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01-132 Resolution No. 01-132 RESOLUTION AUTHORIZING EXECUTION OF A SUB-RECIP ENT AGREEMENT WITH SENIOR SERVICES ASSOCIATES BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that Joyce A. Parker, City Man.ger, and Dolonna Mecum, City Clerk, be and are hereby authorized and directed to execute a Sub-recipient Agreement on behalf of the City of Elgin with Senior Services Associates for buildin• rehabilitation at its center located at 101 South Grove Aven e, a copy of which is attached hereto and made a part hereof by reference . s Ed Shock Ed Schoc , Mayor Presented: May 23 , 2001 Adopted: May 23 , 2001 Omnibus Vote : Yeas : 6 Nays : 0 Attest : s/ Suellyn Losch Suellyn Losch, Deputy City Clerk SUB-RECIPIENT AGREEME 'T BETWEEN THE CITY OF ELG ',AND SENIOR SERVICES ASSOCIA ES B-17-00-MC-0011 THIS AGREEMENT is made and entered into thi- 14th day of May, 2001, by and between SENIOR SERVICES ASSOCIATES, a not-for-profiu corporation incorporated pursuant to the laws of the State of Illinois, (hereinafter referred to as i e "Sub-recipient"), and the CITY OF ELGIN, Illinois, an Illinois municipal corporation, (herein•fter referred to as the "Grantee" or "City"). WHEREAS, Grantee has applied for and receive. funds from the United States Government pursuant to Title I of the Housing and Communi Development Act of 1974, Public Law 93—383, as amended; and WHEREAS, Subrecipient operates a multiple pu ..se center exclusively for senior citizens located at 101 South Grove Avenue in Elgin, I linois (hereinafter referred to as "Facility"), which provides transportation, recreation, health, ,ducation, information, referral and outreach services and programs; and WHEREAS, Subrecipient's Facility is in need of buil ing rehabilitation work as follows: removal of existing flooring and base, including ceramic tile ooring, vinyl-asbestos tile flooring, and carpet, and installation of new flooring and base, includ. g vinyl tile, quarry tile, and carpet. The scope of work includes removal and replacement of existing water closets, and disconnection,removal and re-installation of the range,refrige ator, sink and base cabinets; and WHEREAS, Subrecipient provides assistance to e derly persons who are generally presumed to be principally low and moderate income persons; and WHEREAS, Sub-recipient lacks the capital to undert.ke all needed flooring repairs to the Center and will use CDBG funds to upgrade their food prepar.tion facilities; and WHEREAS, Grantee has determined it to be in is best interest to enter into this Agreement with Sub-recipient to assist Grantee in utilizing •I BG funds totaling $31,623.77 for the flooring replacement project. NOW, THEREFORE, in consideration of the mutua promises and covenants contained herein,the sufficiency of which is hereby acknowledged,the •arties hereby agree as follows: 1. Statement of Work A. Activities The Sub-recipient's performance of all the following a tivities must be performed in a satisfactory manner. Whether performance is satisfactory is •etermined by the Grantee in its sole discretion. Should Sub-recipient not perform in a satisfacto manner, as solely determined by the Grantee, Grantee may terminate the Agreement and pu sue any remedies provided by law including but not limited to suits for breach of contract, or for reimbursement of any and all money paid to Sub-recipient by Grantee. Sub-recipient shall provide the following services: inforim tion, referral and outreach; case management services: elder abuse intervention; nursing ho e ombudsman services; adult day care; recreation, education and health programs; voluntee opportunities; transportation for doctor's appointments outside of Elgin, for recreational events, for emergencies, and for adult day care; and shared housing consultation. Sub-recipient will be allocated $31,623.77 in Program Year 1'99 CDBG funds for the renovation of the Senior Center flooring. CDBG funds shall be us:. for improvements consisting of removing existing flooring and base, including ceramic tile ooring, vinyl-asbestos tile flooring, and carpet, and installing new flooring and base, including vi yl tile, quarry tile, and carpet. The scope of work includes removal and replacement of existin: water closets, and disconnection, removal and re-installation of the range, refrigerator, sink and base cabinets as indicated in architectural drawing and specifications. Sub-recipient shall p erform their activities in a manner satisfactory to Grantee and consistent with any standards r-.uired as a condition of providing these funds and shall comply with all applicable Federal, .tate, and local statutes, rules and regulations governing such CDBG funds. Such project ill include the following activities eligible under the CDBG Program: Activity# 1: Grantee shall furnish specifications for th- flooring renovation project. Sub- recipient shall review and approve, in wri ing, the specifications for facility improvements. Activity#2: Grantee shall prepare the Request for Bids, and upon approval of Subrecipient, distribute the Request to appropriate vendors. Activity#3: Sub-recipient shall oversee progress of floo 'ng renovation. Completed facility improvements shall be approved by the Su.-recipient, in writing, prior to the City of Elgin's release of payment to the con.actor. Activity#4: Sub-recipient shall submit monthly constructi i n status reports to Grantee. Activity#5: Sub-recipient shall maintain records in .ccordance with Section 2 of this Agreement and shall submit quarterly state ents to the Grantee documenting number of clients served, client income and ,lient household size, as required by the U.S.Department of Housing and Urban I evelopment. B. Eligibility and National Objectives Senior Services Associates certifies that the activities undert• en pursuant to this Agreement will be implemented in accordance with CDBG eligibility an. national objectives criteria. Sub- recipient is eligible to receive CDBG funds for the rehabilita ion of commercial buildings owned by a non-profit organization pursuant to 570.202 (a)(4)and .1(2). Improvements shall benefit low and moderate income parsons on a limited clientele basis pursuant to 570.208 (a)(2)(B). Documentation on family siz: and household income will confirm that at least 51%of the clients are low and moderate income ouseholds. C. Levels of Accomplishment In addition to the normal administrative services required nder this Agreement, Sub-recipient commits to achieving the following implementation milesto es which are the sole responsibility of the Sub-recipient. Activity#5 is the sole responsibility oft e Sub-recipient. Activity Date of Completion Activity# 1: Review and Approve Plans Sub. it to Grantee by 6/1/01. Activity#2: Oversee and Approve Renovation 7/1/11 through project completion. Activity#3: Construction Progress Reports Sub' it monthly beginning 8/1/01 thro gh project completion and due to Gra tee on the first of each month then after. Activity#4: Project Completion Approval Upo completion of work,provide wri en notice to Grantee that contractor wor, has been satisfactorily completed. Activity#5: Clientele Data Reports Sub, it quarterly,April 15,July 15 Oct.ber 15 and, January 15 during and afte construction beginning 5/19/01 and endi g 5/19/06. D. Budget Sub-recipient expenditures are not to exceed the following budget as provided by the City of Elgin through the Community Development Block Grant Prof am: Line Item: Am.unt: Flooring Renovation: Materials and Labor $31,.23.77 Total Project Budget $31 123.77 2. Records and Report' A. Types and Schedules Sub-recipient certifies that it will make all records pertainin t to this Agreement available to the Grantee, U. S. Department of Housing and Urban Develo sment, Comptroller General of the United States, or any of their duly authorized representati es, until such time as they are no longer required under this Agreement. Sub-recipient shall aintain the following records which are necessary to guarantee project eligibility and for re.orting/monitoring purposes. Sub- recipient will retain all records pertinent to this Agreement fo a period of 5 years from the date of this Agreement, starting 5/19/01 and ending 5/19/06. 1. Number of clients served,household size and household income. 2. Documents related to the kitchen renovation project. B. Invoices and Payments Grantee will maintain financial management of the program Payments to contractor(s) will be processed by Grantee upon approval of Sub-recipient and after submittal of timesheets from contractors. 3. Uniform Administrative Req irements Sub-recipient certifies that they will comply with applicabl; administrative requirements as set forth in 24 CFR part 570.502 (b)(see Exhibit B). These specie scally include: 1. OMB Circular A-110, "Uniform Administrati - Requirements for Grants and Agreements With Institutions of Higher Educatio , Hospitals, and Other Non-Profit Organizations", implemented at 24 CRF Part 84(see Exhibit C). 2. OMB Circular A-122 "Cost Principles for Non-Profi Organizations"(see Exhibit D). 3. OMB Circular A-133 "Audits of Institutions of Hi er Education and Other Non-profit Institutions"(see Exhibit E). 4. Other Program Require ents Sub-recipient will conduct activities authorized under this • greement in compliance with all Federal laws and regulations described in 24 CFR Part 570, S bpart K (see Exhibit F). They may not, however, assume Grantee's environmental responsibilit'-s described at 570.604 or assume Grantee's responsibility for initiating reviews required pursua t to 24CRR Part 52 (see Exhibit G). The applicable laws and regulations include: 570.600 General. 570.601 Public Laws 88-352/90-284; affirmatively furthering air housing; Exec. Order 11063. 570.602 Section 109 of the Act. 570.603 Labor Standards. 570.604 Environmental Standards. 570.605 National Flood Insurance Program. 570.606 Displacement,relocation, acquisition, and replaceme t of housing. 570.607 Employment and contracting opportunities. 570.608 Lead-based paint. 570.609 Use of debarred, suspended, or ineligible contractors sr sub-recipients. 570.610 Uniform administrative requirements and cost princip es. 570.611 Conflict of interest. 570.612 Executive Order 12372. 570.613 Eligibility restrictions for certain resident aliens. 5. Suspension and Termination of . greement This Agreement may, in accordance with the provisions of 2, CFR Part 85.43, be suspended or terminated by Grantee if Sub-recipient materially fails to corn•ly with any term of this award. The award may also be terminated for convenience, in writing, •y either Grantee or Sub-recipient, pursuant to 24 CFR Part 85.44, providing a minimum of 30 •ays prior notice. The Sub-recipient shall repay to the Grantee all funds used for ineligible activities, further described below. 6. Reversion of Assets In the event the services identified in 1. Statement of Work of this Agreement or other eligible services for low and moderate income individuals are no lo ger provided at the Facility due to actions by Senior Services Associates, unless Senior Service. Associates has declared breach of contract by Sub-recipient, Senior Services Associates shall reimburse the U.S. Department of Housing and Urban Development or the City for all CDBG nds expended for the architectural services and building improvements made with CDBG funds an amount equal to 6.7% for each year and portion of each year remaining on the five-year use 1 life of the building improvements. The term of the five-year useful life of the building improve ents at the Facility shall commence on the date of this Agreement. This provision shall not be co strued as limiting the Grantee from asserting any claims against Senior Services Associates for t e breach of any other terms of this Agreement. Upon project completion as specified in 1. Statement of Work, any remaining CDBG project funds shall be available for reallocation by the Grantee to anoth:r eligible CDBG project. If Sub- recipient materially fails to comply with any term of this aw rd, the Sub-recipient shall repay to the Grantee all funds used for ineligible activities. A minimum of 51% of the persons served on an annual basi. shall be at or below the Section 8 Income Limits contained in Exhibit A in order for the Sub-re,ipient to maintain eligibility for the CDBG funds provided for herein. Said income levels shall .- updated and revised from time to time to conform to levels set by the U. S. Department of Housing and Urban Development. Failure to meet the aforementioned minimum 51% thres old shall require Sub-recipient to reimburse Grantee for funds expended, in whole or in part, for .uilding improvements. Changes in the scope of services,budget, or method of compe cation contained in this Agreement, unless otherwise noted, may only be made through a wri len amendment to this Agreement, executed by the Sub-recipient and Grantee. 7. Indemnification To the fullest extent permitted by law, Sub-recipient agre-s to indemnify, defend and hold harmless the City, its officers, employees, boards and commi.Bions from and against any and all claims, suits,judgments, costs, attorney's fees, damages or o her relief arising out of or resulting from or through or alleged to arise out of any reckless or egligent acts or omissions of Sub- recipient's officers, employees or agents in the performance •f this Agreement. In the event of any action against the City, its officers, employees, agents, bo<rds or commissions covered by the foregoing duty to indemnify, defend and hold harmless, suc action shall be defended by legal counsel of the City's choosing. 8. Severability The terms of this Agreement shall be severable. In the event . y of the terms or provisions of this Agreement are deemed to be void or otherwise enforceable fir any reason, the remainder of this agreement shall remain in full force and effect. 9. Independent Contractor S atus This Agreement shall not be construed so as to create a partn:rship,joint venture, employment or other agency relationship between the parties. 10. Choice of Law This Agreement shall be subject to and governed by the laws of the State of Illinois. Venue for the resolution of any disputes or the enforcement of any rights pursuant to this Agreement shall be in the Circuit Court of Kane County, Illinois. 11. No Personal Liability No official, director, officer, agent or employee of the City shall be charged personally or held contractually liable under any term of provision of this Agreement or because of their execution, approval or attempted execution of this Agreement. 12. Period of Applicability This Agreement will be in full force and effect from May 14, 2001 through May 14, 2006. IN WITNESS WHEREOF,the parties hereto have executed this Agreement on the date and year written above. CI � ELGIN By; iguiL___ i /2 . Joyc-Park r City Manager SE►11a ' SE' toES/ : .9C • ES Bgab 7 PI ..4.,.„ Be"111""F°.'ory Business Manager 111 Attest: .i 4 Loni Mecum City Clerk Exhibit A: Year 2000 Section 8 Income Guidelines •nd Fair Market Rents STATE: ILLINOIS INCOME LIMITS PREPARED: 3-29-01 PROGRAM 1 PERSON 2 PERSON 3 PERSON 4 PERSON 5 PERSON 6 PERSON 7 PERSON 8 PERSON MSA : Bloomington-Normal, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 13650 15600 17550 19500 21050 22600 24200 25750 INCOME: 65000 VERY LOW-INCOME 22750 26000 29250 32500 35100 37700 40300 42900 LOW-INCOME 36400 41600 46800 52000 56150 60300 64500 68650 MSA : Champaign-Urbana, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 11800 13500 15200 16900 18250 19600 20950 22300 INCOME: 56300 VERY LOW-INCOME 19700 22500 25350 28150 30400 32650 34900 37150 LOW-INCOME 31550 36050 40550 45050 48650 52250 55850 59450 AREA : Chicago, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 14800 16900 19050 21150 22850 24550 26250 27900 INCOME: 70500 VERY LOW-INCOME 24700 28200 31750 35250 38050 40900 43700 46550 LOW-INCOME 36750 42000 47250 52500 56700 60900 65100 69300 MSA : Davenport-Moline-Rock Island, FY 2001 MEDIAN FAMILY 30% OF MEDIAN 11050 12650 14250 15800 17050 18350 19600 20850 INCOME: 52700 VERY LOW-INCOME 18450 21100 23700 26350 28450 30550 32650 34800 LOW-INCOME 29500 33750 37950 42150 45550 48900 52300 55650 MSA t Decatur, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 10900 12450 14000 15550 16800 18050 19300 20550 INCOME: 51900 VERY LOW-INCOME 18150 20750 23350 25950 28050 30100 32200 34250 LOW-INCOME 29050 33200 37350 41500 44850 48150 51500 54800 AREA : De Kalb County, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 13950 15950 17950 19900 21500 23100 24700 26300 INCOME: 66400 VERY LOW-INCOME 23250 26550 29900 33200 35850 38500 41150 43800 LOW-INCOME 36750 42000 47250 52500 56700 60900 65100 69300 AREA : Grundy County, IL • FY 2001 MEDIAN FAMILY 30% OF MEDIAN 13600 15550 17500 19450 21000 22550 24100 25650 INCOME: 64800 VERY LOW-INCOME 22700 25900 29150 32400 35000 37600 40200 42750 LOW-INCOME 36300 41450 46650 51850 56000 60150 64300 68450 PMSA : Kankakee, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 11100 12700 14300 15850 17150 18400 19700 20950 INCOME: 52900 VERY LOW-INCOME 18500 21150 23800 26450 28550 30700 32800 34900 LOW-INCOME 29600 33850. 38100 42300 •45700 49100 52500 55850 AREA : Kendall County, I1 I FY 2001 MEDIAN FAMILY 30% OF MEDIAN 17000 19400 21850 24250 26200 28150 30100 32050 INCOME: 80900 VERY LOW-INCOME 28300 32350 36400 40450 43700 46900 50150 53400 LOW-INCOME 36750 42000 47250 52500 56700 60900 65100 69300 MSA : Peoria-Pekin, IL FY 2001 MEDIAN FAMILY 30% OF MEDIAN 11550 13200 14850 16500 17800 19150 20450 21800 INCOME: 55000 VERY LOW-INCOME 19250 22000 24750 27500 29700 31900 34100 36300 LOW-INCOME 30800 35200 39600 44000 47500 51050 54550 58100 Exhibit B: 24 CFR sart 570.502 . 