program. As stated in section 200.300(a), awards must be implemented in 
full accordance with applicable provisions of the Constitution and 
Federal statutes and regulations, including those protecting religious 
liberty such as the First Amendment's Free Exercise and Establishment 
clauses and RFRA.
    Finally, in response to comments pointing out that the Fourteenth 
Amendment's Equal Protection Clause does not apply to the Federal 
government, OMB has revised section 200.300(c) to confirm that it is 
referring to the Fifth Amendment's equal protection guarantee, which 
does apply to the Federal government. See Bolling v. Sharpe, 347 U.S. 
497, 499 (1954). Related comments questioning how section 200.300(c) 
can apply to recipients ignore that part 200 provides guidance to 
Federal agencies, not recipients. Indeed, section 200.300(c) states 
what ``the Federal agency'' must do: in administering awards in 
accordance with the Constitution, they must take account of heightened 
scrutiny that may apply.

Section 200.301--Performance Measurement

    OMB did not propose significant changes to this section. Many 
commenters expressed support for OMB's clarification that Federal 
agencies should not require additional information that is not 
necessary for measuring program performance. One commenter requested 
that OMB require Federal agencies to consult with recipients on the 
proposed measurement, reporting, and evaluation framework and 
requirements before finalizing them in a Federal award. Another asked 
OMB to clarify what is meant by ``promising practices.'' Several 
commenters requested that OMB reinstate the examples of expected 
outcomes in paragraph (b). Lastly, some commenters requested that the 
section be revised to require Federal agencies to include information 
in the Federal award about how performance will be measured. These 
commenters also requested OMB to expand the measurement of performance 
to specifically include measuring the recipient's progress, which they 
stated may support continuous improvement of the recipient's 
performance.
    OMB Response: OMB did not find it necessary to require Federal 
agencies to consult with recipients on the proposed measurement, 
reporting, and evaluation framework before a Federal award is finalized 
in all cases. This recommendation could be a best practice for agencies 
to consider, but OMB finds that mandating this practice is not 
appropriate in part 200 at this time. The term ``promising practices'' 
may vary by Federal agency and program.
    OMB agrees with the commenters on reinstating the examples of 
expected outcomes in paragraph (b). These examples are again included 
in the text of the final guidance. Finally, Federal agencies are 
already required to include information on how performance will be 
measured in section 200.211(a). OMB disagrees with the commenters that 
this section needs to be expanded further through this update.

Section 200.302--Financial Management

    OMB did not propose significant changes to this section. One 
commenter stated that it is not possible to reasonably assess the 
financial management systems of foreign subrecipients. Another 
commenter stated that OMB's plain language revisions diluted the 
requirement to identify all Federal awards. One commenter requested 
that this section be revised to exclude fixed amount awards. Several 
commenters stated that the inclusion of the term ``Federal award year'' 
was causing confusion.
    OMB Response: This section does not directly require recipients to 
assess the financial management systems of subrecipients, but states 
the requirements that the subrecipient must meet. OMB agrees with a 
commenter that the proposed revision in paragraph (b) was confusing. 
OMB first clarified in the final guidance that the financial management 
systems of recipients and subrecipients must meet the requirements that 
follow. OMB also restored more of the language from the prior version 
of guidance in paragraph (b)(1), which may have been obscured by OMB's 
proposed revisions. OMB also made minor clarifying edits in paragraph 
(b)(3) in the final guidance. OMB disagrees with the commenters that 
this section should not apply to fixed amount awards and did not make a 
change related to those comments.

Section 200.303--Internal Controls

    In the proposed guidance, OMB added a requirement in paragraph (e) 
of section 200.303 that recipient and subrecipient internal controls 
include cybersecurity and other measures to safeguard information. OMB 
also proposed other minor clarifying edits.
    OMB received several comments requesting that the guidance specify 
what constitutes proper documentation of internal controls under 
paragraph (a). The same commenters also noted that paragraph (a) of 
section 200.303 indicated that internal controls should ``comply'' with 
the listed practices, which the commenter stated was overly 
prescriptive. Some commenters objected to the inclusion of the 
requirement to ``document'' internal controls. Many commenters stated 
that the guidance should be revised to incorporate the requirements of 
NIST SP 800-53 or other existing frameworks in paragraph (e) to ensure 
that the internal control requirements are not onerous and a barrier to 
participation. Commenters also requested that OMB reinstate the word 
``reasonable'' in paragraph (e).
    OMB Response: In section 200.303(a), OMB agrees with commenters 
that internal controls should ``align'' rather than ``comply'' with 
guidance in the listed standards. The word ``align'' more accurately 
reflects OMB's policy intent for this section.
    Several commenters also expressed concerns about the addition of 
the word ``document'' in paragraph (a). OMB does not consider this a 
policy change but rather clarification of the existing policy already 
contained within the guidance. The prior version of the guidance 
already stated that internal controls should comply with guidance in 
``Standards for Internal Control in the Federal Government'' issued by 
the Comptroller General of the United States or the ``Internal Control 
Integrated Framework'' issued by the Committee of Sponsoring 
Organizations of the Treadway Commission (COSO). Both include guidance 
on documenting internal controls. It is reasonable to expect that if a 
recipient has established internal controls, some form of written 
documentation should exist for them. However, it was not OMB's intent 
to require a specific level of documentation. As recognized in the 
Standards for Internal Control in the Federal Government, the recipient 
or subrecipient may use some judgment in determining the extent of 
documentation that is needed. The level and nature of documentation may 
vary based on the size of the recipient or subrecipient and the 
complexity of the operational processes it performs.
    For the purposes of this update, OMB disagrees with commenters on 
requiring a specific framework for cybersecurity and other measures 
used to safeguard information. OMB did not propose changes to establish 
a specific framework in the guidance and generally maintains the 
guidance in paragraph (e) as proposed. However, OMB will continue to 
evaluate whether to implement a specific framework on a government-wide 
basis in the future. OMB agrees with commenters that this

[[Page 30077]]

is a topic worthy of consideration for future updates. In the interim, 
Federal agencies may consider providing more specific guidance on this 
topic as appropriate for their Federal financial assistance programs.
    OMB did make two minor changes to paragraph (e). First, OMB agrees 
with commenters to maintain the word ``reasonable'' from the prior 
version of the guidance when describing actions necessary to safeguard 
information. OMB added the word ``reasonable'' back to the guidance 
text in place of ``as appropriate,'' which appeared later in the 
sentence as proposed. However, OMB does not intend to signal a 
substantive policy change by this modest revision to restore the word 
``reasonable'' from the prior version of the guidance text as requested 
by commenters. This merely recognizes, as the guidance text implies, 
that the recipient and subrecipient have some reasonable discretion on 
the appropriate framework for safeguarding information as required by 
this section.
    Next in paragraph (e), OMB restored the phrase ``and other types of 
information'' following protected PII. This language is consistent with 
the prior version of the guidance and recognizes that not only 
protected PII must be safeguarded.

Section 200.304--Bonds

    OMB did not propose significant revisions to section 200.304. OMB 
made a minor change to correct its proposed plain language revision. 
The word ``entity'' was removed after ``recipient.''

Section 200.305--Federal Payment

    In section 200.305 on Federal payment, OMB proposed 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 received several comments requesting that the guidance promote 
up-front payments. OMB also received one comment regarding paragraph 
(b)(1) and inquiring what is meant by ``minimum amounts needed.'' OMB 
received another comment regarding the use of ``may'' and ``must'' in 
paragraph (b)(4).
    Next, OMB also received a comment requesting that subrecipients be 
removed from the section on advance payments. The same commenter 
requested that paragraph (b)(2) be revised to state that payments ``may 
be consolidated.'' This commenter also requested that the recipient be 
provided with a 30-day notice before a withholding action is taken due 
to a debt to the government. The commenter also requested that aspects 
of the compliance supplement that impact section 200.305 be 
incorporated in the guidance text. Another commenter also requested 
that OMB increase the amount of interest a recipient or subrecipient be 
permitted to retain to $1,000. Other comments requested additional 
options for recipients and subrecipients to not use interest bearing 
accounts as a result of conflict or disaster. Finally, OMB received 
multiple comments about the use of ``and'' and ``or'' for recipients 
and subrecipients.
    OMB Response: Regarding comments requesting that the guidance 
promote up-front payments, the guidance in section 200.305 already 
recognizes advance payments as the default payment method for 
recipients and subrecipients, other than States, when the relevant 
criteria can be met. Paragraph (b)(1) explains that the ``recipient or 
subrecipient must be paid in advance, provided it maintains or 
demonstrates the willingness to maintain written procedures'' meeting 
the relevant criteria. OMB finds it is appropriate to retain the policy 
that advance payments must only be for actual, immediate cash 
requirements in carrying out the purpose of the approved program or 
project--except as otherwise provided in this paragraph and section of 
the guidance.
    On comments requesting further clarification of paragraph (b) and 
some of the sub-paragraphs that follow, OMB made some clarifying edits 
in the final version of the guidance. Some of these edits reincorporate 
language from the prior version of the guidance, which OMB proposed to 
remove in the course of its plain language revisions. Upon review, 
particularly in paragraph (b)(1), OMB found that some of the language 
proposed for removal provided useful context and clarity on the meaning 
of the guidance. Thus, OMB restored much of the language in paragraph 
(b)(1).
    Next, for comments on paragraph (b)(2), the prior version of the 
guidance already provided some flexibility by framing the sentence with 
``whenever possible.'' Thus, advance payment requests by the recipient 
or subrecipient must be consolidated as described, but some flexibility 
is allowed if this is not possible under the circumstances.
    On the comment regarding the use of ``may'' and ``must'' in 
paragraph (b)(4), OMB finds that these terms are used appropriately. 
They also remain consistent with the prior version of the guidance.
    Regarding Paragraph (b)(6)(ii), OMB disagrees that specifying a 
timeframe before taking a withholding action is necessary. Reasonable 
notice is still required but--as in the prior version of the guidance--
OMB does not specifically define a standard for what notice is 
reasonable within the guidance. OMB also made minor revisions to 
correct confusion caused by OMB's plain language revisions in this 
paragraph. As proposed, it was not clear which party was supposed to 
withhold payments, which OMB has now clarified.
    Regarding the comment requesting removal of subrecipients from the 
paragraphs on advance payments: subrecipients were always to be paid in 
advance if they meet the requirements of this section. Next, on 
comments requesting OMB increase the amount of interest a recipient or 
subrecipient is permitted to retain to $1,000, OMB disagrees. For this 
update, OMB retained the level at $500.
    In response to comments asking for additional options other than 
interest bearing accounts for recipients and subrecipients to use in 
circumstances involving conflict or disaster, such options may already 
exist under paragraph (b)(11)(v) depending on the circumstances 
involved. That provision allows an exception when an interest-bearing 
account is not readily accessible. The example in the parenthetical is 
illustrative only. Lastly, OMB reviewed its use of ``and'' and ``or'' 
for recipients and subrecipients. The language in the final guidance 
reflects OMB's intent on how specific requirements apply. However, OMB 
added additional clarifying guidance on this topic in section 
200.101(a)(4).

Section 200.306--Cost Sharing

    OMB proposed 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. OMB also proposed to provide 
additional guidance on voluntary uncommitted cost sharing for 
institutes of higher education. OMB received several comments 
expressing support for the proposed changes.
    OMB received several comments requesting that OMB maintain the use 
of the word ``matching'' throughout, citing for example, that this 
change would require additional updates to other policies, such as the 
compliance supplement. OMB also received several comments requesting 
that the topic of

[[Page 30078]]

cost share should only be included in the NOFO when cost share is 
mandated by the program.
    Regarding paragraph (a), several commenters suggested that ``may'' 
should be changed to ``must.'' The same commenters suggested that pass-
through entities should also be referenced in paragraph (a). Commenters 
also recommended that OMB revise the policy to state that voluntary 
committed cost share is not expected in the case of all Federal 
financial assistance--not just in the case of Federal research grants. 
Commenters also requested that OMB remove the guidance stating that 
cost share may be required if permitted by agency regulations and 
specified in the NOFO.
    OMB also received several comments requesting a policy requiring 
agencies to consider proposed financial matches made by outside 
investors, philanthropists, corporations, or other organizations to 
count as a cost share or leverage towards the project. Several comments 
also inquired about the use of cost sharing over matching. Other 
commenters asked OMB to discourage or prohibit matching requirements. 
One commenter asked OMB to amend the guidance to include language that 
would not require an applicant to have secured commitments for all cost 
share prior to the Federal award. Another comment recommended 
paragraphs (d) through (g) be combined to create a single fair market 
value approach for all items. Another commenter asked OMB to remove 
paragraph (b)(5) in section 200.306 and paragraph (f) in 200.403. 
Finally, OMB received several comments requesting clarification and 
changes to paragraph (k) in section 200.306.
    OMB Response: Regarding comments on the elimination of the term 
``matching,'' OMB disagrees and maintains that this change is 
appropriate. ``Matching'' is a type of cost share, as provided in the 
definition in section 200.1. OMB acknowledges that certain supplemental 
materials, such as the compliance supplement, may need revision to 
ensure consistency with the updated guidance.
    On comments asking OMB to further discourage or prohibit cost 
sharing for Federal financial assistance in general, cost sharing 
requirements may vary on a program-by-program basis. For example, 
mandatory cost sharing requirements may be imposed based on a program's 
authorizing statute or at the discretion of the Federal agency, 
consistent with its legal authorities, through a NOFO. OMB did not make 
significant changes on cost sharing requirements through this update.
    In the case of voluntary cost sharing, however, since 2013, 
paragraph (a) of section 200.306 has already prohibited Federal 
agencies from using voluntary committed cost sharing as a factor during 
the merit review of applications or proposals for Federal research 
grants unless authorized by Federal statutes or agency regulations and 
specified in the NOFO. See 78 FR 78590 (Dec. 26, 2013). OMB now 
includes language in the final guidance stating that Federal agencies 
are also discouraged--but not prohibited--from using voluntary 
committed cost sharing as a factor during the merit review of 
applications for other non-research Federal financial assistance 
programs. While the existing provision on Federal research awards 
serves to provide a more level playing field in that context--allowing 
more applicants to compete for research awards--OMB is uncertain of 
what impact such a prohibition could have on Federal agency practice or 
other assistance programs if implemented more broadly for non-research 
awards. Thus, through this update, OMB only discourages the practice of 
using voluntary cost sharing as a factor during the merit review of 
applications or proposals for non-research Federal financial assistance 
programs, but leaves Federal agencies with discretion, consistent with 
their legal authorities, on this topic. OMB may consider comments on 
this topic for future updates.
    OMB disagrees with commenters that paragraph (a) should be applied 
to pass-through entities. Based on its references to notices of funding 
opportunity, the paragraph is structured to apply to Federal agencies, 
not to pass-through entities, which are not required to conduct the 
same form of merit reviews.
    OMB also did not remove guidance in paragraph (a) stating that 
voluntary committed cost sharing for research awards may be considered 
in merit review if permitted by agency regulations and specified in the 
NOFO. OMB leaves Federal agencies with discretion, consistent with law, 
on this topic.
    On comments regarding paragraph (b), OMB revised the guidance to 
clarify that a Federal agency or pass-through entity must accept any 
cost sharing funds--including cash and third-party in-kind 
contributions, and also including funds committed by the recipient, 
subrecipient, or third parties--as part of the recipient's or 
subrecipient's contributions to a program when the funds meet the 
conditions listed in this paragraph. For the comments asking OMB to 
require agencies to consider proposed financial matches made by third 
parties, such matches would be recognized if they meet the conditions 
in paragraph (b).
    Next, regarding the comment suggesting combination of paragraphs 
(d) through (g), OMB did not propose a policy change to these 
paragraphs. OMB may consider this suggestion for future updates.
    OMB did not agree with the commenter suggesting removal of 
paragraph (b)(5) in section 200.306 and paragraph (f) in 200.403 
through this update. In this final guidance, OMB retained the default 
restriction on a recipient proposing to use funds from another Federal 
award as cost share unless the program's authorizing statute 
specifically allows doing so. OMB may consider this suggestion for 
future updates.
    OMB reverted to the prior version of the guidance in paragraph (f) 
in section 200.306. The proposed revision inadvertently impacted the 
policy for this provision, which was not OMB's intent.
    On comments requesting changes and clarification to paragraph (k), 
OMB maintained the reference to voluntary uncommitted cost sharing only 
with respect to IHEs in alignment with OMB Memorandum M-01-06. The 
different treatment referenced in both the memorandum and guidance text 
is related specifically to IHEs. OMB also agrees with commenters that 
voluntary uncommitted cost sharing consists of more than just faculty 
donated time and clarified the section to indicate that it includes, 
but is not limited to, faculty donated time.

Section 200.307--Program Income

    OMB proposed to revise section 200.307 on program income by 
clarifying paragraph (a) regarding the use and expenditure of program 
income, including allowing the use of program income for certain 
closeout costs. OMB also proposed to revise and clarify guidance in 
paragraph (b) for each of the three methods for use of program income. 
OMB received several comments expressing support for the proposed 
changes.
    OMB received one comment requesting clarification on how program 
income should be handled if earned after the period of performance. OMB 
also received several comments questioning the policy that program 
income be expended prior to requesting additional Federal funds. 
Commenters questioned whether this policy should continue to be 
included in the guidance.
    Commenters also requested revisions to paragraphs (b) and (b)(2). 
Commenters stated there was a conflict

[[Page 30079]]

in the language as to what method should be applied when no program 
income method is selected by an agency.
    OMB also received a comment requesting clarification on whether 
more than one method of program income may be used under an award. OMB 
received several comments requesting clarification on what closeout 
costs may be paid for by program income. OMB also received several 
comments requesting the guidance to provide agencies with the ability 
to allow recipients to retain program income balances after the period 
of performance has ended.
    One commenter also requested that the default method for program 
income be ``addition.'' The commenter also requested OMB remove the 
prior approval requirement for calculation of program income based on 
``net'' program income, rather than gross program income. Another 
commenter asked OMB to change the default program income method from 
the deduction method to the cost sharing method. Finally, OMB received 
one comment suggesting that the guidance on program income be removed 
in its entirety.
    OMB Response: OMB disagrees with comments questioning the policy 
under paragraph (a) that program income be expended prior to requesting 
additional Federal funds. This is a long-standing feature of section 
200.307 on program income, which OMB did not propose to change through 
this update.
    In response to comments requesting that ``addition'' or ``cost 
sharing'' be the default method for program income, the default method 
in this paragraph is only used when a method is not specified by the 
Federal agency. Thus, the default method in the final guidance is not 
necessarily the default method that will be used in practice by all 
agencies for specific programs or awards. OMB disagrees, however, with 
changing the default method from the deduction method when an agency 
does not specify. OMB did not change the policy in paragraph (d) on the 
cost of generating program income.
    Regarding the comment requesting clarity on whether more than one 
method of program income may be used under an award, OMB made a minor 
revision in paragraph (b) to clarify that the Federal agency must 
specify in the terms and conditions what ``method(s)'' must be 
followed. This change recognizes that more than one may be used for 
different aspects of a project or program if specified by the Federal 
agency.
    On comments requesting revisions to paragraphs (b), (b)(2), and 
(b)(3), OMB revised all three provisions for clarity. The prior 
approval requirement for using the addition or cost sharing methods is 
now explained only in the top-level paragraph (b).
    On comments requesting clarity on what closeout costs may be paid 
for by program income, OMB included a reference in paragraph (a) to the 
guidance on allowable closeout costs in section 200.742(b). On the 
comment requesting guidance on how program income should be handled if 
earned after the period of performance: this topic is addressed in 
paragraph (c).
    In response to comments requesting flexibility for Federal agencies 
to allow recipients to retain program income balances after the period 
of performance has ended, OMB appreciates the commenters' suggestions. 
While OMB made no change through this final guidance document, it may 
consider the suggestion for future updates. Finally, in response to the 
comments suggesting that the guidance prohibit program income, 
eliminate certain other provisions on program income OMB retained from 
the last guidance, or remove the guidance on program income altogether, 
OMB disagrees that such changes are appropriate.

Section 200.308--Revision of Budget and Program Plans

    OMB proposed 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 proposed 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 proposed 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 
was 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 proposed to identify other items requiring prior approval, 
including requesting additional funds, transferring funds, and no-cost 
extensions. OMB proposed 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. OMB received 
several comments expressing support for the proposed changes.
    OMB received several comments requesting separate distinctions be 
made for construction and non-construction awards and to provide a 
definition of construction awards. One commenter requested OMB to 
revise paragraph (a) to reflect the definition of budget in section 
200.1. Another commenter asked for clarification of the term deviation 
in paragraph (b). OMB received a recommendation from several commenters 
to improve the language of paragraph (c). The same commenters suggested 
that OMB extend the notification requirement in paragraph (d) from 30 
days to 60 days. Another commenter asked that paragraph (e) be 
clarified.
    OMB also received several comments suggesting that the guidance 
permit an agency to waive all prior approval requirements in 200.308. 
OMB received another comment requesting clarification that prior 
approval is not needed for the addition of subrecipient organizations 
under paragraph (f).
    Several comments requested clarity on when a change in key 
personnel is needed under paragraph (f)(2). OMB received another 
comment requesting that OMB define key personnel as those named in the 
Federal award and subaward. Commenters also asked OMB to clarify in 
paragraph (f)(3) of the guidance if prior approval is necessary for the 
disengagement of a principal investigator by 25 percent or more than 25 
percent. The same commenters also requested that paragraph (f)(3) be 
revised to state: ``Key personnel are not required during a period of 
no cost time extension to commit additional effort beyond that which 
was originally approved in an award notice.''
    Several commenters asked OMB to clarify paragraph (f)(4). OMB 
received one comment suggesting that paragraph (f)(4) does not lessen 
the administrative burden felt by recipients. OMB received one comment 
requesting that the prior approval for transferring between participant 
support costs to other budget categories in paragraph (f)(5) be 
removed.
    Other commenters requested OMB clarify the intention of paragraph 
(f)(6) by this language: ``This requirement does not apply to acquiring 
equipment, supplies, or general support services.'' Commenters also 
requested OMB revise the guidance in paragraph (f)(6) to indicate that, 
if agencies relied on the

[[Page 30080]]

subrecipient partner as part of its merit review, the agency should 
state this in the terms and conditions of the Federal award. OMB 
received several comments requesting clarification on subaward prior 
approval under paragraph (f)(6). Several commenters also asked OMB to 
remove language from section paragraph (f)(6) limiting when prior 
approval of a change to a subrecipient should be required to 
circumstances when ``the inclusion was a determining factor in the 
merit review or eligibility process.'' OMB received one comment 
requesting OMB remove aspects of paragraph (f)(6) that enable an agency 
to approve a different subrecipient partner. A commenter also requested 
that OMB remove certain language from paragraph (f)(6) regarding 
whether the ``inclusion [of a subrecipient] was a determining factor in 
the merit review or eligibility process.''
    Next, a commenter asked OMB to remove the ``total'' out of ``total 
approved cost share'' in paragraph (f)(7) and revert to the original 
language. OMB received one comment requesting the guidance clarify the 
difference between construction and non-construction work in paragraph 
(f)(9). OMB also received a comment requesting clarity on what is meant 
by an extension of time that requires no additional funds under 
paragraph (f)(10). Another comment requested clarity on the parameters 
of no-cost extensions under paragraphs (f)(10) and (g)(2) and whether 
the requirements apply to pass-through entities.
    OMB received a request to clarify that allowable costs incurred 
prior to the start of the next budget period are not pre-award costs 
under paragraph (g)(1). OMB received one comment requesting OMB 
encourage Federal agencies to simplify and streamline the process for 
no-cost extension pre-approvals where they are necessary. The commenter 
also recommended that OMB consider extending the guidance in paragraph 
(h) to State governments.
    Lastly, OMB received one comment requesting that the guidance 
specify where agencies must indicate that they are restricting 
transfers in accordance of paragraph (i).
    OMB Response: OMB revised paragraph (a) of section 200.308 to 
clarify that the approved budget may include the Federal share and non-
Federal share, or only the Federal share, as determined by the Federal 
agency or pass-through entity. On this change, OMB agrees with a 
commenter requesting that paragraph (a) reflect the definition of 
budget in section 200.1.
    OMB revised paragraph (c) to permit Federal agencies to approve 
alternative formats for receiving budget revisions. OMB also provided 
some examples of alternative formats, and specified the need to 
document such alternative forms of request. This broadens the 
flexibility available under the prior version of the guidance, which 
only mentioned a letter of request.
    OMB disagrees with the comment requesting extension of the 
notification requirement in paragraph (d) to 60 days. OMB made a 
revision, however, to indicate the agency or pass-through entity 
``should'' provide notice within 30 days. This change was made to 
account for conflicts where Federal agency approval is also necessary.
    Regarding the comment requesting clarification to paragraph (e), 
OMB agrees and revised the sentence to more clearly state the policy. 
OMB revised paragraph (f)(2) to clarify that a change in key personnel 
is only required for those who are identified in the Federal award. OMB 
agrees with comments asking for clarity on this point. OMB disagrees 
with comments asking for a specific definition of key personnel. In the 
context of this provision, however, OMB provides illustrative examples 
of key personnel.
    On the comments asking for clarity on disengagement by a principal 
investigator under paragraph (f)(3), the guidance references ``a 25 
percent reduction in time and effort devoted to the Federal award.'' 
Revising to ``more than'' 25 percent in this update would make a 
marginal difference, which OMB did not find necessary. OMB also 
disagrees with commenters suggesting further revisions to paragraph 
(f)(3); the current text reflects OMB's policy intent.
    OMB revised paragraph (f)(4) to restore text from the prior version 
of the guidance. OMB was concerned that proposed plain language 
revisions may have altered the meaning of this provision, and reverted 
back to the prior text. OMB disagrees with comments suggesting that 
paragraph (f)(4) may present excessive administrative burden.
    In response to a comment, OMB revised paragraph (f)(6) to clarify 
that the provision does not apply to procurement transactions for goods 
and services. However, OMB disagrees that further revisions are 
necessary in response to comments suggesting that the terms and 
conditions of a Federal award should state whether an agency relied on 
a subrecipient partner as part of the merit review. In this context, 
the current language is already responsive to this comment. In response 
to the comments requesting that OMB remove language from paragraph 
(f)(6) limiting when prior approval of a change to a subrecipient 
should be required, this is recommended guidance to Federal agencies to 
relieve the burden on recipients. In response to another comment on 
this paragraph, the requirement for prior approval is needed if a 
portion of the programmatic activities that were to be performed by a 
recipient will now be performed by a subrecipient. The change in a 
subrecipient partner, however, is not required unless approval is 
required in the terms and conditions of the Federal award.
    OMB disagrees with the comment suggesting removal of the word 
``total'' from ``total approved cost share'' in paragraph (f)(7). The 
inclusion of ``total'' better reflects the intent of the prior approval 
requirement. On the comment asking OMB to provide further guidance to 
differentiate between construction and non-construction work in 
paragraph (f)(9), this decision is often made at a programmatic level 
by a Federal agency. Federal agencies may provide further guidance on 
the categories in the terms and conditions of a Federal award. OMB 
revised paragraph (f)(10) to clarify that a no-cost extension means an 
extension of time that does not require the obligation of additional 
Federal funds.
    OMB disagrees with the comment suggesting extension of the guidance 
in paragraph (h) to State governments. This provision does not apply 
specifically to any particular recipient group, but rather is based on 
the nature of the work being conducted--research awards. OMB disagrees 
with the comment asking OMB to specify where agencies must indicate 
that they are restricting transfers in accordance of paragraph (i). 
Federal agencies may elect to include the restriction in the Federal 
award or their standard terms and conditions.
    On the comment requesting clarification on the term deviation under 
this section, OMB did not find that additional clarification is 
necessary in the guidance text. It is up to the Federal agency and 
recipient to ascertain what may or may not be considered an action that 
departs from the standard course for a given program.
    On the comment requesting clarification that prior approval is not 
needed for the addition of subrecipient organizations, OMB finds that 
further clarification is unnecessary. It is left to the discretion of 
the Federal agency to include such a term in the Federal award.
    OMB disagrees with the comment requesting that the prior approval 
for transferring between participant support costs to other budget 
categories be removed. OMB does not make a change.

[[Page 30081]]

OMB also disagrees with the comment suggesting that a Federal agency be 
permitted to waive all prior approval requirements. OMB finds this 
would not be an appropriate revision.
    On the comment asking OMB to encourage Federal agencies to simplify 
and streamline the process for no-cost extension pre-approval, the 
process for approvals is not specified by OMB's guidance. OMB did not 
revise the guidance to address this topic at this time.
    On the comment asking OMB to clarify that allowable costs incurred 
prior to the start of the next budget period are not pre-award costs, 
OMB finds this clarification is unnecessary. The start of a new budget 
period does not constitute a new award and therefore would not be 
considered pre-award costs by definition.
    In response to a comment asking for clarity on the parameters of 
no-cost extensions and whether the requirements apply to pass-through 
entities, the guidance on no-cost extension applies strictly to Federal 
agencies. The parameters for no-cost extensions are at the discretion 
of the agency.

Section 200.309--Modifications to Period of Performance

    In section 200.309 on modifications to the period of performance, 
OMB proposed 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 proposed to incorporate 
the definition of ``renewal award'' in this section.
    OMB received a comment suggesting that the proposed revision may 
have the unintended consequence of allowing a Federal agency or pass-
through entity to unilaterally extend an award. Another comment 
suggested that the proposed revisions implied that an agency may 
terminate an award for convenience.
    OMB Response: OMB's proposed revisions in this section were not 
intended to allow a Federal agency or pass-through entity to 
unilaterally extend an award. As such, OMB clarified in the final 
guidance that the role of the Federal agency and pass-through entity is 
to approve an extension to a Federal award.
    In response to the comment suggesting that OMB's proposed revisions 
to this section would allow a termination by convenience by the Federal 
agency: the guidance in this section merely provides direction for how 
to adjust the period of performance based on actions addressed more 
specifically in other sections of the guidance, such as extending or 
terminating a Federal award. In the final version, OMB removed proposed 
text from this section on how to amend the period of performance in 
circumstances in which a Federal agency decides not to continue a 
Federal award with multiple budget periods. The final guidance 
continues to recognize that the start date of a renewal award begins a 
new and distinct period of performance. OMB's guidance on termination 
is provided in section 200.340 and discussed in this preamble below.

Section 200.310--Insurance Coverage

    OMB did not propose significant changes to this section. One 
commenter asked OMB to revise this section to indicate that what is 
required is like treatment of like items, not like treatment of all 
items.
    OMB Response: OMB finds the intent of the guidance is sufficiently 
clear. A recipient or subrecipient must, at a minimum, provide 
equivalent insurance coverage for real property and equipment paid for 
with Federal funds, as they would provide for real property equipment 
that they purchased with their own funds.

Section 200.311--Real Property

    In section 200.311, addressing real property, OMB proposed 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 proposed to include a definition of the 
term ``encumbrance'' in sections 200.311, 200.313, and 200.315.
    A commenter asked OMB to allow Indian Tribes to place on-
reservation real property acquired in a Federal award in trust for 
general Tribal governmental purposes and use the property as such 
during the fee-to-trust process. Other commenters asked for further 
clarification on what is meant by the statement that ``real property 
must be used for the originally-authorized purpose as long as it is 
needed for that purpose'' and how the guidance applies to various 
Federal programs. OMB also received several comments requesting the 
addition of a definition for encumbrance in section 200.1 and the 
removal of the text from sections 200.311, 200.313, and 200.315. 
Another comment asked OMB to revise the definition of encumbrance to 
include that a Federal agency should not require subordination of any 
pre-existing encumbrance. One commenter asked OMB to revise the 
guidance to prevent Federal agencies from directing recipients to sell 
real property even if a recipient prefers to retain the property and 
compensate the agency. OMB also received a comment suggesting that the 
real property guidance in this section include additional flexibilities 
similar to those provided for equipment.
    OMB Response: OMB revised paragraph (b) of section 200.311 to 
remove the proposed definition of encumbrance and clarify that 
easements that benefit real property are not considered an encumbrance. 
OMB did not include a specific definition of encumbrance in section 
200.1 for the reasons explained in subpart A of this preamble above. 
OMB finds that the term ``encumber'' is sufficiently clear in context 
in which it is used in this section without OMB providing a specific 
definition. See also discussion of the term ``encumbrance'' in this 
preamble above. OMB elected not to define that term in part 200.
    A commenter asked OMB to clarify that ordinary and necessary 
easements in favor of utility, cable and other service providers that 
benefit the real property will not be deemed an encumbrance. OMB agrees 
with this suggestion and incorporated similar language in section 
200.311 of the final guidance. OMB recognizes that utility related 
easements are routinely granted, typically enhance rather than diminish 
the value of property, and may facilitate development for authorized 
purposes under the Federal award.
    OMB revised paragraph (c) of section 200.311 to clarify that the 
requirements of this provision only apply when an appraisal of real 
property is required under the Federal award. On the comment regarding 
real property acquired by Indian Tribes, OMB may consider providing 
additional guidance on this topic in future updates, but did not 
propose substantive changes to the policy as it relates to this comment 
in its proposed revisions.
    OMB may also consider providing other additional guidance on, or 
clarifying edits to, section 200.311 in future updates, but did not 
make further substantive changes to the policy. For example, the policy 
that real property must be used for the originally-authorized purpose 
as long as it is needed for that purpose--which received many 
comments--remains unchanged. The policy on vesting of

[[Page 30082]]

real property ``acquired improved under a Federal award'' also remains 
the same as it appeared in the proposed revisions. While there may be 
some variations between Federal agencies and programs in implementation 
of this section--such as in the context of Federal financial assistance 
provided in response to disasters--OMB cannot address all possible 
scenarios in the government-wide guidance, which remains substantially 
similar to the guidance initially provided in this section in 2013 on 
this topic.
    OMB disagrees with the comment asking OMB to prevent Federal 
agencies from directing recipients to sell real property in accordance 
with this section. Such decisions are left to the discretion, 
consistent with law, of the Federal agency.
    OMB did not make a policy change in response to the comment asking 
for additional flexibilities under this section similar to those in the 
section on equipment. Although not included in this update, OMB may 
consider this suggestion for additional updates in the future.

Section 200.312--Federally-Owned and Exempt Property

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that Indian Tribes be allowed to 
acquire excess Federally-owned property at fair market value.
    OMB Response: OMB may consider providing additional guidance on 
property acquired by Indian Tribes in future updates, but did not 
include substantive changes to the policy as it relates to the above 
comment in the final guidance.

Section 200.313--Equipment

    In section 200.313, relating to equipment, OMB proposed 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 
proposed a definition of the term ``encumbrance.'' Consistent with the 
existing requirements for States, OMB also proposed to allow Indian 
Tribes to dispose of equipment in accordance with tribal law. OMB also 
proposed 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 proposed to 
reinforce the responsibility of recipients to maintain updated records 
regarding equipment. OMB received several comments expressing support 
for the proposed changes.
    OMB received several comments requesting the addition of a 
definition for encumbrance in section 200.1 and the removal of the text 
from 200.311, 200.313, and 200.315. One commenter suggested that 
section 200.313 be revised to include language on leasehold 
improvements.
    One commenter asked OMB to update paragraph (b) to include language 
regarding subrecipients for consistency with other sections. Another 
commenter asked OMB to update guidance in paragraph (c)(2) to clarify 
that Federal agencies should not require the use of equipment on other 
programs supported by the Federal Government. The commenter stated that 
additional use would cause additional or accelerated wear and tear. OMB 
received several comments regarding paragraph (d)(3), including on 
OMB's use of ``must'' in that paragraph.
    OMB also received several comments requesting that the threshold 
for equipment in paragraph (e) be raised above $10,000. Another 
commenter opposed raising the threshold for equipment to $10,000. This 
commenter requested OMB incorporate usage and accountability 
requirements for items between $5,000 and $10,00 that are considered 
``attractive'' or subject to misappropriation. One commenter also noted 
that paragraph (e)(2)--related to proceeds from selling equipment--
should be revised to ``$1,000'' instead of ``$1,000 or 10 percent 
(whichever is less).'' Several commenters also asked OMB to expand 
paragraph (f) to refer to subrecipients.
    OMB Response: OMB revised paragraph (a)(2) of section 200.313 to 
remove the proposed definition of encumbrance. OMB did not include a 
specific definition of encumbrance in section 200.1 for the reasons 
explained in subpart A of this preamble above.
    OMB revised paragraph (b) to clarify that recipients and 
subrecipients other than States and Indian Tribes, including 
subrecipients of a State or Indian Tribe, must follow paragraphs (c) 
through (e) of section 200.313.
    OMB did not revise paragraph (c)(2) relative to what was proposed. 
On the comment asking about the requirement under paragraph (c)(2) to 
make equipment available for use on other programs supported by the 
Federal Government, this requirement is generally implemented at the 
discretion of the Federal agency, which may assess whether use on other 
projects would interfere with the purpose for which it was originally 
acquired.
    OMB made no change to paragraph (c)(3). The paragraph already 
recognizes that a Federal authorizing statute would prevail in cases of 
conflict. See also 2 CFR 200.101(d) (as revised).
    OMB made a minor edit in paragraph (d) to use ``replacement 
equipment'' in place of ``replacing equipment.'' OMB revised paragraph 
(d)(1) to clarify that a subrecipient is also responsible for 
maintaining and updating property records. OMB revised paragraph (d)(3) 
to modify the proposed reporting requirement for equipment loss, 
damage, or theft that will impact a program to a notification 
requirement.
    OMB did not make changes to paragraph (e)(1). In response to the 
comments asking OMB to raise the threshold for equipment above $10,000, 
OMB does not find this warranted at this time and did not make a 
change. Regarding the comment suggesting additional requirements for 
equipment valued between $5,000 and $10,000, OMB finds this request 
would be overly burdensome to recipients. OMB did not make a change.
    OMB revised paragraph (e)(2) to clarify that recipients or 
subrecipients may be permitted to retain, from the Federal share, 
$1,000 of the proceeds to cover expenses associated with the selling 
and handling of the equipment. OMB agrees with commenters that ``$1,000 
or 10 percent (whichever is less)'' should be revised to just state 
``$1,000.'' Based on the updated threshold for equipment under 
paragraph (e), there would not be a circumstance in which 10 percent 
would be lower than $1,000.
    OMB revised paragraph (f) to clarify that Federal agencies may 
authorize pass-through entities to allow subrecipients to retain 
equipment. OMB agrees with some of the commenters on this topic. In the 
final guidance, OMB allows the pass-through entity to receive 
permission from Federal agencies to allow subrecipients to retain 
equipment without further obligation. The provision specifies, however, 
that permission must be included by the Federal agency in the terms and 
conditions of the award. Thus, a pass-through entity could not exercise 
this flexibility independently.
    In response to the comment requesting the addition of language on 
leasehold improvements, OMB made no policy change to this section on 
that topic through this final guidance. OMB may consider the comment 
for additional updates in the future.

Section 200.314--Supplies

    OMB proposed to revise section 200.314 on supplies to raise the

[[Page 30083]]

threshold from $5,000 to $10,000. OMB also proposed 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 proposed to 
include a definition of ``unused supplies'' in section 200.314. OMB 
received several comments expressing support for the proposed changes.
    OMB received one comment asking OMB to clarify the meaning of 
unused supplies that are in new condition. OMB also received several 
comments requesting that the threshold for equipment and supplies be 
raised above $10,000. One commenter noted that OMB's guidance on the 
proceeds for selling unused supplies should be revised to refer to 
``$1,000'' and not ``$500 or 10 percent (whichever is less)'' to be 
consistent with the requirements for equipment. Several commenters also 
asked OMB to revise the guidance to allow for unused supplies to be 
retained.
    OMB Response: OMB revised paragraph (a) of section 200.314 in the 
final guidance to clarify that recipients or subrecipients may be 
permitted to retain, from the Federal share, $1,000 of the proceeds to 
cover expenses associated with the selling and handling of the 
supplies. OMB agrees with the commenter who recommended revising the 
guidance this way. OMB also made a minor edit to delete a duplicated 
word.
    On the comment requesting clarity on the meaning of unused supplies 
that are in new condition, OMB finds the guidance to be sufficiently 
clear. New condition means not having been used or opened before.
    On comments asking OMB to raise the threshold for supplies above 
$10,000, OMB does not find this warranted in this update. OMB did not 
make a change at this time.
    On comments asking OMB to allow unused supplies to be retained, OMB 
does not agree that this should be the government-wide default. OMB did 
not make a change in this update, but may consider this recommendation 
for future updates. Even under the structure of the current guidance, 
however, Federal agencies would have authority under section 200.102(c) 
to exercise reasonable discretion in providing case-by-case exceptions 
to allow retention of unused supplies.

Section 200.315--Intangible Property

    In section 200.315 on intangible property, OMB proposed 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 proposed a definition of the term ``encumbrance.''
    OMB received several comments requesting the addition of a 
definition for encumbrance in section 200.1 and the removal of the text 
from sections 200.311, 200.313, and 200.315.
    Commenters also asked OMB to revise guidance in 200.315 to state 
that copyright in works voluntarily created by a recipient or 
subrecipient are not considered acquired under a Federal award.
    Several commenters also supported OMB's proposed guidance to make 
intangible property publicly available on agency-designated websites. A 
few of the commenters requested additional clarification on this topic.
    Lastly, several commenters noted that access to Federally funded 
data is a priority for a variety of reasons, including transparency, 
regulatory review, impact analysis, and program evaluation. For 
example, one commenter called for greater data transparency for the 
purposes of regulatory review of impact analysis; another commenter 
called for greater access to Federally funded data for the purposes of 
administrative evaluation and policy development; another commenter 
drew attention to data quality issues and the need for greater 
transparency; another commenter emphasized the importance of data 
gathering program evaluation and transparency; and another commenter 
stated that agencies sometimes use FOIA and FOIA exemptions to inhibit 
access to information by outside stakeholders.
    OMB Response: OMB revised paragraph (a) of section 200.315 to 
remove the proposed definition of encumbrance. To avoid any confusion, 
OMB removed the definition of encumbrance from sections 200.311, 
200.313, and 200.315. OMB did not include a specific definition of 
encumbrance in section 200.1 for the reasons explained in subpart A of 
this preamble above.
    OMB did not revise paragraph (b) of section 200.315 in response to 
comments requesting recognition of a new category of ``voluntarily 
created works,'' which would not be considered ``acquired'' under a 
Federal award. The suggestion would create confusion and unnecessary 
regulatory burden by inserting an unclear distinction between 
``voluntarily created'' works and ``acquired'' works. It would also be 
unclear whether title to such ``voluntarily created works'' would vest 
in the Federal government, the recipient, the subrecipient, or some 
other entity. Section 200.315(b) reserves certain rights of the Federal 
government for works acquired or developed under a Federal award, 
including ``a royalty-free, nonexclusive, and irrevocable right to 
reproduce, publish, or otherwise use the work for the government's 
purposes and to authorize others to do so.'' This license limits the 
ability of the recipient or subrecipient to exercise certain rights--
which are subject to the Federal government's license against the 
government or those authorized by the government. Inclusion of the new 
language proposed by commenters on ``voluntarily created works'' would 
create confusion regarding the scope of the government's license, which 
is a long-standing feature of OMB's government-wide guidance on this 
topic. OMB did not propose substantial changes to the license through 
the proposed guidance issued in October 2023 and did not make any such 
changes in the final guidance.
    The term ``work'' in paragraph (b) is a term of art in copyright. 
This term is better fitted under paragraph (b), which speaks only to 
copyright and not all intangible property. Paragraph (b) also refers to 
works ``developed'' or ``acquired'' under a Federal award. This removes 
the burden of attempting to determine whether a ``work'' was 
``voluntarily'' created or not.
    If commenters' concerns on this topic were based on the newly 
proposed definition of ``encumbrance'' in this section, that definition 
is not included as part of the final guidance text. Although OMB made 
minor revisions, it generally aimed to preserve the status quo on the 
government's license and other provisions in paragraphs (a) and (b) 
relative to the prior version of the guidance.
    OMB added a new paragraph (f) in the final guidance in response to 
comments noting that access to Federally funded data is a priority for 
a variety of reasons. The new paragraph reminds agencies of their 
responsibilities to provide public access to research data, possibly 
through exerting their Federal purpose licenses when needed, with 
appropriate privacy and confidentiality protections. The new language 
also reminds agencies to rely on FOIA to provide access only as a last 
resort. Specifically, the new paragraph (f) states that Federal 
agencies should work with recipients to maximize public access to 
Federally funded research results and data in a manner that protects 
data providers' confidentiality, privacy, and security. The new 
paragraph also states that agencies should provide guidance to 
recipients to make restricted-access data

[[Page 30084]]

available through a variety of mechanisms. Finally, the new paragraph 
states that FOIA may not be the most appropriate mechanism for 
providing access to intangible property, including federally funded 
research results and data.

Section 200.316--Property Trust Relationship

    OMB did not propose significant changes to this section. OMB 
received several comments pertaining to this section. A few commenters 
requested the section be deleted in full while others requested the 
section be clarified.
    OMB Response: OMB did not make any changes to this section. OMB 
appreciates the feedback and may consider comments for future updates. 
Any significant revisions to section 200.316 would go beyond the scope 
of OMB's proposed update.

Section 200.317--Procurements by States and Indian Tribes

    OMB proposed 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 
proposed to allow Indian Tribes to follow their own policies and 
procedures. OMB received several comments expressing support for the 
proposed changes in this section.
    One commenter requested a revision of the guidance to allow for 
local governments to follow their own procurement standards, rather 
than those in section 200.318. Another commenter requested revision of 
the guidance to acknowledge that some recipients or subrecipients might 
be subject to the procurement standards of a State or Indian Tribe.
    OMB Response: Under the final version of section 200.317, OMB 
states that, except for States and Indian Tribes, all other recipients 
and subrecipients, including subrecipients of a State or Indian Tribe, 
must follow the procurement standards in sections 200.318 through 
200.327.
    On the comment requesting OMB to allow local governments to follow 
their own procurement standards, rather than those in section 200.318, 
OMB did not make a change through this update of the guidance. Beyond 
extending the provision to Indian Tribes, OMB did not propose a further 
expansion for public comment.
    OMB also disagrees with a commenter suggesting that it was 
necessary to also permit other recipients and subrecipients, which are 
not States or Indian Tribes, to apply this provision if subject to 
procurement standards of a State or Indian Tribe. Recipients and 
subrecipients subject to procurement standards of a State or Indian 
Tribe should not, in most cases, be precluded from following them under 
the general procurement standards in section 200.318 (as revised). If 
conflicts arise in particular cases, a recipient or subrecipient may 
request a case-by-case exception from the Federal agency under section 
200.102(c) (as revised). OMB declines, however, to further expand the 
types of recipients and subrecipients that section 200.317 applies to 
in the way proposed by the commenter. OMB updated this section in the 
final guidance as proposed.

Section 200.318--General Procurement Standards

    OMB also proposed to revise the procurement standards in section 
200.318. These proposed revisions included 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 proposed adding a new paragraph (l) in section 200.318 to 
clarify 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, OMB explained in its 
proposal that 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.
    OMB received several comments expressing support for the proposed 
changes in section 200.318. OMB received a few comments requesting that 
reference to local governments be retained in paragraph (c)(2). Other 
comments expressed some concerns with paragraph (l) and made 
suggestions for revisions. Some commenters observed that while the 
guidance does not prohibit the listed labor practices, the final 
sentence seems to indicate that use of the practices remains contingent 
on Federal agencies allowing recipients to use them.
    OMB also received several comments requesting numerous changes that 
were not proposed for public comment. For example, some commenters 
requested that the guidance include new language stating that it is 
permissible for recipients to take steps to ensure that employees of 
contractors are paid a living wage.
    OMB Response: OMB revised paragraph (c)(1) to add reference to a 
``board member'' in the context of conflicts of interest. OMB revised 
paragraph (c)(2) to restore the reference to local governments. OMB 
agrees with the comments asking OMB to retain the reference from the 
prior version of the guidance to local governments in this paragraph.
    OMB removed the proposed sentence in paragraph (k) stating that 
proper oversight ``does not relieve the recipient or subrecipient of 
any of its contractual responsibilities.'' Commenters suggested that 
OMB may have changed the meaning of the sentence by introducing the 
concept of ``proper oversight.'' OMB recognizes commenters' concerns 
and reverted to language stating that these ``standards do not relieve 
the recipient or subrecipient of any contractual responsibilities under 
its contracts.''
    OMB revised paragraph (l) of section 200.318 to clarify that 
recipients and subrecipients ``may use'' the listed 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. 
However, OMB's revision is not necessarily intended to prevent Federal 
agencies from having any role in assessing whether the listed practices 
are consistent with the standard in what is now paragraph (l)(2). For 
example, a

[[Page 30085]]

Federal agency may be in the best position to determine if use of one 
of the listed practices would be consistent with authorizing laws that 
apply to that agency's programs or the objectives and purposes of those 
programs.
    Aside from minor edits to fix the structure of the section and 
other typographical changes, OMB did not make further changes, but 
appreciates the commenters' additional feedback, which OMB will 
consider for future revisions. The labor and employment practices 
listed in paragraph (l) are intended as illustrative examples of 
practices that are not prohibited by the procurement standards in 
subpart D. It is not feasible for OMB to provide an exhaustive list of 
all such practices, but the fact that an alternative practice is not 
expressly included in the list in paragraph (l) does not necessarily 
mean that it is prohibited.

Section 200.319--Competition

    In section 200.319, OMB proposed to remove the prohibition in the 
Uniform Guidance on using geographic preference requirements. In the 
same section, OMB also proposed 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. In its 
proposed guidance, OMB cautioned, 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 proposed to clarify 
that any such scoring mechanism must be consistent with established 
practices and legal requirements applicable to the recipient or 
subrecipient. OMB received several comments expressing support for the 
proposed changes.
    One commenter opposed the removal of the prohibition on using 
geographic preferences. This commenter stated that it may cause 
confusion among the recipients or subrecipients of the Federal award. 
The commenter stated that the guidance should retain clear parameters 
on when geographic preferences may be used.
    Similar to section 200.318, OMB also received several comments 
requesting numerous changes that were not proposed for public comment. 
For example, some commenters requested that the guidance include new 
language stating that it is permissible for recipients to take steps to 
ensure that employees of contractors are paid a living wage. OMB also 
received several comments questioning removal of the word ``develop'' 
and insertion of the word ``assist'' in paragraph (b).
    OMB Response: OMB revised paragraph (b) of section 200.319 to 
clarify that contractors that ``develop or draft'' specifications, 
requirements, statements of work, or invitations for bids must be 
excluded from competing on those procurements. OMB agrees with comments 
on this topic and replaced the word ``assist'' with ``develop or 
draft.''
    Relative to the proposed guidance, OMB revised paragraph (c) to 
replace ``examples of requirements'' with ``examples of situations.'' 
This revision restored the reference to ``situations'' in the prior 
version of the guidance.
    On the comment opposing the removal of the prohibition on using 
geographic preferences, section 200.300 is relevant to the commenters' 
concerns. As discussed above, that section provides that the Federal 
agency or pass-through entity must manage and administer the Federal 
award in a manner that ensures implementation in full accordance with 
the U.S. Constitution and applicable Federal statutes and regulations. 
Thus, any geographic preferences used under a Federal award must be 
consistent with governing law outside of part 200. At least in some 
circumstances, Federal agencies may retain an important role in working 
with the recipient on reviewing the permissibility of geographic 
preferences under a Federal award.
    OMB did not make any further changes to this section, but 
appreciates the commenters' additional feedback, which OMB may consider 
for future revisions.

Section 200.320--Procurement Methods

    In section 200.320 on procurement methods, OMB proposed to change 
``small purchases'' to ``simplified acquisitions'' to further align 
with standard terminology. In paragraph (a), OMB proposed to clarify 
that ``micro-purchases'' and ``simplified acquisitions'' are types of 
``informal procurement methods for small purchases.'' OMB also proposed 
to remove the requirements that local and tribal governments must open 
sealed bids in public. OMB received several comments expressing support 
for the proposed changes.
    Several commenters questioned why OMB removed the requirement for 
sealed bids to be publicly opened by Indian Tribes but not local 
governments. One commenter questioned why OMB removed the documentation 
requirement for micro-purchase awards.
    Other comments questioned the changes in terms from ``small 
purchases'' to ``simplified acquisitions'' in the proposed guidance and 
requested additional clarifications for why the change was made.
    OMB Response: OMB revised paragraph (a)(1)(ii) of section 200.320 
to clarify that a recipient or subrecipient must maintain documents to 
support its conclusion when awarding micro-purchase awards without 
soliciting competitive price or rate quotations. OMB made this change 
in response to comments questioning why OMB removed the documentation 
requirement for micro-purchase awards. OMB reinserted language similar 
to the language used in the prior version of the guidance on 
documenting the decision.
    On comments questioning why OMB proposed to remove the requirement 
for sealed bids to be opened publicly by Indian Tribes but not local 
governments, OMB will consider this feedback for future updates. A 
change of this nature to a long-standing and government-wide public 
policy warrants an opportunity for public comment and careful review 
before reversing in the final guidance. OMB sought public comment on 
this change only for Indian Tribes, but not local governments. At this 
time, OMB only made the change for Indian Tribes as proposed.
    Regarding references to an adequate number of bids in this section, 
OMB clarified in the guidance text that the recipient or subrecipient 
may exercise judgment in determining what number is adequate unless 
specified by a Federal agency. For example, a Federal agency may 
specify what number is adequate in the terms and conditions of a 
Federal award.
    OMB appreciates the additional comments received on this section 
and may consider them for future updates.

Section 200.321--Contracting With Small Businesses, Minority 
Businesses, Women's Business Enterprises, Veteran-Owned Businesses, and 
Labor Surplus Area Firms

    In section 200.321, OMB proposed 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. 
Additionally, OMB proposed plain language and clarifying revisions. OMB 
received several comments expressing support for the proposed changes. 
OMB incorporated revisions in the final guidance in this section as 
proposed.

[[Page 30086]]

Section 200.322--Domestic Preferences for Procurements

    OMB did not propose significant changes to this section. OMB 
received several comments on this section requesting additional 
clarification regarding infrastructure awards. The guidance on this 
topic can be found in 2 CFR part 184 and the associated preamble for 
that part. 88 FR 57750 (Aug. 23, 2023). See also OMB Memorandum M-24-
02.

Section 200.323--Procurement of Recovered Materials

    OMB proposed to add a new paragraph (b) in section 200.323 and 
proposed minor technical edits in paragraph (a). Regarding the proposed 
paragraph (b), Executive Order 14057 of December 8, 2021 (``Catalyzing 
Clean Energy Industries and Jobs Through Federal Sustainability'') 
established 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 proposed to add a new paragraph (b) in section 200.323 encouraging 
Federal award recipients and subrecipients, 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 
received several comments expressing support for the proposed changes.
    Other comments requested OMB clarify whether its ``encouragement'' 
means that recipients can specify these types of characteristics in 
Federally-funded procurements and potentially pay more than they would 
for products that do not meet sustainability specifications.
    OMB Response: OMB finds that additional clarification is 
unnecessary in paragraph (b). The practice in paragraph (b) is 
encouraged to the greatest extent practicable and consistent with law, 
but not required. OMB included this paragraph in the final guidance 
text as proposed.

Section 200.324--Contract Cost and Price

    OMB proposed to add additional language to section 200.324 on 
contract cost and price to establish that the recipient or subrecipient 
may consider potential workforce impacts in their procurement analysis 
if the procurement transaction will potentially displace public sector 
employees. OMB also sought comment on its proposal to delete the 
existing paragraph (b), requiring the recipient to negotiate profit as 
a separate element of the price for each contract in which there is no 
price competition. OMB received several comments expressing support for 
the proposed changes.
    Several commenters asked OMB to permit the use of ``cost plus a 
percentage of cost'' and ``percentage of construction costs'' methods 
of contracting. Another commenter asked OMB to provide a definition of 
cost-benefit analysis in this section. Next, a commenter asked OMB to 
reinstate the provision requiring recipients to negotiate profit as a 
separate element of the price for each contract in which there is no 
price competition. Another comment asked for clarification on why the 
word ``independent'' was struck in paragraph (a).
    OMB Response: OMB revised paragraph (a) of section 200.324 to 
clarify that the recipient or subrecipient must make independent 
estimates before receiving bids or proposals. OMB agrees with the 
commenters that this revision--restoring the term used in the prior 
version of the guidance--would clarify the proposed language.
    OMB also made minor typographical fixes in paragraph (a) and 
changed ``may'' to ``must'' in paragraph (c). OMB otherwise made the 
revisions in this section as proposed. OMB disagrees with the commenter 
asking OMB to reinstate the provision requiring recipients to negotiate 
profit as a separate element of the price for each contract in which 
there is no price competition. While this practice is no longer 
expressly required by the guidance, this does not prohibit a recipient 
from taking such action if deemed necessary in instances when there is 
no price competition.
    OMB did not find it necessary to add a definition of cost-benefit 
analysis in this section. Instead, OMB decided to reinstate the 
language from the prior version of the guidance referring to a ``cost 
analysis,'' which remains the intended term in this context. OMB also 
did not permit the use of ``cost plus a percentage of cost'' and 
``percentage of construction costs'' methods of contracting. OMB 
concluded that this would not be appropriate and presents both legal 
and policy concerns. OMB did not make a change in the final guidance.