09:0634 HOUSING AND o EVELOPMENT REPORTER i' : 3 (x) Funds collected through special if CDBG funds are used to repay the ing CDBG funds from the recipient under assessments made against properties guaranteed loan.When such a guaranteed the authority of §570.204, unless the owned and occupied by households not of loan is partially repaid with CDBG funds, grantee explicitly designates it as a subre- low and moderate income, where the the amount generated shall be prorated to cipient.The term includes a public agen- assessments are used to recover all or part reflect the percentage of CDBG funds cy designated by a unit of general local of the CDBG portion of a public im- used. Amounts generated by activities government to receive a loan guarantee provement. financed with loans guaranteed under under subpart M of this part,but does not (2) Program income does not include Section 108 which are not defined as include- contractors providing supplies, income earned (except for interest de- program income shall be treated as mis- equipment,construction,or services sub- scribed in §570.513) on grant advances cellaneous revenue and shall not be sub- ject to the procurement requirements in from the U.S. Treasury. The following ject to any of the requirements of this 24 CFR 85.36 or 84.40, as applicab'e. items of income earned on grant advances Part, except that the use of such funds must be remitted to HUD for transmittal shall be limited to activities that are §570.501 Responsibility for grant to the U.S. Treasury, and will not be located in a revitalization strategy ar . administration. reallocated under section 106(c)or(d)of and implement a HUD approved are. the Act: revitalization strategy pursuant t. (i)Interest earned from the investment §91.215(e) of this title. However, such (a) One or more public agencies, in- of the initial proceeds of a grant advance treatment shall not affect the right.of th. by the U.S. Treasury; Secretary eluding existing local public agencies, to require the Section 108 bor may be designated by the chief executive (ii) Interest earned on loans or other rower to pledge such amounts as securi officer of the recipient to undertake activ- forms of assistance provided with CDBG for the guaranteed loan. The determine Mies assisted by this part.A public agency funds that are used for activities deter- tion whether such amounts shall consti so designated shall be subject to the same mined by HUD either to be ineligible or tute program income shall be governed b requirements as are applicable to subreci- to fail to meet a national objective in the provisions of the contract required a. pients. accordance with the requirements of sub- §570.705(b)(1).. ' (b) The recipient is responsible for part C of this part,or that fail substantial= (5)Examples of other receipts that a . ensuring that CDBG funds are used in ly to meet any other requirement of this not considered program income are pro accordance with all program rc agen- meats.The use of designated public part; and ceeds from fund raising activities curie. does (iii) Interest earned on the investment out by subrecipients receiving CDBs cies, subrecipients, or contractors does of amounts reimbursed to the CDBG assistance (the costs of fundraising ar. bnot relieve the recipient of this responsible for account prior to the use of the generally unallowable under the applica determining ete .The recipient is also for reimbursed funds for eligible purposes. ble OMB circulars referenced in 24 C under subre the adequacy of performance pro- (3) The calculation of the amount of 84.27), funds collected through speci. under subrecipient agreements and curement contracts,and for taking appro- program income for the recipient's assessments used to recover the non priate action when performance problems CDBG program as a whole(i.e.,compris- CDBG portion of a public improvement arise, such as the actions described in ing activities carried out by a grantee and and proceeds from the disposition of rea §570.910. Where a unit of general local its subrecipients) shall exclude payments property acquired or improved wit• government is participating with, or as made by subrecipients of principal and/or CDBG funds when the disposition occur part of, an urban county, or as part of a interest on CDBG-funded loans received after the applicable time period specific• metropolitan city,the recipient is respon- from grantees if such payments are made in §570.503(bX8) for subrecipient-con sible for applying to the unit of general using program income received by the trolled property,or in§570.505 for recip local government the same requirements subrecipient. (By making such payments, ient-controlled property. as are applicable to subrecipients, except the subrecipient shall be deemed to have (b) Revolving fund means a separat. that the five-year period identified under transferred program income to the grant- fund (with a set of accounts that ar- §570.503(b)(8)(i) shall begin with the ee.) The amount of program income independent of other program accounts date that the unit of general local govern- derived from this calculation shall be established for the purpose of carryin:. ment is no longer considered by HUD to used for reporting purposes, for purposes out specific activities which, in to be a part of the metropolitan city or of applying the requirement under generate payments to the fund for the us urban county, as applicable, instead of §570.504(bx2)(iii), and in determining in carrying out the same activities. Eac, the date that the sub recipient agreement limitations on planning and administra- revolving loan fund's cash balance mus expires. tion and public services activities to be be held in an interest-bearing accoun paid for with CDBG funds. and any interest paid on CDBG fund. (4) Program income does not include: held in this account shall be considere §570302 Applicability of uniform (i) Any income received in a single interest earned on grant advances an. administrative requirements. program year by the recipient and all its must be remitted to HUD for transmitt.1 subrecipients if the total amount of such to the U.S. Treasury no less frequentl (a) Recipients and subrecipients that income does not exceed $25,000; and than annually. (Interest paid by borro are governmental entities (including pub- (ii) Amounts generated by activities ers on eligible loans made from th- lic agencies) shall comply with the re- that are financed by a loan guaranteed revolving loan fund shall be progr. quirements and standards of OMB Circu- under Section 108 of the Act and meet income and treated accordingly.) lar No. A-87, "Cost Principles for State,. one or more of the public benefit criteria (c) Subrecipient means a public o Local, and Indian Tribal Governments"; specified at§570.209(b)(2)(v) or are car- private nonprofit agency, authority, a OMB Circular A-128, "Audits of State ried out in conjunction with a grant under organization,or a for-profit entity autho - and Local Governments" (implemented Section 108(q) in an area determined by ized under§570.201(o),receiving CDB I at 24 CFR part 44); and with the follow- HUD to meet the eligibility requirements funds from the recipient or another subr.- ing sections of 24 CFR part 85"Uniform for designation as an Urban Empower- cipient to undertake activities eligible f.i Administrative Requirements for Grants ment Zone pursuant to 24 CFR part 597, such assistance under subpart C of tit'. and Cooperative Agreements to State and subpart B.Such exclusion shall not apply part. The term excludes an entity recei - Local Governments" or the related Published by Warren Gorham Lamont - COMMUNITY DEVELOPMENT 09:0635 HDR RF-582 4-29-96 CDBG provision, as specified in this (3) Subpart C—"Post-Award Require- provisions concerning the following fol- paragraph: ments," except for. lowing items; (1) Section 85.3, "Definitions"; (i) Section 84.22, "Payment Require- (1) Statement of work The agreement (2) Section 85.6, "Exceptions"; ments." Grantees shall follow the stan- shall include a description of the work to (3) Section 85.12, "Special grant or dards of §§85.20(bx7) and 85.21 in be performed, a schedule for completing subgrant conditions for"high risk'grant- making payments to subrecipients; the work,and a budget.These items shall ees"; (ii) Section 84.23, "Cost Sharing and be in sufficient detail to provide a sound (4)Section 85.20,"Standards for finan- Matching"; - basis for the recipient effectively to moni- cial management systems," except para- (iii)Section 84.24,"Program Income." tor performance under the agreement. graph (a); In lieu of §84.24, CDBG subrecipients (2) Records and reports. The recipient (5) Section 85.21, "Payment," except shall follow §570.504; shall specify in the agreement the particu- as modified by §570.513; (iv)Section 84.25,"Revision of Budget las records the subrecipient must main- (6) Section 85.22, "Allowable costs"; and Program Plans"; tarn and the particular reports the subre- (7) Section 85.26, "Non-federal au- (v)Section 84.32, "Real Property." In cipient must submit in order to assist the dits"; lieu of§84.32,CDBG subrecipients shall recipient in meeting its recordkeeping (8)Section 85.32,"Equipment,"except follow §570.505; - and reporting requirements. in all cases in which the equipment is (vi)Section 84.34(g), "Equipment." In (3) Program income. The agreement sold, the proceeds shall be program in- lieu of the disposition provisions of shall include the program income require- come; §84.34(g), the following applies: ments set forth in§570.504(c).The agree- (9) Section 85.33, "Supplies' (A) In all cases in which equipment is ment shall also specify that,at the end of (10) Section 85.34, "Copyrights"; sold, the proceeds shall be program in- the program year,the grantee may require (11) Section 85.35, "Subawards to de- come (prorated to reflect the extent to remittance of all or part of any program barred and suspended parties"; which CDBG funds were used to acquire income balances (including investments (12)Section 85.36,"Procurement,"ex- the equipment); and thereof) held by the subrecipient (except cept paragraph (a); (B) Equipment not needed by the su- those needed for immediate cash needs, (13) Section 85.37, "Subgrants"; brecipient for CDBG activities shall be cash balances of a revolving loan fund, (14) Section 85.40, "Monitoring and transferred to the recipient for the CDBG cash balances from a lump sum draw- reporting program performance," except program or shall be retained after corn- down, or cash or investments held for paragraphs(b)through(d)and paragraph pensating.the recipient; Section 108 security needs). (0; (vii)Section 84.51 (b), (c), (d), (e), (0, (4) Uniform administrative require- (15) Section 85.41, "Financial report- (g), and (h), "Monitoring and Reporting ments. The agreement shall require the ing," except paragraphs (a), (b), and (e); Program Performance' with (16) Section 85.42, "Retention and (viii)Section 84.52,"Financial Report- uniform n form ladministrat administrative requirements,applicables access requirements for records," except ing", described in §570.502. that the period shall be four years; (ix) Section 84.53(b), "Retention and access requirements for records.'Section (5) Other program requirements. The (17) Section 85.43, "Enforcement"; agreement shall require the subrecipient (I 8) Section 85.44, "Termination for 84.53(b)applies with the following excep- to carry out each activity in compliance convenience"; tions: with all Federal laws and regulations (19) Section 85.51 "Later disallo- (A)The retention period referenced in described in Subpart K of these regula- §84.53(b)pertaining to individual CDBG wanes and adjustments" and tions, except that: •(20) Section 85.52, "Collection of activities shall be four years; and (B)The retention period starts from the (i) The subrecipient does not assume amounts due." date of submission of the annual erfor- me recipients environmental responsibil- (b) Subrecipients, except subrecipients P ities described at §570.604; and pre- that are governmental entities,shall corn- mance and evaluation report, as (ii) The subrecipient does not assume scribed in 24 CFR 91.520, in which the ply with the requirements and standardsthe recipient's responsibility for initiating of OMB Circular No.A-122,"Cost Prin- specific activity is reported on for the the review process under the provisions ciples for Non-profit Organizations," or final time rather than from the date of of 24 CFR Part 52. OMB Circular.No.A-21,"Cost Principles submission of the expenditure re- (6) Conditions for religious organiza- for ?ducational Institutions," as applica- Port for the award;finaldons. Where applicable, the conditions bit- and OMB Circular A-133,"Audits of (x) Section 84.61, Termination. In prescribed by HUD for the use of CDBG lieu of the provisions of§84.61, CDBG P In :utions of Higher Education and funds by religious organizations shall be 0 r Nonprofit Institutions" subrecipients shall comply with p (as set §570.503(b)(7); and included in the agreement. forth in 24 CFR part 45).Audits shall be ., (7) Suspension and termination. The conducted annually. Such subrecipients (4) Subpart D— After-the-Award Re- shall also comply with the following pro- quirements, except for §84.71, `Close- agreement shall specifythat, in ionor- out Procedures. dance with 24 CFR 85.43,suspension or visions of the Uniform Administrative termination may occur if the subrecipient requirements of OMB Circular A-110 materially fails to comply with any term - (implemented at 24 CFR part 84, "Uni- §570.503 Agreements with subrecipients of the award, and that the award may be form Administrative Requirements for terminated for convenience in accordance Grants and Agreements With Institutions (a)Before disbursing any CDBG funds with 24 CFR 85.44. of Higher Education,Hospitals and Other to a recipient, the recipient shall sign a (8) Reversion of assets. The agreement Non-Profit Organizations")or the related written agreement with the subrecipient. shall specify that upon its expiration the CDBG provision, as specified in this The agreement shall remain in effect subrecipient shall transfer to the recipient paragraph: during any period that the subrecipient any CDBG funds on hand at the time of (1) Subpart A—"General"; has control over CDBG funds, including expiration and any accounts receivable (2) Subpart B—"Pre-Award Require- program income. attributable to the use of CDBG funds.It ments," except for §84.12, "Forms for (b) At a minimum, the written agree- shall also include provisions designed to Applying for Federal Assistance"; ment with the subrecipient shall include ensure that any real property under the Pubrished by Warren Gorham Lamont Exhibit C 24 CFR 84 Grants and Agreements With Institutions of Higher Education, Hospitals and Other Non-Profit Organizations • I COMMUNITY DEVELOPMENT 09:1651 HDR RF-628 2-2-98 . GRANTS AND AGREEMENTS WITH INSTITUTIO S OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFI ORGANIZATIONS , (24 CFR 84) Office of the Secretary 84.32 Real property. Source: 59 FR 47011, Sept. 13, 1994; 84.33 Federally-owned and exemp prop- 61 FR 61617, Nov. 18, 1997. • 24 CFR Part 84 erty. 84.34 Equipment. . Subpart A-General Uniform Administrative Requirements 84.35 Supplies and other exp: dable for Grants and Agreements With property. §84.1 Purpose. Institutions of Higher Education, 84.36 Intangible property. . Hospitals and Other Non-Profit 84.37 Property trust relationship. This part establishes uniform adminis- Organizations trative requirements for Federal grants Procurement Standards and agreements awarded to institutions of AGENCY:Office of the Secretary, HUD. higher education, hospitals, and other 84.40 Purpose of procurement sta dards. non-profit organizations. Additional or 84.41 Recipient responsibilities, inconsistent requirements shall not be T 84-GRANTS AND 84.42 Codes of conduct. imposed, except as provided in §§84.4, PARWITH INSTITUTIONS 84.43 Competition. • and 84.14 or unless specifically required AGREEMENTS A 84.44 Procurement procedures. by Federal statute or executive order. OF HIGHER GHEN EDUCATION,ER, AND OTHER NON- 84.45 Cost and price analysis. Non-profit organizations that implement PROFITHOORGANIZATIONS 84.46 Procurement records. Federal programs for the States are also 84.47 Contract administration. subject to State requirements. Subpart A-General 84.48 Contract provisions. §84.2 Definitions. Reports and Records Sec. Accrued expenditures means the 84.1 Purpose. 84.50 Put-pose of reports and re ords. charges incurred by the recipient during a 84.2 Definitions. 84.51 Monitoring and reporting .rogram given period requiring the provision of 84.3 Effect on other issuances. performance. funds for. 84.4 Deviations. - 84.52 Financial reporting. (1) Goods and other tangible Sr property perry 84.5 Subawards. 84.53 Retention and access requi ements received; Subpart B-Pre-Award for records. (2) Services performed by employees, P contractors,subrecipients,and other pay- Requirements Termination and Enforcement ees; and (3) Other amounts becoming owed un- 84.10 Purpose. 84.60 Purpose of termination .nd en- der programs for which no current ser- 84.11 Pre-award policies. forcement. vices or performance is required. 84.12 Forms for applying for Federal 84.61 Termination. Accrued income means the sum of: assistance. 84.62 Enforcement. (1) Earnings during a given period 84.13 Debarment and suspension; Drug- from: Free Workplace. Subpart D-After-the-Award (i)Services performed by the recipient; 84.14 Special award conditions. Requirements and 84.15 Metric system of measurement. (ii) Goods and other tangible property 84.16 Resource Conservation and Recov- 84.70 Purpose, delivered to purchasers; and ery Act. 84.71 Closeout procedures. (2) Amounts becoming owed to the 84.17 Certifications and representations. 84.72 Subsequent adjustments . d con- recipient for which no current services or tinuing responsibilities. performance is required by the recipient. Subpart C-Post-Award 84.73 Collection of amounts du-. Acquisition cost of equipment means the Requirements net invoice price of the equipment, in- Subpart E-Use of Lump Su cluding the cost of modifications,attach- Financial and Program Management Grants ments,accessories,or auxiliary apparatus necessary to make the property usable for ' 84.20 Purpose of financial and program 84.80 Conditions for use of Lu u p Sum the purpose for which it was acquired. management. (fixed price or fixed amoun i)grants. Other charges,such as the cost of installa- 84.21 Standards for financial manage- 84.81 Definition. tion, transportation, taxes, duty or pro- ment systems. 84.82 Provisions applicable to I mp sum tective in-transit insurance, shall be in- 84.22 Payment. grants. cluded or excluded from the unit acquisi- 84.23 Cost sharing or matching. 84.83 Property standards. tion cost in accordance with the recipi- 84.24 Program income. 84.84 Procurement standards. ent's regular accounting practices. 84.25 Revision of budget and program 84.85 Reports and records. Advance means a payment made by plans. 84.86 Termination and enforce ent. Treasury check or other appropriate pay- 84.26 Non-Federal audits. 