Section 200.326--Bonding Requirements

    OMB did not propose significant changes to this section. OMB 
received a few comments requesting expansion of this section. 
Specifically, commenters asked OMB to expand this section to address 
specific programs such as those authorized under the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (Stafford Act).
    OMB Response: OMB did not find it warranted at this time to expand 
this section, as requested by commenters. Some of the suggested 
revisions may be more appropriate for agency- or program-specific 
guidance. In any case, before significantly expanding this section, OMB 
would want to propose revised language for public comment.
    Relative to the proposed text, OMB made a minor revision in 
paragraph (a) of section 200.326 to replace the word ``obligations'' 
with ``documents,'' which restored the policy from the prior version of 
the guidance. After review, OMB concluded that the prior version of the 
guidance used the correct term. In the context of this provision, at 
the point when a bid guarantee is provided, no contract yet exists, and 
there are no contractual obligations to ``execute.'' OMB also made a 
minor revision to fix a typographical error.

Section 200.328--Financial Reporting

    In section 200.328, OMB proposed to provide changes to clarify 
required deadlines for financial reporting to align with progress 
reporting requirements. OMB received several comments expressing 
support for the proposed changes.
    Several comments suggested that quarterly financial reports should 
be due 60 days after the close of a quarter. Other comments suggested 
emphasizing that Federal agencies must not require additional financial 
reporting data elements, aside from those approved by OMB. Other 
commenters asked OMB to include a process by which agencies and OMB 
will both request and approve additional data elements for financial 
reports. One comment suggested reverting to language in the prior 
version of the guidance, allowing Federal agencies to require more 
frequent financial reporting ``in unusual circumstances.''
    OMB Response: OMB disagrees with comments asking for a process in 
the guidance by which agencies and OMB will both request and approve 
additional data elements for financial reports. OMB did not include 
such a process within this section.
    In response to comments suggesting that quarterly financial reports 
should

[[Page 30087]]

be due 60 days after the close of a quarter, OMB disagrees and did not 
make a change. OMB also disagrees that it is necessary to revert back 
to language in the prior version of this section referring to more 
frequent reporting in ``unusual circumstances.'' However, Federal 
agencies and pass-through entities may require more frequent or 
detailed financial reporting in accordance with section 200.208 when 
circumstances warrant and consistent with the guidance.

Section 200.329--Monitoring and Reporting Program Performance

    In section 200.329, OMB proposed 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 proposed additional 
language that emphasizes the importance of measuring customer 
experience as well as considering evaluation plans when outlining 
reporting requirements. OMB further proposed 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. OMB received several comments 
expressing support for the proposed changes.
    OMB received several comments requesting that the research 
performance progress reports be reinserted as an example of an OMB-
approved common information collection. Several comments also stated 
that performance reports should not be collected with financial 
reports. Commenters observed that often different business areas of an 
entity are completing the reports.
    OMB Response: OMB revised the heading of paragraph (a) of section 
200.329 to clarify that it also applies to subrecipients. OMB revised 
paragraph (b) of section 200.329 to clarify that, to the extent 
practicable, the Federal agency or pass-through entity should ``align 
the due dates of'' performance reports and financial reports. It was 
not OMB's intent to require that performance reports always be 
submitted together with the financial reports. The reports do not need 
to be submitted together in all cases. However, when practicable, 
Federal agencies should align the due dates. The different reports 
provide a more comprehensive view of the progress made on a Federal 
award when reviewed together.
    Further, in paragraph (b), OMB also agrees with commenters who 
suggested reinserting ``research performance progress reports'' as an 
example of an OMB-approved common information collection. OMB 
incorporated this change in the final guidance.
    OMB also removed the proposed requirement in paragraph (b) that 
Federal agencies only require OMB approved government-wide data 
elements. This provision may have significantly restricted information 
that could be collected to report performance. It is not feasible to 
create a data standard for every piece of information collected on 
performance across all programs, which was not OMB's intent when it 
originally proposed that language.
    Relative to the proposed guidance, in paragraphs (c) through (e), 
OMB also made minor plain language revisions and other revisions 
intended to address grammatical problems or further clarify the 
guidance text. These changes were not intended to substantively change 
the policy in these paragraphs as proposed--but may provide further 
clarity on OMB's intent.

Section 200.330--Reporting on Real Property

    OMB did not propose significant changes to this section. One 
commenter noted that plain language revisions may have unintentionally 
impacted the frequency that reporting is required. The commenter 
suggested that the revision could be interpreted to result in a change 
from requiring reports ``at least annually'' to an ``annual report.'' 
Another commenter requested clarification on the information that must 
be included in real property reports. The same commenter requested that 
OMB provide an exception for cases where the Federal Government has 
only a minor interest in real property.
    OMB Response: OMB removed the reference to ``at least annual'' 
reports in this section and clarified in a separate sentence that such 
reports ``must be submitted at least annually.'' It was not OMB's 
intent to change the meaning of the guidance on this issue. The 
information included in real property reports should be set by the 
Federal agency and included on the SF-429 series of forms. OMB did not 
make a change to this section to provide an exception for cases where 
the Federal Government has only a minor interest in real property, but 
appreciates the comment and may consider it for future revisions.

Section 200.331--Subrecipient and Contractor Determinations

    In section 200.331 on subrecipient and contractor determinations, 
OMB proposed additional language emphasizing that Federal agencies do 
not have a direct legal relationship with subrecipients and contractors 
of pass-through entities. OMB also proposed to clarify that the 
characteristics indicative of a subrecipient or contractor 
determination are not limited to the sample characteristics currently 
provided in the guidance. OMB received several comments expressing 
support for the proposed changes.
    Several commenters asked OMB to reinstate language from the prior 
version of the guidance. A commenter asked OMB to clarify that the 
Federal agency or pass-through entity may require the recipient or 
subrecipient to comply with additional guidance to make subaward and 
contractor determinations, provided such guidance does not conflict 
with this section. Several commenters requested clarity on the proposed 
language stating that the Federal agency does not have a direct legal 
relationship with subrecipients or contractors of any tier. OMB also 
received several comments requesting that section 200.331 include 
information on beneficiary determinations.
    OMB Response: OMB revised section 200.331 to restore language from 
the prior version of the guidance, which commenters and Federal 
agencies indicated was important to understand the guidance. For 
example, OMB revised the introductory paragraph to clarify that the 
Federal agency ``or pass-through entity'' may require the recipient or 
subrecipient to comply with additional guidance to make subaward and 
contractor determinations ``provided such guidance does not conflict 
with this section.'' A commenter raised these points and OMB agrees. 
Based on another comment, OMB also revised this section to clarify that 
no single factor or combination of factors contained in this section is 
necessarily determinative. OMB also restored guidance explaining that 
the pass-through entity must use judgment in classifying each agreement 
as a subaward or a procurement contract. Lastly, OMB also revised the 
introductory paragraph in section 200.331 to clarify that, while a 
Federal agency does not have a direct legal relationship with 
subrecipients, the Federal agency is still responsible for monitoring 
the pass-through entity's oversight of first-tier subrecipients. This 
revision was not based on text from the prior version of the guidance, 
but intended to provide further clarity.
    OMB disagrees that including information on making beneficiary 
determinations would be appropriate in this section. The identification 
of

[[Page 30088]]

beneficiaries can vary between agencies and even between programs 
within an agency. OMB did not make a change.

Section 200.332--Requirements for Pass-Through Entities

    Based on feedback from the Federal financial assistance community, 
OMB proposed 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. OMB received several comments expressing support for the 
proposed changes.
    Several comments noted that the proposed language was inconsistent 
with language in 2 CFR 180.300. OMB also received several comments 
opposing the notification requirement in paragraph (d), which would 
require a pass-through entity to notify the Federal agency if a 
specific condition is included in a subaward. OMB also received several 
comments recommending that the guidance ensure appropriate overhead 
costs of the subrecipient are not unreasonably excluded.
    OMB Response: OMB revised paragraph (a) of section 200.332 to 
clarify that confirming a subrecipient is not excluded in SAM.gov is 
just one of the verification methods available to pass-through entities 
under section 180.300. OMB agrees with commenters that the proposed 
text could be, or appear to be, inconsistent with language in 2 CFR 
180.300. OMB revised the text to address these concerns.
    OMB revised paragraph (b) of section 200.332 to clarify that a 
pass-through entity must provide the unavailable information when it is 
obtained. OMB revised paragraph (c) of section 200.332 to clarify that 
pass-through entities must evaluate a subrecipient's fraud risk in 
addition to its risk of noncompliance with a subaward. OMB also revised 
paragraph (c)(3) to remove the expansion of the existing policy. OMB 
agrees with commenters that it is not feasible to assess whether a 
subrecipient has new or substantially changed policies or procedures. 
Next, OMB revised paragraph (c)(4) of section 200.332 to clarify that 
pass-through entities should consider the extent and results of any 
Federal agency monitoring when evaluating subrecipient risk.
    OMB disagrees with commenters that the notification provision in 
paragraph (d) related to specific conditions is overly burdensome. OMB 
finds this guidance is warranted to allow a Federal agency to conduct 
effective oversight of the pass-through entity in fulfilling its 
monitoring responsibilities. OMB fixed a minor grammatical error in 
paragraph (d).
    OMB also clarified in paragraph (e) of section 200.332 that a 
subrecipient, not a subaward, is the focus in this provision. In 
response to a comment, OMB also restored the words ``as necessary'' 
from the prior version of the guidance. Next, OMB revised paragraph 
(e)(4) of section 200.332 to use the proper term ``cross-cutting audit 
finding.'' The proposed term ``cross-cutting finding'' is not otherwise 
used in the guidance.
    Lastly, OMB revised paragraph (h) of section 200.332 to use the 
term ``site visits,'' which is used throughout the guidance, in place 
of the term ``on site reviews.'' OMB finds the guidance already meets 
the request to ensure appropriate overhead costs of the subrecipient 
are not unreasonably excluded. The guidance in this section states the 
methods by which pass-through entities and subrecipients negotiate 
rates.

Section 200.333--Fixed Amount Subawards

    In section 200.333, OMB proposed 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 received several comments 
expressing support for the proposed changes. One commenter asked OMB to 
remove the prior approval requirement for fixed amount subawards.
    OMB Response: Upon further analysis, OMB determined that a 
threshold for fixed amount subawards remains warranted. Instead of 
removing the threshold entirely, OMB doubled the prior threshold to 
$500,000. OMB may continue to evaluate what threshold is appropriate in 
future updates to the guidance. OMB disagrees with commenters 
requesting removal of the prior approval requirement for fixed amount 
subawards. OMB finds that prior approval is a necessary oversight 
function of Federal agencies for these subawards.

Section 200.334--Record Retention Requirements

    OMB did not propose significant changes to this section. OMB 
received several comments requesting clarifications related to OMB's 
proposed plain language revisions in this section. For example, a 
commenter stated that the proposed changes gave the appearance that a 
pass-through entity and subrecipient had the same three-year record 
retention period.
    OMB Response: OMB agrees with commenters that minor clarifying 
revisions were warranted in this section. Thus, OMB made minor 
clarifying revisions, including adjusting its use of ``and'' and ``or'' 
between listed entities.

Section 200.336--Methods for Collection, Transmission, and Storage of 
Information

    OMB did not propose significant changes to this section. Several 
commenters suggested that OMB changed the meaning of the guidance with 
its plain language revisions. The commenters were specifically 
concerned about preserving the language in the prior version of the 
guidance on collecting, transmitting, and storing Federal award-related 
information in ``open and machine-readable formats.''
    OMB Response: OMB revised section 200.336 to clarify that Federal 
award information must be collected, transmitted, and stored in ``open 
and machine-readable formats.'' OMB agrees with the commenters on 
restoring the reference to ``open and machine-readable formats'' 
without adding extra language.

Section 200.337--Access to Records

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that the guidance be strengthened to 
clarify that other PII, beyond simply the names of victims, should also 
be protected.
    OMB Response: OMB did not make a policy change to this section but 
appreciates the comment and may consider it for future revisions. Other 
provisions in the guidance--such as sections 200.303 and 200.338--
directly address restrictions on PII. As discussed in this preamble 
above, OMB further clarified the definitions of PII and Protected PII 
within part 200.

Section 200.338--Restrictions on Public Access to Records

    OMB did not propose significant changes to this section. OMB 
received several comments indicating that proposed plain language 
revisions in this section may have caused a conflict. Specifically, 
commenters observed that the guidance was expanded to prevent a pass-
through entity from placing restrictions on subrecipients that would

[[Page 30089]]

limit public access. OMB also removed repeated words.
    OMB Response: OMB revised section 200.338 to clarify that it 
applies to Federal agencies. This change to the proposed guidance is 
consistent with the prior version of the guidance. OMB recognized the 
concern from commenters that such a restriction on a pass-through 
entity might prevent the pass-through entity from enforcing the laws of 
a State or Indian Tribe. OMB made a change to clarify it is the Federal 
agency who may not place further restrictions.

Section 200.339--Remedies for Noncompliance

    OMB did not propose significant changes to this section. Several 
commenters requested clarification with regards to the use of ``may'' 
and ``must'' in this section.
    OMB Response: The word ``may'' is used appropriately in this 
section to convey that a Federal agency or pass-through entity has 
discretion in both implementing specific conditions or taking any of 
the actions listed. To avoid confusion, OMB removed the word ``must'' 
from paragraph (d) and further revised the sentence to clarify intent. 
The provision is simply stating that a pass-through entity recommends 
suspension or debarment to the Federal agency. Only a Federal agency 
may initiate the suspension or debarment action. OMB does not intend to 
signal a change in policy by this change.

Section 200.340--Termination

    OMB proposed 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(a)(2), OMB had proposed 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.'' 2 CFR 200.340(a)(2) (prior version). This 
revision was intended to remove unnecessary language because section 
200.340 still allowed agencies to terminate a Federal award according 
to the terms and conditions of the award. Thus, an agency could specify 
the conditions upon which an award could be terminated in the terms and 
conditions of the award, including, for example, when an award no 
longer effectuates the program goals or agency priorities. The proposed 
guidance also proposed to change the definition of termination in 
section 200.1 and provided a new paragraph (e) in 200.340 providing 
that a Federal agency's determination not to provide continuation 
funding does not constitute a termination.
    Several commenters supported removing paragraph (a)(2) of section 
200.340 from the prior version of the guidance. For example, one 
commenter maintained that its removal would prevent agencies from 
terminating high-performing projects based on shifting agency 
priorities. Another commenter stated that removing the prior (a)(2) 
would eliminate a vague standard for award termination and serve OMB's 
goal of clarifying a section that could be interpreted in a variety of 
different ways.
    Other commenters asked OMB to reinstate paragraph (a)(2) from the 
prior version of the guidance. One commenter argued that it was 
important for pass-through entities to maintain the ability for 
unilateral termination based on changes in program goals or agency 
priorities. Another commenter suggested that, even if the prior (a)(2) 
were deleted, a pass-through entity that included a ``termination for 
convenience'' clause in its subaward should still be able to terminate 
based on that clause.
    Other commenters expressed concerns regarding the proposed 
paragraph (e) and suggested removing it. Proposed paragraph (e) 
provided that a Federal agency determination to not award continuation 
funding does not constitute a termination. One commenter observed that 
an agency decision to not provide continuation funding under a Federal 
award would have impacts similar to a termination on the recipient or 
subrecipient, including the need to discontinue program activities and 
potential financial liabilities. This commenter expressed concerns 
about a lack of due process for awards discontinued under paragraph 
(e). The commenter recommended either deleting the proposed paragraph 
(e) or supplementing it with a requirement for the Federal agency to 
notify the recipient or subrecipient no less than 6 months in advance 
of the end of the budget period. On the same topic, another commenter 
expressed concern that the proposed paragraph (e) may cause confusion 
with respect to authorizing statutes that have explicit termination 
provisions, including continuation funding. The same commenter stated 
that OMB failed to adequately explain the distinction between an 
agency's exercise of its discretion when making an award and subsequent 
determinations by the agency, pursuant to terms and conditions of the 
award, to provide funding for additional budget periods for that same 
award. For awards discontinued at the end of a budget period in a 
multi-year award, this commenter questioned what, if any, due process 
would be provided, such as notice, reasons, or opportunity to correct.
    OMB Response: OMB revised paragraph (a)(4) in section 200.340 in 
the final guidance. The new paragraph (a)(4) continues to provide that 
a Federal award may be terminated by the Federal agency or pass-through 
entity pursuant to the terms and conditions of the Federal award. The 
revised version of paragraph (a)(4) also explains that this may include 
a term and condition allowing termination by the Federal agency or 
pass-through entity, to the extent authorized by law, if an award no 
longer effectuates the program goals or agency priorities. Provided 
that the language is included in the terms and condition of the award, 
the revised termination provision at section 200.340 continues to allow 
Federal agencies and pass-through entities with authority to terminate 
an award in the circumstances described in paragraph (a)(2) in the 
prior version of the guidance. The prior version of section 200.340(b) 
and the proposed version both directed Federal agencies and pass-
through entities to clearly and unambiguously specify all termination 
provisions in the terms and conditions of the award. As such, OMB finds 
the final version of the guidance provides greater clarity on the 
policy for termination of awards by the Federal agency or pass-through 
entity by underscoring the need for agencies and pass-through entities 
to clearly and unambiguously communicate termination conditions in the 
terms and conditions of the award.
    OMB also removed the proposed paragraph (e) from the final version 
of the guidance. Other than the change described above in paragraph 
(a), OMB reverted back to a version of section 200.340 more aligned 
with the prior version of the guidance. After considering comments, OMB 
decided not to specifically address the topic of continuation funding 
in this section, but may evaluate this topic further in future updates. 
As a result, OMB deleted the proposed sentence in the definition of 
termination in section 200.1 providing that a determination not to 
issue continuation funding is not a termination. OMB also made minor 
technical and grammatical edits in the final version of the guidance in 
this section.
    On comments regarding due process when terminating an award, 
section 200.342 in the final guidance, discussed below, requires 
Federal agencies to provide administrative appeal rights for

[[Page 30090]]

recipients upon initiating a remedy for noncompliance, including in 
cases in which Federal awards are terminated for that reason. 
Administrative appeal rights may also be required in other 
circumstances by applicable statutes or agency regulations. Federal 
agencies must maintain written procedures for processing objections, 
hearings, and appeals. The comments OMB received on this topic were 
generally focused on the proposed paragraph (e), which OMB decided not 
to include in the final version of the guidance.

Section 200.341--Notification of Termination Requirement

    In section 200.341, OMB proposed to clarify requirements that must 
be included in a notice of termination. One commenter asked OMB to 
further clarify the requirements of this section. The commenter noted 
that the section was confusing.
    OMB Response: OMB agrees with a commenter that the proposed 
guidance in this section was potentially confusing--particularly 
paragraph (b)(3). In the final version of paragraph (b)(3), OMB 
reverted to the text from the prior version of the guidance. After 
review, OMB found that the prior version of the guidance more clearly 
stated the policy for this paragraph than its proposed restatement.

Section 200.342--Opportunities to Object, Hearings, and Appeals

    OMB did not propose significant changes to this section. Several 
commenters noted that OMB's plain language revision expanded the policy 
of this section to require a pass-through entity to maintain documented 
procedures for objections, hearings, and appeals, as well as providing 
subrecipients an opportunity to object to and challenge an action.
    OMB Response: OMB revised section 200.342 to clarify that the 
paragraph applies to Federal agencies. It was not OMB's intent to 
change the policy in this section in a substantive way. OMB made a few 
changes to clarify. Consistent with the prior version of the guidance, 
OMB retained one reference to pass-through entities in the final 
sentence stating that 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. However, the other 
requirements in this section do not apply to pass-through entities.
    The policy in section 200.342 is otherwise unchanged relative to 
the proposed and prior versions of the guidance. Specifically, it 
continues to require Federal agencies to provide administrative appeal 
rights for recipients upon initiating a remedy for noncompliance, and 
to maintain written procedures for processing objections, hearings, and 
appeals.

Section 200.344--Closeout

    In section 200.344 on closeout, OMB proposed 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 proposed to clarify that an additional final report must be 
submitted when the indirect cost rate is finalized. OMB also proposed 
to provide additional flexibilities for agencies and recipients to 
closeout Federal awards in a timely manner. OMB proposed to allow an 
agency and recipient to mutually agree upon a final indirect cost rate 
for an individual award. This proposed revision was not intended to 
grant agencies additional authorities to negotiate rates over cognizant 
agencies for indirect rates; rather, it simply proposed 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. OMB received several comments expressing support for 
the proposed changes.
    OMB received one comment opposing the change of the word 
``promptly'' to ``immediately'' in paragraph (e). Another comment asked 
OMB to revise this section to reiterate and clarify that both parties 
must mutually agree to use a provisional indirect rate to support a 
timely or earlier close-out of an award or subaward, prior to an 
organization receiving their final NICRA rate. Several other comments 
requested clarification on when revised final financial reports must be 
submitted under paragraph (b).
    OMB Response: OMB agrees with the commenter questioning the 
proposed change from ``promptly'' to ``immediately'' in paragraph (e). 
OMB reverted to using the word ``promptly'' in the final guidance in 
paragraph (e).
    Paragraph (h) of the proposed guidance already addresses situations 
in which an indirect cost rate has not been finalized. The paragraph 
states that both parties must ``mutually agree'' to close an award 
using the current or most recently negotiated rate. On questions 
regarding when revised final financial reports must be submitted under 
paragraph (b), OMB finds the guidance is clear that a revised final 
financial report must be submitted when all applicable indirect cost 
rates have been finalized.

Section 200.346--Collection of Amounts Due

    OMB did not propose significant changes to this section. One 
comment stated that the removal of language from the prior guidance 
that provided an opportunity for Federal agencies to reduce recipient 
or subrecipient debt would limit the flexibility for Federal agencies 
to handle such debt on a case-by-case basis. The commenter stated that 
the proposed change removed the option for Federal agencies to withhold 
advance payments otherwise due to the non-Federal entity to reduce the 
debt.
    OMB Response: OMB did not intend to limit the flexibility of 
Federal agencies by removing language in this section. Rather, OMB 
revised the guidance text to simply refer to the authoritative 
regulatory source on the administrative collection of debt at 31 CFR 
part 901. As was already recognized in the prior version of the 
guidance, Federal agencies will follow those authoritative standards 
when collecting amounts due.

Subpart E--Cost Principles

Section 200.400--Policy Guide

    OMB did not propose significant changes to this section. OMB 
received several comments suggesting the guidance in section 200.400 
include a statement that residual unexpended funds under fixed amount 
awards is not considered profit. Another comment suggested that OMB 
require agencies to regularly update their guidance to recipients to 
enable grantees to leverage new technology and governance approaches 
that can utilize cost allocation to improve the cost-effectiveness of 
Federal investments.
    OMB Response: OMB revised paragraphs (a) through (d) of section 
200.400 to refer to the ``recipient and subrecipient'' rather than to 
the ``recipient or subrecipient.'' This revision further clarifies 
OMB's intent on how these provisions will be applied.
    In paragraph (e), however, OMB clarified that the policy on 
indirect rates refers to ``recipients'' and not ``subrecipients,'' as 
subrecipients may not always negotiate indirect rates. OMB also made 
minor clarifying and plain language revisions in paragraph (e) relative 
to the proposed guidance.
    OMB revised paragraph (g) of section 200.400 to add language 
clarifying that any funds remaining upon conclusion of a fixed amount 
award is not considered profit. This was added to clarify that the 
requirements governing the use of fixed amount awards do not conflict 
with the prohibition on profit contained in

[[Page 30091]]

200.400(g). OMB agrees with commenters on this point.
    OMB considers the recommendation that OMB require Federal agencies 
to regularly update their guidance to leverage technology and 
governance approaches to be outside the scope of the revisions. This 
was not proposed for public comment, but OMB appreciates the comment 
and may consider it for future updates.

Section 200.401--Application

    In the proposed guidance in section 200.401, OMB clarified that the 
cost principles in subpart E do not apply to grants and cooperative 
agreements for food commodities.
    OMB received several comments requesting clarification and changes 
to paragraph (a)(2), which addresses capitation awards to IHEs. One 
comment requested that the sentence referencing that the cost 
principles must also be used ``as a guide in pricing fixed-price 
contracts and subcontracts'' be revised to read ``fixed-price awards 
and subawards.'' OMB also received a comment seeking clarification on 
the applicability of the cost principles to ``food commodities.''
    OMB Response: OMB revised paragraph (a)(2) of section 200.401 to 
include all capitation awards in the applicability section, not only 
capitation awards to IHEs, in order to be more inclusive of other types 
of recipients. OMB agrees with the commenters that the cost principles 
should not apply to capitation awards based on case counts or number of 
beneficiaries regardless of the type of recipient. OMB revised the 
guidance to apply this policy to all types of recipients. For example, 
other types of educational institutions exist that are not strictly 
IHEs.
    OMB revised paragraph (a)(3) of section 200.401 to include a cross-
reference to section 200.101, which provides further information on the 
applicability of the cost principles to fixed amount awards. OMB 
clarified that the cost principles do not apply to fixed amount awards, 
except as provided in section 200.101(b). OMB revised paragraph (a)(5) 
of section 200.401 to clarify that the cost principles do not apply to 
the specific portion of an award associated with the provision of food 
commodities themselves. This change was made to recognize that certain 
awards that issue food commodities also involve other activities 
ancillary to the food commodities themselves. The cost principles do 
apply to costs for those other activities under an award beyond the 
food commodities themselves.

Section 200.403--Factors Affecting Allowability of Costs

    In the proposed guidance, OMB revised section 200.403 to add 
language clarifying when allowable administrative closeout costs may be 
incurred in paragraph (h).
    OMB received several comments pointing out a perceived discrepancy 
in the policy that, while administrative closeout costs are allowable 
after the end date of a Federal award, no costs are allowable after the 
termination of a Federal award. OMB also received several comments on 
the period of allowability of costs during closeout, with some 
commenters requesting that certain costs associated with data and 
compliance be allowable for an undefined period after the final reports 
are submitted.
    OMB received a comment requesting that certain prospective costs--
that would occur after the due date of the final report--be allowable. 
Some commenters requested a policy change to provide additional 
clarification about how the administrative closeout cost allowability 
applies to subrecipients. The commenters also requested OMB make the 
policy retroactive for past programs, to clarify how these costs are 
impacted by agency rules on obligating funds and agency prior 
approvals, and to specify that closeout costs cannot ``include cost 
share from other Federal programs.''
    OMB Response: The proposed guidance in this section was included in 
the final revisions, with a minor clarifying edit to paragraph (d). In 
response to some comments focused on costs associated with termination: 
these costs are allowable if specified in a termination notice by the 
agency. Section 200.472(b) addresses the allowability of closeout costs 
after an award is terminated. The period during which closeout costs 
can be charged to an award ends on the due date of the final reports. 
Allowing for a longer period would be inappropriate and could 
potentially impact the timeline closeout of Federal awards. OMB finds 
that the revised policy sufficiently provides for the allowability of 
specific administrative costs during a limited, defined period. OMB did 
not find the guidance needs to be expanded further.

Section 200.404--Reasonable Costs

    OMB did not propose significant changes to this section. OMB 
received many comments in support of the inclusion of certain 
administrative costs for closeout activities. OMB received one comment 
that suggested the phrasing related to determining whether a cost was 
allowable as related to deviations from written policies and procedures 
was too vague.
    OMB Response: OMB agrees the proposed language left room for 
differing interpretations and was potentially confusing. To address 
this, OMB revised paragraph (e) to now call for consideration of 
``whether the cost represents a deviation from the recipient's or 
subrecipient's established written policies and procedures for 
incurring costs'' (emphasis added), instead of ``the degree to which'' 
it does so. Section 200.404 contains only a list of factors to 
consider. OMB did not find that it necessary to specify further.

Section 200.405--Allocable Costs

    OMB did not propose significant changes to this section. One 
commenter took issue with the word ``shifting'' in relation to costs.
    OMB Response: OMB revised paragraph (a) of section 200.405 to 
reinsert ``or other cost objective.'' This change was made to recognize 
costs that are allocable to a particular cost objective as already 
recognized under the prior guidance, and to retain alignment with usage 
of this term throughout other sections of subpart E, including sections 
200.412, 200.413, and 200.431. OMB finds that ``shifting costs'' is an 
adequately understood term when speaking of budget line items. OMB is 
retaining the language. OMB also made some minor clarifying revisions 
to paragraph (e).

Section 200.406--Applicable Credits

    OMB did not propose significant changes to this section. OMB 
received several comments requesting that OMB specify the treatment of 
credits when such credits cannot be identified to a Federal award, 
suggesting for example, that such credits offset indirect costs.
    OMB Response: OMB did not propose policy changes to this section. 
OMB did not make additional changes to section 200.406 in response to 
the above comments, which it does not find warrant implementation at 
this time. Aside from a small grammatical revision, OMB made revisions 
in this section as proposed.

Section 200.407--Prior Written Approval (Prior Approval)

    In the proposed guidance, OMB revised section 200.407 to remove 10 
items from the prior written approval requirements to reduce Federal 
agency and recipient burden. These proposed revisions included no 
longer requiring prior written approval for certain requirements 
related to items such as real property, equipment, direct costs,

[[Page 30092]]

entertainment costs, memberships, participant support costs, selling 
and marketing costs, and taxes.
    OMB received one comment suggesting that OMB remove the remainder 
of the policy on prior approval contained in section 200.308. OMB also 
received a comment requesting clarification on whether the inclusion of 
items in an approved budget still requires separate prior written 
approval. Some commenters requested clarification on prior approvals 
for real property and equipment. Finally, OMB received a couple of 
comments requesting the reinstatement of the of all prior approval 
requirements OMB proposed to remove.
    OMB Response: OMB disagrees with the commenter who suggested that 
reinstating prior approval requirements that OMB proposed to remove was 
necessary to address the risk of subsequent disallowance of costs. The 
commenter stated that reducing burden associated with prior approval 
would result in elevated risk of later disallowance for the associated 
costs. OMB did not find that the elevated risk is so great that it must 
reverse its earlier proposal. OMB cautions, however, that recipients 
and subrecipients must still follow applicable cost principles under 
subpart E even in cases in which prior approval is not required. The 
requirement to apply the cost principles is unaffected by changes to 
this section.
    To further clarify the guidance under this section as it relates to 
real property and equipment, OMB revised the list of prior approval 
requirements in section 200.407 to remove reference to the real 
property and equipment provisions in section 200.311 and 200.313. Other 
requirements to obtain instructions or approval from the Federal 
agency--such as requirements to request disposition instructions--
remain in place in those sections and are unaffected by the changes to 
section 200.407. Section 200.439--which remains included in the list of 
prior written approvals in section 200.407 and is specifically 
referenced in section 200.313--continues to describe circumstances in 
which prior written approval is required for allowability of equipment 
and other capital expenditures. For example, when equipment disposal is 
directed by a Federal agency under the process described in section 
200.313, section 200.439 continues to recognize that this Federal 
agency action is needed before the costs are allowable. Section 200.439 
also describes other circumstances when prior written approval is 
necessary for the allowability of equipment and capital expenditures, 
including for general purpose equipment, buildings, and land; and 
improvements to land, buildings, or equipment that materially increase 
their value or useful life.
    In section 200.407, OMB restored one item to the list from the 
prior version of the guidance, which it previously proposed to delete. 
As discussed in more detail below, OMB restored the reference to 
exchange rates in section 200.440. More information on the specific 
circumstances in which prior approval is required is generally provided 
in the sections listed in section 200.407, including in the restored 
reference to section 200.440 on exchange rates.

Section 200.411--Adjustment of Previously Negotiated Indirect Cost 
Rates Containing Unallowable Costs

    OMB did not propose significant changes to this section. OMB 
received several comments requesting significant additional information 
regarding the adjustments of negotiated indirect cost rates. For 
example, commenters requested that OMB add a new section that speaks to 
informing stakeholders if unallowable costs are included in indirect 
rates, determining the legitimacy of the finding in conjunction with 
OMB, and establishing a different process for reimbursing the Federal 
government.
    OMB Response: OMB did not propose policy changes for section 
200.411 and considers the new suggestions received by commenters to be 
outside of the scope for the final version of the guidance. OMB 
appreciates the comments and may consider them for future updates. OMB 
made a minor update to paragraph (a) to remove the word ``Federal.''

Section 200.413--Direct Costs

    OMB did not propose significant policy changes to this section, but 
did propose extensive plain language revisions. OMB received one 
comment of support for the changes in this section. OMB received 
several comments requesting clarification on the use of the term 
``procurement transaction'' in paragraph (b), which had replaced 
``goods and services'' from the prior version. The same commenters 
indicated that a change from employee and fringe benefits to ``staff'' 
represented a change in policy. OMB received several comments stating 
that revisions to paragraph (e) changed the standard for unallowable 
indirect costs and was confusing.
    OMB received several comments requesting that paragraph (c) include 
the following language: ``Direct charging of these costs may be 
appropriate, where unlike circumstances exist, only if they meet all of 
the following conditions.'' Several comments addressed issues related 
to direct costs, but were not pertinent to any proposed revisions to 
the guidance, including issues such as how administrative and clerical 
staff costs are treated, or the need to invest in data infrastructure.
    OMB Response: OMB revised paragraph (b) of section 200.413 to 
improve the accuracy of the statement describing direct costs. OMB 
retained the statement that the ``association of costs with a Federal 
award'' determine their nature, but removed ``rather than the nature of 
the procurement transaction,'' which was too limiting, as not all costs 
in an award are necessarily procurement transactions. OMB agrees with 
commenters on clarifying this point.
    OMB also revised paragraph (b) of section 200.413 to provide a more 
accurate example of staff costs that are considered direct costs. 
Rather than simply saying ``staff salaries,'' OMB revised this to 
``employee salaries and fringe benefits,'' which more accurately 
reflects all costs associated with paying an employee directly charged 
to a specific award.
    OMB disagrees with commenters that adding ``where unlike 
circumstances exist'' is necessary in paragraph (c). OMB made some more 
clarifying edits to paragraph (d) to improve the readability of the 
sentence. OMB revised paragraph (d) to replace ``minor direct cost'' 
with a ``direct cost of a minor amount,'' which is the intended 
meaning. OMB also finds that ``for reasons of practicality'' more 
clearly communicates the intended policy in this paragraph than ``when 
it is practical to do so.''
    OMB agrees with comments suggesting that proposed revisions to 
paragraph (e) changed the standard for treatment of unallowable costs 
in determining indirect cost rates. OMB reverted to the original 
language from the prior version of the guidance with minor grammatical 
changes. OMB made other minor clarifying edits to the list of examples 
in paragraph (f).

Section 200.414--Indirect Costs

    In the proposed guidance in section 200.414, OMB revised several 
aspects of the guidance pertaining to indirect costs. OMB proposed 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 rate. OMB also proposed to 
revise the guidance to clarify that pass-through entities must accept 
all

[[Page 30093]]

federally negotiated indirect cost rates for subrecipients.
    In the same section, in response to feedback from the Federal 
financial assistance community, OMB proposed to raise the de minimis 
rate from 10 percent to 15 percent. OMB explained that 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. OMB also 
explained that the 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 clarified 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 
clarified 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 proposed 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 noted that this 
may be revisited when applicable systems are updated to allow for the 
posting of indirect cost rates. OMB sought comments that include 
analysis on the advantages and disadvantages of raising the de minimis 
rate in the way proposed.
    OMB received over 250 comments expressing support for the increase 
in the de minimis rate to 15 percent. Several commenters urged OMB to 
increase the de minimis rate to 20 percent or more. Another commenter 
asked OMB to allow a de minimis rate of up to 15 percent over direct 
labor instead of modified total direct costs. OMB also received several 
comments objecting to the language that ``the recipient or subrecipient 
is authorized to determine the appropriate rate up to this limit,'' 
suggesting that it could be a barrier for entry for some organizations. 
Commenters also suggested that the policy could be misinterpreted to 
imply that the pass-through entity could decide for the subrecipient 
which percentage would apply.
    OMB also received several comments requesting that OMB allow pass-
through entities to waive the policy in section paragraph (d) that 
``pass-through entities are subject to the requirements in 2 CFR 
200.332(b) and must accept all active federally negotiated indirect 
costs rates for subrecipients.'' Several comments asked OMB to add a 
qualifying phrase to allow pass-through entities flexibility on their 
acceptance of federally negotiated indirect rates such as adding 
``unless otherwise provided in the grant agreement.'' OMB also received 
several comments indicating that paragraph (f) would require 
subrecipients to submit indirect cost proposals in accordance with the 
appropriate Appendix to pass-through entities.
    Several commenters voiced concern over Federal agencies' reported 
refusal to recognize formally negotiated rates. The commenters urged 
OMB to add language to propose OMB action in the event that Federal 
agencies refuse to apply or allow recipients or subrecipients to use 
their federally negotiated indirect cost rate.
    There were several comments from the IHE community requesting that 
OMB retain the use of ``F&A'' in relation to negotiated indirect rates, 
stating that this term is ``necessary for IHEs'' or is widely used and 
understood. OMB also received comments on certain language proposed in 
paragraph (f) stating: ``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.).'' OMB also received several comments requesting OMB 
increase the threshold above $50,000, as proposed, for recovering 
indirect costs from subawards.
    OMB Response: OMB revised paragraph (b) of section 200.414 to 
improve the accuracy of the statement describing indirect costs of 
nonprofit organizations. OMB retained the statement that the 
``association of a cost with a Federal award'' determines its nature, 
but removed ``rather than the nature of the procurement transactions,'' 
which was too limiting, as not all costs in an award are necessarily 
procurement transactions.
    OMB revised paragraph (c)(1) to simplify the reference to Federal 
agencies using a different rate ``based on documented justification 
described in paragraph (c)(3).'' OMB replaced the text with ``in 
accordance with paragraph (c)(3).'' OMB also moved ``in the notice of 
funding opportunity'' from the end of paragraph (c)(4) to the beginning 
of the same paragraph to make the requirement easier to read and 
understand.
    OMB revised paragraph (f) of section 200.414 to clarify that 
neither Federal agencies nor pass-through entities may require 
recipients and subrecipients to use a de minimis rate lower than this 
standard unless required by Federal statute or regulation. This does 
not limit the recipient or subrecipient from electing to use a lower 
rate than the de minimis rate. OMB also removed the reference to 
recipients and subrecipients submitting cost proposals in accordance 
with the appropriate appendix if they chose not to use the de minimis 
rate. Other sections of the guidance adequately explain that recipients 
and subrecipients have a right to negotiate a rate, rather than using 
the de minimis rate.
    OMB also removed the proposed language from paragraph (f) stating 
that governmental or department entities receiving more than $35 
million are not allowed to use the de minimis rate. Appendix VII to 
part 200 addresses this topic. It explains that a governmental 
department or agency receiving 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.
    Regarding the de minimis rate, in the proposed language OMB 
referred to the rate as ``up to'' 15 percent in order to allow 
flexibility for the recipient or subrecipient to elect to apply a lower 
rate for their own organizations or if a program statue or agency 
regulations required a lower rate. The phrasing ``up to'' is not 
intended to interfere with recipients or subrecipients applying the 15 
percent rate if they are not prohibited by an authorizing statute or 
agency regulation. Rather, the ``up to'' language is only intended to 
reflect the fact that, in some cases, a lower de minimis may be 
applied.
    OMB understands that there have been disagreements over the 
negotiation of indirect rates, whether related to the length of time 
taken to finalize them, or the rate that was established. In the 
proposed guidance, OMB included additional language in section 
200.414(c)(2) that recipients or subrecipients may contact OMB in the 
event of indirect rate disputes. OMB includes that guidance in the 
final revision. However, OMB did not establish itself as a formal 
arbiter of indirect cost rate disputes.
    The guidance also states in section 200.414(c)(1) that agencies do 
not have the authority to set their own indirect rates without 
justification or support in statute or regulation. However, OMB 
disagrees with the comments requesting OMB waive requirements for pass-
through entities. The same requirements that apply to Federal agencies 
should also apply to pass-through entities in this context. OMB 
retained the language.
    In response to comments on the elimination of ``F&A,'' the term 
``F&A''

[[Page 30094]]

was often used in the guidance in parentheses after the word 
``indirect'' in terms including ``indirect cost'' and ``indirect cost 
rate.'' This implied that ``F&A'' was generally interchangeable with 
the word ``indirect'' in those terms. In practice, the term ``F&A'' may 
not in all cases be used interchangeably with the word ``indirect'' in 
the context of negotiated indirect cost rates. OMB does not, however, 
consider there to be a substantial benefit derived from formally 
maintaining this phrasing for indirect costs and indirect cost rates 
whenever referenced by repeating ``F&A'' after ``indirect'' throughout 
part 200. The policy that IHEs must classify their indirect costs into 
these two categories is still in place, and the removal of this term 
does not impact the use of the term ``F&A'' throughout the community of 
IHEs. OMB also discusses this change in the definition of ``indirect 
cost'' in subpart A of this preamble above.
    In response to commenters urging OMB to increase the de minimis 
rate to 20 percent or higher: OMB determined to maintain the de minimis 
rate at 15 percent as proposed. Regarding the increased threshold for 
calculating modified total direct costs, OMB disagrees that a threshold 
increase higher than $50,000 was necessary and did not further increase 
the threshold at this time. OMB also did not create a mechanism 
allowing a de minimis rate of up to 15 percent over direct labor, but 
may consider this and other suggestions on the de minimis rate for 
future updates. OMB also made a few stylistic and clarifying revisions 
to paragraph (g) in section 200.414.

Section 200.415--Required Certifications

    In the proposed guidance, OMB revised section 200.415 to require 
that subrecipients must certify to pass-through entities that financial 
information submitted to the pass-through entity is complete and 
accurate. OMB received one comment of support for this proposed change 
in policy. OMB also received two comments requesting clarifications 
that certifications apply to ``financial'' reports and that indirect 
cost proposals are not necessarily ``annual.''
    OMB Response: OMB revised section 200.415 to remove the phrase 
``and payment requests under federal awards.'' OMB removed this phrase 
because the certification language provided in the section refers only 
to the certification associated with the financial report. The previous 
version that applied to payment requests as well was technically 
inaccurate. The standard payment request form contains a different 
certification. This section now specifies that only financial reports 
require the certification that is specified in this text. Additionally, 
OMB revised paragraph (e) to remove the word ``annual.''

Section 200.416--Cost Allocation Plans and Indirect Cost Proposals

    OMB did not propose significant changes to this section. OMB 
received two comments requesting additional examples of centralized 
service costs to include, for example, computer centers, integrated 
data systems, central analytics capacity, and cloud computing 
infrastructure.
    OMB Response: OMB did not find it necessary to include additional 
items of centralized services in this guidance. The types of service 
costs provided are illustrative only and are not meant to be a 
comprehensive list.

Section 200.417--Interagency Service

    OMB did not propose significant changes to this section. OMB 
received several comments requesting that OMB increase the indirect 
rate agencies can apply for interagency services from 10 percent to 15 
percent to be consistent with the increase in the de minimis rate.
    OMB Response: OMB revised section 200.417 to increase the 
percentage of costs that an operating department may charge to cover 
the costs of providing services to another operating department. While 
the type of rate is different (interagency service versus de minimis), 
OMB agrees that aligning these rates is sensible and increased the rate 
in this section to 15 percent in response to the comments. OMB finds 
that the de minimis rate for services should align with the increase in 
the de minimis rate allowed under Federal awards.

Section 200.419--Cost Accounting Standards

    In the proposed guidance, based on feedback from both IHEs and 
Federal agencies, OMB removed the requirement in section 200.419 for an 
IHE that receives an aggregate total of $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.
    OMB received many comments in support of the removal of the DS-2 
requirement, which was required to be submitted to the cognizant agency 
for indirect costs. OMB also received many comments expressing 
appreciation for the proposed removal of this requirement and 
highlighting the reduction in burden it would provide if finalized. In 
reference to the usefulness of this form to the audit community, some 
commenters suggested that IHEs could provide the information to the 
audit entity upon request, if needed, because relevant information 
contained in the DS-2 is often readily available at IHEs. One comment 
requested that OMB add language stating that IHEs subject to the DS-2 
requirement should continue to submit a DS-2 to their cognizant agency 
for indirect cost.
    OMB Response: In the final guidance, OMB made revisions in this 
section as proposed. OMB did not make a change to this section in 
response to the comment requesting OMB to require submission of the DS-
2 to the cognizant agency for indirect cost. Removal of the DS-2 
requirement was intended to provide more consistent requirements for 
all types of recipients. The commenter's proposal would not align with 
that intent.

Section 200.420--Considerations for Selected Items of Cost

    In the proposed guidance, OMB made several revisions to the general 
provisions for items of costs. Specifically, in section 200.420, OMB 
added 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 it 
is allowable or unallowable. OMB revised this section as proposed.

Section 200.421--Advertising and Public Relations

    OMB did not propose significant changes to this section. OMB 
received a comment requesting OMB amend paragraph (b)(1) of section 
200.421 to clarify the scope of the allowability of recruitment costs 
to include ``project participants'' in addition to ``personnel.'' OMB 
also received one comment recommending language that specifically 
includes interpretation and translation of documents, websites, 
presentations, and recordings in the list of costs.
    OMB Response: OMB revised section 200.421 to include ``recruiting 
project participants'' as an example of ``program outreach.'' This 
change was made for the sake of clarifying that type of activity. OMB 
agrees that including project participants in the scope of allowable 
recruitment costs would be a helpful clarification and revised the 
guidance text accordingly. However, OMB disagrees that adding language 
to specifically identify costs associated with ``language and 
interpretation'' was

[[Page 30095]]

necessary. The absence of any one cost does not mean it is allowable or 
unallowable. Rather, the analysis depends on the programmatic need 
consistent with other principles and provisions under subpart D.

Section 200.422--Advisory Councils

    In the proposed guidance, OMB revised section 200.422 to 
incorporate the definition of an ``advisory council or committee.'' OMB 
received two comments asking OMB to clarify the intent of this section, 
citing that advisory councils can be internal or external to a 
recipient.
    OMB Response: OMB revised section 200.422 in the final guidance to 
clarify that the term advisory councils is intended to be inclusive of 
internal and external councils and committees. OMB also made minor 
clarifying edits.

Section 200.425--Audit Services

    OMB did not propose significant changes to this section. OMB 
received one comment that objected to the removal of ``types of'' from 
``Type of Compliance Requirements'' so that it reads ``Compliance 
Requirements.'' The commenter noted that this would permit pass-through 
entities to indirectly include other types of compliance requirements 
for which non-compliance may cause a cost not to be allowable to the 
award. For example, one commenter stated the section appears to make 
any costs for audits that are not required by and performed in 
accordance with the Single Audit Act unallowable. Another commenter 
objected to the prohibition on a reasonably proportionate share of 
other audit services.
    OMB Response: In paragraphs (a)(1) and (a)(2) of section 200.425, 
OMB reverted to the original language in the prior version of the 
guidance. OMB decided that the original language better communicated 
the requirements and its intent. In paragraph (c)(3) of section 
200.425, OMB also reverted to the original language of ``types of 
compliance requirements.''
    OMB finds that other commenters raised issues beyond the scope of 
changes that OMB had proposed or that do not align with its policy 
intent for the update to this section. OMB appreciates the other 
comments it received on this section, but was not able to address them 
in the final version. Lastly, OMB reverted the heading of this section 
back to ``Audit services.''

Section 200.427--Bonding Costs

    OMB did not propose significant changes to this section, nor did it 
receive significant comments. In the final version of section 200.427, 
OMB added ``subrecipient'' to make the provision applicable to both 
recipients and subrecipients. This more accurately conveys the policy 
intent. OMB also changed ``Bonding costs'' to ``Costs of bonding'' in 
paragraphs (b) and (c). This is a more precise formulation in the 
context of these provisions.

Section 200.430--Compensation--Personal Services

    OMB proposed a variety of plain language and clarifying revisions 
to this section. Additionally, OMB also proposed to relocate some of 
the guidance within this section. OMB received a comment indicating 
that a citation in this section was out of date. Next, OMB received 
several comments requesting additional clarification on aspects of the 
guidance in which OMB did not propose a policy change, such as making 
approximations in allocating actual personnel costs. OMB also received 
several comments requesting OMB to address the increased costs of 
complying with overtime pay, which was related to a recently proposed 
U.S. Department of Labor (DOL) overtime rule. Lastly, OMB also received 
one comment indicating that the propose guidance does not explicitly 
permit recipients to provide a living wage.
    OMB Response: In paragraph (d)(2) of section 200.430, OMB agrees 
with the comment stating that 10 U.S.C. 2324(e)(1)(P) was repealed. OMB 
updated the guidance to reference the recodified statute at 10 U.S.C. 
3744(a)(16).\6\
---------------------------------------------------------------------------

    \6\ Public Law 116-283 transferred 10 U.S.C. 2324(e)(1)(P) to 
appear in 10 U.S.C. 3744(a)(16).
---------------------------------------------------------------------------

    In paragraph (i)(7)(ii) OMB restored language from the prior 
version of the guidance, which was inadvertently muddled by OMB's 
proposed revisions. OMB also replaced ``recipient'' with ``IHE'' in 
paragraph (i)(8) because the policy contained in paragraph (i) only 
pertains to IHEs.
    In response to requested changes in part 200 to reflect DOL's new 
rule, the policies in the DOL rule are beyond the scope of proposed 
changes in OMB's 2 CFR guidance update. OMB did not make changes on 
this topic in its current update of the 2 CFR text. Regarding the 
comment on changing the policy to ``provide a living wage,'' OMB did 
not propose such a change, and does not have the authority to establish 
such a government-wide mandate on that topic through this update.

Section 200.431--Compensation--Fringe Benefits

    In the proposed guidance, OMB proposed revising section 200.431 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 clarified 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 proposed additional clarifying guidance on pension plan costs and 
post-retirement health plans.
    OMB received numerous comments expressing significant concerns 
about additional language that OMB proposed under paragraphs (g) and 
(h) addressing pension costs and post-retirement health plan costs. 
Many commenters objected to the potential impacts of this policy change 
on State and local governments. A number of commenters maintained that 
the proposed language lacked clarity and could lead to unintended 
consequences, including inconsistent outcomes as applied in practice 
and increasing agency and recipient burden. Commenters also suggested 
that the proposed guidance in these paragraphs would be inconsistent 
with established pension methodologies and standards. Commenters 
emphasized that both paragraph (g) on unfunded pension costs and 
paragraph (h) on post-retirement health plans needed further 
clarification from OMB in the final guidance.
    Some commenters noted that the proposed revisions appeared to limit 
pension and other postemployment costs charged directly to Federal 
awards to the normal cost without recognizing the unfunded accrued 
liability (UAL) component of pension rates. Another commenter noted 
that use of the term ``current pension cost'' needed to be further 
clarified as it could potentially be interpreted as only ``normal 
pension cost'' and exclude ``unfunded liability amortization.'' The 
commenter noted that this could create an undue burden on State and 
local governments to fund this additional component. Another commenter 
noted that State pension systems use a rate that includes both normal 
pension costs as well the unfunded liability amortization. Some 
commenters specifically identified the change in paragraph (g)(6)(iii) 
from ``in excess of the actuarily determined amount'' to ``in excess of 
the costs

[[Page 30096]]

calculated using an actuarial cost-based method recognized by GAAP.''
    OMB also received a comment requesting removal of the requirement 
in paragraph (g)(6)(vi) that recipients or subrecipients provide the 
Federal government an equitable share of any previously allowed pension 
costs that the recipient or subrecipient receives through a refund, 
withdrawal, or other credit.
    OMB also received several comments on the parenthetical reference 
in paragraph (a) associated with the cost of leave--(vacation, sick, 
family, or military). Commenters argued that 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.
    In paragraph (b)(3), a couple of commenters asked OMB to further 
clarify the distinction between subparagraph (i) on the cash basis of 
accounting versus subparagraph (ii) on the accrual basis, including 
further clarifying how to determine the basis of accounting. A 
commenter also requested a definition of general administrative 
expenses in paragraph (b)(3)(i).
    One commenter noted that OMB has not consistently changed the word 
``family-related'' to just ``family.'' This commenter recommended 
deleting ``-related'' after family in paragraph (b).
    OMB Response: OMB appreciates all of the comments it received on 
proposed changes to section 200.431. After carefully reviewing the 
comments, OMB removed significant portions of the proposed language 
from paragraph (g) on pension plan costs and paragraph (h) on post-
retirement health. In both paragraphs, OMB initially proposed language 
providing that costs may not exceed the contribution rate of the 
employee's current pension costs in one case and current health benefit 
costs in the other. In both paragraphs, OMB also proposed additional 
approval and notification requirements. OMB's intent for the proposed 
revisions was only to underscore that pension plan and post-retirement 
health plan costs cannot be charged to an award for employees that are 
not associated with the award. OMB removed the additional language from 
both paragraphs and left only the statement related to allocability. 
OMB agrees with the commenters that the proposed revisions would 
potentially result in unintended burden or confusion. Based on careful 
consideration of the comments on this topic, OMB substantially scaled 
back its proposed revisions to section 200.431 as further detailed 
below.
    OMB revised paragraph (a) of section 200.431 to remove the 
parenthetical reference to types of leave. The reference contained only 
some of the types of leave--family, vacation, sick, or military--
whereas paragraph (b) provides a more complete list of types of leave. 
The reference to ``family-related'' leave in paragraph (b) is also just 
an example of types of leave. OMB did not revise this term, but did 
remove the parenthetical in the preceding paragraph, which may have 
appeared to use inconsistent terms.
    OMB revised paragraph (b)(3)(i) of section 200.431 to remove the 
requirement that agencies must include certain costs in fringe benefit 
rates only with the approval of the cognizant agency for indirect 
costs. OMB recognizes that some recipients might not have a cognizant 
agency for indirect costs. OMB received numerous comments on this 
proposed requirement, which is removed from the final guidance. OMB 
otherwise finds paragraph (b)(3) sufficiently clear and similar to the 
policy in the prior version of the guidance. In response to comments 
asking OMB to further clarify the distinction between the cash basis of 
accounting versus the accrual basis, OMB did not insert additional 
guidance on this topic. OMB may consider doing so in the future, but 
was not prepared to do so through this update. OMB also did not find it 
necessary to provide a definition of general administrative expenses at 
this time.
    OMB revised paragraph (g)(6)(iii) of section 200.431 to revert to 
the prior language that amounts funded by the recipient or subrecipient 
in excess of the ``actuarially determined amount'' for a fiscal year 
may be used as the recipient's or subrecipient's contribution in future 
periods. The language included in the draft revisions had inadvertently 
changed the meaning.
    OMB also substantially revised paragraph (g)(6)(v) of section 
200.431, which was the focus of many comments, to remove much of the 
additional language that was proposed. OMB removed guidance stating 
that ``payments for unfunded pension costs may not exceed the 
contribution rate of the employee's current pension costs'' in response 
to numerous public comments objecting to this change. OMB also removed 
other newly proposed language following that sentence in response to 
concerns expressed by commenters. Through the proposed updates, OMB 
only sought to clarify that payments for unfunded pension costs must be 
charged in accordance with the allocation principles of subpart E. 
Specifically, the recipient or subrecipient may not charge unfunded 
pensions costs directly to a Federal award if they are not allocable to 
that award. OMB deleted additional proposed guidance on unfunded 
pension costs that caused significant concern to commenters.
    OMB revised paragraph (g)(6)(vi) of section 200.431 to revert to 
previous language stating that the recipient or subrecipient must 
provide the Federal Government an equitable share of any previously 
allowed pension costs ``that revert or inure to the recipient or 
subrecipient.'' OMB proposed to refer to pension costs that the 
recipient or subrecipient ``receives.'' OMB did not intend to change 
the meaning and reverted to the prior guidance text.
    Under paragraph (h) of section 200.431 on post-retirement health, 
OMB revised paragraph (h)(3) to revert to the prior language, which 
stated that amounts ``funded by the recipient or subrecipient in excess 
of the actuarially determined amount for a fiscal year may be used as 
the recipient's or subrecipient's contribution in future periods.'' The 
language included in the draft revisions inadvertently changed the 
meaning.
    OMB revised paragraph (h)(5) of section 200.431 to remove a 
significant portion of the newly proposed language. OMB only sought to 
clarify that payments for unfunded post-retirement health plan (PRHP) 
costs must be charged in accordance with the allocation principles of 
subpart E. Specifically, the recipient or subrecipient may not charge 
unfunded PHRP costs directly to a Federal award if they are not 
allocable to that award. OMB deleted additional proposed guidance on 
unfunded PHRP costs that caused significant concern to commenters.
    OMB revised paragraph (h)(7) of section 200.431 to revert to the 
original language stating the recipient must provide the Federal 
government with an equitable share of costs that ``revert or inure'' to 
the recipient, rather than the previous formulation describing costs 
``received'' by the recipient. OMB considers the original language to 
be more precise and appropriate in this context.
    OMB revised paragraph (i)(5) of section 200.431 to clarify 
circumstances in which severance payments to foreign nationals need 
approval by the Federal agency. To the extent these payments would be 
required by foreign law, OMB did not find the Federal agency approval 
requirement was warranted. However, OMB retained the Federal

[[Page 30097]]

agency approval requirement for payments under this paragraph deemed 
``necessary for the performance of Federal programs.'' OMB generally 
retained the language as proposed, but slightly restructured the 
paragraph to make this distinction clear.
    OMB revised paragraph (k) to relocate a clarifying statement to a 
new paragraph (k)(2). That relocated provision at (k)(2) states that 
the ``allowability of these costs for the IHE does not depend on 
whether they are recorded in the accounting records of the IHE.''
    OMB did not propose any changes related to unused leave in section 
200.431. In paragraphs (g)(6)(vi) and (h)(7), OMB disagrees with 
comments suggesting that the requirement to provide the Federal 
government with an equitable share of costs should be changed, even if 
the amount could potentially be small.