84.87 Closeout procedures, su•sequent ment mechanism to a recipient upon its 84.27 Allowable costs. adjustments and continuin: respon- request either before outlays are made by 84.28 Period of availability of funds. sibilities. the recipient or through the use of prede- termined payment schedules. Property Standards Appendix A to Part 84-Contr.ct Award means financial assistance that Provisions provides support or stimulation to ac- 84.30 Purpose of property standards. complish a public purpose. Awards in- 84.31 Insurance coverage. Authority: 42 U.S.C. 3535(d) elude grants and other agreements in the 0..Wie h,4 M. Woe, arra n 09:1652. HOUSING AND DEVELOPMENT REPORTER form of money or property in lieu of Federal awarding agency means the to, income from fees for services per- money, by HUD to an eligible recipient. Federal agency that provides an award to formed, the use or rental of real or • The term does not include: technical the recipient. personal property acquired under federal- assistance, which provides services in- Federal funds authorized means the ly-funded projects, the sale of commodi- stead of money: other assistance in the total amount of Federal funds obligated ties or items fabricated under an award, form of loans, loan guarantees, capital by HUD for use by the recipient. This license fees and royalties on patents and advances under the Sections 202 and 811 amount may include any authorized car- copyrights, and-interest on loans made programs, interest subsidies, or insur- ryover of unobligated funds from prior with award funds. Interest earned on ance: direct payments of any kind to funding periods when permitted by HUD advances of Federal funds is not program individuals: and, contracts which are re- regulations or implementing instructions. income. Except as otherwise provided in quired to be entered into and adminis- Federal share of real property, equip- HUD regulations or the terms and condi- tered under procurement laws and regula- ment, or supplies means that percentage tions of the award, program income does tions. of the property's acquisition costs and not include the receipt of principal on Cash contributions means the recipi- any improvement expenditures paid with loans, rebates, credits, discounts, etc., or ent's cash outlay, including the outlay of Federal funds. interest earned on any e f them. money contributed to the recipient by Funding period means the period of Project costs means all allowable costs, third parties. time when Federal funding is available as set forth in the applicable Federal cost Closeout means the process by which for obligation by the recipient. principles,incurred by a recipient and the HUD determines that all applicable ad- Intangible property and debt instru- value of the contributions made by third ministrative actions and all required ments means,but is not limited to,trade- parties in accomplishing the objectives of work of the award have been completed marks, copyrights, patents and patent the award during the project period. by the recipient and HUD. applications and such property as loans, Project period means the period estab- Contract means a procurement con- notes and other debt instruments, lease lished in the award document during tract under an award or subaward, and a agreements, stock and other instruments which HUD sponsorship begins and ends. procurement subcontract under a recipi- of property ownership,whether consid- Property means, unless otherwise stat- ent's or subrecipient's contract. ered tangible'or intangible. ed, real property, equipment, intangible Cost sharing or matching means that Obligations means the amounts of or- property and debt instruments. portion of project or program costs not ders placed, contracts and grants award- Real property means land, including borne by HUD. ed, services received and similar transac- land improvements, structures and ap- Date of completion means the date on tions during a given period that require purtenances thereto, but excludes mova- which all work under an award is paymentcorn- y the recipient during the same ble machinery and equipment. pleted or the date on the award docu- or a future period. Recipient means an organization re- ment, or anysupplement or amendment Outlays or expo"ditures means charges ceiving financial assistance directly from made to the pr^•:ct or program. They HUD to carry out project or program. thereto, on vhich HUD sponsorship may be reporter; on a cash or accrual The term includes public and private ends. basis. For reports prepared on a cash institutions of higher education, public Disallowed costs means those charges to basis, outlays are the sum of cash dis- and private hospitals, and other quasi- an award that HUD determines to be bursements for direct charges forgoods organiza- unallowable, accordance with the ap- g public and private non-profit Federalin oprinciplesaccordance or other and services, the amount of indirect ex- tions such as,but not l:nited to,commu- plicable and conditionscost contained in the pense charged,the value of third pa-:y in- nity action agencies, research institutes, termkind contributions applied and the educational associations, and health cen- award. nonexpend- amount of cash advances and payments ters.The term includes commercial orga- Equipmentabpersonal means tangibleo made to subrecipients. For reports pre- nizations, international organizations ble per charged directlyrincludingtthe exempt pared on an accrual basis,outlays are the when operating domestically (such as propertyhaving a useful life of more thanoone yearaward sum of cash disbursements for direct agencies of the United Nations)which are charges for goods and services, the recipients, subrecipients, or contractors and an acquisition cost of S5000 or more amount of indirect expense incurred, the or subcontractors of recipients or subreci- per unit.However,consistent with recipi- value of in-kind contributions applied, pients.The term does not include govern- ent policy, lower limits may be estab-. and the net increase (or decrease) in the ment-owned contractor-operated facili- lished. amounts owed by the recipient for goods ties or research centers providing contin- Excess property means property under and other property received, for services ued support for mission-oriented, large- the control of HUD that, as determined performed by employees,contractors, su- scale programs that are government- by the Secretary,is no longer required for brecipients and other paye"s and other owned or controlled,or are designated as its needs or the discharge of its responsi- amounts becoming owed um :r programs federally-funded research and develop- bilities. for which no current services or perfor- ment centers. The 'erm does not include Exempt property means tangible per- mance are required. mortgagors that ceive mortgages in- sonal property acquired in whole or in Personal property means property of sured or held by HUD or mortgagors or part with Federal funds,where HUD 'zas any kind except real property. It may be project owners that receive capital ad- statutory authority to vest title i.. :he tangible, having physical existence, or vances from HUD under the Section 202 recipient without further obligation 1,,the - intangible, having no physical existence, and 811 programs. Federal Government. An example of ex- such as copyrights, patents, or securities. Research and development means all empt property authority is contained in Prior approval means written approval research activities, both basic and ap- the Federal Grant and Cooperative by an authorized official evidencing prior plied, and all development activities that Agreement Act (31 U.S.C. 6306), for consent. are supported at universities, colleges, property acquired under an award to Program income means gross income and other non-profit institutions. "Re- conduct basic or applied research by a earned by the recipient that is directly search" is defined as a systematic study non-profit institution of higher education generated by a •supported activity or directed toward fuller scientific knowl- or non-profit organization whose princi- earned as a result of the award (see edge or understanding of the subject • _ pal purpose is conducting scientific re- exclusions in §§84.24 (e) and (h)). Pro- studied."Development"is the systematic search. gram income includes,but is not limited use of knowledge and understanding Published by West Group COMMUNITY DEVELOPMENT 09:1653 HDR RF-628 2-2-98 gained from research directed toward the Suspension of an award is a .eparate approved by OMB, except for those re- . • production of useful materials, devices, action from suspension under H D regu- quirements which are statutory. Excep- systems. or methods, including design lations implementing E.O. 12'49 and tions on a case-by-case basis may also be and development of prototypes and pro- E.O. 12689, "Debarment and Suspen- made by HUD. cesses. The term research also includes sion," at 24 CFR part 24. activities involving the training of indi- Termination means the cancel ation of §84.5 Subawards. viduals in research techniques where such HUD sponsorship, in whole or in part, activities utilize the same facilities as under an agreement at any time prior to . other research and development activities the date of completion. - Unless sections of this part specifically and where such activities are not included Third party in-kind cont ibutions exclude subrecipients from coverage, the in the instruction function. means the value of non-cash •ontribu- provisions of this part shall be applied to Small awards means a grant or cooper- tions provided by non-Federal t ird par- subrecipients performing work under ative agreement not exceeding $100,000 ties. Third party in-kind cont •butions awards if such subrecipients are institu- or the small purchase threshold fixed at may be in the form of real .roperty, tions of higher education,hospitals,com- 41 U.S.C. 403(11), whichever is greater. equipment, supplies and other •xpenda- mercial organizations and international Subaward means: - ble property, and the value of g ods and organizations operating domestically, or (l)An award of financial assistance in services directly benefiting and s'ecifical- other non-profit organizations. State, lo- the form of money,or property in lieu of ly identifiable to the project or t rogram. cal and Federally recognized Indian tribal money.made under an award by a recipi- Unliquidated obligations, for inancial government subrecipients are subject to ent to an eligible subrecipient or by a reports prepared on a cash basi•, means the provisions of regulations implement- subrecipient to a lower tier subrecipient. the amount of obligations incurr•d by the ing the grants management common rule, The term includes financial assistance recipient that have not been ••id. For "Administrative Requirements for when provided by any legal agreement, reports prepared on an accrued xpendi- Grants and Cooperative Agreements to even if the agreement is called a contract, ture basis, they represent the a ount of State, Local and Federally Recognized but does not include procurement of obligations incurred by the reci.ient for Indian Tribal Governments," (24 CFR . goods and services nor does it include any which an outlay has not been 'ecorded. part 85). • form of assistance which is excluded from Unobligated balance means th• portion the definition of "award". of the funds authorized by HU 5 that has Subpart B—Pre-Award (2) . For Community Development not been obligated by the recipi t and is P Block Grants,the term "subaward"does determined by deducting the c i ulative Requirements not include the arrangement whereby the obligations from the cumulati e funds prime recipient transfers funds to another authorized. §84.10 Purpose. ! entity and that entity is the project. A Unrecovered indirect cost mans the distinction is made between such a trans- difference between the amount awarded Sections 84.11 through 84.17 prescribe fer for the furtherance of the prime and the amount which could h:ve been forms and instructions and other pre- recipient's goals and the transfer of funds awarded under the recipient's pproved award matters to be used in applying for negotiated indirect cost rate. to a subrecipient who carries out activi- HUD awards. Working capital advance mea s a pro- ties and is accountable to the prime recipient.For example,in a CDBG award cedure whereby funds are advan•ed to the 84.11 Pre-award policies. where a prime recipient has as its pro- recipient to cover its estimated •isburse- § gram goal the revitalization of a down- town ment needs for a given initial period. area, the funds transferred to a (a) Use of Grants and Cooperative business in the downtown area to remodel §843 Effect on other issuance•. Agreements, and Contracts. In each in- its store would not be considered a suba- stance, HUD shall decide on the appro- ward subject to this part 84. For awards subject to this part, all priate award instrument(i.e.,grant,coop- Subrecipient means the legal entity to administrative requirements o codified erative agreement,or contract).The Fed- which a subaward is made and which is program regulations, program manuals, eral Grant and Cooperative Agreement accountable to the recipient for the use of handbooks and other nonregul•tory ma- Act (31 U.S.C. 6301-08) governs the use the funds provided. The term includes terials which are inconsistent with the of grants, cooperative agreements and commercial organizations and interna- requirements of this part shall .e super- contracts. A grant or cooperative agree- tional organizations operating domesti- seded, except to the extent they are ment shall be used only when the princi- cally (such as agencies of the United required by statute, or auth•rized in pal purpose of a transaction is to accom- Nations). accordance with the deviations •rovision plish a public purpose of support or Supplies means all personal property in §84.4. stimulation authorized by Federal statute. excluding equipment, intangible proper- The statutory criterion for choosing be- ty, and debt instruments as defined in §84.4 Deviations. tween grants and cooperative agreements this section, and inventions of a contrac- is that for the latter,"substantial involve- tor conceived or first actually reduced to The Office of Management a d Budget ment is expected between the executive practice in the performance of work un- (OMB) may grant exceptions f.r classes agency and the State, local government, der a funding agreement ("subject inven- of grants or recipients subje•t to the or other recipient when carrying out the tions"). as defined in 37 CFR part 401, requirements of this rule when e ceptions activity contemplated in the agreement." "Rights to Inventions Made by Nonprofit are not prohibited by statute. H.wever,in Contracts shall be used when the princi- Organizations and Small Business Firms the interest of maximum unifo miry, ex- pal purpose is acquisition of property or Under Government Grants, Contracts, ceptions from the requiremen s of this services for the direct benefit or use of the and Cooperative Agreements." rule shall be permitted only i unusual Federal Government. Suspension means an action by HUD circumstances. HUD may ap.ly more (b) Public Notice and Priority Setting. that temporarily withdraws HUD spon- restrictive requirements to a class of HUD shall notify the public of its intend- sorship under an award, pending correc- recipients when approved by 0 B. HUD ed funding priorities for discretionary tive action by the recipient or pending a may apply less restrictive req irements grant programs, unless funding priorities decision to terminate the award by HUD. when awarding small awards •nd when are established by Federal statute. 09:1654 HOUSING AND DEVELOPMENT REPORTER §84.12 Forms for applying for Federal shall be promptly removed once the con- Subpart C—Post-Award assistance. ditions that prompted them have been Requirements corrected. (a)HUD shall comply with the applica- Financial and Program Management ble report clearance requirements of-5 §84.15 Metric system of measurement. CFR part 1320, "Controlling Paperwork §84.20 Purpose of financial and Burdens on the Public."with regard to all The Metric Conversion Act,as amend- Program management. forms used by HUD in place of or as a supplement to the Standard Form 424 ed by the Omnibus Trade and Competiti- Sections 84.21 through 84.28 prescribe (SF-424) series. veness Act (15 U.S.C. 205) declares that (b) Applicants shall use the SF-424 the metric system is the preferred mea- standards for financial management sys- surement system for U.S.trade and corn- tems, methods for making payments and series or those forms and instructions merce. The Act requires each Federal rules for. satisfying cost sharing and prescribed by HUD. matching requirements, accounting for (c) For Federal programs covered by agency to establish a date or dates in program income,budget revision approv- E.Q. 12372, "Intergovernmental Review consultation with the Secretary of Co -mals,making audits,determining allowabil- of 1-ederal Programs,"the applicant shall merce, when the metric system of mea- itv of cost, and establishing fund avai!- co: plete the appropriate sections of the surement will be used in the agency's ability. SF--424 (Application for Federal Assis- procurements,grants,and other business- • tance) indicating whether the application related activities. Metric implementation was subject to review by the State Single may take longer where the,use of the maria Stan'arstemsr financial Point of Contact (SPOC). The name and system is initially impractical or likely to g y address of the SPOC for a particular State cause significant inefficiencies in the ac- • can be obtained from the Catalog of complishment of federally-funded activi- (a) HUD shall require recipients to Federal Domestic Assistance. The SPDC ties. HUD shall follow the provisions of relate financial data to performance data shall advise the applicant whether the E.O. 12770, "Metric Usage in Federal and develop unit cost information when- program for which application is made Government Programs." ever practical. has been selected by that State for review. • (b) Recipients' financial management Resource Conservation and. systems shall provide for the following: §84.16 (1) Accurate, current and complete §84.13 Debarment and suspension; Recovery Act. disclosure of the financial results of each Drug-Free Workplace. federally-sponsored project or program in Under the Resource Conservation and accordance with the reporting require- (a)HUD and its recipients and subreci- Recovery Act (RCRA) (Pub. L. 94-580, ments set forth in §84.52. If a recipient pients shall comply with the nonprocure- 42 U.S.C. 6962), any State agency or maintains its records on other than an mcnt debarment and suspension common agency of a political suhc+ivision of a State accrual basis, the recipient shall not be . rule implementing E.O.s '2549 and which is using app: Yriated Federal required to establish an accrual account- 12689, "Debarment and Suspension," at funds must comply with Section 6002. ing system.These recipients may develop 24 CFR part 24. This common rule Section 6002 requires that preference be such accrual data for their reports on the restricts subawards and contracts with given in procurement programs to the basis of an analysis of the documentation certain parties that are debarred, sus- purchase of specific products containing on hand. pended or otherwise excluded from or recycled materials identified in guidelines (2) Records that identify adequately ineligible for participation in Federal developed by the Environmental Protec- the source and application of funds for assistance programs or activities. (b) tion Agency (EPA) (40 CFR parts 247 federally-sponsored activities. These•rec- HUD and its recipients and subrecipients through 254). Accordingly, State and lo- ords shall contain information pertaining shall comply with the certification re- cal institutions of higher education, hos- to Federal awards,authorizations,obliga- quirements of the Drug-Free Workplace pitals, commercial organizations and in- tions, unobliated balances, assets, out- Act of 1988 (42 U.S.C. 701), as set forth ternational organizations when operating lays, income and interest. at 24 CFR part 24, subpart F. domestically, and non-profit organiza- (3)Effective control over and account- tions that receive direct Federal