Section 200.432--Conferences

    In the proposed guidance, OMB clarified 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 
allowed for dependent-care costs associated with participants' 
attending or partaking in program-related conferences.
    OMB received many comments in support of the changes to this 
section, in particular noting that the proposal to allow for dependent-
care costs associated with participants' attending or participating in 
program-related conferences in particular would enable more employees 
of lesser means to participate in educational programming that will 
benefit their performance. OMB received one comment requesting the 
guidance in 200.432 to also specifically include costs for attending 
conferences as allowable costs.
    OMB Response: OMB revised section 200.432 to remove language 
specifying that allowable conference costs may only include those paid 
by the recipient or subrecipient as a sponsor of the conference. OMB 
recognizes that some program activities include conference costs 
sponsored by another party. OMB also clarified that these costs can 
include attendance fees.

Section 200.433--Contingency Provisions

    OMB did not propose significant changes to this section. In the 
final guidance, section 200.433 was revised to change contingency 
``costs'' to contingency ``amounts.'' This better reflects that the 
policy relates not to the ``costs'' themselves, but rather to the 
``amount'' of costs. OMB also clarified that the costs for major 
project scope changes, unforeseen risks, or extraordinary events ``must 
not be included in the proposed budget estimates for a Federal award,'' 
even if they are in fact allowable should they arise.

Section 200.434--Contributions and Donations

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that the guidance clarify that the 
value of the donations of personal property and use of space may be 
used to meet cost sharing of nonprofit corporations. Another comment 
requested that OMB remove the stipulation for nonprofits that the cost 
of volunteer services often ``must be allocated a proportionate share 
of applicable indirect costs.''
    OMB Response: OMB revised paragraph (g)(2) of section 200.434 to 
clarify that the value of donation of ``personal property and use of 
space'' are allowable as cost share. This clarifies that the guidance 
does not mean the value of donations in general.
    OMB did not propose a change to the policy in paragraph (e) 
applicable to nonprofit organizations. OMB considers the comment on 
this provision out of scope relative to the proposed changes to the 
guidance. OMB finds that the requested change to the ``proportionate 
share'' requirement is not warranted in this update.

Section 200.435--Defense and Prosecution of Criminal and Civil 
Proceedings, Claims, Appeals and Patent Infringements

    OMB did not propose significant changes to this section. In the 
final guidance, OMB made some minor clarifying and grammatical edits in 
this section, including correcting a paragraph heading. In paragraph 
(a)(2), OMB also revised the definition of ``costs'' applicable in 
section 200.435. The revised definition explains earlier in the 
paragraph that costs ``include the services that bear a direct 
relationship to a judicial or administrative proceeding.'' OMB finds 
this change clarifies the policy in this section.

Section 200.438--Entertainment and Prizes

    In the proposed guidance, OMB included prizes in this section. 
Guidance on prizes was located in subpart B in the prior version of the 
guidance despite the fact that prizes are an item of cost. OMB received 
several comments expressing support for the proposed revisions made to 
section 200.438. Several commenters also requested that OMB incorporate 
language from OMB Memorandum M-10-11, Guidance on the Use of Challenges 
and Prizes to Promote Open Government, into the guidance.
    OMB Response: With minor edits, OMB otherwise incorporated the 
revisions in this section as proposed. OMB agrees, however, that OMB 
Memorandum M-10-11, as referenced by commenters, remains a relevant 
source of information providing additional guidance to Federal agencies 
on this topic.

Section 200.439--Equipment and Other Capital Expenditures

    In the proposed guidance, OMB revised paragraph (b)(2) of section 
200.439 to adjust the dollar value for special purpose equipment 
requiring prior approval from $5,000 to $10,000. Other sections of the 
guidance provide that equipment refers to items over $10,000. In the 
final guidance, OMB made additional clarifying edits--including 
replacing ``direct charges'' with ``direct costs'' in two places--but 
otherwise made changes in this section as proposed.

Section 200.440--Exchange Rates

    In the proposed guidance, OMB removed the requirement for prior 
approval of fluctuations of exchange rates. OMB explained that while a 
recipient or subrecipient would still need 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. OMB received one comment supporting this change.
    OMB Response: In the final guidance, OMB reverted to the prior 
version of the guidance on exchange rates. The circumstances when prior 
written approval is needed in relation to fluctuations in exchange 
rates are narrowly defined within the prior version of the guidance in 
section 200.440--which OMB restored. Prior approval is only needed when 
the change results in the need for additional Federal funding, or the 
increased costs result in the need to significantly reduce the scope of 
the project. Because prior approval remained necessary in these 
circumstances in both the prior and proposed versions of the guidance, 
OMB decided it would clarify the policy to retain the reference to this 
provision in section 200.407 and continue to explain circumstances in 
which prior approval is needed within section 200.440.

[[Page 30098]]

Section 200.442--Fund Raising and Investment Management Costs

    OMB did not propose significant changes to this section. OMB 
received one comment recommending that OMB revert to the prior language 
of OMB Circular A-122.
    OMB Response: OMB disagrees that a change was necessary. OMB finds 
that the suggestion to revert to the earlier circular was out of scope 
relative to the proposed revisions to the final guidance. In the final 
guidance, OMB included revisions in this section as proposed.

Section 200.443--Gains and Losses on the Disposition of Depreciable 
Assets

    OMB did not propose any significant changes to this section. In the 
final guidance, OMB made a minor change from ``individual basis'' to 
``case-by-case basis.''

Section 200.445--Goods or Services for Personal Use

    OMB revised section 200.445(b) to clarify that the housing costs 
refer to those costs as associated with a recipient's or subrecipient's 
employees. In addition, OMB removed the reference to the costs being 
allowable ``regardless of whether [they are] reported as taxable income 
to the employees.'' Upon further review, OMB considered this to be an 
unnecessary clarification. It is sufficient to state that such costs 
are only allowable as direct costs and must be approved by the Federal 
agency.

Section 200.447--Insurance and Indemnification

    OMB did not propose significant changes to this section. OMB 
received one comment that suggested OMB incorporate additional guidance 
on medical liability insurance and include ``general liability'' as an 
example of contributions to a self-insurance program. The commenter 
also requested a change to the title of section 200.447.
    OMB Response: OMB did not make changes to section 200.447 in 
response to the comment. The additional policy on medical liability 
insurance suggested by a commenter fell outside the scope of OMB's 
proposed changes. OMB also decided that providing the additional 
example of ``general liability'' was unnecessary.
    OMB made a minor revision to paragraph (d)(3)(ii) of section 
200.447 to insert ``levels described in paragraph (d)(3)(i)'' in place 
of the ``above-mentioned value.'' OMB found the revised text to be more 
precise. OMB also removed the header on paragraph (b)(6) and added a 
clarification to that paragraph. Lastly, OMB made a typographical fix 
to paragraph (d)(1).

Section 200.448--Intellectual Property

    OMB did not propose significant changes to this section. OMB 
received one comment requesting changes to address royalties received 
on a patent or copyright.
    OMB Response: OMB did not make any policy changes to this section. 
OMB considered the comment on royalties to be out of scope of its 
proposed revisions for this update and did not make a change.

Section 200.452--Maintenance and Repair Costs

    OMB did not propose significant changes to this section. OMB 
received several comments asking OMB to clarify allowability of 
maintenance warranties. The commenters noted that this section 
specifically states that costs intended to keep buildings and equipment 
in efficient operation are allowable, but does not address warranties.
    OMB Response: OMB disagrees that costs related to maintenance 
warrantees and other related costs need to be included in this section. 
This would constitute a significant policy change and such changes were 
not proposed for comment.

Section 200.454--Memberships, Subscriptions, and Professional Activity 
Costs

    In the proposed guidance, OMB revised section 200.454 to remove 
prior approval requirements for the cost of membership in any civic or 
community organization. OMB updated the final guidance as proposed.

Section 200.455--Organization Costs

    In the proposed guidance, OMB revised section 200.455 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 added clarifying language that 
certain costs related to data, evaluation, and other related 
organization costs are allowable.
    OMB received a number of comments expressing appreciation for the 
increased clarity for allowable organization costs. However, some 
commenters requested the inclusions of many additional types of 
activities--and even new subsections--related to organization costs. 
Examples of these activities included community engagement, outreach 
activities, personnel, materials, cloud-based services, and cyber 
security measures related to effectively building and using evidence 
and evaluation for program design, administration, or improvement.
    One comment objected to the inclusion of new language related to 
costs associated with either persuading or dissuading employees from 
collective bargaining and related activities, citing that it is 
redundant as it is already covered under the National Labor Relations 
Act (NLRA). OMB received one comment that section 200.455(b) was 
difficult to understand the way it was presented.
    OMB Response: OMB made a minor revision to paragraph (b) of section 
200.455 by moving the phrase the ``costs of any of the following 
activities are unallowable'' to the beginning of the paragraph. OMB 
made this change to improve readability in response to a comment.
    OMB revised paragraph (c) of section 200.455 to clarify that some 
of the proposed language addressed data costs. OMB's revisions to the 
final guidance now provide additional information on evaluation costs.
    In response to comments, OMB observes that various costs related to 
program design, monitoring, and evaluation can be allowable costs. OMB 
disagrees, however, that this section should include all of the 
additions suggested by commenters. In applying the cost principles in 
subpart D, the absence of any particular costs in the general 
provisions for selected items of cost does not imply that such costs 
are necessarily unallowable. See 2 CFR 200.420(b). OMB also disagrees 
that referencing the NLRA was redundant and retained the language. It 
is helpful to clarify for both agencies and recipients.

Section 200.456--Participant Support Costs

    In the proposed guidance, OMB removed from section 200.456 the 
prior approval requirement of participant support costs. OMB received 
several comments in support of the proposed changes to section 200.456. 
OMB also received one comment requesting additional clarity on whether 
written policies and procedures needed to be developed on the subject 
of participant support costs.
    OMB Response: OMB disagrees that it was necessary to establish any 
specific format or requirements for policies and procedures regarding 
participant support costs. For this update, OMB decided that 
establishing additional requirements was not necessary.

Section 200.458--Pre-Award Costs

    OMB did not propose significant changes to this section. OMB 
received

[[Page 30099]]

several comments objecting to the policy requiring prior written 
approval for pre-award costs, noting that this would constitute a 
possibly unintended policy change. OMB also received several specific 
comments regarding pre-award costs--requesting, for example, that OMB 
expand the pre-award costs description to specifically state that the 
recipient or subrecipient would be allowed to ``achieve outcomes'' 
prior to the award dates. Another commenter requested that OMB state 
affirmatively that pre-award costs apply to all types of assistance, 
including discretionary grants.
    OMB Response: OMB agrees with the comment pointing out that the 
requirement for ``prior written approval'' could constitute an 
unintended policy change. OMB removed the word ``prior'' in the final 
text. OMB emphasizes, however, that written approval is still required 
for pre-award costs. OMB did not incorporate additional policy changes 
in response to the comments relating to specific costs, activities, or 
award types. The description of pre-award costs only provides general 
guidance on the allowability of and general process for such costs.

Section 200.460--Proposal Costs

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that OMB provide guidance to agencies, 
including elaborating on the need for Federal agencies to make efforts 
to reduce requirements requested at the proposal development stage.
    OMB Response: OMB did not revise the guidance in response to this 
comment. Generally, OMB considers this to be an agency-specific issue 
that is not appropriate for resolution through policy guidance in this 
section.

Section 200.461--Publication and Printing Costs

    In the proposed guidance, OMB revised section 200.461 to add 
additional clarifying guidance on publication and printing costs by 
adding reference to ``article processing charges'' or ``similar open 
access fees.''
    OMB received one comment supporting the proposed revisions. OMB 
received several comments requesting that section 200.461 refer to 
article publishing charges (APCs) and not ``processing charges.'' The 
same commenters also requested that OMB change the policy regarding how 
charges are levied by a journal. Several other commenters submitted 
recommendations to make additional changes that would be out of scope 
of the proposed changes, or were deemed unnecessary. For example, OMB 
received comments underscoring that researchers are permitted to budget 
for the costs of managing and sharing research data, software, code, 
and other open science outputs resulting from a Federal award; or 
addressing costs related to the making available of software or data 
and the curation, metadata tagging, hosting, preservation, and other 
charges related to open science. Finally, one comment recommended 
replacing ``developed under a Federal award'' with ``resulting from 
research performed under a Federal award'' for clarification.
    OMB Response: OMB revised paragraph (b) of section 200.461 to refer 
to ``similar fees such as open access fees,'' rather than ``similar 
open access fees.'' The prior formulation was revised because it 
implied that the preceding terms, such as ``page charges,'' were ``open 
access fees.'' OMB also clarified that these charges can be ``resulting 
from a Federal award,'' as opposed to ``developed under'' a Federal 
award. OMB recognizes that, in some cases, it may be possible for 
charges to result from a Federal award, but not necessarily be 
developed under the award.
    OMB did not make substantial changes to this section to include 
multiple examples of costs but appreciated the comments for future 
consideration.

Section 200.463--Recruiting Costs

    OMB revised Paragraph (d) of section 200.463 to restructure the 
sentence on short-term visa costs for the sake of clarity. OMB 
considers the revised language to flow better than the previously 
proposed language.

Section 200.465--Rental Costs of Real Property and Equipment

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that OMB remove the word ``workspace'' 
from the reference to ``right-of-use operating lease asset,'' citing 
that it is unclear what would be considered an ``operating lease 
workspace asset'' as opposed to what would be considered an ``operating 
lease asset.'' Further, one comment requested that OMB reinstate the 
term ``FASB standards'' in relation to leases, since both the financial 
reporting frameworks of the ``GASB'' and ``FASB'' are considered 
generally accepted accounting principles (GAAP). One commenter 
requested language pertaining to the application of the cost principles 
for Subscription Based Information Technology Arrangements be included.
    OMB Response: OMB revised paragraph (c)(2) of section 200.465 to 
clarify that the arms-length leases under common control refer to those 
between a recipient or subrecipient ``and another entity'' and not 
between the recipient and subrecipient.
    OMB revised paragraphs (d) and (e) of section 200.465 to revert to 
the existing language that referenced FASB standards instead of GAAP 
standards. OMB also revised paragraph (e) to remove ``workspace'' 
before ``asset.'' OMB considered the comment on Subscription Based 
Information Technology Arrangements to be out of the scope of this 
update.

Section 200.466--Scholarships, Student Aid Costs, and Tuition Remission

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that OMB divide paragraph (a) into two 
paragraphs to address ``tuition remission'' separately. The commenter 
also asked OMB to revise the title to include mention of tuition 
remission, which the commenter stated would better reflect the current 
policy. OMB also received multiple comments requesting clarification as 
to whether various restrictions that apply to IHE's should also apply 
to other comparable degree issuing organizations.
    OMB Response: In response to the comment on tuition remission, OMB 
restructured the first paragraph to break it in two. OMB also added 
``tuition remission'' to the section header. OMB did not make revisions 
in response to the other comments received on this section. OMB finds 
the section presents policy on scholarships and student aid costs 
adequately and appropriately. While OMB is not proposing a change at 
this time to address the application of policy to other degree-issuing 
organizations, OMB appreciates the comments for future consideration.

Section 200.467--Selling and Marketing Costs

    In the proposed guidance, OMB removed 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. OMB included 
revisions to this section as proposed in the final guidance.

[[Page 30100]]

Section 200.468--Specialized Service Facilities

    OMB did not propose significant changes to this section. OMB 
received one comment requesting clarification that the costs of 
services include the acquisition cost of necessary equipment and also 
to add to the additional examples of the types of facilities. Another 
commenter also requested that OMB address other service facilities.
    OMB Response: The ``acquisition cost of necessary equipment'' is 
not in the same category as a ``cost of service.'' Additionally, the 
types of facilities provided are merely examples of facilities and 
intended to be illustrative. OMB did not find these suggestions 
warranted changes at this time and did not make additional revisions. 
OMB did not propose to expand the information in section 200.468 to 
address other types of service facilities and is not revising the 
guidance in response to this comment.

Section 200.470--Taxes (Including Value Added Tax)

    OMB did not propose significant changes to this section. OMB 
received one comment requesting that OMB clarify that these costs 
include payments made by tax exempt institutions to local governments 
to offset the loss of taxes and that are commensurate with the local 
government services received.
    OMB Response: OMB did not agree that a clarification was necessary 
and did not make a change to this section based on this comment.

Section 200.472--Termination and Standard Closeout Costs

    OMB proposed to revise the section on termination costs at section 
200.472 to include closeout costs. Specifically, OMB proposed to 
include guidance for recipients and subrecipients to charge 
administrative costs specifically associated with the closeout of a 
Federal award.
    OMB received many comments supporting the clarification that 
specific administrative closeout costs are allowable. 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. OMB received several comments requesting specific 
clarifications, as well as suggesting modification to existing policy. 
For example, OMB received one comment seeking clarification on the 
allowability of indirect costs. OMB received several comments 
suggesting that closeout costs have a longer liquidation period than 
the 120 days provided by OMB guidance and that costs should therefore 
be covered beyond the period of the due date of the final report. 
Finally, OMB received one comment requesting that we specify that 
termination is ``prior to its stated expiration date'' and requesting 
that OMB qualify that closeout costs refer to ``normal closeout 
costs.'' The commenter also requested that OMB add ``data management 
and sharing'' and ``compliance'' costs.
    OMB Response: OMB revised paragraph (a)(4) of section 200.472 to 
restructure the paragraph in refence to rental costs. Specifically, the 
phrase ``less the residual value of such leases'' and the sentence 
referring to costs of alteration and restoration were moved for 
clarity.
    OMB revised paragraph (b) of section 200.472 to include indirect 
costs in examples of allowable administrative close-out costs. This 
change was intended to clarify that indirect costs are often associated 
with the closeout activity. For example, they may include 
administrative staff expenses.
    The list of closeout costs provided in paragraph (b) are only 
examples and not exhaustive of all types of closeout activities. OMB 
thus elected not to expand this paragraph further with terms such as 
``data management and sharing.''
    In response to the comments requesting a longer liquidation period, 
OMB disagrees that a longer liquidation period is necessary. OMB did 
not revise the guidance to accommodate comments on this topic in this 
section. In the final guidance, sections 200.328(d) and 200.344(b) 
continue to recognize a period of 120 days.
    Finally, in response to the comment suggesting that OMB clarify 
that termination occurs before the stated expiration date, a 
termination date is always before the stated expiration date of the 
award. In response to the request to clarify that standard closeout 
costs are ``normal closeout costs,'' the title of the section itself 
refers to ``standard closeout costs.'' OMB considers it critical that 
closeout costs under this section be specifically related to the 
closeout of the award--and not compliance or other activities, which 
are not ``standard'' or normal closeout costs. OMB finds that the text 
of the guidance is sufficiently clear on this point and does not make a 
change.

Section 200.475--Travel Costs

    OMB did not propose significant changes to this section. OMB 
received one comment that requested OMB incorporate government travel 
regulations into section 200.475.
    OMB Response: OMB did not make a change in response to this 
comment. It is beyond the scope of the proposed changes to section 
200.475. Recipients are ultimately responsible for adhering to the cost 
principles of this subpart, but not necessarily to the government 
travel regulations. OMB made certain clarifying edits to paragraph (c) 
of section 200.475.

Subpart F--Audit Requirements

General Comments on Subpart F

    Specific proposed changes to subpart F are discussed section-by-
section below; however, some commenters provided comments on the 
subpart generally. Several commenters asked OMB to revise this subpart 
to use the terms ``recipient'' and ``subrecipient'' in the same way 
that OMB had proposed revisions in other subparts. Other comments 
recommended expanding subpart F to explicitly apply to for-profit 
organizations.
    OMB Response: OMB must ensure that its guidance throughout part 200 
is consistent with authorizing statutes. The Single Audit Act, as 
amended, only applies to non-Federal entities as that term is defined 
in the Act and section 200.1 of OMB's guidance. OMB finds using the 
terms ``recipient'' and ``subrecipient'' throughout OMB's implementing 
guidance for the Single Audit Act in subpart F of part 200 would create 
unnecessary confusion on the applicability of the Act. OMB does not 
have authority to expand the applicability of the statute. OMB 
appreciates the commenters' suggestions on developing separate audit 
requirements applicable to for-profit organizations and will consider 
these recommendations for future updates to OMB's guidance. This could 
potentially involve establishing a separate subpart with audit 
requirements applicable to for-profit organizations or a separate 
division of subpart F, which would not impact OMB's implementation of 
the Single Audit Act for non-Federal entities. In the final guidance, 
OMB continues to only apply subpart F to ``non-Federal entities.''

Section 200.501--Audit Requirements

    In this section, OMB proposed to raise the audit threshold from 
$750,000 to $1,000,000. Every two years, the Director of OMB is 
authorized to adjust the dollar amount of this threshold

[[Page 30101]]

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.
    OMB received numerous comments supporting the increase in the 
threshold to $1,000,000. A few commenters also opposed the change. They 
stated that the increase posed a significant risk to the oversight of 
Federal awards that would outweigh any benefits. Other commenters 
stated that the increase would place a greater burden on pass-through 
entities to monitor subrecipients. Conversely, several comments 
suggested that OMB should increase the audit threshold even higher than 
$1,000,000.
    A few commenters requested further clarification in paragraph (h)--
explaining circumstances in which the auditee is responsible for 
ensuring compliance for procurement transactions. Commenters observed 
that OMB's use of passive voice in this provision caused confusion on 
which party OMB intended to be responsible for program compliance. One 
commenter stated that OMB should revise paragraph (g) of section 
200.501 to clarify that Federal awards expended as a recipient or 
subrecipient may not be subject to subpart F if there is a statutory 
exemption. Multiple commenters stated that this section should be 
revised to state that payments received as a beneficiary are not 
subject to subpart F.
    OMB Response: OMB appreciates all of the comments received on its 
proposed increase to the audit threshold from $750,000 to $1,000,000. 
As discussed above, numerous comments expressed strong support for the 
increase, but other commenters explained some concerns. In determining 
the appropriate increase, OMB evaluated the number of entities that 
would benefit from the increase in connection with the types of auditor 
opinions issued and the number of questioned costs. OMB disagrees with 
the comments suggesting that the increase in the threshold poses a 
significant risk to oversight. The increase in the threshold should not 
materially increase the burden related to monitoring subrecipients; the 
requirement to have an audit conducted is not a substitute for proper 
monitoring. Regardless of whether audit requirements apply, pass-
through entities should monitor subrecipients consistent with 
requirements in part 200. The increased threshold represents the 
smallest percentage increase to the threshold to date. The increase 
also aligns closely with the Consumer Price Index since the last 
increase in 2014. OMB appreciates commenters' concerns but has decided 
to maintain the proposed increase to the audit threshold.
    After updating the threshold in paragraph (a), OMB also revised 
paragraph (b) of subpart F to clarify that Single Audit requirements 
apply to a non-Federal entity ``that expends $1,000,000 or more in 
Federal awards during the non-Federal entity's fiscal year.''
    OMB revised paragraph (g) of section 200.501 to clarify that 
Federal awards expended as a recipient or a subrecipient are subject to 
audit under subpart F unless a program is exempted by a Federal 
statute. OMB agrees with the request from commenters to provide this 
clarification in the guidance text.
    In the final guidance, OMB revised paragraph (h), which explains 
circumstances in which the auditee is responsible for ensuring 
compliance for procurement transactions. OMB's proposed revisions to 
this paragraph prompted questions from commenters. In the final 
guidance, OMB explains that, for procurement transactions in which the 
contractor is made responsible for meeting program requirements, the 
auditee must ensure those requirements are met, including by clearly 
stating the contractor's responsibilities within the contract and 
reviewing the contractor's records to determine compliance. In other 
words, an auditee may not simply rely on procurement transactions to 
achieve program compliance--or outsource the function of complying with 
a Federal program requirement to a third-party contractor without 
monitoring the activities of the contractor to ensure compliance. The 
responsibility for program compliance continues to belong to the 
auditee. In the final guidance, OMB also included cross-references 
between sections 200.318(b) and 200.501(h), as requested by a 
commenter.
    OMB received some questions on possible misalignment between the 
subject heading and first sentence of paragraph (i). Although the 
subject heading and subsequent text in the paragraph refer to for-
profit subrecipients, the first sentence more broadly states that 
subpart F does not apply to for-profit organizations. OMB considered 
revising the sentence to only refer to for-profit subrecipients, but 
did not want to create confusion on whether the subpart applies to 
other for-profit organizations such as recipients. Thus, although the 
remainder of the paragraph discusses for-profit subrecipients, OMB 
retained the original statement that the subpart does not apply to for-
profit organizations in general, which is also accurate.
    OMB reviewed comments requesting clarification on whether or not 
subpart F applies to program beneficiaries. As explained above in this 
preamble in the context of definitions in section 200.1, OMB did not 
provide a government-wide definition of the term ``beneficiary'' 
through this update. The meaning of the term beneficiary can vary 
widely between Federal agencies and even within agencies between 
assistance programs. Many Federal programs may have different 
definitions and requirements applicable to beneficiaries in their 
authorizing statutes or agency regulations and guidance. For these 
reasons, OMB does not provide government-wide guidance on the 
applicability of subpart F to beneficiaries, which is not a defined 
term in part 200. Individual Federal agencies may provide further 
guidance on this topic for their assistance programs provided that any 
such guidance is consistent with the statutory requirements in the 
Single Audit Act. Federal agencies should also include information in 
their compliance supplement drafts on whether or not payments received 
as a beneficiary are subject to audit requirements.

Section 200.502--Basis for Determining Federal Awards Expended

    In section 200.502, OMB proposed to clarify that, in determining 
Federal awards expended, 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. 
Multiple commenters stated that the proposed language could cause 
confusion. The comments suggested that some individuals may interpret 
the language to mean that there are always continuing compliance 
requirements. OMB also received a question on language in the preamble 
to the proposed guidance discussing proposed changes to the schedule of 
expenditures of Federal Awards immediately after discussion of proposed 
changes to section 200.502. OMB's final guidance on the schedule of 
expenditures of Federal Awards is discussed and clarified under section 
200.510 below, not under section 200.502.
    OMB Response: OMB revised paragraph (b) of section 200.502 to avoid 
potential confusion. OMB removed the proposed language stating that 
loans and loan guarantees retain their Federal character through the 
end of the period of performance. While the statement is accurate, it 
is not essential to include within the guidance in this

[[Page 30102]]

paragraph on calculating the value of Federal awards expended under 
loan programs. Inclusion of this statement in this paragraph of the 
guidance is also not essential in determining whether or not a loan or 
loan guarantee has continuing compliance requirements.

Section 200.504--Frequency of Audits

    OMB did not propose significant changes to this section. One 
commenter asked OMB to address situations that result in partial audit 
periods. For example, partial audit periods could result from a fiscal 
year change or mergers and acquisitions. Another commenter questioned 
whether the dates associated with biennial audits are still necessary.
    OMB Response: OMB revised section 200.504 to clarify that annual 
audits are required unless biennial audits are permitted under 
paragraphs (a) or (b). OMB also clarified that biennial audits must 
cover both fiscal years within the biennial period. The ability to 
conduct biennial audits is recognized in certain circumstances under 
the Single Audit Act. Relevant provisions of the Single Audit Act as 
codified at 31 U.S.C. 7502 and OMB's implementing guidance in this 
section explain the circumstances in which biennial audits are 
permitted.
    OMB did not find it necessary to specify how partial audit periods 
should be handled through this update. The circumstances of a merger or 
acquisition, or change in fiscal year, can present many variations, 
which OMB is not prepared to address at this time. Under section 
200.513(a)(4)(x), it is the responsibility of the cognizant agency for 
audit to provide guidance on changes in the fiscal year. Under section 
200.513(a)(4)(i), the cognizant agency for audit may also provide 
technical audit advice and liaison assistance on other variations, 
which should be addressed in a manner consistent with the framework 
provided by subpart F.

Section 200.505--Remedies for Audit Noncompliance

    OMB did not propose significant changes to the content of this 
section, but proposed changing its heading from ``Sanctions'' to 
``Remedies for noncompliance.'' One commenter observed that, based on 
this proposed change, both sections 200.505 and 200.339 in the proposed 
guidance had the same heading. The commenter suggested changing the 
heading for this section to ``remedies for not being audited.''
    OMB Response: In response to comments, OMB revised the heading of 
section 200.505 from ``Remedies for noncompliance'' to ``Remedies for 
audit noncompliance'' (emphasis added).