awards ability for all funds, property and other §84.14 Special award conditions. or other Federal funds shall give prefer- assets. Recipients shall adequately safe- ence in their procurement programs fund- guard all such assets and assure they are If an applicant or recipient: ed with Federal funds to the purchase of used solely for authorized purposes. (a) Hasa history of poor performance; recycled products pursuant to the EPA (4)Comparison of outlays with budget (b) Is : financially stable; guidelines. amounts for each award. Whenever ap- (c)Has a management system that does propriate, financial information should not meet the standards prescribed in this §84.17 Certifications and be related to performance and unit cost part; • representations. data. (d)Has not conformed to the terms and (5)Written procedures to minimize the conditions of a previous award; or time elapsing between the transfer of (e) Is not otherwise responsible, HUD Unless prohibited by statute or codi- funds to the recipient from the U.S. may impose additional requirements as fled regulation, HUD is authorized and Treasury and the issuance or redemption needed, provided that such applicant or encouraged to allow recipients to submit of checks, warrants or payments by other recipient is notified in writing as to: the certifications and representations re- means for program purposes by the recip- nature of the additional requirements,the quired by statute, executive order, or ient.To the extent that the provisions of reason why the additional requirements regulation on an annual basis, if the the Cash Management Improvement Act are being imposed, the nature of the recipients have ongoing and continuing_ (CMIA) (Pub. L. 101-453) govern, pay- corrective action needed, the time al- relationships with the agency. Annual ment methods of State agencies, instru- lowed for completing the corrective ac- certifications and representations shall be mentalities, and fiscal agents shall be tions, and the method for requesting signed by responsible officials with the consistent with CMIA Treasury-State reconsideration of the additional require- authority to ensure recipients' compli- Agreements or the CMIA default proce- ments imposed. Any special conditions ance with the pertinent requirements. dures codified at 31 CFR part 205, Published by West Group I COMMUNITY DEVELOPMENT 09:1655 HDR RF-628 2-2-98 "Withdrawal of Cash from the Treasury needs for all awards made by HU or to the paragraphs(h)(I)or(h)(2)of this section • • for Advances under Federal Grant and recipient. apply. Other Programs." (1) Advance payment mechani ms in- (1) A recipient has failed to comply (6)Written procedures for determining chide, but are not limited to, T easury with the project objectives,the terms and the reasonableness.allocability and allow- check and electronic funds trans er. conditions of the award, or Federal re- ability of costs in accordance with the (2) Advance payment mechani ms are porting requirements. provisions of the applicable Federal cost subject to 31 CFR part 205. (2) The recipient or subrecipient is principles and the terms and conditions (3) Recipients shall be autho 'zed to delinquent in a debt to the United States of the award. submit requests for advances an. reim- as defined in OMB Circular A-129, (7) Accounting records including cost bursements at least monthly wh n elec- "Managing Federal Credit Programs." accounting records that are supported by tronic fund transfers are not us=d. Under such conditions, HUD may,upon source documentation. (d) Requests for Treasury ch ck ad- reasonable notice, inform the recipient (c) Where the Federal Government vance payment shall be submitte. on SF- that payments shall not be made for guarantees or insures the repayment of 270, "Request for Advance o Reim- obligations incurred after a specified date money borrowed by the recipient, HUD, bursement," or other forms as ay be until the conditions are corrected or the at its discretion, may require adequate authbrized by OMB. This form i, not to indebtedness to the Federal Government bonding and insurance if the bonding and be used when Treasury check dvance is liquidated. insurance requirements of the recipient payments are made to the recipie t auto- (i) Standards governing the us: of are not deemed adequate to protect the matically through the use of a .redeter- banks and other institutions as deposito- interest of the Federal Government. mined payment schedule or if p,ecluded ries of funds advanced under awards are (d)HUD may require adequate fidelity by special HUD instructions for electron- as follows. bond coverage where the recipient lacks is funds transfer. (1) Except for situations described in sufficient coverage to protect the Federal (e) Reimbursement is the .referred paragraph (i)(2) of this section, HUD Government's interest. method when the requirements ,n para- shall not require separate depository ac- (e) Where bonds are required in the graph (b) of this section cannot be met. counts for funds provided to a recipient situations described above, the bonds HUD may also use this metho. on any or establish any eligibility requirements shall be obtained from companies holding construction agreement, or if t e major for depositories for funds provided to a certificates of authority as acceptable portion of the construction p oject is recipient. However, recipients must be sureties, as prescribed in 31 CFR part accomplished through private arket fr- able to account for the receipt,obligation 223, "Surety Companies Doing Business nancing or Federal loans,and the Federal and expenditure of funds. with the United States." • assistance constitutes a minor portion of (2)Advances of Federal funds shall be the project. deposited and maintained in insured ac- •§84.22 Payment. (1)When the reimbursement ethod is counts whenever possible. used, HUD shall make payme t within (j)Consistent with the national goal of 30 days after receipt of the billi g,unless expanding the opportunities for women- (a) Payment methods shall minimize the billing is improper. owned and minority-owned business en- thc time elapsing between the transfer of (2) Recipients shall be auth.rized to terprises, recipients shall be encouraged funds from the United States Treasury submit request for reimburseme t at least to use women- owned and minority- and the issuance or redemption of checks, monthly when electronic funds transfers owned banks (a bank which is owned at warrants, or payment by other means by are not used. least 50 percent by women or minority the recipients. Payment methods of State (f) If a recipient cannot meet he crite- group members). agencies or instrumentalities shall be con- ria for advance payments and UD has (k) Recipients shall maintain advances . sistent with Treasury-State CMIA agree- determined that reimburseme t is not of Federal funds in interest bearing ac- ments or default procedures codified at feasible because the recipient la ks suffi- counts,unless paragraphs(k)(1),(k)(2),or 31 CFR part 205. cient working capital, HUD ma provide (k)(3) of this section apply. (b) Recipients are to be paid in ad- cash on a working capital adva ce basis. (1) The recipient receives less than vance,provided they maintain or demon- Under this procedure, HUD .hall ad- $120,000 in Federal awards per year. strate the willingness to maintain: vance cash to the recipient to cover its (2)The best reasonably available inter- (1) Written procedures that minimize estimated disbursementneeds fir an ini- est bearing account would not be expect- the time elapsing'between the transfer of tial period generally geared to he awar- ed to earn interest in excess of$250 per funds and disbursement by the recipient; dee's disbursing cycle. Therea r, HUD year on Federal cash balances. and shall reimburse the recipient for its actual (3) The depository would require an (2)Financial management systems that cash disbursements. The worki,g capital average or minimum balance so high that meet the standards for fund control and advance method of payment sh:11 not be it would not be feasible within the expect- accountability as established in §84.21. used for recipients unwilling or nable to ed Federal and non-Federal cash re- Cash advances to a recipient organization provide timely advances to thei subreci- sources. shall be limited to the minimum amounts pient to meet the subrecipien 's actual (I) For those entities where CMIA and needed and be timed to be in accordance cash disbursements. its implementing regulations do not ap- with the actual, immediate cash require- (g) To the extent available, ecipients ply, interest earned on Federal advances ments of the recipient organization in shall disburse funds available fro m repay- deposited in interest bearing accounts carrying out the purpose of the approved ments to and interest earned o a revolv- shall be remitted annually to Department program or project. The timing and ing fund, program income, re.ates, re- of Health and Human Services, Payment amount of cash advances shall be as close funds, contract settlements, au.it recov- Management System, P.O. Box 6021, as is administratively feasible to the actu- eries and interest earned on s ch funds Rockville, MD 20852. In keeping with al disbursements by the recipient organi- before requesting additional ash pay- Electronic Funds Transfer rules(31 CFR zation for direct program or project costs ments. part 206), interest should be remitted to and the proportionate share of any allow- (h) Unless otherwise require. by stat- the HHS Payment Management System able indirect costs. ute, HUD shall not withhold payments through an electronic medium such as the (c) Whenever possible, advances shall for proper charges made by re.ipients at FEDWIRE Deposit system. Recipients be consolidated to cover anticipated cash any time during the project pe od unless which do not have this capability should a..y;chM by Wvct Grou. 09:1656 HOUSING AND DEVELOPMENT REPORTER • use a check. Interest amounts up to $250 tion/facilities acquisition projects or long- for land may be allowed, provided that per year may be retained by the recipient term use,the value of the donated proper- HUD has approved the charges. .for administrative expense. State univer- ty for cost sharing or matching shall be (h)The value of donated property shall sities and hospitals shall comply with the lesser of paragraphs(c)(1)or(c)(2)of be determined in accordance with the CMIA, as it pertains to interest. If an this section. usual accounting policies of the recipient, entity subject to CMIA uses its own funds (1)The certified value of the remaining with the following qualifications. to pay pre-award costs for discretionary life of the property recorded in the recipi- (1) The value-of donated land and awards without prior written approval ent's accounting records at the time of buildings shall not exceed its fair market from the Federal awarding agency, it donation. value at the time of donation to the waives its right to recover the interest (2)The current fair market value.How- recipient as established by an indepen- under CMIA. ever,when there is sufficient justification, dent appraiser(e.g.,certified real proper- (m) Except as noted elsewhere in this HUD may approve the use of the current ty appraiser or General Services Adminis- rule, only the following forms shall be fair market value of the donated property, tration representative) and certified by a authorized for the recipients in requesting even if it exceeds the certified value at the responsible official of the recipient. advances and reimbursements. Federal time of donation to the project. (2) The value of donat..d equipment agencies shall not require more than an (d) Volunteer services furnished by shall not exceed the fair market value of original and two copies of these forms. professional and technical personnel,con- equipment of the same age and condition (1) SF-270, Request for Advance or sultants, and other skilled and unskilled at the time of donation. Reimbursement. HUD has adopted the labor may be counted as cost sharing or (3) The value of donated space shall SF-270 as a standard form for all noncon- matching if the service is an integral and not exceed the fair rental value of compa- struction programs when electronic funds necessary part of an approved project or rable space as established by an indepen- transfer or predetermined advance meth- program. Rates for volunteer services dent appraisal of comparable space and ods are not used. HUD has the option of shall be consistent with those paid for facilities in a privately-owned building in using this form for construction programs similar work in the recipient's organiza- the same locality. in lieu of the SF-271,"Outlay Report and tion. In those instances in which the (4) The value of loaned equipment Request for Reimbursement for Con- required skills are not found in the recipi- shall not exceed its fair rental value. • struction Programs." • ent organization,rates shall be consistent (5)The following requirements pertain (2)SF-271.Outlay Report and Request with those paid for similar work in the to the recipient's supporting records for for Reimbursement for Construction Pro- labor market in which the recipient com- in-kind contributions from third parties. grams. HUD has adopted the SF-271 as petes for the kind of services involved.In (i) Volunteer services shall be docu- the standard form to be used for request- either case, paid fringe benefits that are mented and, to the extent feasible, sup- ing reimbursement for construction pro- reasonable, allowable, and allocable may ported by the same methods used by the grams. However, HUD may substitute be included in the valuation. recipient for its own employees. the SF-270 when HUD determines that it ,:) When an employer other than the (ii)The basis for determining the valu- IC provides adequate information to meet re.:lient furnishes the services of an ation for personal service, material, Federal needs. employee, these services shall be valued equipment, buildings and land shall be - at the employee's regular rate of pay(plus documented. §84.23 Cost sharing or matching. - an amount of fringe benefits that are reasonable, allowable, and allocable, but §84.24 Program income. (a) All contributions, including cash exclusive of overhead costs), provided and third party in-kind,shall be accepted these services are in the same skill for (a) HUD shall apply the standards set as part of the recipient's cost sharing or which the employee is normally paid. forth in this section in requiring recipient matching when such contributions meet (f) Donated supplies may include such organizations to account for program all of the following criteria. items as expendable equipment, office income related to projects financed in (1) Are verifiable from the recipient's supplies,laboratory supplies or workshop whole or in part with Federal funds. records. and classroom supplies.Value assessed to (b)Except as provided in paragraph(h) (2) Are not included as contributions donated supplies included in the cost of this section, program income earned for any other federally-assisted project or sharing or matching share shall be reason- during the project period shall be retained program. • able and shall not exceed the fair market by the recipient and, in accordance with (3) Are necessary and reasonable for value of the property at the time of the HUD regulations or the terms and condi- proper and efficient acconiplishment of donation. tions of the award,shall be used in one or • project or program objectives. (g) The method used for determining more of the ways listed in the following. (4) Are allowable under th applicable cost :haring or matching for donated. (1) Added to funds committed to the cost principles. equii.,ment, buildings and land for which project by HUD and recipient and used (5) Are not paid by the Federal Gov- title passes to the recipient may differ to further eligible project or program ernment under another award, except according to the purpose of the award, if objectives. where authorized by Federal statute to be paragraphs (g)(1) or(g)(2) of this section (2) Used to finance the non-Federal used for cost sharing or matching. apply. share of the project or program. (6) Are provided for in the approved (1) If the purpose of the award is to (3) Deducted from the total project or budget when required by HUD. assist the recipient in the acquisition of program allowable cost in determining (7)Conform to other provisions of this equipment, buildings or land, the total the net allowable costs on which the part, as applicable. value of the donated property may be Federal share of costs is based. (b) Unrecovered indirect costs may be claimed as cost sharing or matching. (c) When HUD authorizes the disposi- included as part of cost sharing or match- (2) If the purpose of the award is to tion of program income as described in ing only with the prior approval of HUD. support activities that require the use of paragraphs(b)(1)or(b)(2)of this section, (c)Values for recipient contributions of equipment, buildings or land, normally program income in excess of any limits services and property shall be established only depreciation or use charges for stipulated shall be used in accordance in accordance with the applicable cost equipment and buildings may be made. with paragraph (b)(3) of this section. _ principles. If HUD authorizes recipients However, the full value of equipment or (d) In the event that HUD does not to donate buildings or land for construe- other capital assets and fair rental charges specify in its regulations or the terms and • Published by West Group r • COMMUNITY DEVELOPMENT 09:1657 HDR RF-628 2-2-98 conditions of the award how program (3) The absence for more than three (ii) The extension requires additional • • income is to be used, paragraph (b)(3)of months,or a 25 percent reductio in time Federal funds. this section shall apply automatically to devoted to the project, by the .pproved (iii)The extension involves any change all projects or programs except research. project director or principal inv.stigator. in the approved objectives or scope of the For awards that support research. para- (4) The need for additional Federal project. graph (b)(I) of this section shall apply funding. (3)Carry forward unobligated balance's automatically unless HUD indicates in (5) The transfer of amounts :udgeted to subsequent funding periods. the terms and conditions another alterna- for indirect costs to absorb inc eases in ' (4) For awards that support research, tivc on the award or the recipient is direct costs, or vice versa, if ap.roval is unless HUD provides otherwise in subject to special award conditions, as required by HUD. HUD's regulations, the prior approval indicated in §84.14. (6) The inclusion, unless w.ived by requirements described in paragraph (e) (c) Unless HUD regulations or the HUD,of costs that require prior<pproval of this section are automatically waived terms and conditions of the award pro- in accordance with OMB Circu ar A-21, (i.e.,recipients need not obtain such prior vide otherwise, recipients shall have no "Cost Principles for Institutions of High- approvals) unless one of the conditions obligation to the Federal Government er Education," OMB Circula A-122, included in paragraph (eX2) of this sec- regarding program income earned after "Cost Principles for Non-Profi, Organi- tion applies. the cnd of the project period. zations,"or,45 CFR part 74 Ap•endix E, (0 HUD may,at its option,restrict the (1)If authorized by HUD regulations or "Principles for Determining Cots Appli- transfer of funds among direct cost cate- the terms and conditions of the award, cable to Research and Develop ent un- gories or programs, functions and activi- costs incident to the generation of pro- der Grants and Contracts wit Hospi- ties for awards in which the Federal share gram income may be deducted from gross tals,"or 48 CFR part 31, "Cont act Cost of the project exceeds S100,000 and the income to determine program income, Principles and Procedures," as applica- cumulative amount of such transfers ex- provided these costs have not been ble. ceeds or is expected to exceed 10 percent charged to the award. • (7) The transfer of funds all•tted for of the.total budget as last approved by (g) Proceeds from the sale of property training allowances (direct pa ment to HUD. HUD shall not permit a transfer shall be handled in accordance with the trainees) to other categories o expense. that would cause any Federal appropria- requirements of the Property Standards (8)Unless described in the a u plication tion or part thereof to be used for pur- (See §§84.30 through 84.37). and funded in the approved a ards, the poses other than those consistent with the (h) Unless HUD regulations or the subaward, transfer or contracti g out of original intent of the appropriation. terms and condition of the award provide any work under an award.This •rovision (g) All other changes to nonconstruc- otherwise,recipients shall have no obliga- does not apply to the purchas- of sup- tion budgets, except for the changes de- tion to the Federal Government with plies,material,equipment or ge eral sup- scribed in paragraph(j)of this section,do respect to program income earned from port services. not require prior approvaL license fees and royalties for copyrighted (d) No other prior approva require- (h)For construction awards, recipients material, patents, patent applications, ments for specific items may b: imposed shall request prior written approval trademarks,and inventions produced un- unless a deviation has been ap'roved by promptly from HUD for budget revisions dcr an award. However, Patent and OMB. whenever Trademark Amendments (35 U.S.C. 18) paragraphsssection (ply. (h)(2) or apply to inventions made under an ex er- (e) Except for requirements listed in (h)(3) of this apply. p paragraphs (c)(1) and (c)(4) o this sec- (1)The revision results from changes in imental, developmental, or research tion,HUD is authorized,at its •ption, to the scope or the objective of the project or award. waive cost-related and administ ative pri- program. • or written approvals required b Circular (2)The need arises for additional Fed- §84.25 Revision of budget and program A-110 and OMB Circulars A-.1 and A- eral funds to complete the project. plans. 122. Such waivers may include authoriz- (3)A revision is desired which involves ing recipients to do any one o more of specific costs for which prior written (a) The budget plan is the financial the following. approval requirements may be imposed expression of the project or program as (1) Incur pre-award costs 91 calendar consistent with applicable OMB cost approved during the award process. It days prior to award or mor- than 90 principles listed in §84.27. may include either the Federal and non- calendar days with the prior a.proval of (i) Noother. prior approval require- Federal share, or only the Federal share, HUD.All pre-award costs are i curred at ments for specific items may be imposed depending upon HUD requirements. It the recipient's risk(i.e.,HUD i• under no unless a deviation has been approved by shall be related to performance for pro- obligation to reimburse such c.sts if for OMB. gram evaluation purposes whenever ap- any reason the recipient does .t receive 6) When HUD makes an award that propriate. an award or if the award is less than provides support for both construction (b) Recipients are required to report anticipated and inadequate to .over such and nonconstruction work, HUD may deviations from budget and program costs). require the recipient to request prior plans, and request prior approvals for (2) Initiate a one-time exten-ion of the approval from HUD before making any budget and program plan revisions, in expiration date of the award o up to 12 fund or budget transfers between the two accordance with this section. months unless one or more of he follow- types of work supported. (c)For nonconstruction awards,recipi- ing conditions apply. For one-t me exten- (k) For both construction and noncon- ents shall request prior approvals from sions, the recipient must notif HUD in struction awards, HUD shall require re- HUD for one or more of the following writing with the supporting reasons and cipients to notify HUD in writing program or budget related reasons. revised expiration date at lea't 10 days promptly whenever the amount of Feder- (I)Change in the scope or the objective before the expiration date speci ied in the al authorized funds is expected to exceed of the project or program (even if there is award. This one-time extensio may not the needs of the recipient for the project no associated budget revision requiring be exercised merely for the .urpose of period by more than S5000 or five per- prior written approval). using unobligated balances. cent of the Federal award, whichever is (2)Change in a key person specified in (i)The terms and condition of award greater. This notification shall not be the application or award document. prohibit the extension. required if an application for additional 09:1658 HOUSING AND DEVELOPMENT REPORTER fundingis submitted for a continuation sions of OMB Circular A-87,"Cost Prin- (a) Title to real property shall vest in award. ciples for State and Local Governments." the recipient subject to the condition that ' Al) When requesting approval for bud- The allowability of costs incurred by non- the recipient shall use the real property get revisions, recipients shall use the profit organizations is determined in ac- for the authorized purpose of the project budget forms that were used in the appli- cordance with the provisions of OMB as long as it is needed and shall not cation unless HUD indicates a letter of Circular A-122,"Cost Principles for Non- encumber the property without approval request suffices. Profit Organizations."The allowability of of HUD. (m) Within 30 calendar days from the costs incurred by institutions of higher (b) The recipient shall obtain written date of receipt of the request for budget education is determined in accordance approval by HUD for the use of real revisions, HUD shall review the request with the provisions of OMB Circular A- property in other federally-sponsored and notify the recipient whether the bud- 21, "Cost Principles for Educational In- projects when the recipient determines get revisions have been approved. If the stitutions." The allowability of costs in- that the property is no longer needed for revision is still under consideration:at the curred by hospitals is determined in ac- the purpose of the original project.Use in end of 30 calendar days, HUD shall cordance with the provisions of Appendix other projects shall be limited to those inform the recipient in writing of the date E of 45 CFR part 74, "Principles for under federally-sponsored projects (i.e., when the recipient may expect the deci- Determining Costs Appl:cable to Re- awards) or programs that have r -poses sion. search and Development Under Grants consistent with those authorized .sup- and Contracts with Hospitals." The al- port by HUD. §84.26 Non-Federal audits. . ' !qv/ability of costs incurred by commer- (c)When the real property is n.:longer cial organizations and those non-profit needed as provided in paragraphs(a)and (a) Recipients and subrecipients that organizations listed in Attachment C to (b) of this section, the recipient shall are institutions of higher education or Circular A-122 is determined in actor- request disposition instructions from other non-profit organizations(including dance with the provisions of the Federal HUD or its successor Federal awarding hospitals) shall be subject to the audit Acquisition Regulation(FAR)at 48 CFR agency. HUD shall observe one or more requirements contained in the Single Au- part 31. of the following disposition instructions. dit Act Amendments of 1996 (31 U.S.C. • (1)The recipient may be permitted to 7501-7507)and revised OMB Circular A- §84.28 Period of availability of funds. retain title without further obligation to 133, "Audits of States, Local Govern- the Federal Government after it compen- ments and Non-Profit Organizations." Where a funding period is specified, a sates the Federal Government for that (l) Non-profit organizations subject to recipient may charge to the grant only percentage of the current fair market regulations in the part 200 and part 800 allowable costs resulting from obligations value of the property attributable to the - series of this title which receive awards incurred during the funding period and Federal participation in the project. subject to part 84 shall comply with the any pre-award costs authorized by HUD. (2) The recipient may be directed to audit requirements of revised OMB Cir-. sell the property under guidelines provid- cular A.133, "Audits of States, Local Property Standards ed by HUD and pay the Federal Govern- Governments, and Non-Profit Organiza- ment for that percentage of the current tions." For HUD programs, a non-profit §84.30 Purpose of property standards. fair market value of the property attribut- organization is the mortgagor or owner able to the Federal participation in the (as these terms are defined in the part 200 Sections 84.31 through 84.37 set forth project (after deducting actual and rea- ar.d part 800 series) and not a related or uniform standards governing manage- sonab!e selling and fix-up expenses, if affiliated organization or entity. ment and disposition of property fur- any, from the sales proceeds). When the (2) Reserved. nished by the Federal Government whose recipient is authorized or required to sell (b)State and local governments shall be cost was charged to a project supported the property, proper sales procedures subject to the audit requirements con- by a Federal award. HUD shall require shall be established that provide for com- tained in the Single Audit Act Amend- recipients to observe these standards un- petition to the extent practicable and ments of 1996(31 U.S.C. 7501-7507 and der awards and shall not impose addition- result in the highest possible return. revised OMB Circular A-133, "Audits of al requirements, unless specifically re- (3) The recipient may be directed to States, Local Governments, and -Non- quired by Federal statute. The recipient transfer title to the property to the Feder- Profit Organizations." • may use its own property management al Government or to an eligible third (c) For-profit hospitals not covered by standards and procedures provided it party provided that, in such cases, the the audit provisions of revised OMB observes the provisions of §§84.31 recipient shall be entitled to compensa- Circular A-133 shall be subject to the through 84.37. tion for its attributable percentage of the audit requirement of the Federal award- current fair market value of the property. ing agencies. §8431 Insurance coverage. (d) Commercial organizations shall be §8433 Federally-owned and exempt subject to the audit requirements of HUD Recipients shall, at a minimum, pro- property. or the prime recipient as incorporated vide the equivalent insurance coverage into the award document. for real property and equipment acquired (a) Federally-owned property. (1) Title with Federal funds as provided to proper- to federally-owned property remains vest- §84.27 Allowable costs. ty owned by the recipient. Federally- ed in the Federal Government. Recipi- owned property need not be insured ents shall submit annually an inventory For each kind of recipient,there is a set unless required by the terms and condi- listing of federally-owned property in of Federal principles for determining al- tions of the award. their custody to HUD. Upon completion towable costs. Allowability of costs shall of the award or when the property is no be determined in accordance with the §84.32 Real property. longer needed, the recipient shall report cost principles applicable to the entity the property to HUD for further HUD incurring the costs. Thus, allowability of HUD prescribes the following require- utilization. costs incurred by State,local or federally- ments for recipients concerningthe use (2)If HUD has no further need for the --- recognized _recognized Indian tribal governments is and disposition of real property acquired property, it shall be declared excess and determined in accordance with the provi- in whole or in part under awards: reported to the General Services Admin- Published by West Group COMMUNITY DEVELOPMENT 09:1659 HDR RF-628 2-2-98 istration. unless HUD has statutory au- by the Federal Government,use on other (5) Adequate maintenance procedures thority to dispose of the property by activities not sponsored by the Federal shall be implemented to keep the equip- alternative methods (e.g.. the authority Government shall be permissi. e if au- ment in good condition. provided by the Federal Technology thorized by HUD. User charge shall be (6)Where the recipient is authorized or Transfer Act (15 U.S.C. 3710 (I)) to treated as program income. required to-sell the equipment, proper donate research equipment to educational (e)When acquiring replaceme t equip- sales procedures shall be established and non-profit organizations in accor- ment, the recipient may use t e equip- . which provide for competition to the dance with E.O. 12821. "Improving ment to be replaced as trade-in •r sell the - extent practicable and result in the high- Mathematics and Science Education in equipment and use the proceeds to offset est possible return. Support of the National Education the costs of the replacement esuipment (g)When the recipient no longer needs Goals.")Appropriate instructions shall be subject to the approval of HU*. the equipment, the equipment may be issucd to the recipient by HUD. (f) The recipient's property manage- used for other activities in accordance (b) Exempt property. When statutory ment standards for equipment acquired with the following standards. For equip- authority exists. HUD has the option to with Federal funds and federa iy-owned ment with a current per unit fair market vest title to property acquired with Feder- equipment shall include all of t e follow- value of$5000 or more,the recipient may al funds in the recipient without further obligation to the Federal Government ing• retain the equipment for other uses pro- and under conditions HUD considers (1) Equipment records shall .e main- vided that compensation is made to HUD appropriate. Such property is "exempt tamed accurately and shall in.lude the or its successor.The amount of compen- property." Should HUD not establish following information. sation shall be computed by applying the conditions,title to exempt property upon (i) A description of the equ pment. percentage of Federal participation in the acquisition shall vest in the recipient (ii) Manufacturer's serial number, cost of the original project or program to without further obligation to the Federal model number, Federal stock number, the current fair market value of the Government. national stock number, or othe identifi- equipment. If the recipient has no need cation number. for the equipment, the recipient shall §84.34 Equipment. (iii)Source of the equipment,including request disposition instructions from the award number. HUD. HUD shall determine whether the (iv)Whether title vests in the recipient equipment can be used to meet HUD s (a) Title to equipment acquired by a or the Federal Government. requirements. If no requirement exists recipient with Federal funds shall vest in (v) Acquisition date (or date received, within HUD, the availability of the the recipient,subject to conditions of this if the equipment was furnish:d by the equipment shall be reported to the Gener- section. al Services Administration by HUD to (b) The recipient shall not use equip- Federal Government) and cos determine whether a requirement for the ment acquired with Federal funds to (vi) Information from whic one can equipment exists in other Federal agen- • provide services to non-Federal outside calculate the percentage of Fede .1 panic- cies. HUD shall issue instructions to the organizations for a fee that is less,than ipation in the cost of the equip ent (not recipient no later than 120 calendar days private companies charge for equivalent applicable to equipment furnis ed by the after the recipient's request and the fol- services, unless specifically authorized by Federal Government). lowing procedures shall govern. Federal statute, for as long as the Federal (vii) Location and conditi.n of the (1) If so instructed or if disposition Government retains an interest in the equipment and the date the in ormation instructions are not issued within 120 equipment. was reported. calendar days after the recipient's re- (c) The recipient shall use the equip- (viii) Unit acquisition cost, quest, the recipient shall sell the equip- ment in the project or program for which (ix) Ultimate disposition daua, includ- ment and reimburse HUD an amount it was acquired as long as needed,wheth- ing date of disposal and sales.p •ce or the computed by applying to the sales pro- cr or not the project or program continues method used to determine c rrent fair ceeds the percentage of Federal participa- to be supported by Federal funds and market value where a recipien compen- tion in the cost of the original project or shall not encumber the equipment with- sates HUD for its share. program. However, the recipient shall be out approval of HUD. When the equip- (2) Equipment owned by t e Federal permitted to deduct and retain from the ment is no longer needed for the original Government shall be identifies to indi- Federal share$500 or ten percent of the project or program,the recipient shall use tate Federal ownership. proceeds,whichever is less,for the reci i the equipment in connection with its (3) A physical inventory of .quipment p ent's selling and handling expenses. other federally-sponsored activities, in shall be taken and the results econciled the following order of priority: (2)If the recipient is instructed to ship (1)Activities sponsored by HUD which with the equipment records at least once the equipment elsewhere, the recipient funded the original project; then every two years.Any different=s between shall be reimbursed by the Federal