Section 200.507--Program-Specific Audits

    OMB did not propose significant changes to this section. One 
commenter recommended several revisions to this section, such as 
changing the type of engagement for program-specific audits to a 
compliance examination engagement.
    OMB Response: While OMB did not propose a change for public 
comment, OMB appreciates the comments received and may consider them 
for future updates. Some of the requests would require further analysis 
to determine whether they would be consistent with authorizing law and 
OMB policy. Other than minor grammatical fixes, OMB did not make a 
change at this time. OMB made minor clarifying edits to the header of 
paragraph (c)(1) to ensure proper alignment with the content of the 
paragraph. OMB also made other minor clarifying edits in this section, 
such as updating references to the submission and reporting package.

Section 200.508--Auditee Responsibilities

    OMB did not propose significant changes to this section. One 
commenter asked OMB to revise this section to add the auditee's 
responsibility to prepare the auditee sections of the data collection 
form and to make the submission to the Federal Audit Clearinghouse 
(FAC).
    OMB Response: Section 200.508(a) states that an auditee is required 
to ensure the audit is properly submitted in accordance with section 
200.512. In the final guidance, OMB included the minor changes to this 
section as proposed. OMB did not make any further edits to this section 
in the final guidance.

Section 200.509--Auditor Selection

    OMB did not propose significant changes to this section. One 
commenter stated that OMB should consider easing the restriction on 
selecting an auditor who prepares the indirect cost proposal or cost 
allocation plan. Another commenter suggested that auditees should be 
allowed to procure an auditor using their own procurement policy, 
instead of the existing requirements.
    OMB Response: While OMB did not propose a change to the policy, OMB 
appreciates the comments on this section. OMB did not make a change to 
the threshold to restrict certain auditors from being selected to 
perform an audit. OMB finds the threshold is appropriate and a critical 
safeguard to ensure there are no conflicts of interest. OMB understands 
the commenter's concerns regarding the method of procurement of an 
auditor. However, even though the Federal Government does not directly 
procure the Single Audit, it is required by Federal law and paid for 
with Federal funds. OMB finds the existing requirements are 
appropriate.

Section 200.510--Financial Statements

    In section 200.510, at paragraph (b), OMB proposed 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. Several commenters opposed this change. They indicated that it 
would be overly burdensome and that it added extraneous information, 
which is not necessary for the users of the Schedule of Federal 
Expenditures (SEFA).
    OMB Response: OMB removed the proposed language in paragraph (b)(2) 
from the final guidance. OMB intends to look for alternative means of 
making the information available in a manner that would be less 
burdensome for auditees and auditors. OMB renumbered the subparagraphs 
in the final guidance appropriately.

Section 200.511--Audit Findings Follow-Up

    OMB did not propose significant changes to this section. Several 
commenters stated that OMB should revise the guidance to clarify that 
corrective action plans must be on auditee letterhead and that OMB 
require a specific timeframe for corrective action completion and 
verification.
    OMB Response: The guidance does not require a corrective action 
plan on auditee letterhead. This confusion results from a frequently 
asked questions document, which OMB may address separately outside of 
this guidance-making process. OMB did not find it necessary to 
establish a specific timeframe for completing corrective action because 
the nature and degree of audit findings and the corrective action 
required can vary significantly. It is the responsibility of the 
auditee to promptly take corrective action. See 2 CFR 200.508(c) (as 
revised). The auditee is also responsible for establishing an 
anticipated completion date. See 2 CFR 200.511(c) (as revised). OMB did 
not make any changes based on these comments, but made minor clarifying 
edits to this section in the final guidance.

[[Page 30103]]

Section 200.512--Report Submission

    OMB proposed some clarifying revisions to this section. Several 
commenters suggested OMB specify how the FAC should follow up with 
known auditees that have not submitted the required data collection 
form and reporting packages. One commenter stated that OMB should 
remove the requirement that auditees make copies available for public 
inspection. Next, another commenter stated that a revision made to 
paragraph (a)(1) made it appear that the data collection form is a part 
of the audit itself. That same commenter stated that the required 
statements do not align with the required certifications in the FAC.
    OMB Response: OMB revised paragraph (a) of section 200.512 to more 
accurately reflect the provisions of the Single Audit Act with respect 
to the report submission deadline. This paragraph now recognizes that a 
cognizant agency for audit or oversight agency for audit (in the 
absence of a cognizant agency for audit) may authorize extensions for 
Single Audit submissions when the nine-month timeframe would place an 
undue burden on the auditee. OMB also made a few clarifying and plain 
language revisions in paragraphs (a), (b), (e), and (g) of section 
200.512 unrelated to authorizing extensions of the report submission 
deadline.
    OMB did not add procedures on how the FAC follows up with known 
auditees. In response to another comment, the requirement for auditees 
to make copies of an audit available for public inspection is essential 
to Federal funding transparency. OMB understands the commenter's 
concerns about redundancy. However, the public may not be aware of the 
existence of the FAC and OMB finds it is still necessary for auditees 
to make copies available for public inspection. Lastly, OMB finds that 
the auditee and auditor certification statements are appropriately 
aligned to the guidance.

Section 200.513--Responsibilities

    In section 200.513, OMB proposed to revise the responsibilities of 
Federal agencies. Specifically, OMB proposed to encourage Federal 
agencies to engage with external audit stakeholders and the Federal 
agency's Office of Inspector General, and the National Single Audit 
Coordinator (NSAC) prior to submitting compliance supplement drafts to 
OMB. In the same section OMB also proposed to clarify that a Federal 
agency's key management single audit liaison must also coordinate with 
the agency's Office of Inspector General and the NSAC, when 
appropriate.
    OMB received many comments supporting the proposed revisions to 
this section. A few commenters also recommended that the guidance not 
just recommend but affirmatively require Federal agencies to engage 
with external stakeholders. One commenter requested that OMB reinstate 
language providing that OMB would conduct a government-wide audit 
analysis every six years. Other commenters stated that the change from 
``higher-risk'' to ``high-risk'' in paragraph (c)(6)(ii) changed the 
meaning of the responsibility. One commenter asked OMB to revise the 
guidance to change the meaning of cross-cutting audit findings from 
findings that affect all Federal awards to those that ``may affect a 
large proportion of all Federal awards.''
    OMB Response: OMB revised paragraph (a)(4)(i) of section 200.513 to 
correct an unintended plain language revision. The word ``liaison'' was 
restored to the guidance text. Cognizant agencies for audit must 
provide technical advice and liaison assistance to auditees and 
auditors. Removing the word liaison was not intended to expand or 
otherwise alter the scope of cognizant agency responsibility.
    In paragraph (a)(4)(iii) of section 200.513, OMB disagrees that the 
government-wide analysis requires a fixed interval. Instead, OMB finds 
that the government-wide analysis should be conducted on an as-
warranted basis at intervals determined by OMB. OMB made clarifying 
edits to paragraph (a)(4)(viii) of section 200.513. OMB also provided 
an example of a cross-cutting audit finding.
    OMB revised paragraph (c)(4) of section 200.513 to clarify that 
agencies ``should'' engage with external stakeholders, the Federal 
agency's Office of Inspector General (OIG), and the National Single 
Audit Coordinator (NSAC) prior to submitting compliance supplement 
drafts to OMB. OMB's edits also clarify that coordination with NSAC is 
not included within coordination with the agency's OIG; they are 
distinct items in the list. OMB understands the commenters' desire to 
require Federal agencies to engage with external stakeholders when 
submitting compliance supplement drafts. However, this may not be 
appropriate or feasible in all circumstances. OMB replaced ``are 
encouraged to engage'' with ``should engage,'' but generally maintained 
the proposed language on this topic. In the final guidance, OMB does 
not require engagement or specifically define what this engagement 
should involve.
    OMB made a change at paragraph (c)(6)(ii). OMB agrees with the 
commenters that the proposed revision unintentionally changed the 
meaning of the guidance. OMB restored the reference to ``higher risk'' 
non-Federal entities.
    OMB revised paragraph (c)(6)(vi) of section 200.513 to correct an 
unintended policy change made during OMB's plain language rewrite. The 
liaison is not responsible for managing a Federal agency's process for 
following up on cross-cutting audit findings. Rather, the liaison is 
responsible for ensuring the agency fulfills its responsibilities to 
coordinate a management decision for cross-cutting audit findings. In 
the final guidance, OMB also made other minor clarifying revisions in 
paragraphs (a) and (c) of this section.
    OMB disagrees with commenters on changing the meaning of cross-
cutting audit findings at this stage. This proposal would require 
further analysis to determine if a change could have unintended 
consequences. For example, OMB would need to evaluate further whether 
any such change could impact OMB's implementation of the Single Audit 
Act under this subpart.

Section 200.514--Standards and Scope of Audit

    In section 200.514, on standards and scope of audit, OMB proposed 
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.
    One commenter stated that paragraph (b) should be revised because 
the Uniform Guidance does not set a basis of accounting for the 
financial statements prepared by the auditee. Several commenters stated 
that paragraph (d)(4) should be revised to remove the requirement that 
compliance testing include a test of transactions, as this may not be 
the most appropriate or effective methodology for every situation and 
compliance requirement. Another comment recommended that ``sufficient 
audit evidence'' be revised to ``sufficient appropriate audit 
evidence'' to better align with terminology used by the audit 
community.
    OMB Response: OMB agrees with a comment on paragraph (b) of section 
200.514 maintaining that part 200 does not set a basis of accounting 
for the financial statements prepared by the auditee. To recognize 
this, OMB added a parenthetical to paragraph (b) stating: ``or a 
special purpose framework such as

[[Page 30104]]

cash, modified cash, or regulatory as required by State law.''
    OMB also agrees with commenters that testing of transactions may 
not always be the most appropriate method for every situation. Thus, 
OMB revised paragraph (d)(4) to state that compliance testing must 
include a test of transactions ``or'' other necessary auditing 
procedures. Lastly, OMB revised paragraph (d)(4) to reference 
``sufficient appropriate audit evidence'' as requested by a commenter.

Section 200.516--Audit Findings

    In section 200.516, based on feedback OMB received from the Federal 
financial assistance community, OMB proposed to revise the definitions 
of known questioned costs and likely questioned costs and provide 
further clarity on how they are identified in an audit report.
    Several commenters submitted comments regarding these proposed 
definitions.
    OMB Response: OMB addressed comments regarding definitions under 
subpart A of this preamble. OMB made only minor clarifying edits in the 
final guidance in section 200.516.

Section 200.517--Audit Documentation

Section 200.518--Major Program Determination

    OMB did not propose significant changes to this section. Several 
commenters questioned whether OMB should revise the table for Type A 
thresholds in light of the increase to the Single Audit threshold.
    OMB Response: OMB revised paragraph (b)(1) of section 200.518 to 
adjust the thresholds for determining Type A programs. OMB increased 
the threshold to $1,000,000 for non-Federal entities with total Federal 
awards expended that are equal to or exceed $1,000,000 but less than 
$34 million. OMB also made minor clarifications to paragraphs (b)(3) 
and (c).

Section 200.519--Criteria for Federal Program Risk

Section 200.520--Criteria for a Low-Risk Auditee

    OMB did not propose significant changes to this section. OMB 
received several comments suggesting that plain language revisions to 
paragraph (b) of section 200.520 changed the meaning of the policy.
    OMB Response: OMB agrees with some of the comments on paragraph (b) 
and reverted the language to be more consistent with the policy in the 
prior version of the guidance. OMB also clarified that the financial 
statements should be prepared in accordance with GAAP ``or a special 
purpose framework such as cash, modified cash, or regulatory as 
required by State law.'' This addition was made to ensure consistency 
throughout the subpart including with sections 200.514 and 200.515.

Section 200.521--Management Decisions

    OMB did not propose significant changes to this section. A few 
commenters asked OMB to revise the guidance to clarify that a 
corrective action plan will be considered accepted without exception if 
an agency does not issue a management decision within six months. 
Another commenter asked OMB to correct a cross-reference in this 
section from 200.332(d) to 200.332(e). This commenter also asked OMB to 
add an exception to paragraph 200.521(c) on the pass-through entity's 
responsibility for issuing a management decision in this section. The 
commenter requested an exception for findings that are of a cross-
cutting or systemic nature such that they will be resolved by the 
cognizant agency for audit.
    OMB Response: While OMB did not propose a change for public 
comment, OMB considered and appreciates the comments expressing 
concerns about Federal agencies issuing timely management decisions. 
OMB may consider these comments for future updates. In response to the 
other commenter, OMB corrected the cross-reference in this section to 
reference the correct provision at section 200.332(e). OMB may also 
consider the suggestion to add an exception for findings that are of a 
cross-cutting or systemic nature for future updates, but did not 
include that language in the final guidance. OMB recognizes the 
exception available under the prior version of the guidance at section 
200.332(e)(4). See 85 FR 49506, 49519 (Nov. 12, 2020). OMB did not 
propose to modify that exception, which remains available in the final 
version of the guidance. The relevant paragraph of section 200.332 is 
now referenced in section 200.521. OMB finds that it would be useful to 
obtain further information on how the existing exception works in 
certain circumstances before making additional changes to the guidance 
on this topic outside of section 200.332.

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

General Comments on Appendix I

    OMB proposed 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 NOFO in 
Appendix I were 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.
    A significant number of commenters supported the proposed changes. 
Other commenters recommended that OMB maintain the existing language in 
Appendix I to Part 200. Several other commenters requested that OMB 
revise paragraph (b)(6)(ii)(A)(4), which they stated was in conflict 
with section 200.306. Several commenters also requested that certain 
sections be renamed or provide further examples for illustrative 
purposes.
    OMB Response: OMB appreciates the comments and support for the 
proposed changes to Appendix I. OMB disagrees with the comments 
recommending OMB maintain the existing text of the appendix. OMB finds 
the proposed revisions will simplify NOFOs in alignment with OMB's 
stated intent for the proposed revisions.
    OMB revised paragraph (b)(3)(ii) of Appendix I to add a new 
paragraph (C). The new paragraph states that the program description 
section may also include, for infrastructure projects subject to Build 
America, Buy America requirements, ``information on key items 
anticipated to be purchased under the program, and any related domestic 
sourcing concerns based on market research.''
    Based on the final version of section 200.306, OMB disagrees with 
comments suggesting that paragraph (b)(6)(ii)(A)(4) conflicts with 
section 200.306. Thus, OMB maintains this paragraph in Appendix I 
permitting a Federal agency to consider proposed cost sharing in the 
review process even if it is not an eligibility criterion. However, the 
Federal agency may only include such language in a NOFO if consistent 
with

[[Page 30105]]

the current guidance provided by OMB in section 200.306.
    OMB appreciates the comments suggesting ideas for renaming 
paragraphs in the appendix and providing additional examples. The 
appendix is only a template that outlines basic requirements for 
uniformity. Federal agencies retain discretion in certain areas to 
include additional information as necessary for a particular Federal 
financial assistance program. In the final guidance, OMB also made 
other minor clarifying edits in this appendix.

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

    OMB proposed to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 for modified total 
direct costs. OMB did not receive any substantive comments regarding 
the proposed change. OMB did not make significant changes to Appendix 
III to Part 200 relative to the proposed guidance.

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

    OMB proposed to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 for modified total 
direct costs. OMB also proposed to clarify that under the direct cost 
allocation method, joint costs include costs for information 
technology. One commenter stated that there should be no exclusion for 
subawards unless it distorts the modified total direct cost base. The 
commenter also stated that recipients should be permitted to take a de 
minimis rate of 10 percent on all subawards to reduce administrative 
costs and to appropriately reimburse prime recipients for the 
appropriate costs required to manage and monitor subawards.
    OMB Response: OMB disagrees with the commenter and finds the 
proposed increase is appropriate. OMB did not make significant changes 
to Appendix IV to Part 200 relative to the proposed guidance. In the 
final guidance, OMB did clarify that the Federal agency's review should 
be limited to ensuring the proposal is consistent with the principles 
of this part.

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

    OMB proposed to update this appendix to adjust the exclusion 
threshold of subawards from $25,000 to $50,000 under modified total 
direct costs. OMB also proposed to clarify the meaning of ``department 
or agency'' for State and local governments.
    OMB also proposed 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. In 
the preamble to the proposed guidance, OMB emphasized, 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.
    One commenter asked OMB to revise and clarify the guidance to 
permit an awarding Federal agency to request that a governmental 
department or agency that receives $35 million or less in direct 
Federal funding during its fiscal year submit its indirect cost 
proposal for review.
    OMB Response: OMB agrees with the comment described above. OMB 
revised paragraph (D)(1)(c) of Appendix VII to clarify that an awarding 
Federal agency may request that a governmental department or agency 
that receives $35 million or less in direct Federal funding during its 
fiscal year submit its indirect cost proposal for review. OMB also 
added language explaining that the Federal agency's review should be 
limited to ensuring the proposal is consistent with the principles of 
part 200.

Appendix X to Part 200--Data Collection Form

    OMB proposed to revise this appendix to clarify where audit 
submission instructions are located. OMB did not receive any 
substantive comments regarding the proposed change. OMB made minor 
changes to Appendix X to revise the heading and incorporate minor 
clarifications.

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

    OMB proposed 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 proposed to renumber the award 
term to align to the requirements of the standard organization of the 
CFR. OMB did not receive any substantive comments regarding the 
proposed change. OMB did not make significant changes to Appendix XII 
to Part 200 relative to the proposed guidance. OMB made changes in the 
final version of this appendix as proposed.

General Comments on 2 CFR

    Several commenters requested that OMB simplify the process for 
organizations and service providers to apply for U.S. government 
funding. Other commenters asked OMB to center funding around what 
communities say they need and reduce recipient burden so that 
recipients of government grants can focus more on driving long-term 
impact. Commenters also asked OMB to make it easier for Federal 
officials to issue awards that deliver results, rather than focus on 
specific activities.
    Some comments expressed appreciation for OMB's proposed use of 
terms such as ``Federal agency,'' ``pass-through entity,'' 
``recipient,'' and ``subrecipient.'' Other commenters noted their 
appreciation of OMB's more specific use of connectors such as ``and'' 
and ``or'' to provide specificity on application of the policies in the 
guidance to Federal agencies, pass-through entities, applicants, 
recipients, and subrecipients. Conversely, some commenters opposed 
these changes and preferred the use of ``non-Federal entity'' 
throughout the prior version of the guidance.
    Other comments discussed the need for more flexibility on indirect 
cost rates and for specific entities, such as Indian Tribes. Other 
commenters requested more training, webinars, FAQs, checklists, 
templates, and technical assistance. Other comments discussed the need 
for improved metrics, more access to data, rural impact analysis, 
supporting capacity building, and increased collaboration with 
organizations and among Federal agencies.
    Lastly, OMB also received many comments offering general support 
for the proposed updates to 2 CFR without providing specific details on 
what the commenter supported. OMB also

[[Page 30106]]

received some comments generally opposing the proposed changes without 
specifically indicating what the commenter opposed.
    OMB Response: OMB appreciates the general feedback submitted on the 
revisions to 2 CFR. OMB will strive to continue to support the proper 
implementation and oversight of Federal financial assistance, including 
potentially through additional training, guidance, and supporting 
information. However, it is also incumbent on Federal agencies to 
address specific processes, data sharing, and coordination for their 
respective Federal financial assistance programs, as applicable. 
Federal agencies provide regulations, processes, and guidance 
documents, which are specific to their agencies and programs. While OMB 
strives to improve consistency across Federal programs, there are 
inherent limitations to the extent to which all processes can be 
uniform--such as variations in authorizing statutes.

Comments on 2 CFR Related to Process and Implementation

    OMB received several comments on agency processes for implementing 
the final guidance. For example, some commenters questioned when the 
guidance would be applied to specific Federal agency programs. Other 
commenters had specific recommendations for the effective date of the 
final guidance and processes by which OMB and Federal agencies should 
work to implement it. OMB also received several questions on whether 
recipients may independently adopt or apply certain provisions of the 
guidance earlier than the guidance's effective date or prior to 
implementation by Federal agencies. A few commenters also requested 
either an extended comment period on OMB's proposed revisions or an 
opportunity to comment on OMB's final revisions.
    Other commenters suggested that indirect cost rates could be 
affected by the increases in thresholds in the final guidance. Some of 
these commenters requested additional guidance on options for revising 
or renegotiating indirect cost rates to align with the final guidance.
    Another commenter argued that OMB should have characterized the 
revision of the 2 CFR guidance as a significant regulatory action under 
Executive Order 12866 and accordingly undertaken a regulatory impact 
analysis. The commenter acknowledged that the guidance would be 
implemented by Federal agencies, but noted that implementation would 
occur government-wide.
    OMB Response: OMB appreciates the comments suggesting specific 
processes for implementation and information provided by commenters on 
the potential effects of implementation processes. As discussed above 
in the preamble on sections of the OMB guidance related to its 
implementation, OMB did not make substantial changes to the long-
standing structure of agency implementation of OMB's guidance in 2 CFR. 
Federal agencies are responsible for implementing the guidance for 
their Federal awards. See, e.g., 2 CFR 1.105(c), 1.110, 1.220, 200.106. 
Concurrently with the final guidance, OMB is issuing a memorandum to 
agencies with implementation guidance. OMB is not providing any 
additional guidance in relation to indirect cost rates beyond that 
already provided in the preamble above or the text of the final 
guidance. OMB also did not provide an additional or secondary comment 
period. OMB provided a 60-day comment period on the proposed guidance 
even though it was not required to do so by the Administrative 
Procedure Act, and commenters did not adequately explain why that was 
insufficient. And although OMB is not inviting comments on the final 
guidance at this time, OMB will consult with stakeholders as 
appropriate in considering any further revisions to it. Finally, 
because Federal agencies are responsible for implementing the guidance, 
the guidance itself is not significant regulatory action within the 
meaning of E.O. 12866 section 3(f). E.O. 12866's requirements regarding 
a regulatory impact analysis do not apply.

Commenter Suggestions for Future Updates

    In the preamble to the proposed guidance, OMB shared that it may 
consider additional revisions for potential future updates. 
Specifically, OMB sought additional comments from the public on 
potential future revisions to the guidance currently under 
consideration. The topics OMB mentioned in this context included:
     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.
    OMB received approximately 60 comments reacting to these general 
proposals under consideration. Many commenters stated that additional 
policy changes were needed to improve the process of negotiating 
indirect cost rates. Some commenters requested more information on the 
actual process for indirect cost rate negotiations, while other 
commenters recommended that OMB consider changes to improve the process 
and timeliness associated with negotiating rates. Specifically, one 
commenter shared that indirect cost rate delays negatively impact 
organizations. The commenter also suggested that recipients might be 
able to pay a fee to ensure that agencies have the appropriate 
resources for the timely negotiation of rates. A few comments spoke to 
specific issues, such as eliminating the 26 percent cap on rates for 
IHEs.
    Difficulties with obtaining a UEI and registering in SAM.gov 
received considerable feedback as well. Several commenters expressed 
support for providing recipients with additional time to obtain a UEI 
and complete SAM.gov registration if exigent circumstances persist 
beyond 30 days. Other comments suggested allowing additional exemptions 
for certain applicants including foreign organizations, in particular. 
Other comments recommended allowing certain thresholds to be increased 
automatically to account for inflation.
    OMB received several comments concerning audits. For example, 
several commenters suggested clarifying that the auditor ``may'' report 
likely questioned costs to help provide proper perspective for known 
questioned costs, and several commenters suggested clarifying whether 
the auditor ``is expected'' to do so. OMB also received several 
comments requesting that the guidance be expanded in sections that 
apply to IHEs to also apply to nonprofit degree-granting research 
institutions. Some comments also suggested OMB provide additional 
guidance on the treatment of loan and loan guarantees in

[[Page 30107]]

a single audit; and defining ``continuing compliance requirements.''
    OMB also received many additional comments on various topics such 
as pre-award certification for Fixed Amount Awards. Some comments 
indicated that pre-award certifications are already completed as part 
of the UEI registration process. Other commenters objected to the 
increased burden that pre-award certification for Fixed Amount Awards 
would place on recipients. Several comments underscored the importance 
of increasing thresholds and recommended continued attention to this 
topic by OMB in the future. Other commenters requested specific changes 
to Appendix II and III, including, for example, listing specifically 
which contract provisions should be included in contracts under Federal 
financial assistance. Some commenters requested that OMB remove 
additional prior approval requirements; continue to reduce 
administrative burden; and define more terms such as ``base period'' 
and ``infrastructure costs.''
    OMB Response: OMB greatly appreciates the many suggestions for 
potential future revisions to 2 CFR. OMB will explore these comments 
further in the context of future updates. There are certain legal 
limitations on threshold increases. Some thresholds are expressly 
provided in statutory law. OMB will also consider additional changes in 
response to the feedback on audits, including in response to comments 
on ``proper perspective'' and potential audit or compliance 
requirements applicable to for-profit organizations.

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

    Executive Orders (EOs) 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 Federal Financial Assistance published in subtitle 
A of 2 CFR is guidance to Federal agencies and not regulation. 2 CFR 
1.100(b). OMB thus determined that the revision of 2 CFR is not a 
significant regulatory action under E.O. 12866, as amended.

Regulatory Flexibility Act

    This guidance is exempt from the notice and comment requirements of 
the Administrative Procedure Act (APA), 5 U.S.C. 553(b), because it is 
guidance to Federal agencies and not regulation. Moreover, even if this 
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 provided the following 
information for the public in the proposed guidance, which it restates 
here. 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 in this document, 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 
revisions that may impose a non-significant burden; however, there are 
more revisions that reduce burden to small entities. When reviewing all 
revisions, the burden that will be reduced for recipients is much 
greater than the burden imposed.

Unfunded Mandates Reform Act of 1995

    The guidance will not impose unfunded mandates as defined by the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48). The 
revisions to the guidance will 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 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 guidance will 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 final 
guidance by means of posting the RFI prior to proposing revisions and 
requesting comments on proposed changes. OMB weighed carefully the 
interests of those who submitted comments in response to the RFI and 
proposed guidance in finalizing revisions to the guidance, which 
balances 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 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 provides greater flexibility to Tribal 
governments in the final guidance centered on procurement standards and 
disposition of equipment. OMB also clarifies 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.

[[Page 30108]]

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 184

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

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 amends title 2, subtitle A, part 1, and 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.
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 government-wide 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 government-wide 
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.


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 subtitle, which should remain in effect.

[[Page 30109]]

Subpart C--Responsibilities of OMB and Federal Agencies


Sec.  1.300   OMB responsibilities.

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

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

CHAPTER I--OFFICE OF MANAGEMENT AND BUDGET GOVERNMENT-WIDE GUIDANCE FOR 
FEDERAL FINANCIAL ASSISTANCE

0
5. 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. 6101 note; 31 U.S.C. 6102; 
31 U.S.C. 6307; 41 U.S.C. 2313; 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 (first-tier 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, the Federal agency 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 an applicant, recipient, or 
subrecipient 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
    (4) 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;
    (iii) For applicants or recipients, the Federal agency may exempt 
foreign organizations or foreign public entities from completing full 
registration in SAM.gov for a Federal award less than $500,000 that 
will be performed outside the United States. Foreign organizations or 
foreign public entities exempted from registering in SAM.gov under this 
provision must still obtain a UEI. The Federal agency must determine 
this exemption on a case-by-case basis while utilizing a risk-based 
approach; or
    (iv) For applicants, the Federal agency determines that there are 
exigent circumstances that prohibit the applicant from receiving a UEI 
and

[[Page 30110]]

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 as a recipient or an 
application under consideration by a Federal agency. The applicant or 
recipient 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 or recipient's immediate and highest-level 
owner and subsidiaries, as well as providing information on all 
predecessors that have received a 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 must meet the 
Federal agency's eligibility criteria and have the legal authority to 
apply for 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 to 
provide additional Federal funds 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 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) Any other grantee or contractor that is not excluded by 
paragraph (2);
    (ix) Any State or locality; and
    (x) any subcontractor or subgrantee that is not excluded by 
paragraph (2);
    (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 means:
    (1) 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

[[Page 30111]]

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, the recipient must 
maintain a current and active registration in SAM.gov. The 
recipient's registration must always be current and active until the 
recipient submits all final reports required under this Federal 
award or receives the final payment, whichever is later. The 
recipient must review and update its information in SAM.gov at least 
annually from the date of its initial registration or any subsequent 
updates to ensure it is current, accurate, and complete. If 
applicable, this includes identifying the recipient's immediate and 
highest-level owner and subsidiaries and providing information about 
the recipient's predecessors that have received a Federal award or 
contract within the last three years.
    (b) Requirement for Unique Entity Identifier (UEI). (1) If the 
recipient is authorized to make subawards under this Federal award, 
the recipient:
    (i) Must notify potential subrecipients that no entity may 
receive a subaward until the entity has provided its UEI to the 
recipient.
    (ii) Must not make a subaward to an entity unless the entity has 
provided its UEI to the recipient. 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 2 CFR 25.400 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.