Gov- (2) Activities sponsored by other Fed- quantities determined by the physical ernment by an amount which is comput- eral awarding agencies. inspection and those shown n the ac- ed by applying the percentage of the (d) During the time that equipment is counting records shall be inve tigated to recipient's participation in the cost of the used on the project or program for which determine the causes of the s ifyerence. original project or program to the current it was acquired, the recipient shall make The recipient shall, in conne tion with fair market value of the equipment, plus it available for use on other projects or the inventory, verify the existence, cur- any reasonable shipping or interim stor- programs if such other use will not inter- rent utilization, and continue, need for age costs incurred. fere with the work on the project or the equipment. (3) If the recipient is instructed to program for which the equipment was (4)A control system shall be n effect to otherwise dispose of the equipment, the originally acquired. First preference for insure adequate safeguards t. prevent recipient shall be reimbursed by HUD for such other use shall be given to other loss, damage, or theft of the uipment. such costs incurred in its disposition. projects or programs sponsored by HUD Any loss, damage, or theft of quipment (4) HUD may reserve the right to that financed the equipment;second pref- shall be investigated and fully socument- transfer the title to the Federal Govern- erence shall be given to projects or pro- ed; if the equipment was o ed by the ment or to a third party named by the grams sponsored by other Federal award- Federal Government, the reci•ient shall Federal Government when such third ing agencies. If the equipment is owned promptly notify HUD. _ party is otherwise eligible under existing 09:1660 HOUSING AND DEVELOPMENT REPORTER •• -: statutes. Such transfer shall be subject to (1)Obtain,reproduce,publish or other- matters of a contractual nature. Matters the_ following standards. wise use the data first produced under an concerning violation of statute are to be (i)The equipment shall be appropriate- award. referred to such Federal, State or local ly identified in the award or otherwise (2) Authorize others to receive, repro- authority as may have proper jurisdic- made known to the recipient in writing. duce, publish,or otherwise use such data tion. (ii) HUD shall issue disposition in- for Federal purposes. structions within 120 calendar days after (d) Title to intangible property and §84.42 Codes of conduct. receipt of a final inventory. The final debt instruments acquired under an inventory shall list all equipment ac- award or subaward vests upon acquisition The recipient shall maintain written quired with grant funds and federally- in the recipient. The recipient shall use standards of conduct governing the per- owned equipment. If HUD fails to issue that property for the originally-author- formance of its employees engaged in the disposition instructions within the 120 ized purpose, and the recipient shall not award and administration of contracts. calendar day period, the recipient shall encumber the property without approval No employee, officer, or agent shall par- apply the standards of this section, as of HUD. When no longer needed for the ticipate in the selection,award,or admin- appropriate. originally authorized purpose,disposition istration of a contract supported by Fed- (iii) When HUD exercises its right to of the intangible property shall occur in eral funds if a real or apparent conflict of take title, the equipment shall be subject accordance with the provisions of interest would be involved. Such a con- to the provisions for federally-awned §84.34(g). flict would arise when the employee, equipment. officer, or agent, any member of his or §84.37 Property trust relationship; her immediate family,his or her partner, §84.35 Supplies and other expendable or an organization which employs or is • property. Real property, equipment, intangible about to employ any of the parties indi- property and debt instruments that are cated herein, has a financial or other • acquired or improved with Federal funds interest in the firm selected for an award. (a)Title to supplies and other expenda- shall be held in trust by the recipient as The officers,employees,and agents of the ble property shall vest in the recipient trustee for the beneficiaries of the project recipient shall neither solicit nor accept upon acquisition. If there is a residual or program under which the property was gratuities, favors, or anything of mone- inventory of unused supplies exceeding acquired or improved.HUD may require tary value from contractors,or parties to 55000 in total aggregate value upon ter- recipients to record liens or other appro- subagreements. However, recipients may mination or completion of the project or priate notices of record to indicate that set standards for situations in which the program and the supplies are not needed personal or real property has been ac- financial interest is not substantial or the for any other federally-sponsored project quired or improved with Federal funds gift is an unsolicited item of nominal or program, the recipient shall retain the and that use and disposition conditions value. The standards of conduct shall (. supplies for use on non-Federal spon- apply to the property. provide for disciplinary actions to be sored activities or sell them,but shall, in applied for violations of such standards either case,compensate the Federal Gov- Procurement Standards by officers, employees, or agents of the ernment for its share. The amount of • recipient. compensation shall be computed in the §84.40 Purpose of procurement- same manner as for equipment. - standards. (b)The recipient shall not use supplies §&4.43 Competition. acquired with Federal funds to provide Sections 84.41 through84.48 set forth services to non-Federal outside organiza- All procurement transactions shall be tions for a fee that is less than private standards for use by recipients in estab- conducted in a manner to provide,to the charge services, lishing procedures for the procurement of maximum extent practical,open and free companiess specifically forauequivalentived by Federalessupplies and other expendable property, competition. The recipient shall be alert unlesequipment, real property and other ser- to organizational conflicts of interest as statute, as long as the Federal Govern- vices with Federal funds.These standards well as noncompetitive practices among ment retains an interest in the supplies. are furnished to ensure that such materi- contractors that may restrict or eliminate als and services are obtained in an effec- competition or otherwise restrain trade. §84.36 Intangible property. tive manner and in compliance with the In order to ensure objective contractor provisions of applicable Federal statutes performance and eliminate unfair corn- (a) The-recipient may copyright any and executive orders. No additional pro- petitive advantage, contractors that de- wo:k that is subject to copyright and was curement standards or requirements shall velop, or draft specificatie: require- de:doped, or for which ownership was be imposed by HUD upon recipients, merits,statements of work,i- ;,ns for purchased, under an award. HUD re- unless specifically required by Federal bids and/or requests fcr pro. .,shall be serves a royalty-free, nonexclusive and statute or executive order or approved by excluded from competing ;. such pro- irrevocable right to reproduce,publish,or OMB. curements. Awards shall be r ade to the otherwise use the work for Federal pur- bidder or offeror whose bid or offer is poses, and to authorize others to do so. §84.41 Recipient responsibilities. responsive to the solicitation and is most (b)Recipients are subject to applicable advantageous to the recipient,price,qual- regulations governing patents and inven- The standards contained in this section ity and other factors cc idered. The tions. including government-wide regula- do not relieve the recipient of the contrac- other factors shall include c,a bidder's or tions issued by the Department of Com- tual responsibilities arising under its con- offeror's compliance with Section 3 of the merce at 37 CFR part 401, "Rights to tract(s). The recipient is the responsible Housing and Urban Development Act of Inventions Made by Nonprofit Organiza- authority, without recourse to HUD, re- 1968 (12 U.S.C. 1701u), hereafter re- tions and Small Business Firms Under garding the settlement and satisfaction of ferred to as "Section 3." Section 3 pro- Government Grants, Contracts and Co- all contractual and administrative issues vides that, to the greatest extent feasible, operative Agreements." arising out of procurements entered into and consistent with existing Federal, (c)Unless waived by HUD,the Federal in support of an award or other agree- State, and local laws, and regulations, — Government has the right to paragraphs ment.This includes disputes,claims,pro- economic opportunities generated by cer- (c)(1) and (c)(2) of this section. tests of award,source evaluation or other tain HUD financial assistance shall be Published by West Group r COMMUNITY DEVELOPMENT 09:1661 HDR RF-628 2-2-98 directed to low- and very low-income (3) Consider in the contract .rocess other than the apparent low bidder under • persons. Solicitations shall clearly set whether firms competing for larg=r con- a sealed bid procurement. forth all requirements that the bidder or tracts intend to subcontract with small (5) A proposed contract modification offeror shall fulfill in order for the bid or businesses, minority-owned firm-, and changes the scope of a contract or in- offer to be evaluated by the recipient.Any women's business enterprises. creases the contract amount by more than and all bids or offers may be rejected (4) Encourage contracting with c.nsor- the amount of the small purchase thresh- when it is in the recipient's interest to do tiums of small businesses, mi ority- old. so. owned firms and women's business enter- - prises when a contract is too large •r one §84.45 Cost and price analysis. §84.44 Procurement procedures. of these firms to handle individually. (5) Use the services and assista ce, as Some form of cost or price analysis (a)All recipients shall establish written appropriate, of such organizations as the shall be made and documented in the procurement procedures. These prose- Small Business Administration a d the Procurement files in connection with ev- dures shall rproce for, at a minimum, Department of Commerce's M nority P cry procurement action. Price analysis Business Development Agency i the may be accomplished in various ways, that paragraphs(a)(1),(aX2)and(a)(3)of iiiiii solctaton and utilization of sural bust- including the comparison of price quota- this section apply, nesses, minority-owned firms and wom- tions submitted, market prices and simi- (1)Recipients avoid purchasing unnec- en's business enterprises. - lar indicia, together with discounts. Cost essary items. (c) The typeanalysis is the review and evaluation of (2) Where appropriate, an anal analysis is of procuring instru encs Y Y each element of cost to determine reason- made of lease and purchase alternatives used (e.g., fixed price contracts cost ableness, allocability and allowability. to determine which would be the most reimbursable contracts, purchase orders, and practical procurement and incentive contracts) shall be deter- economicalfor the Federal Government. mined by the recipient but shall be ppro- §84.46 Procurement records. (3)Solicitations for goods and services priate for the particular procureme t and provide for all of the following. for promoting the best interest of the Procurement records and files for pur- i) A clear and accurate description of program or project involved. The 'cost- chases in excess of threshold shall include the he follosmall wing atse the technical requirements for the materi- plus-a-percentage-of-cost"or"perc mage minimum: ' al, product or service to be procured. In of construction cost" methods o con- (a) Basis for contractor selection; competitive procurements, such a de- trading shall not be used. scription shall not contain features which (d)'Contracts shall be made onl with when competitib) ve bids or offers competitionn for lack of renot unduly restrict competitic;i. responsible contractors who posses the potential ability to perform succe sfully obtained; and (ii) Requirements which the bidder/ under the terms and conditions •f the (c) Basis for award cost or price. offeror must fulfill and all other factors to be used in evaluating bids or proposals. Proposed' procurement. Conside ation §84.47 Contract administration. (iii) A description, whenever practica- shall be given to such matters as co frac- ble,of technical requirements in terms of for integrity;compliance with publi poli-. A system for contract administration functions to be performed or perfor- cy, including,where applicable,Sec ion 3 includingrange of the Housing and Urban Develo•ment mance required, shall be maintained to ensure contractor acceptablcharacteristicsminimum Act of 1968 (12 U.S.C. 1701u); recrd of the or of oconformance with the terms, conditions acceptable standards. past performance;financial and tec nical and specifications of the contract and to of (iv) The specific features of "brand resources or accessibility to other eces- all puure cha es.adequaand timely follow up to saryresources. In certain circumst noes, all purchases. Recipients shall evaluate name or equal" descriptions that bidders contractor performance and document,as are contracts with certain required to meet when such items are parties are re.trict- q appropriate, whether contractors have included in the solicitation. ed by implementation of E.O.s 125•' and met the terms, conditions and specifics- (v)The acceptance,to the extent practi- 12689, "Debarment and Suspensio at tions of the contract. cable and economically feasible, of prod- 24 CFR part 24. ucts and services dimensioned in the (e) Recipients shall, on request, make §84.48 Contract provisions. metric system of measurement. available for the Federal awarding agen- (vi) Preference, to"the extent practica- cy, pre-award review and procur.ment The recipient shall include,in addition ble and economically feasible, for prod- documents,such as requests for pro•.sals to provisions to define a sound and ucts and services that conserve natural or invitations for bids, independen cost complete agreement, the following provi- resources and protect the environment estimates,etc.,when any of the foll„wing sions in all contracts. The following pro- and are energy efficient. conditions apply. visions shall also be applied to subcon- (b) Positive efforts shall be made by (1) A recipient's procurement Croce- tracts. recipients to utilize small businesses, mi- dures or operation fails to comply with (a) Contracts in excess of the small nority-owned firms, and women's busi- the procurement standards in H D's purchase threshold shall contain contrac- ness enterprises, whenever possible. Re- implementation of Circular A-110. tual provisions or conditions that allow cipients of Federal awards shall take all of (2) The procurement is expect:d to for administrative, contractual, or legal the following steps to further this goal. exceed 5100,000 or the small pur hase remedies in instances in which a contrac- (I) Ensure that small businesses, mi- threshold fixed at 41 U.S.C. 403 (I I), tor violates or breaches the contract nority-owned firms, and women's busi- whichever is greater,and is to be aw.rded terms, and provide for such remedial ness enterprises are used to the fullest without'competition or only one bd or actions as may be appropriate. • extent practicable. offer is received in response to a sol'cita- (b) All contracts in excess of the small (2) Make information on forthcoming tion. purchase threshold shall contain suitable opportunities available and arrange time (3)The procurement,which is exp•cted provisions for termination by the recipi- frames for purchases and contracts to to exceed the small purchase thres old, ent, including the manner by which ter- encourage and facilitate participation by specifies a "brand name” product. mination shall be effected and the basis small businesses, minority-owned firms, (4)The proposed award over the mall for settlement.In addition,such contracts and women's business enterprises. purchase threshold is to be award:d to shall describe conditions under which the 09:1662 HOUSING AND DEVELOPMENT REPORTER r contract may be terminated for default as Reports and Records lated. and any assistance needed to re- •well as conditions where the contract may solve the situation. be terminated because of circumstances §84.50 Purpose of reports and records. (g) HUD may make site visits, as beyond the control of the contractor. needed. (c) Except as otherwise required by Sections 84.51 through 84.53 set forth (h) HUD shall comply with clearance statute, an award that requires the con- the procedures for monitoring and report- requirements of_..5 CFR part 1320 when tracting(or subcontracting) for construe- ing on the recipient's financial and pro- requesting performance data from recipi- tion or facility improvements shall pro- gram performance and the necessary Stan- ents. vide for the recipient to follow its own dard reporting forms.They also set forth - requirements relating to bid guarantees, record retention requirements. §84.52 Financial reporting. performance bonds, and payment bonds unless the construction contract or sub- §84.51 Monitoring and reporting (a) The following forms or such other contract exceeds$100,000.For those con- program performance. forms as may be approved by OMB are tracts or subcontracts exceeding authorized for obtaining financial infor- 5100,000, HUD may accept the bonding (:.'• Recipients are responsible for man- mation from recipients. policy and requirements of the recipient, ag:. ; and monitoring each project, pro- (1) SF-269 or SF-269A, Financial Sta- provided HUD has made a determination gram,subaward,function or acttvity•sup- tus Report. that the Federal Government's interest is ported by the award. Recipients shall • (i) HUD requires recipients to use the adequately protected. If such a determi- monitor subawards to ensure- subreci- SF-269 or SF-269A to report the status of nation has not been made,the minimum pients have met the audit requirements as funds for all nonconstruction projects or requirements shall be as follows: delineated in §84.26. P (1) A bid guarantee from each bidder (b) HUD shall prescribe-the frequency programs. HUD has the option of not equivalent to five percent of the bid price. with which the performance reports shall requiring the SF-269 or SF-269A when • The "bid guarantee" shall consist of a be submitted. Except as provided in the SF-270, Request for Advance or firm commitment such as a bid bond, §84.51(f), performance reports shall not Reimbursement, or SF-272, Report of certified check,or other negotiable instru- . be required more frequently than quarter- Federal Cash Transactions, is determined mcnt accompanying a bid as ly or less frequently than annually.Annu- to provide adequate information to meet that the bidder shall, upon assurance al reports shall be due 90 calendar days its needs, except that a final SF-269 or tasuch contractual acceptance oof after the grant year; quarterly or semi- SF-269A shall be required at the comple- his his bid,ts executemebe such ed n time annual reports shall be due 30 days after tion of the project when the SF-270 is the reporting period. HUD may require used only for advances. specified. annual reports before the anniversary (ii) HUD shall prescribe whether the (,. (2)A performance bond on the pa - of dates of multiple year awards in lieu of report shall be on a cash or accrual basis. the contractor i'o: 100 percent of .'