0
6. 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 (Pub. L. 109-282), 
as amended by the Digital Accountability and Transparency Act of 2014 
(Pub. L. 113-101) and other Public Laws, hereafter referred to as the 
``Transparency Act.''


Sec.  170.105   Applicability.

    (a) Applicability in general. 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) Non-applicability to individuals. 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.
    (2) [Reserved]
    (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 Government-wide Spending Data Model 
(GSDM).
    (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.

[[Page 30112]]

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 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;
    (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 229.402(c)(2).

Appendix A to Part 170--Award Term

I. Reporting Subawards and Executive Compensation

    (a) Reporting of first-tier subawards--(1) Applicability. Unless 
the recipient is exempt as provided in paragraph (d) of this award 
term, the recipient must report each subaward that equals or exceeds 
$30,000 in Federal funds for a subaward to an entity or Federal 
agency. The recipient must also report a subaward if a modification 
increases the Federal funding to an amount that equals or exceeds 
$30,000. All reported subawards should reflect the total amount of 
the subaward.
    (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 issued. (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. The recipient must report the total 
compensation for each of the recipient's 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, the recipient received:
    (A) 80 percent or more of the recipient's 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. The recipient must report executive 
total compensation described in paragraph (b)(1) of this appendix:
    (i) As part of the recipient's 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, the recipient 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 1986after 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 the 
recipient their executive total compensation described in paragraph 
(c)(1) of this appendix. The recipient is required to submit this 
information to the Federal Funding Accountability and Transparency 
Act Subaward Reporting System (FSRS) at https://www.fsrs.gov no later

[[Page 30113]]

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) A recipient with gross income under $300,000 
in the previous tax year is 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
7. 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 agreements to implement the requirements in 22 U.S.C. 
7104(g); 22 U.S.C. 7104a; 22 U.S.C. 7104b; and 22 U.S.C. 7104c.


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 or take any remedial actions authorized by 22 
U.S.C. 7104b(c), 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 subrecipient, contractor, subcontractor, 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 subrecipient, contractor, or subcontractor of the 
recipient or any agent of the recipient or of such a subrecipient, 
contractor, or subcontractor, is engaged in any of the activities 
described in paragraph (a) of this section.
    (2) Annual certification. The recipient 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

[[Page 30114]]

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 Federal agency and Inspector General of 
the Federal agency of any information it receives from any source that 
alleges credible information that the recipient, any subrecipient, 
contractor, or subcontractor of the recipient, or any agent of the 
recipient or of such a subrecipient, contractor, or subcontractor, 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. A 
Federal agency may also include additional information in the award 
term, consistent with the statutory authority of this part, such as 
further information on the compliance plan and certification 
requirements in Sec.  175.105(b).


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.

Subpart C--Definitions


Sec.  175.300   Definitions.

    Terms not defined in this part 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:

[[Page 30115]]

    (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, the recipient, its employees, 
subrecipients under this award, and subrecipient's employees must 
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) The Federal agency may unilaterally terminate this award or 
take any remedial actions authorized by 22 U.S.C. 7104b(c), without 
penalty, if any 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 this appendix through 
conduct that is either:
    (A) Associated with the performance under this award; or
    (B) Imputed to the recipient 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) The Federal agency may unilaterally terminate this award 
or take any remedial actions authorized by 22 U.S.C. 7104b(c), 
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) The recipient 
must inform the Federal agency and the Inspector General of the 
Federal agency immediately of any information you receive from any 
source alleging a violation of a prohibition in paragraph (a)(1) of 
this appendix.
    (2) The Federal agency's 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 the Federal agency under this award.
    (3) The recipient must include the requirements of paragraph 
(a)(1) of this award term in any subaward it makes to a private 
entity.
    (4) If applicable, the recipient must also comply with the 
compliance plan and certification requirements in 2 CFR 175.105(b).
    (d) Definitions. For purposes of this award term:
    Employee means either:
    (1) An individual employed by the recipient 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 the recipient 
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
8. 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?

[[Page 30116]]

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?
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?

[[Page 30117]]

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. 113-101Pub. 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.


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.

[[Page 30118]]

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.
------------------------------------------------------------------------

    (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);

[[Page 30119]]

    (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.


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

[[Page 30120]]

    (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.

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.

[[Page 30121]]

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.

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;

[[Page 30122]]

    (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.

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.

[[Page 30123]]

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.


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

[[Page 30124]]

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 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 of this 
part, 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

[[Page 30125]]

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 not material to the 
suspending official's initial decision to suspend, or the official's 
decision whether to continue the suspension; or
    (4) On the basis of advice from the Department of Justice, an 
office of the United States Attorney, a State attorney general's 
office, or a State or local prosecutor's office, that substantial 
interests of the government in pending or contemplated legal 
proceedings based on the same facts as the suspension would be 
prejudiced by conducting fact-finding.
    (b) You will have an opportunity to challenge the facts if the 
suspending official determines that:
    (1) The conditions in paragraph (a) of this section do not exist; 
and
    (2) Your presentation in opposition raises a genuine dispute over 
facts material to the suspension.
    (c) If you have an opportunity to challenge disputed material facts 
under this section, the suspending official or designee must conduct 
additional proceedings to resolve those facts.


Sec.  180.740   Are suspension proceedings formal?

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

[[Page 30126]]

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.


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 factfinder 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.

[[Page 30127]]

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:
    (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;

[[Page 30128]]

    (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 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 of this part 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-

[[Page 30129]]

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 
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

[[Page 30130]]

[GRAPHIC] [TIFF OMITTED] TR22AP24.805


0
9. 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?
182.220 By when must I publish my drug-free workplace statement and 
establish my drug-free awareness program?

[[Page 30131]]

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


[[Page 30132]]

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 requirements. You may identify the workplaces:
    (1) To the Federal agency awarding official that is making the 
Federal

[[Page 30133]]

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 of this part, if the recipient is not an individual; 
or
    (b) Subpart C of this part, 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 of 
this part; 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 30134]]

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 of 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
10. 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
183.35 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

[[Page 30135]]

executive agency directly or indirectly to covered persons or entities; 
or
    (2) Fails to exercise due diligence to ensure that no funds, 
including goods 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

[[Page 30136]]

United States Central Command, where the estimated value is in excess 
of $100,000.
    Covered person or entity means a person or entity that is actively 
opposing United States or coalition forces involved in a contingency 
operation in which members of the Armed Forces are actively engaged in 
hostilities.

Appendix A to Part 183--Award Terms for Never Contract With the Enemy

    Federal 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)

PART 184--[Amended]

0
11. Amend part 184 by:
0
a. Removing remove the text ``Federal awarding agency'' and ``Federal 
Awarding Agency'', wherever it appears, and adding, in its place, the 
text ``Federal agency''; and
0
b. Removing the text ``Federal awarding agencies'', wherever it 
appears, and adding, in its place, the text ``Federal agencies''.

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

0
13. 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
14. Amend part 200 by revising subparts A through F to read as follows:
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
Sec.
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 equipment or services.
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 agency or pass-through entity review.
200.326 Bonding requirements.
200.327 Contract provisions.

Performance and Financial Monitoring and Reporting

200.328 Financial reporting.

[[Page 30137]]

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.

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 Audit services.
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 Fundraising 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, student aid costs, and tuition remission.
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 audit 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 Standards and 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 (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

[[Page 30138]]

    (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)
    (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

[[Page 30139]]

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 cognizant 
agency for indirect costs. A list of Federal agency Single Audit 
contacts 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 conducts 
procurement transactions 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 the second or subsequent budget period 
within an identified period of performance.
    Cooperative agreement means a legal instrument of financial 
assistance between a Federal agency and a recipient or between a pass-
through entity and subrecipient, 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 or pass-through entity in 
carrying out the activity contemplated by the Federal award.
    (3) The term does not include:
    (i) A cooperative research and development agreement as defined in 
15 U.S.C. 3710a; or
    (ii) An agreement that provides only:
    (A) Direct United States Government cash assistance to an 
individual;
    (B) A subsidy;
    (C) A loan;
    (D) A loan guarantee; or
    (E) Insurance.
    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 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 in 
accordance with applicable Federal statutes, regulations, the 
provisions of this part, or the terms and conditions of the Federal 
award.
    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 the definitions of 
capital assets, computing devices, general purpose equipment, 
information technology systems, special purpose equipment, and supplies 
in this section.
    Expenditures means charges made by a recipient or subrecipient to a 
project or program for which a Federal award is received.
    (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

[[Page 30140]]

    (C) Programs for which no current services or performance are 
required, such as annuities, insurance claims, or other benefit 
payments.
    Federal agency means an ``agency'' as defined at 5 U.S.C. 551(1) 
and further clarified by 5 U.S.C. 552(f). The term generally refers to 
the agency that provides a Federal award directly to a recipient unless 
the context indicates otherwise. See also definitions of Federal award 
and recipient.
    Federal Audit Clearinghouse (FAC) means the repository of record 
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 
Regulation 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, 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 will 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), 200.101(b), 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;

[[Page 30141]]

    (2) A public international organization, which is an organization 
entitled to enjoy privileges, exemptions, and immunities as an 
international organization under the International Organizations 
Immunities Act (22 U.S.C. 288-288f);
    (3) An entity owned (in whole or in part) or controlled by a 
foreign government; or
    (4) Any other entity consisting wholly or partially of one or more 
foreign governments or foreign governmental entities.
    General purpose equipment means equipment 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 and a recipient or between a pass-
through entity and a subrecipient, 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 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 basis that will produce an equitable result in consideration of 
relative benefits derived. For Institutions of Higher Education (IHE), 
the term facilities and administrative (F&A) cost is often used to 
refer to indirect costs.
    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 related procedures, services 
(including support services), and 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, such as intellectual property, 
software, or software subscriptions or 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 processes 
designed and implemented by recipients and subrecipients to provide 
reasonable assurance regarding the achievement of objectives in the 
following categories:
    (1) Effectiveness and efficiency of operations;
    (2) Reliability of reporting for internal and external use; and
    (3) Compliance with applicable laws and regulations.
    Loan means a Federal loan or loan guarantee received or 
administered by a recipient or subrecipient, 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.

[[Page 30142]]

    (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 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, except as 
provided in Sec.  200.320, 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 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 participating in or 
attending program activities under a Federal award, such as trainings 
or conferences, but who is not responsible for implementation of the 
Federal award. Individuals committing effort to the development or 
delivery of program activities under a Federal award (such as 
consultants, project personnel, or staff members of a recipient or 
subrecipient) are not participants. Examples of participants may 
include community members participating in a community outreach 
program, members of the public whose perspectives or input are sought 
as part of a program, students, or conference attendees.
    Participant support costs means direct costs that support 
participants (see definition for Participant in Sec.  200.1) and their 
involvement in a Federal award, such as stipends, subsistence 
allowances, travel allowances, registration fees, temporary 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. The authority of the pass-through 
entity under this part flows through the subaward

[[Page 30143]]

agreement between the pass-through entity and subrecipient.
    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 interval between the start and 
end date of a Federal award, which may include one or more budget 
periods. Identification of the period of performance in the Federal 
award consistent with Sec.  200.211(b)(5) 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. 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 obtained in advance 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 
PII (see definition in this section), except for PII that must be 
disclosed by law. Examples of PII include, but are 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; and educational 
transcripts.
    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 the reporting type of compliance 
requirement (described in the compliance supplement) 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.
    (6) Questioned costs are not improper payments until reviewed and 
confirmed to be improper payments as defined in OMB Circular A-123 
Appendix C.
    Real property means land, including land improvements, structures, 
and appurtenances thereto, and legal interests in land, including fee 
interest, licenses, rights of way, and easements. Real property 
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 or beneficiaries of the award.
    Renewal award means 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

[[Page 30144]]

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 similar 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, beneficiary, or participant. A subaward may be provided 
through any form of legal agreement consistent with criteria in with 
Sec.  200.331, 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. The term 
subrecipient does not include a 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 due to 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 project or program funded by a 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 for which expenditures have not been 
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 expending 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. As provided in paragraph (a)(2), subparts A through E 
may also apply to Federal agencies that make Federal awards to other 
entities.
    (2) Federal agencies must apply subparts A though F of this part to 
non-Federal entities unless a particular

[[Page 30145]]

section of this part or Federal statute provides otherwise. Federal 
agencies may apply subparts A through E of this part 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. 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 extent permitted within applicable statutes, regulations, and 
policies.
    (3) Throughout subparts A through F, the word ``must'' indicates a 
requirement. The words ``should'' or ``may'' indicate a recommended 
approach and permit discretion.
    (4) Throughout subparts A through E, when the word ``or'' is used 
between the terms ``recipient'' and ``subrecipient,'' any requirements 
or recommendations in the relevant provisions of this part apply to the 
recipient, the subrecipient, or both, as applicable. The use of ``or'' 
between recipient and subrecipient does not mean that applicable 
requirements or recommendations only apply to one of these entities 
unless the context clearly indicates otherwise.
    (b) Applicability to Federal financial assistance. (1) Paragraphs 
(b)(2) through (b)(5) of this section describe what portions of this 
part apply to specific types of Federal financial assistance. 
Paragraphs (d) and (e) of this section explain additional exceptions 
related to governing provisions and Federal program applicability. The 
terms and conditions of Federal awards (including this part) flow down 
to subawards to subrecipients unless a particular section of this part 
or the terms and conditions of the Federal award specifically indicate 
otherwise. Pass-through entities must comply with the requirements 
described in subpart D, Sec. Sec.  200.331 through 200.333, and any 
other sections of this part addressing pass-through entities.
    (2) Subpart A (Acronyms and Definitions) and subpart B (General 
Provisions) apply to all Federal financial assistance, except that 
Sec. Sec.  200.111 (English language), 200.112 (Conflict of interest), 
and 200.113 (Mandatory disclosures) do not apply to agreements for 
loans, loan guarantees, interest subsidies, and insurance.
    (3) Subpart C (Pre-Federal Award Requirements and Contents of 
Federal Awards) and subpart D (Post Federal Award Requirements) only 
apply to grants and cooperative agreements with the following 
exceptions:
    (i) Section 200.203 (Requirement to provide public notice of 
Federal financial assistance programs) also applies to agreements for 
loans, loan guarantees, interest subsidies, and insurance;
    (ii) Section 200.216 (Prohibition on certain telecommunications and 
video surveillance equipment or services) applies to loans and grants 
(see Pub. L. 115-232, Div. A, Title VIII, Sec.  889, as amended); and
    (iii) Sections 200.303 (Internal controls) and 200.331 through 
200.333 (Subrecipient monitoring and management) also apply to all 
types of Federal financial assistance.
    (4) Subpart E (Cost Principles) applies to grants and cooperative 
agreements, but does not apply to the following:
    (i) Food commodities provided through grants and cooperative 
agreements;
    (ii) Fixed amount awards, except for Sec. Sec.  200.400(g), 200.402 
through 200.405, and 200.407(d), which do apply;
    (iii) Agreements for loans, loan guarantees, interest subsidies, 
and insurance; and
    (iv) Federal awards to hospitals (see Appendix IX--Hospital Cost 
Principles).
    (5) Subpart F (Audit Requirements) only applies to the following 
items when awarded to a non-Federal entity:
    (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 (codified at 31 U.S.C. 7501-
7507).
    (c) Applicability to different types of contracts and subcontracts 
awarded by a Federal agency to a non-Federal entity under the Federal 
Acquisition Regulations (FAR). (1) Paragraphs (c)(2) and (c)(3) of this 
section describe what portions of this part apply to specific types of 
contracts and subcontracts awarded by a Federal agency to a non-Federal 
entity. See also paragraph (b)(5)(ii) on audit requirements. For both 
paragraphs (c)(2) and (c)(3):
    (i) In cases of conflict between the requirements of applicable 
portions of this part and the terms and conditions of the contract, the 
terms and conditions of the contract and the FAR prevail.
    (ii) When the Cost Accounting Standards (CAS) are applicable to the 
contract or subcontract, they also take precedence over this part.
    (iii) 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.
    (2) Cost-reimbursement contract under the FAR awarded 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 applicable.
    (3) Fixed-price contract or subcontract under the FAR awarded to a 
non-Federal entity. When a non-Federal entity is awarded a fixed-price 
contract or subcontract under the FAR, only subpart A, subpart B 
(except for Sec. Sec.  200.111, 200.112, and 200.113), subpart D (only 
at Sec.  200.303 and Sec. Sec.  200.331 through 200.333), and subpart E 
are applicable to the contract, except that subpart E is not applicable 
to fixed-price contracts and subcontracts that are not negotiated.
    (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:

[[Page 30146]]

    (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);
    (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 class exceptions. Except for subpart F, OMB may allow 
exceptions from requirements of this part for classes of Federal 
awards, recipients, or subrecipients when the exceptions are not 
prohibited by statute. For example, Federal agencies may request 
exceptions in support of innovative program designs that apply a risk-
based, data-driven framework to alleviate select compliance 
requirements and hold recipients accountable for good performance. See 
also Sec.  200.206. Federal agencies may also request exceptions in 
emergency situations. When OMB allows an exception to requirements of 
this part, the Federal agency remains responsible for ensuring the 
exception is applied to Federal awards in a manner consistent with 
Federal statutes and regulations.
    (b) Statutory and regulatory exceptions. A Federal agency may 
adjust requirements to a class of Federal awards, recipients, or 
subrecipients when required by Federal statutes or regulations, except 
for the requirements in subpart F. Except for provisions in subpart F, 
when a Federal statute requires exceptions to requirements of this part 
for a class of Federal awards, recipients, or subrecipients, a Federal 
agency does not need OMB approval to allow those exceptions. See also 
Sec.  200.106.
    (c) Federal agency exceptions. Federal agencies may allow 
exceptions to requirements of this part on a case-by-case basis for 
individual Federal awards, recipients, or subrecipients, except when 
the exceptions are prohibited by law or other approval is 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 (codified at 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 superseded previous OMB guidance issued under Title 2, 
subtitle A, chapter II of the Code of Federal Regulations and certain 
OMB circulars 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 this part upon implementation 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

[[Page 30147]]

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 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). Federal agencies must maintain an official controlling 
English version of the Federal financial assistance announcement and 
the Federal award, including the terms and conditions.(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, in connection with the Federal award 
(including any activities or subawards thereunder), it has credible 
evidence of the commission of a violation of Federal criminal law 
involving fraud, conflict of interest, bribery, or gratuity violations 
found in Title 18 of the United States Code or a violation of the civil 
False Claims Act (31 U.S.C. 3729-3733). The disclosure must be made in 
writing to the Federal agency, the agency's Office of Inspector 
General, and pass-through entity (if applicable). Recipients and 
subrecipients are also 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 200.217 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 the definition of 
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. See Sec.  
200.101(b)(4)(ii) for further information on which provisions in 
subpart E (cost principles) apply to fixed amount awards. The Federal 
agency or pass-through entity may use fixed amount awards if the 
project scope has measurable goals and objectives and if accurate cost, 
historical, or unit pricing data is available to establish a fixed 
budget based on a reasonable estimate of actual costs. Budgets for 
fixed amount awards are negotiated with the recipient or subrecipient 
and the total amount of Federal funding is determined in accordance 
with the recipient's or subrecipient's proposal, available pricing 
data, and subpart E. Accountability must be based on performance and 
results, which can be communicated in performance reports or through 
routine monitoring. There is no expected routine monitoring 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 recipient or subrecipient from the

[[Page 30148]]

record retention requirements contained in Sec. Sec.  200.334 through 
200.338; nor does it absolve the recipient or subrecipient of the 
responsibilities of making records available for review during an 
audit. See Sec.  200.101(b)(5)(i). 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 must not be used in programs that require 
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, or identify those activities that were not completed, 
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(f) (paragraphs 1 through 3, 6 through 8, 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 
and be 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 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 well as the Foundations for Evidence-Based 
Policymaking Act (Pub. L. 115-435), as applicable; and
    (5) To encourage applicants to engage, when practicable, during the 
design phase, members of the community that will benefit from or be 
impacted by a program.
    (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, evidence, 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 experience 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

[[Page 30149]]

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 and tribal 
organizations). 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 modify 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 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 review of merit 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. 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. The merit review process 
explained in this section 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, defined at 41 U.S.C. 134, over the period of performance. 
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; 41 U.S.C. 2313(d). 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

[[Page 30150]]

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, fraud 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. 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 or 
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. Examples of 
application information collections approved by OMB include the 
Standard Forms 424 (SF-424), which is available on Grants.gov, and the 
Biographical Sketch Common Form (OMB Control Number 3145-0279), which 
Federal agencies should use to collect biographical sketches and other 
disclosure information from award applicants. OMB will authorize 
additional information collections only on a limited basis and 
consistent with these requirements.
    (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 of whether a recipient or subrecipient has 
inadequate financial capability 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, a Federal agency or pass-through entity is authorized to 
require a recipient to submit annual certifications and 
representations. Submission may be required more frequently if a 
recipient or subrecipient fails to meet a requirement of a Federal 
award. When a recipient is provided an exception to the requirements of 
2 CFR 25.110, the recipient 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

[[Page 30151]]

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
    (16) 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 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. For loan and loan guarantee programs, the Federal agency 
must specify whether or not the Federal award has continuing compliance 
requirements. 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 Government-wide Spending Data Model 
(GSDM).
    (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. The 
notification from the Federal agency to the applicant should also 
provide a brief explanation for 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 Public Law 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;

[[Page 30152]]

    (4) The applicant may review the responsibility and 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 
and 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 nonprocurement 
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 equipment or services.

    (a) Recipients and subrecipients are prohibited from obligating or 
expending loan or grant funds to:
    (1) Procure or obtain covered telecommunications equipment or 
services;
    (2) Extend or renew a contract to procure or obtain covered 
telecommunications equipment or services; or
    (3) Enter into a contract (or extend or renew a contract) to 
procure or obtain covered telecommunications equipment or services.
    (b) As described in section 889 of Public Law 115-232, ``covered 
telecommunications equipment or services'' means any of the following:
    (1) Telecommunications equipment produced by Huawei Technologies 
Company or ZTE Corporation (or any subsidiary or affiliate of such 
entities);
    (2) For the purpose of public safety, security of government 
facilities, physical security surveillance of critical infrastructure, 
and other national security purposes, video surveillance and 
telecommunications equipment produced by Hytera Communications 
Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua 
Technology Company (or any subsidiary or affiliate of such entities);
    (3) Telecommunications or video surveillance services provided by 
such entities or using such equipment;
    (4) 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;
    (c) For the purposes of this section, ``covered telecommunications 
equipment or services'' also include systems that use covered 
telecommunications equipment or services as a substantial or essential 
component of any system, or as critical technology as part of any 
system.
    (d) In implementing the prohibition under section 889 of Public Law 
115-232, heads of executive agencies administering loan, grant, or 
subsidy programs must 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 telecommunications equipment or services, to procure 
replacement equipment or services, and to ensure that communications 
service to users and customers is sustained.
    (e) When the recipient or subrecipient accepts a loan or grant, it 
is certifying that it will comply with the prohibition on covered 
telecommunications equipment and services in this section. The 
recipient or subrecipient is not required to certify that funds will 
not be expended on covered telecommunications equipment or services 
beyond the certification provided upon accepting the loan or grant and 
those provided upon submitting payment requests and financial reports.
    (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 must 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. The recipient and subrecipient must inform their 
employees in writing of employee whistleblower rights and protections 
under 41 U.S.C. 4712. 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 and 
regulations--including provisions protecting free speech, religious 
liberty, public welfare, and the environment, and those prohibiting 
discrimination--and the requirements of this part. The Federal agency 
or pass-through entity

[[Page 30153]]

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 a Federal 
statute 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 if the statute's prohibition on sex discrimination 
encompasses discrimination based on sexual orientation and 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 guarantee for government action that provides differential 
treatment based on protected characteristics.


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 
(such as outputs, service performance, or public impacts of any of 
these), 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 and evaluation. 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 and 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 received and expended and 
the Federal programs under which they were received. Federal program 
and Federal award identification must include, as applicable, the 
Assistance Listings title and number, Federal award identification 
number, year the Federal award was issued, 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 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 amount, 
source, and expenditure of Federal funds for Federal awards. These 
records must contain information necessary to identify Federal awards, 
authorizations, financial obligations, unobligated balances, as well as 
assets, expenditures, income, and interest. All records must 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 and 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 align 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 reasonable cybersecurity and other measures to safeguard 
information including protected personally identifiable information 
(PII) and other types of information. 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.

[[Page 30154]]

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 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. 
For recipients and subrecipients other than States, payment methods 
must minimize the time elapsing between the transfer of funds from the 
Federal agency or the pass-through entity and the disbursement of funds 
by the recipient or subrecipient 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 both written 
procedures that minimize the time elapsing between the transfer of 
funds and disbursement by the recipient or subrecipient, and financial 
management systems that meet 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 of the recipient 
or subrecipient in carrying out the purpose of the approved program or 
project. The timing and amount of advance payments must be as close as 
is administratively feasible to the actual disbursements by the 
recipient or subrecipient 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 awarding 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 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, after providing reasonable 
notice, withhold payments to the recipient or subrecipient 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.

[[Page 30155]]

    (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) Voluntary committed cost sharing is not expected under Federal 
research grants. The Federal agency may not use voluntary committed 
cost sharing as a factor during the merit review of applications or 
proposals for Federal research grants unless authorized by Federal 
statutes or agency regulations and specified in the notice of funding 
opportunity. Federal agencies are also discouraged from using voluntary 
committed cost sharing as a factor during the merit review of 
applications for other Federal financial assistance programs. If 
voluntary committed cost sharing is used for this purpose for other 
programs, the notice of funding opportunity must specify how an 
applicant's proposed cost sharing will be considered. See Sec. Sec.  
200.414, 200.204, and Appendix I.
    (b) For all Federal awards, the Federal agency or pass-through 
entity must accept any cost sharing funds (including cash and third-
party in-kind contributions, and also including funds committed by the 
recipient, subrecipient, or third parties) as part of the recipient's 
or subrecipient's contributions to a program when the funds:
    (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 
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 is reasonable, necessary, 
allocable, and otherwise allowable, and indirect costs at either the 
third-party organization's approved federally-negotiated indirect cost 
rate or, a rate in accordance with Sec.  200.414(d) provided these 
services employ the same skill(s) for which the employee is normally 
paid. Where donated services are treated as indirect costs, indirect 
cost rates will separate the value of the donated services so that 
reimbursement for the donated services will not be made.
    (g) Donated property from third parties may include 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

[[Page 30156]]

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. Voluntary uncommitted cost sharing 
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 includes 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. 
See Sec.  200.472(b). 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 what program income method(s) 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. When no program income method is specified in the 
Federal award, prior approval is required to use the addition or cost 
sharing methods. 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.
    (3) Cost sharing. Program income is used to meet the Federal 
award's cost sharing requirement.
    (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.
    (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 and non-Federal share or only the Federal share, as determined by 
the Federal agency or pass-through entity.
    (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, except if the Federal agency has approved an alternative 
format. Alternative formats may include the use of electronic systems, 
email, or other agency-approved mechanisms that document the request.
    (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 should 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.