_le these requirements. The final perfor- If HUD requires accrual information and cc-tract price. A "performance bond' is mance reports are due 90 calendar days the recipient's accounting records are not ono executed in connection with a con- after the expiration or termination of the normally kept on the accrual basis, the tract to secure fulfillment of all the con- award. recipient shall not be required to convert frac or's obligations under such contract. (c)If inappropriate,a final technical or its accounting system, but shall develop (_)A payment bond on the part of the performance report shall not be required such accrual information through best contractor for 100 percent of the contract after completion of the project: estimates based on an analysis of the price.A"payment bond"is one executed (d) When required, performance re- documentation on hand. . in connection with a contract to assure ports shall generally contain, for each (iii)_HUD shall determine the frequen- payment as required by statute of all award, brief information on each of the cy of the Financial Status Report for each persons supplying labor and material in following: project or program, considering the size the execution of the work provided for in (1)A comparison of actual accomplish- and complexity of the particular project the contract. ments with the goals and objectives estab- or program.However,the report shall not (4) Where bonds are required in the lished for the period, the findings of the be required more frequently than quarter- situations described herein, the bonds investigator,or both.Whenever appropri- ly or less frequently than annually.A final shall be obtained from companies holding ate and the output of programs or report shall be required at the completion certificates of authority as acceptable projects can be readily quantified, such of the agreement. sureties pursuant to 31 CFR part 223, quantitative data should be related to cost (iv)HUD requires recipients to submit "SuretyCompanies Dein Business with data for computation of unit costs. ' g the SF-269 or SF-269A (an original and the United States." (2)Reasons why established goals were not met if appropriate. no more t:- t two copies)no later than 30 (d) All negotiated contracts (except (3)Other pertinent information includ- days after the end of each specified those for less than the small purchase semi- ing, when appropriate, analysisreporting period for threshold) awarded by recipients shall cost and ex- annual reorts, and 90 calendar days for include a provision to the effect that the planation of cost overruns or high unit P costs. annual and final reports. Extensions of recipient,HUD,the Comptroller General (e) Recipients shall not be required to reporting due dates may be approved by of the United States, or any of their duly submit more than the original and two HUD upon request of the recipient. authorized representatives, shall have ac- copies of performance reports. (2) SF-272, Report of Federal Cash cess to any books,documents,papers and (f) Recipients shall immediately notify Transactions. records of the contractor which are direct- HUD of developments that have a signifi- (i)When funds are advanced to recipi- ly pertinent to a specific program for the cant impact on the award-supported ac- ents HUD shall require each recipient to purpose of making audits, examinations, tivities. Also, notification shall be given submit the SF-272 and, when necessary2 excerpts and transcriptions. (e) All con- in the case of problems,delays,or adverse its continuation sheet, SF-272a. HUD tracts, including small purchases, award- conditions which materially impair the shall use this report to monitor cash ed by recipients and their contractors ability to meet the objectives of the advanced to recipients and to obtain — shall contain the procurement provisions award. This notification shall include a disbursement information for each agree- of Appendix A to this rule,as applicable, statement of the action taken or contemp- ment with the recipients. Published by West Group COMMUNITY DEVELOPMENT 09:1663 HDR RF-628 2-2-98 (ii) HUD may require forecasts of (b) Financial records,supportin:•docu- supporting records— indirect cost rate • • Federal cash requirements in the "Re- ments, statistical records, and all other computations or proposals, cost alloca- marks" section of the report. records pertinent to an award s all be tion plans, and any similar accounting (iii)When practical and deemed neces- retained for a period of'three yea • from computations of the rate at which a sary. HUD may require recipients to the date of submission of the final xpen- particular group of costs is chargeable report in the "Remarks" section the diture report or, for awards that are (such as computer usage chargeback rates amount of cash advances received and renewed quarterly or annually, frim the or composite fringe benefit rates). retained in excess of three days. Recipi- date of the submission of the quart rly or ' (1) If submitted for negotiation. If the ents shall provide short narrative expla- annual financial report, as authori ed by recipient submits to HUD or the subreci- nations of actions taken to reduce the HUD.The only exceptions are the ollow- pient submits to the recipient the propos- excess balances. ing. al,plan,or other computation to form the (iv) Recipients shall be required to (1) If any litigation, claim, or a dit is basis for negotiation of the rate,then the submit not more than the original and started before the expiration of the 3-year 3-year retention period for its supporting two copies of the SF-272 15 calendar days period,the records shall be retaine. until records starts on the date of such submis- following the end of each quarter. HUD all litigation, claims or audit fi dings sion. may require a monthly report from those involving the records have been r .olved (2) If not submitted for negotiation. If recipients receiving advances totaling SI and final action taken. the recipient is not required•to submit to million or more per year. (2) Records for real propert and HUD or the subrecipient is not required (v) HUD may waive the-requirement equipment acquired with Federal funds to submit to the recipient the proposal, for submission of the SF-272 for any one shall be retained for 3 years afte final Plan, or other computation for negotia- of the following reasons: disposition. tion purposes, then.the 3-year retention (A) When monthly advances do not (3) When records are transferee• to or period for the proposal, plan, or other exceed 525,000 per recipient, provided maintained by HUD,the 3-year ret ntion computation and its supporting records that such advances are monitored requirement is not applicable to th-recip- starts at the end of the fiscal year (or through other forms contained in this fent, other accounting period) covered by the section; (4) Indirect cost rate (B) If, in HUD's opinion, the recipi- proposal, cost proposal, plan,.or other computation. P p allocation plans, etc. as specifi d in ent's accounting controls are adequate to §84.53(g). Termination and Enforcement minimize excessive Federal advances: or (c) Copies of original records ay be . (C) When the electronic payment substituted for the original records if §84.60 Purpose otermination rmination and • mechanisms provide adequate data. authorized by HUD. enforcement. (b)When HUD needs additional infor- '(d) HUD shall request transfer If cer- mation or more frequent reports, the tain records to its custody from rec pients Sections 84.61 and 84.62 set forth following shall be observed. when it determines that the record poss- uniform suspension, termination and en- (1) When additional information is ess long term retention value. Ho ever, forcement procedures. needed to comply with legislative require- in order to avoid duplicate recor.keep- ments, HUD shall issue instructions to ing, HUD may make arrangeme is for84.61 Termination. • require recipients to submit such infor- recipients to retain any records t at are § oration under the "Remarks" section of continuously •needed for joint use • (a)Awards may be terminated in whole the reports. (2)When HUD determine that a recipi- (e) HUD, the Inspector G neral, or in part only if paragraphs(a)(1),(a)(2) ent's accounting system does not meet the Comptroller . General of the nited or (a)(3) of this section apply. standards in§84.21, additional pertinent States, or any of their duly authorized (1) By HUD, if a recipient materially information to further monitor awards representatives, have theighiy fails to comply with the terms and condi- may be obtained upon written notice to and unrestriright ofmel cted access to any •ooks, tions of an award. the recipient until such time as the system documents, papers, or other reco ds of (2) By HUD with the consent of the is brought up to standard. HUD, in recipients that are pertinent t. the recipient, in which case the two parties obtaining this information, shall comply awards, in order to make audits, •=xami- shall agree upon the termination condi- with report clearance requirements of 5 nations, excerpts, transcripts and opies tions, including the effective date and, in CFR part 1320. • of such documents. This right,al.• in- the case of partial termination, the por- (3) HUD wilt shade out any line item eludes timely and reasonable acce s to a tion to be terminated. on any report if not necessary. recipient's personnel for the purpose of - (3) By the recipient upon sending to (4) HUD may accept the identical interview and discussion related ti such HUD written notification setting forth information from the recipients in ma- documents. The rights of access i this the reasons for such termination, the chine readable format or computer print- paragraph (e) are not limited t• the effective date, and, in the case of partial outs or electronic outputs in lieu of required retention period,but shall ast as termination, the portion to be terminat- prescribed formats. long as records are retained. ed. However, if HUD determines in the (5) HUD may provide computer or (f) Unless required by statute, HUD case of partial termination that the re- electronic outputs to recipients when such shall not place restrictions on reci.ients duced or modified portion of the grant expedites or contributes to the accuracy that limit public access to the rec.'ds of will not accomplish the purposes for of reporting. recipients that are pertinent to an .ward, which the grant was made, it may termi- except when HUD can demonstra that nate the grant in its entirety under either 84.53 and access such records shall be kept confi•ential paragraphs(a)(1)or(a)(2)of this section. § §84 53 Retentionts for records. and would have been exempted from (b)If costs are allowed under an award, rdisclosure pursuant to the Freed•m of the responsibilities of the recipient re- Information Act (5 U.S.C. 552) f the ferred to in§84.71(a),including those for (a)This section sets forth requirements records had belonged to HUD. property management as applicable,shall for record retention and access to records (g) Indirect cost rate proposals cost be considered in the termination of the for awards to recipients. HUD shall not allocation plans, etc. Paragraphs (g)(I) award, and provision shall be made for impose any other record retention or and (g)(2) of this section apply io the continuing responsibilities of the recipi- access requirements upon recipients. following types of documents, an. their ent after termination, as appropriate. 09:1664 HOUSING AND DEVELOPMENT REPORTER Com: §84.62 Enforcement. Subpart D—After-the-Award (5) Records retention as required in Requirements §84.53. (a) Remedies for noncompliance. If a (b) After closeout of an award, a rela- recipient materially fails to comply with §84.70 Purpose. tionship created under an award may be the terms and conditions of an award, modified or ended in whole or in part pi- whether stated in a Federal statute, re u- Sections 84.71 through 84.73 contain with providedhe dee thet of HUD and the orf the lation,assurance,application,or notice of closeout procedures and other procedures ent, referred toresponsibilitiesin§84.73(a), of the PP for subsequent disallowances and adjust- recipient in§ includ- award. HUD may, in addition to impos- mems. ing those for property management as ing any of the special conditions outlined applicable,are considered and provisions in §84.14, take one or more of the made for continuing responsibilities of following actions, as appropriate in the §84.71 Closeout procedures. the recipient, as appropriate. circumstances. (1) Temporarily withhold cash pay- calea)ndar days after he date of ients shall comp9!tio0 §84.73 Collection of amounts due. mems pending correction of the deficien- of the award, all financial, performance, (a) Any funds paid to a recipient in cy by the recipient or more severe en- and other reports as required by the terms excess of the amount to which the recipi- forcement action by HUD. _ and conditions of the award. HUD may ent is finally determined to be entitled (2) Disallow (that is, deny both use of approve extensions when requested by under the terms and conditions of the funds and any applicable matching credit the recipient. award constitute a debt to the Federal for)all or part of the cost.of the activity or (b) Unless HUD authorizes an exten- Government.If not paid within a reason- action not in compliance. sion,a recipient shall liquidate all obliga- able period after the demand for pay- (3) Wholly or partly suspend or termi- tions incurred under the award not later ment, HUD may reduce the debt by nate the current award. than 90 calendar days after the funding paragraphs (a)(1), (a)(2) or (aX3) of this (4) Withhold further awards for the period or the date of completion as section. specified in the terms and conditions of (1) Making an administrative offset project or program. : . the award or in HUD instructions, against other requests for reimburse- (5) Take other remedies that may be (c) HUD shall make prompt payments ments. legally available. to a recipient for allowable reimbursable (2) Withholding advance payments (b) Hearings and appeals. In taking an costs under the award being closed out. otherwise due to the recipient. enforcement action, HUD shall provide (d)The recipient shall promptly refund (3) Taking other action permitted by the recipient an opportunity for hearing, any balances of unobligated cash that statute. appeal, or other administrative proceed- HUD has advanced or paidand that is (b) Except as otherwise provided by ( 1 ing to which the :recipient is entitled not authorized to be retained by the law, HUD shall charge interest on an under any statute or regulation applicable recipient for use in other projects. OMB overdue debt in accordance with 4 CFR Circular A-129 governs unreturned Chapter II, "Federal Claims Collection to the action involved. amounts that become delinquent debts. Standards." (c) Effects of suspension-and termina- (e)When authorized by the terms and lion. Costs of a recipient resulting from conditions of the award,HUD shall make Subpart E—Use of Lump Sum obligations incurred by the recipient dur- a settlement for any upward or downward Grants ing a suspension or after termination of adjustments to the Federal share of costs an award are not allowable unless HUD after closeout reports are received. . expressly authorizes them in the notice of (f)The recipient shall account for any §84.80 Conditions for use of Lump P Y suspension or termination or subsequent- real and personal property acquired with Sum (fixed price or fixed amount)grants. ly. Other recipient'costs_during suspen- Federal funds or received from the Feder- sion or after termination which are neces- Government in accordance with (a) Heads of awarding activities sary and not reasonablyavoidable are §§84.31n throughv84.37: (g) In the event a final audit has not (HAAs) shall determine and publish the allowable if paragraphs.(c)(1)and(c)(2)of •been performed prior to the closeout of funding arrangement for award programs this.section apply. an award, HUD shall retain the right to having a published program regulation or (1) The costs result-from obligations recover an appropriate amount after fully Notice of Funding Availability.For other which were properly incurred by the considering the recommendations on di- Grant discretion may be provided to recipient before the effective date of sallowed costs resulting from the final Grant Officers to determine the funding suspension or termination, are not in audit. arrangement on a transact:Officers s . basis. In anticipation of it,'and in the case of a such cases,Grant s.. . document the basis for selection of the funding termination, are noncancellable. §84.72 Subsequent adjustments and arrangement in the negotiation record. (2)The costs would be allowable if the continuing responsibilities. Appropriate consideration to fixed award were not siispended or expired amount(lump sum)awards shall be made normally at the end of the funding period (a)The closeout of an award does not if one or more of the following conditions in which the termination takes effect. affect any of the following. are present: (d) Relationship to debarment and sus- (1)The right of HUD to disallow costs (1) The HUD funding amount is defi- pension.The enforcement remedies iden- and recover funds on the basis of a later nitely less than the total actual cost of the tilled in this section, including suspen- audit or other review, project. Sion and termination, do not preclude a (2) The obligation of the recipient to (2)The HUD funding amount does not return any funds due as a result of later exceed $100,000 or the small purchase recipient from being subject to debar- refunds, corrections, or other transac- threshold fixed at 41 U.S.C. 403 (I l), merit and suspension under E.O.s 12549 tions. whichever is greater. • and 12689 and HUD's implementing (3) Audit requirements in §84.26. (3) The project scope is very specific regulations at 24 CFR part 24 (see (4)Property management requirements and adequate cost, historical, or unit §84.13). in §§84.31 through 84.37. pricing data is available to establish a Published by West Group COMMUNITY DEVELOPMENT 09:1665 HDR RF-628 2-2-98 fixed amount award with assurance that tion should be related to perform.nce and approved during the award process. It - ' the recipient will realize no increment unit cost data. may include either the Federal and non- above actual cost. (4) Where HUD guarantees or insures Federal share, or only the Federal share, (b) [Reserved) the repayment of money borrowe. by the depending upon HUD requirements. It recipient, HUD, at its discreti.n, may shall be related to performance for pro- §84.81 Definition. require adequate bonding and i surance gram evaluation purposes whenever ap- if the bonding and insurance equire- .propriate. ments of the recipient are not •eemed - (2) Recipients are required to report (a)A lump sum award is an award for a adequate to protect the interes of the deviations from program plans, and re- predetermined amount.as set forth in the Federal Government. quest prior approvals for budget and grant agreement, which amount does not (5)HUD may require adequate fidelity program plan revisions, in accordance vary with the amount of the recipient's bond coverage where the recipie t lacks with this section. actual incurred costs. Under this type of sufficient coverage to protect the Federal (3)For nonconstruction awards,recipi- award. HUD does not pay the recipient Government's interest. ents shall request prior approvals from for its incurred costs but rather for com- (6) Where bonds are require. in the HUD for one or more of the following pleting certain defined events in the work situations described above, the bonds program or budget related reasons. or achievement of some other well-de- shall be obtained from companies I olding (i)Change in the scope or the objective fined milestone. Some of the ways in certificates of authority as ac•eptable of the project or program(even if there is which the grant amount may be paid are, sureties, as prescribed in 31 C'R part no associated budget revision requiring but are not limited to: 223, "Surety Companies Doing :usiness prior written approval). (1) In several partial payments. the with the United States." (ii) The need for additional Federal amount of each agreed upon in advance, (c) Payment. (1)The standard :overn- funding. and the "milest.