[[Page 30157]]

    (e) Limitation on other prior approval requirements. Unless 
specified in this guidance, the Federal agency must not impose 
additional prior approval requirements without OMB approval. 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 program and budget-related reasons:
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in key personnel (including employees and contractors) 
that are identified by name or position 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) The inclusion, unless waived by the Federal agency, of costs 
that require prior approval in accordance with subpart E as applicable.
    (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 of 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 of subrecipient unless the inclusion was a 
determining factor in the merit review or eligibility process. This 
requirement does not apply to procurement transactions for goods and 
services.
    (7) Changes in the total approved cost-sharing amount.
    (8) The need arises for additional Federal funds to complete the 
project. Before providing approval, 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 non-
construction work under a Federal award.
    (10) A no-cost extension (meaning, an extension of time that does 
not require the obligation of 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 cost-related and administrative prior written 
approval requirements 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 require 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; or
    (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 for the actions described in paragraph (g) of this section 
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.
    (i) Transfer of funds. The Federal agency must not permit a 
transfer of funds that would cause any Federal appropriation to be used 
for purposes other than those consistent with the appropriation. The 
Federal agency may also, at its option, 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 or is expected to 
exceed 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 approves an 
extension to a Federal award, or if a recipient extends under Sec.  
200.308(g)(2), the period of performance will be amended to end at the 
completion of the extension. If termination occurs, the period of 
performance will be amended to end upon the effective date of 
termination. 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

[[Page 30158]]

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. Easements for utility, cable, and 
similar services that benefit the real property and are consistent with 
the authorized use are not considered an encumbrance.
    (c) Appraisals. When an appraisal of real property is required and 
obtained by the recipient or subrecipient, it must be 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 result 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.
    (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.
    (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, including subrecipients of a State or Indian Tribe, 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

[[Page 30159]]

funded the original program or 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 unless 
specifically authorized by Federal statute. This restriction is 
effective as long as the Federal Government retains an interest in the 
equipment.
    (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 replacement 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 and subrecipient are 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. The recipient or subrecipient must 
notify the Federal agency or pass-through entity of any loss, damage, 
or theft of equipment that will have an impact on the program.
    (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, from the Federal share, $1,000 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 
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, or authorize a pass-through entity to permit the 
subrecipient 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 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, from the Federal share, $1,000 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 
vests upon acquisition in the recipient or

[[Page 30160]]

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. 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 
may copyright any work that is subject to copyright and was developed, 
or for which ownership was acquired, under a Federal award. 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 part 401.
    (d) The Federal Government has the right to:
    (1) Obtain, reproduce, publish, or otherwise use the data produced 
under a Federal award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use 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.
    (f) Federal agencies should work with recipients to maximize public 
access to Federally funded research results and data in a manner that 
protects data providers' confidentiality, privacy, and security. 
Agencies should provide guidance to recipients to make restricted-
access data available through a variety of mechanisms. FOIA may not be 
the most appropriate mechanism for providing access to intangible 
property, including Federally funded research results and 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 or Indian Tribe, must 
follow the procurement 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. See also Sec.  200.501(h).
    (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, agent, or board member, 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, agent, and board 
member 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, local government, or 
Indian Tribe, the recipient or subrecipient must also maintain written 
standards of conduct

[[Page 30161]]

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. These standards do not 
relieve the recipient or subrecipient of any contractual 
responsibilities under its contracts. The Federal agency will not 
substitute its judgment for that of the recipient or subrecipient 
unless the matter is primarily a Federal concern. The recipient or 
subrecipient must report violations of law to the Federal, State, or 
local authority with proper jurisdiction.
    (l) Examples of labor and employment practices. (1) The procurement 
standards in this subpart do not prohibit recipients or subrecipients 
from:
    (i) Using Project Labor Agreements (PLAs) or similar forms of pre-
hire collective bargaining agreements;
    (ii) Requiring construction contractors to use hiring preferences 
or goals for people residing in high-poverty areas, disadvantaged 
communities as defined by the Justice40 Initiative (see 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. The hiring preferences or goals should be consistent with the 
policies and procedures of the recipient or subrecipient, and must not 
prohibit interstate hiring;
    (iii) Requiring a contractor to use hiring preferences or goals for 
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 14091;
    (iv) Using agreements intended to ensure uninterrupted delivery of 
services; using agreements intended to ensure community benefits; or
    (v) Offering employees of a predecessor contractor rights of first 
refusal under a new contract.
    (2) Recipients and subrecipients may use the practices listed in 
paragraph (1) 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 develop or draft 
specifications, requirements, statements of work, or invitations for 
bids must be excluded from competing on those procurements.
    (c) Examples of situations 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

[[Page 30162]]

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 products or 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; and maintains 
documents to support its conclusion. 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 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. Unless specified by the Federal agency, the 
recipient or subrecipient may exercise judgment in determining what 
number is adequate.
    (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 must 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

[[Page 30163]]

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. Unless specified by the Federal agency, the 
recipient or subrecipient may exercise judgment in determining what 
number is adequate. 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 applies:
    (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 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.

[[Page 30164]]

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 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 make independent 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 must 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-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 documents 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.

[[Page 30165]]

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 require only 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 and subrecipient. The recipient and 
subrecipient are responsible for the oversight of the Federal award. 
The recipient and subrecipient must monitor their activities under 
Federal awards to ensure they are compliant with all requirements and 
meeting performance expectations. Monitoring by the recipient and 
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 (for example, Research 
Performance Progress Reports) when requesting performance reporting 
information. 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 
align the due dates of performance reports and 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. 
Reporting requirements should not solicit information from the 
recipient or subrecipient that is not necessary for the effective 
monitoring or evaluation of the Federal award. Federal agencies should 
consult monitoring framework documents such as the agency's Evaluation 
Plan to make that determination. 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.
    (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:
    (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 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. When a significant development that 
could impact the Federal award occurs between performance reporting due 
dates, the recipient or subrecipient must notify the Federal agency or 
pass-through entity. 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.

[[Page 30166]]

    (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 reports on the status of real 
property in which the Federal Government retains an interest. Such 
reports must be submitted at least annually. 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 pass-through entity 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 pass-through entity to comply with additional 
guidance to make these determinations, provided such guidance does not 
conflict with this section. The Federal agency does not have a direct 
legal relationship with subrecipients or contractors of any tier; 
however, the Federal agency is responsible for monitoring the pass-
through entity's oversight of first-tier subrecipients. 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. 
No single factor or any combination of factors is necessarily 
determinative. The pass-through entity must use judgment in classifying 
each agreement as a subaward or a procurement contract. In making this 
determination, 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) Verify that the subrecipient is not excluded or disqualified in 
accordance with Sec.  180.300. Verification methods are provided in 
Sec.  180.300, which include confirming 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 provide the unavailable information when it is obtained. 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 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 which case the pass-through entity is not required to 
collect information justifying the rate but may elect to do so; or

[[Page 30167]]

    (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) Evaluate each subrecipient's fraud risk and risk of 
noncompliance with a subaward to determine the appropriate subrecipient 
monitoring described in paragraph (f) 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; and
    (4) The extent and results of any Federal agency monitoring (for 
example, if the subrecipient also receives Federal awards directly from 
the Federal agency).
    (d) If appropriate, consider implementing specific conditions in a 
subaward as described in Sec.  200.208 and notify the Federal agency of 
the specific conditions.
    (e) Monitor the activities of a subrecipient as necessary to ensure 
that the subrecipient 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 audit 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 agency for audit or oversight 
agency for audit to perform audit follow-up and make management 
decisions related to cross-cutting audit 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, site 
visits, 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 up to $500,000. Fixed 
amount subawards must meet the requirements of Sec.  200.201.

Record Retention and Access


Sec.  200.334   Record retention requirements.

    The recipient and subrecipient must retain all Federal award 
records for three years from the date of submission of their final 
financial report. For awards that are renewed quarterly or annually, 
the recipient and subrecipient must retain records for three years from 
the date of submission of their 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 entities may not impose any other 
record retention requirements except for the following:
    (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:

[[Page 30168]]

    (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 other 
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 open 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 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 entities must not impose any 
other access requirements upon recipients and subrecipients.


Sec.  200.338   Restrictions on public access to records.

    Federal agencies 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, or 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 
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, or for pass-through 
entities, recommend suspension or debarment proceedings 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

[[Page 30169]]

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, including, to the extent 
authorized by law, if an award no longer effectuates the program goals 
or agency priorities.
    (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.


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 
from the date of the termination and then archived;
    (3) Federal agencies that consider making a Federal award to the 
recipient during the five year period must consider this information in 
judging whether the recipient is qualified to receive the Federal award 
when the Federal share of the Federal award is expected to exceed the 
simplified acquisition threshold over the period of performance;
    (4) The 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 required by the Federal Funding Accountability 
and Transparency Act (FFATA) to USAspending.gov. 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 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 must provide the recipient 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.


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, and 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

[[Page 30170]]

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 promptly 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, to reflect 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 are 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 constitute 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 part 901).

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 and subrecipient are responsible for the 
efficient and effective administration of the Federal award through 
sound management practices.
    (b) The recipient and subrecipient are 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 and subrecipient, in recognition of their unique 
combination of staff, facilities, and experience, are 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 and 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) When reviewing, negotiating, and approving cost allocation 
plans or indirect cost proposals, the cognizant agency for indirect 
costs should ensure that the recipient consistently applies these cost 
principles. Where wide variations exist in the treatment of a given 
cost item by the recipient, 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 must 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. When the required activities of a fixed amount award 
were completed in accordance with the terms

[[Page 30171]]

and conditions of the award, the unexpended funds retained by the 
recipient or subrecipient are not considered profit.


Sec.  200.401   Application.

    (a) General. The recipient and subrecipient must apply these 
principles in determining allowable costs under Federal awards. The 
recipient and 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 based on case counts or the number of 
beneficiaries.
    (3) Fixed amount awards, except as provided in Sec.  200.101(b). 
See also Sec.  200.201.
    (4) Federal awards to hospitals (see Appendix IX of this part).
    (5) Food commodities provided through grants and cooperative 
agreements.
    (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 contracts 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 48 CFR. The recipient only needs to maintain 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 must 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).


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;
    (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; and
    (e) Whether 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 or other cost objective if the cost is assignable to that Federal 
award or other cost objective 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

[[Page 30172]]

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. If a contract is subject to 
CAS, costs must be allocated to that contract 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, and 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 200.440 Exchange rates;
    (i) Section 200.441 Fines, penalties, damages and other 
settlements;
    (j) Section 200.442 Fund raising and investment management costs;
    (k) Section 200.445 Goods or services for personal use;
    (l) Section 200.447 Insurance and indemnification;
    (m) Section 200.455 Organization costs;
    (n) Section 200.458 Pre-award costs;
    (o) Section 200.462 Rearrangement and reconversion costs;
    (p) 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:
    (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) 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

[[Page 30173]]

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 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 employee 
compensation and fringe benefits expended in relation to that specific 
award). 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 direct cost of a minor amount may be treated as 
an indirect cost, for reasons of practicality, provided that it is 
treated consistently for all Federal and non-Federal purposes.
    (e) Treatment of unallowable costs in determining indirect cost 
rates. The costs of certain activities are not allowable as charges to 
Federal awards. Even though these costs are unallowable, they must be 
treated as direct costs for purposes of determining indirect cost rates 
and 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 those held to conduct 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) Administration of group benefits on behalf of members or 
clients, including life and hospital insurance, annuity or retirement 
plans, and financial aid. See also Sec.  200.431.


Sec.  200.414   Indirect costs.

    (a) Facilities and administration classification. For major 
Institutions of Higher Education (IHE) and major 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. The association of a cost with a Federal award is the 
determining factor in distinguishing direct from indirect costs. 
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.)

[[Page 30174]]

    (1) Negotiated indirect cost rates must be accepted by all Federal 
agencies. A Federal agency may use a rate different from the negotiated 
rate for either a class of Federal awards or a single Federal award 
only when required by Federal statute or regulation, or when approved 
by the awarding Federal agency in accordance with 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, in the notice of funding 
opportunity, the policies relating to indirect cost rate reimbursement 
or cost share as approved under paragraph (e). 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 and pass-through entities may not require recipients and 
subrecipients to use a de minimis rate lower than the negotiated 
indirect cost rate or the rate elected pursuant to this subsection 
unless required by Federal statute or regulation. 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. 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.
    (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 this extension is granted, the recipient 
or subrecipient may not request a rate review until the extension 
period ends. The recipient or subrecipient must re-apply to negotiate a 
new rate when the extension ends. After a new rate has been 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 must include a certification, signed by an 
official who is authorized to legally bind the recipient, 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 financial 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 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 
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

[[Page 30175]]

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 15 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 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.
    (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 (for example, recruiting project participants) 
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

[[Page 30176]]

    (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 both internal and external advisory 
councils or committees are allowable if 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   Audit services.

    (a) A reasonably proportionate share of the costs of audits 
required by and performed in accordance with the Single Audit Act 
Amendments of 1996 (31 U.S.C. 7501-7507), and the requirements of this 
part are allowable. However, the following audit costs are unallowable:
    (1) Any costs when audits required by the Single Audit Act and 
subpart F of this part have not been conducted, or have been conducted 
but not in accordance with the requirements; and
    (2) Except as provided for in paragraph (c) of this section, any 
costs of auditing a non-Federal entity that is exempted from having an 
audit conducted under the Single Audit Act and subpart F of this part 
because its expenditures under Federal awards are less than $1,000,000 
during its fiscal year.''
    (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 types of 
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 or subrecipient. They also arise when the recipient or 
subrecipient requires similar assurance, including bonds as bid, 
performance, payment, advance payment, infringement, and fidelity bonds 
for employees and officials.
    (b) Costs of bonding required under the Federal award's terms and 
conditions are allowable.
    (c) Costs of bonding required by the recipient or subrecipient 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:
    (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 other 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

[[Page 30177]]

    (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. 
3744(a)(16), 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 
other 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) fluctuations 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.
    (viii) Because practices vary as to the activity constituting a 
full workload (for example, the Institutional Base Salary (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 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 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

[[Page 30178]]

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 (h) 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.
    (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

[[Page 30179]]

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 for 
which a cost is determined for assessment as a direct charge, the 
aggregate amount of such assessments applicable to all work of the 
institution during the base period must be reasonable in relation to 
the IHE's actual experience under its sabbatical leave policy.
    (8) Salary rates for non-faculty members. Non-faculty full-time 
professional personnel may also earn ``extra service pay'' in 
accordance with the IHE'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, 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.
    (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 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

[[Page 30180]]

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 actuarially determined amount 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 not allocable to that award.
    (vi) The recipient or subrecipient must provide the Federal 
Government an equitable share of any previously allowed pension costs 
(including subsequent earnings) that revert or inure to the recipient 
or subrecipient 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 actuarially determined amount 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 not allocable to 
that award.
    (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-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 revert or inure to 
the recipient or subrecipient 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 either:
    (i) Required by applicable foreign law; or
    (ii) Necessary for the performance of Federal programs and approved 
by the Federal agency.

[[Page 30181]]

    (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. (1) 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, subject to the following:
    (i) The costs meet the requirements of Basic Considerations in 
Sec. Sec.  200.402 through 200.411;
    (ii) The costs are properly supported by approved cost allocation 
plans in accordance with applicable Federal cost accounting principles; 
and
    (iii) The costs are not otherwise borne directly or indirectly by 
the Federal Government.
    (2) The allowability of these costs for the IHE does not depend on 
whether they are recorded in the accounting records of the IHE.


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 may include the rental of facilities, 
speakers' fees, attendance fees, costs of meals and refreshments, local 
transportation, and other items incidental to such conferences unless 
further restricted by the terms and conditions of the Federal award. 
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 amounts for major project scope 
changes, unforeseen risks, or extraordinary events must not be included 
in the budget estimates for a Federal award.
    (b) It is permissible for contingency amounts other than those 
excluded in paragraph (a) of this section to be explicitly included in 
budget estimates to the extent necessary to improve their precision. 
Contingency amounts 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.


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 (that is, in-kind 
donations) 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 of personal property and use of 
space may be used to meet cost sharing requirements described in Sec.  
200.300.

[[Page 30182]]

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 that bear a direct relationship to a 
judicial or administrative proceeding and provided by in-house or 
private counsel, accountants, consultants, or others engaged to assist 
the recipient or subrecipient before, during, or after the commencement 
of that 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.
    (e) Allowability of costs in general. Costs incurred in connection 
with proceedings described in paragraph (b), and not made unallowable 
by that paragraph, may be allowed 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 has determined 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 an 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) Patent infringement litigation. Costs of legal, accounting, and 
consultant services, and related costs incurred in connection with 
patent infringement litigation, are unallowable unless otherwise 
provided for in the Federal award.
    (i) 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 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

[[Page 30183]]

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. Once used, depreciation methods 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.


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 allowable as direct costs, but only 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 
allowable as a direct cost, but only 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

[[Page 30184]]

allowability of real property and equipment rental costs.
    (4) When approved as a direct cost 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.

    (a) Cost increases for fluctuations in exchange rates are allowable 
costs subject to the availability of funding. Prior approval of 
exchange rate fluctuations is required only when the change results in 
the need for additional Federal funding, or the increased costs result 
in the need to significantly reduce the scope of the project. Before 
providing approval, the Federal agency must ensure that adequate funds 
are available to cover currency fluctuations in order to avoid a 
violation of the Antideficiency Act.
    (b) The recipient or subrecipient is required to make reviews of 
local currency gains to determine the need for additional Federal 
funding before the expiration date of the Federal award. Subsequent 
adjustments for currency increases may be allowable only when the 
recipient or subrecipient provides the Federal agency with adequate 
source documentation from a commonly used source in effect at the time 
the expense was made, and to the extent that sufficient Federal funds 
are available.


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 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 a case-by-case 
basis.
    (c) Gains or losses of any nature arising from the sale or exchange 
of property other than the property covered in paragraph (a) of this 
section 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 for the recipient's or subrecipient's employees are only 
allowable as direct costs and must be approved in advance by the 
Federal agency.


Sec.  200.446   Idle facilities and idle capacity.

    (a) Definitions for the purpose of this section:

[[Page 30185]]

    (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 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 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 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 exceeding the levels described in paragraph (d)(3)(i) 
of this section 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

[[Page 30186]]

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 ownership.


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) Requirements 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.
    (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

[[Page 30187]]

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 requirements 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 requirements 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 requirements 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) Requirements for nonprofit organizations subject to full 
coverage under CAS. 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 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;
    (iii) Any activity specifically authorized by statute to be 
undertaken with funds from the Federal award; or
    (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).
    (3) When a recipient or subrecipient seeks reimbursement for 
indirect costs,

[[Page 30188]]

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.
    (4) 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.)
    (5)(i) 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:
    (A) The employee engages in lobbying (as defined in paragraphs 
(c)(1) and (2) of this section) for 25 percent or less of the 
employee's compensated hours of employment during that calendar month; 
and
    (B) 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.
    (ii) When conditions in paragraph (c)(5)(i)(A) and (B) 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)(5)(i)(A) and (B) 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.
    (iii) 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.
    (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 of the following activities are unallowable: 
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.
    (c) The costs related to data and evaluation are allowable. Data 
costs 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, cybersecurity, 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. 
Evaluation costs include (but are not limited to) evidence reviews, 
evaluation planning and feasibility assessment, conducting evaluations, 
sharing evaluation results, and other personnel or materials costs 
related to the effective building and use of evidence and evaluation 
for program design, administration, or improvement.


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

[[Page 30189]]

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 
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 (APCs), or similar 
fees such as open access fees for professional journal publications and 
other peer-reviewed publications resulting from 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. 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 
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 those 
relocation costs. See Sec.  200.464.
    (d) Short-term visas (as opposed to longer-term immigration visas) 
are generally an allowable cost and they may be proposed as a direct 
cost because they 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

[[Page 30190]]

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 as 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 this section.
    (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 that would have been 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 and another entity 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 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 FASB standards are allowable only up to the amount (described in 
paragraph (b) of this section) that would have been 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 asset under FASB standards 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.

[[Page 30191]]

Sec.  200.466  Scholarships, student aid costs, and tuition remission.

    (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.
    (b) 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.
    (c) 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 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 are 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:

[[Page 30192]]

    (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 any 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) If paragraph (a)(4)(i) and (ii) below are satisfied, rental 
costs under unexpired leases (less the residual value of such leases) 
are generally allowable where clearly shown to have been reasonably 
necessary for the performance of the terminated Federal award. These 
rental costs may include the cost of alterations of the leased property 
and the cost of reasonable restoration required by the lease, provided 
the alterations were necessary for the performance of the Federal 
award.
    (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.
    (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, costs associated with the disposition of equipment and property, 
and related indirect costs). 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.


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 made, 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, on 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

[[Page 30193]]

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) Dependents. (1) Temporary dependent care costs (dependent is 
defined in 26 U.S.C. 152) above and beyond regular dependent care are 
allowable provided that these costs:
    (i) Are a direct result of the individual's travel to a conference 
for the Federal award;
    (ii) 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 exceeds 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 or 
more in Federal awards during the non-Federal entity's 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.
    (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. Unless a program is 
exempt by Federal statute, 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, for procurement transactions in 
which the contractor is made responsible for meeting program 
requirements, the auditee must ensure those requirements are met, 
including by clearly stating the contractor's responsibilities within 
the contract and reviewing the contractor's records to determine 
compliance. Also, when these procurement transactions relate to

[[Page 30194]]

a major program, the scope of the audit must include a determination of 
whether these transactions comply with Federal statutes, regulations, 
and the terms and conditions of a Federal award. See also Sec.  
200.318(b).
    (i) For-profit subrecipient. This subpart 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). 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 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

[[Page 30195]]

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 unless 
biennial audits are permitted under paragraph (a) or (b) of this 
section. Biennial audits must cover both fiscal years within the 
biennial period.
    (a) A State, local government, or Indian Tribe that is required by 
constitution or statute, in effect on January 1, 1987, to undergo its 
audits less frequently than annually, is permitted to undergo 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.


Sec.  200.505  Remedies for audit noncompliance.

    In cases of continued inability or unwillingness of a non-federal 
entity to have an audit conducted in accordance with this part, Federal 
agencies or pass-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 have basically the same responsibilities for the Federal program 
as they would have for an audit of a major program in a single audit.
    (2) The auditee must prepare the financial statement(s) for the 
Federal program that includes 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 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) Submission 
deadline and public availability. 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 
the auditee receives the auditor's report(s) or nine months after the 
end of the audit period (whichever is earlier). The submission 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 reporting package 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

[[Page 30196]]

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 also include the financial 
statement(s) of the Federal program, summary schedule of prior audit 
findings, and corrective action plan as described in paragraph Sec.  
200.507(b)(2) and the auditor's report(s) described in paragraph Sec.  
200.507(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 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 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.
    (3) Provide total Federal awards expended for each individual 
Federal program and the Assistance Listings number or other identifying 
number when the Assistance Listings information is unavailable. For a 
cluster of programs, the auditee must also provide the total for the 
cluster.
    (4) Include the total amount provided to subrecipients from each 
Federal program.
    (5) For loan or loan guarantee programs described in 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.
    (6) Include notes describing the significant accounting policies 
used in preparing the schedule and whether the auditee elected to use 
the de minimis indirect cost rate of up to 15 percent (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

[[Page 30197]]

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 financial statement findings that the auditor was required 
to report 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 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, the data collection form, and the 
reporting package must be submitted within 30 calendar days after the 
auditee receives the auditor's report(s) or nine months after the end 
of the audit period (whichever is earlier). The cognizant agency for 
audit or oversight agency for audit (in the absence of a cognizant 
agency for audit) may authorize an extension when the nine-month 
timeframe would place an undue burden on the auditee. 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 
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 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 Indian Tribe 
opts not to authorize publication, it 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

[[Page 30198]]

(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, when requested by a Federal agency or pass-through entity, 
a copy of any management letters issued by the auditor.
    (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 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 (as listed on the non-Federal entity's Schedule of expenditures 
of Federal awards, see Sec.  200.510(b)) 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 FAC, the 
auditee, and the auditor (if known) of the change.
    (4) The cognizant agency for audit must:
    (i) Provide technical audit advice and liaison assistance to 
auditees and auditors.
    (ii) Obtain or conduct quality control reviews on selected audits 
made by 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 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 awards of more than one Federal 
agency or pass-through entity); for example, a cross-cutting audit 
finding may include an issue related to the recipient's accounting 
system.
    (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.

[[Page 30199]]

    (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 will take action 
in accordance with Sec.  200.505. Prior to submitting compliance 
supplement drafts to OMB, Federal agencies should engage with external 
audit stakeholders, the Federal agency's Office of Inspector General, 
and the National Single Audit Coordinator (NSAC).
    (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 higher 
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) Ensure the Federal agency fulfills its responsibility, as a 
cognizant agency for audit, to coordinate a management decision for 
cross-cutting audit findings under (a)(4)(viii) of this section. 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). For example, 
this may include an issue related to the recipient's accounting system.
    (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 and National Single Audit Coordinator (NSAC).

Auditors


Sec.  200.514  Standards and 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 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 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

[[Page 30200]]

    (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 or 
other auditing procedures necessary to provide the auditor with 
sufficient appropriate 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) on 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;
    (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;
    (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; (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 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.

[[Page 30201]]

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 the auditee to prepare 
a corrective action plan and take corrective action and for Federal 
agencies or pass-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. 
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 finding 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 finding must 
identify the applicable prior year audit finding reference numbers in 
these instances.
    (10) Recommendations to prevent future occurrences of the 
deficiency identified in the audit finding.
    (11) Views of responsible officials of the auditee.
    (c) Reference numbers. Each audit finding in the schedule of 
findings and questioned costs must include a reference number in the 
format meeting the requirements of the data collection form submission 
(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

[[Page 30202]]

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 table 1:

                       Table 1 to Paragraph (b)(1)
------------------------------------------------------------------------
     Total Federal awards expended               Type A threshold
------------------------------------------------------------------------
Equal to or exceed $1,000,000 but less   $1,000,000.
 than or equal to $34 million.
Exceed $34 million but less than or      Total Federal awards expended
 equal to $100 million.                   times .03.
Exceed $100 million but less than or     $3 million.
 equal to $1 billion.
Exceed $1 billion but less than or       Total Federal awards expended
 equal to $10 billion.                    times .003.
Exceed $10 billion but less than or      $30 million.
 equal 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. The auditor must 
identify each large loan 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 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 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

[[Page 30203]]

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 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's opinion on whether the financial statements were 
prepared in accordance with generally accepted accounting principles 
(or a special purpose framework such as cash, modified cash, or 
regulatory as required by State law), and the auditor's in-relation-to 
opinion on the schedule of expenditures of Federal awards were 
unmodified.
    (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
    (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

[[Page 30204]]

of more than one Federal agency (see Sec.  200.513(a)(4)(viii)). 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(e)).
    (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
15. 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) Requirements for developing NOFOs. 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) Considerations for developing NOFOs. 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)I 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 (b)(4) 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:
    (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) For infrastructure projects subject to Build America, Buy 
America requirements, information on key items anticipated to be 
purchased under the program, and any related domestic sourcing 
concerns based on market research.

[[Page 30205]]

    (D) Other information the Federal agency finds necessary.
    (4) Application Contents and Format. This section 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 section must specifically address content and form or 
format requirements for:
    (A) Whether pre-applications, letters of intent, or white papers 
are required or encouraged.
    (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 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 section 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 section 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 section 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 section 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 section 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 section 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 ``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.

[[Page 30206]]

    (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 specific 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 specific 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

* * * * *

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
16. 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

* * * * *

[[Page 30207]]

    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
17. Amend appendix VII to part 200 by revising and republishing 
paragraphs C.2.c.(1), C.3.e.(1), and D.1 to read as follows:

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

* * * * *
    2. * * *

    c. The distribution base may be (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), (2) direct salaries and wages, or (3) 
another base which results in an equitable distribution.
* * * * *
    3. * * *

    e. The distribution base used in computing the indirect cost 
rate for each function may be (1) total direct costs (excluding 
capital expenditures and other distorting items such as pass-through 
funds, subawards in excess of $50,000, and participant support 
costs), (2) direct salaries and wages, or (3) another base which 
results in an equitable distribution. An indirect cost rate should 
be developed for each separate indirect cost pool developed. The 
rate in each case should be stated as the percentage relationship 
between the particular indirect cost pool and the distribution base 
identified with that pool.
* * * * *

D. Submission and Documentation of Proposals

* * * * *

1. Submission of Indirect Cost Rate Proposals

    a. All departments or agencies of the governmental unit desiring 
to claim indirect costs under Federal awards must prepare an 
indirect cost rate proposal and related documentation to support 
those costs. The proposal and related documentation must be retained 
for audit in accordance with the records retention requirements 
contained in Sec.  200.334.
    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 an awarding Federal agency. The 
Federal agency's review should be limited to ensuring the proposal 
is consistent with the principles of this part. Where a non-Federal 
entity only receives funds as a subrecipient, the pass-through 
entity will be responsible for negotiating and/or monitoring the 
subrecipient's indirect costs.
    c. Each Indian tribal government desiring reimbursement of 
indirect costs must submit its indirect cost proposal to the 
Department of the Interior (its cognizant agency for indirect 
costs).
    d. Indirect cost proposals must be developed (and, when 
required, submitted) within six months after the close of the 
governmental unit's fiscal year, unless an exception is approved by 
the cognizant agency for indirect costs. If the proposed central 
service cost allocation plan for the same period has not been 
approved by that time, the indirect cost proposal may be prepared 
including an amount for central services that is based on the latest 
federally approved central service cost allocation plan. The 
difference between these central service amounts and the amounts 
ultimately approved will be compensated for by an adjustment in a 
subsequent period.
* * * * *

0
18. Revise appendix X to part 200 to read as follows:

Appendix X to Part 200--Data Collection Form

    The data collection form is available as a series of workbooks 
on the Federal Audit Clearinghouse (FAC.gov). The form and 
submission instructions can be found at https://www.fac.gov/.


0
19. 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

[[Page 30208]]

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.
    (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 
ControllerOffice of Federal Financial Management.
[FR Doc. 2024-07496 Filed 4-16-24; 8:45 am]
BILLING CODE 3110-01-P