}ne" or event triggering ing the use of banks and other inst tutions (iii)Unless described in the application the payment also agreed upon in advance, as depositories of funds advance, under and funded in the approved awards, the and set forth in the•grant; awards is,HUD shall not require parate subaward, transfer or contracting out of (2)On a unit pricebasis, for a defined depository accounts for funds pro ided to any work under an award.This provision unit or units (such as a housing counsel- a recipient or establish any el gibility does not apply to the purchase of sup- ing unit), at a defined price or prices, requirements for depositories fo funds plies,material,equipment or general sup- agreed to in advance of performance of provided to a recipient. However recipi- port services. the grant and set forth in the grant; or, ents must be able to account or the (4) No other prior approval require- (3) In one payment at grant comple- receipt, obligation and expendi ure of ments for specific items may be imposed tion. funds. unless a deviation has been approved by (b)The key distinction between a lump (2)Consistent with the national goal of OMB. sum and a cost reimbursement grant is . expanding the opportunities for omen- (5) Except for requirements listed in the lack of a direct relationship between owned and minority-owned busi ess en- paragraphs (d)(3)(i) and (d)(3)(ii) of this the costs incurred by the recipient and the terprises, recipients shall be enc.uraged section, HUD is authorized,at its option, amount paid by HUD in the lump sum to use women-owned and m nority- to waive cost-related and administrative arrangement. owned banks (a bank which is o ned at prior written approvals required by Cir- least 50 percent by women or inority cular A-110 and OMB Circulars A-21 and §84.82 Provisions applicable only to group members). A-122.Such waivers may include author- lump sum grants. (3) Except as noted elsewhere in this izing recipients to do any one or more of part, only the following forms s all be the following. In addition to the provisions of this authorized for the recipients in req esting (i) Initiate a one-time extension of the subpart E, subparts A and B of this part Payments. HUD shall not requir more expiration date of the award of up to 12 apply to lump sum grants. than an original and two copies .f these months unless one or more of the follow- (a) Financial and program manage- forms. ing conditions apply.For one-time exten- ment. Paragraphs (b) through (e) of this (i) SF-270, Request for Adva ce or sions, the recipient must notify HUD in section prescribe standards for financial Reimbursement. HUD has adop.ed the writing with the supporting reasons and management systems, methods for mak- SF-270 as a standard form for all nencon- revised expiration date at least 10 days . ing payments, budget revision approvals, struction programs when electroni funds before the expiration date specified in the and making audits. transfer or predetermined advanc- meth . award. This action may be taken unless: (b)Standards for financial management ods are not used.The SF-270 shall :Iso be (A)The terms and conditions of award systems. used for lump sum payment re.uests. prohibit the extension. (I) Records that identify adequately HUD, however, has the option o using (B) The extension requires additional the source and application of funds for this form for construction progr.ms in Federal funds. federally-sponsored activities are re- lieu of the SF-271, "Outlay Rep.rt and (C)The extension involves any change quired.These records shall contain infor- Request for Reimbursement fo Con- in the approved objectives or scope of the mation pertaining to Federal awards, au- struction Programs." project. thorizations,obligations,unobligated bal- (ii)SF-271,Outlay Report and 'equest (6) For construction awards, recipients ances, assets, outlays, income and inter- for Reimbursement for Constructi•n Pro- shall request prior written approval est. grams. HUD has adopted the SF-P71 as promptly from HUD for budget revisions (2) Effective control over and account- the standard form to be used for r:quest- whenever paragraphs(d)(6)(i)or(d)(6)(ii) ability for all funds, property and other ing reimbursement for constructs. pro- of this section apply. assets are required. Recipients shall ade- grams. However, HUD may su.stitute (i)The revision results from changes in quately safeguard all such assets and the SF-270 when HUD determines that it the scope or the objective of the project or assure they are used solely for authorized provides adequate information t. meet program. purposes. HUD's needs. (ii)The need arises for additional Fed- (3)Comparison of outlays with budget (d) Revision of budget and p 'gram eral funds to complete the project. amounts for each award is required. plans. (1)The budget plan is the fi ancial (7) No other prior approval require- Whenever appropriate,financial informa- expression of the project or prog .m as ments for specific items may be imposed 09:1666 HOUSING AND DEVELOPMENT REPORTER unless a deviation has been approved by and equipment acquired with Federal (2) The recipient shall use the equip- -- • OMB. funds as provided to property owned by ment in the project or program for which (8) When HUD makes an award that the recipient. Federally-owned property it was acquired as long as needed,wheth- provides support for both construction need not be insured unless required by er or not the project or program continues and nonconstruction work, HUD may the terms and conditions of the award. to be supported by Federal funds and require the recipient to request prior (c) Real property. HUD prescribes the shall not encumber the equipment with- approval from HUD before making any following requirements for recipients con- out approval of-HUD. When the equip- fund or budget transfers between the two cerning the use and disposition of real ment is no longer needed for the original types of work supported. property acquired in whole or in part project or program,the recipient shall use (e) Non-Federal audits. (1) Recipients under awards: the equipment in connection with its and subrecipients that are institutions of (1) Title to real property shall vest in other federally-sponsored activities, in higher education or other non-profit orga- the recipient subject to the condition that the following order of priority: nizations (including hospitals) shall be the recipient shall use the real property (i)Activities sponsored by HUD which subject to the audit requirements con- for the authorized purpose of the project funded the original project; then tained in the Single Audit Act Amend- as long as it is needed and shall not (ii)Activities sponsored by other Fed- ments Act of 1996(31 U.S.C.7501-7507) encumber the property without approval eral awarding agencies. and revised OMB Circular A-133, "Au- of HUD. (3) During the time that equipment is dits of States, Local Governments, and (2) The recipient shall obtain written used on the project or program for which Non-Profit Organizations." approval by HUD for the use of real it was acquired, the recipient shall make (i) Non-profit organizations subject of property in other federally-sponsored it available for use on other projects or regulations in the part 200 and part 800 projects when the recipient determines programs if such other use will not inter- series of this title which receive awards that the property is no longer needed for fere with the work on the project or subject to part 84 shall comply with the the purpose of the original project.Use in program for which the equipment was audit requirements of revised OMB Cir- other projects shall be limited to those originally acquired. First preference for • cular A-I33, "Audits of States, Local under federally-sponsored projects (i.e., such other use shall be given to other Governments, and Non-Profit Organiza- awards) or programs that have purposes projects or programs sponsored by HUD tions." For HUD programs, a non-profit. consistent with those authorized for sup- that financed the equipment;second pref- organization is the mortgagor or owner port by HUD. erence shall be given to projects or pro- (as these terms are defined in the regula- (d)Federally-owned and exempt proper - grams sponsored by other Federal award- tions in the part 200 and part 800 series) ty. (1) Federally-owned property. ing agencies. If the equipment is owned and not a related or-affiliated organiza- (i) Title to federally-owned property by the Federal Government,use on other tion or entity. remains vested in the Federal Govern- activities not sponsored by the Federal (ii) [Reserved]. ment.Recipients shall submit annually an Government shall be permissible if au- ( (2)State and local governments shall be inventory listing of ftderally-owned prop- thorized by HUD. subject to the audit requirements con- erty in their custody to HUD. Upon (4) The recipient's property manage- tained in the Single Audit Amendments completion of the award or when the ment standards for equipment acquired Act of 1996 (31 U.S.C. 7501-7507) and property is no longer needed, the recipi- with Federal funds and federally-owned revised OMB Circular A-133, "Audits of ent shall report the property to HUD for equipment shall include all of the follow- States, Local Governments, and Non- further HUD utilization. ing. Profit Organizations." (ii)If HUD has no further need for the (i) Equipment records shall be main- (3) For-profit hospitals not covered by property, it shall be declared excess and tained accurately and shall include the the audit provisions of revised OMB reported to the General Services Admin- following information. Circular.A-133 shall be subject to the istration, unless HUD has statutory au- (A) A description of the equipment. audit requirements of the Federal award- thority to dispose of the property by (B) Manufacturer's serial number, ing agencies. alternative methods (e.g., the authority _ model number, Federal stock number, (4) Commercial organizations shall be provided by the Federal Technology national stock number, or other identifr- subject to the audit requirements of HUD Transfer Act (15 U.S.C. 3710 (I)) to cation number. or the prime recipient as incorporated donate research equipment to educational including into the award document. (C)Source of the equipment, and non-profit organizations in accor- the award number. dance with E.O. 12821, "Improving (D)Whether title vests in the recipient §84.83 Property standards. Mathematics and Science Education in or the Federal Government. Support of the National Education (E) Acquisition date(or date received, (a)Purpose of property standards. Para- Goals.")Appropriate instructions shall be if the equipmert was furnished by the graphs (b) through (g) of this section set issued to the recipient by HUD. Federal Govern ent) and cost. forth uniform standards governing man- (2) Exempt prop.rty. When statutory (F) Location and condition of the agement and disposition of property fur- authority exists, HUD has the option to equipment and the date the information nished by the Federal Government whose vest title to property acquired with Feder- was reported. cost was charged to a project supported al funds in the recipient without further (ii) Equipment owned by the Federal by a Federal award. HUD shall require obligation to the Federal Government Government shall be identified to indi- recipients to observe these standards un- and under conditions HUD considers cate Federal ownership. der awards and shall not impose addition- appropriate. Such property is "exempt (iii)A physical inventory of equipment al requirements, unless specifically re- property." Should HUD not establish shall be taken and the results reconciled quired by Federal statute. The recipient conditions,title to exempt property upon with the equipment records at least once may use its own property management acquisition shall vest in the recipient every two years.Any differences between standards and procedures provided it without further obligation to the Federal quantities determined by the physical observes the provisions of paragraphs(b) Government. inspection and those shown in the ac- through (g) of this section. (e) Equipment. (1) Title to equipment counting records shall be investigated to (b) Insurance coverage. Recipients acquired by a recipient with Federal determine the causes of the difference. shall,at a minimum,provide the equiva- funds shall vest in the recipient,subject to The recipient shall, in connection with lent insurance coverage for real property conditions of this section. the inventory, verify the existence, cur- Published by West Group COMMUNITY DEVELOPMENT 09:1667 HDR RF-628 2-2-98 rent utilization, and continued need for (g) Property trust relationshi Real vors,or anything of monetary value from • ' the equipment. property, equipment, intangible p operty contractors, or parties to subagreements. (iv) A control system shall be in effect and debt instruments that are acq ired or However, recipients may set standards to insure adequate safeguards to prevent improved with Federal funds s all be for situations in which the financial inter- loss, damage, or theft of the equipment. held in trust by the recipient as tru.tee for est is not substantial or the gift is an Any loss. damage. or theft of equipment the beneficiaries of the project •r pro- unsolicited item of nominal value. The shall he investigated and fully document- gram under which the property as ac- standards of conduct shall provide for ed; if the equipment was owned by the quired or improved. HUD may equire disciplinary actions to be applied for Federal Government. the recipient shall recipients to record liens or other appro- violations of such standards by officers, promptly notify HUD. priate notices of record to indic•te that employees, or agents of the recipient. (v) Adequate maintenance procedures personal or real property has b•en ac- (d) Competition. All procurement shall be implemented to keep the equip- quired or improved with Federa funds transactions shall be conducted in a man- ment in good condition. and that use and disposition con•itions ner to provide, to the maximum extent (5) HUD may reserve the right to apply to the property. practical,open and free competition.The transfer the title to the Federal Govern- recipient shall be alert to organizational ment or to a third party named by the §84.84 Procurement standards. conflicts of interest as well as noncompet- Federal Government when such third itive party is otherwise eligible under existing practices among contractors that party is. Such transfer shall be t to (a) Purpose of procurement sta dards. may restrict or eliminate competition or stsh rParagraphs (b) through (i) of this ection. otherwise restrain trade. In order to en- the(i)Thefollowingstandards.equipment shall be appropriate- set forth standards for use by recip ents in sure objective contractor performance ly identified in the award or otherwise establishing procedures for the p ocure- and eliminate unfair competitive advan- made known in the.recipient in writing. .ment of supplies and other expo dable tage, contractors that develop or draft de shalltotnnin-gproperty, equipment, real prope y and specifications, requirements, statements (ii)strs HUDwitsin 120 issue dispositioncalendardays n- other services with Federal funds. These of work, invitations for bids and/or re- standards are furnished to ensu,e that quests for proposals shall be excluded receipt of a final inventory. The final such materials and services are o.tained from competing for such procurements. inventory shall list all equipment ac- in an effective manner and in com+fiance Awards shall be made to the bidder or quired with grant funds and federally- with the provisions of applicable •ederal offeror whose bid or offer is responsive to owned equipment. If HUD fails to issue statutes and executive orders. N. addi- the solicitation and is most advantageous disposition instructions within the 120 tional procurement standards or r quire- to the recipient, price, quality and other calendar day period, the recipient shall ments shall be imposed by HU IP upon factors considered.The other factors shall apply the standards of this section, as recipients, unless specifically requ ed by include the bidder's or offeror's compli- appropriate. Federal statute or executive or.,er or ance with Sectiono3 of the Housing and (iii) When HUD exercises its right to approved by OMB. Urban Development Act of 1968 (12 take title, the equipment shall be subject (b)Recipient responsibilities.Thstar- U.S.C. 1701u), hereafter referred to as to the provisions for federally-owned dards contained in this section i o not "Section 3." Section 3 provides that, to equipment. relieve the recipient of the cont actual (f) Intangible property. (1) The recipi- responsibilities arising under it• con- the greatest extent feasible,and consistent ent may copyright any work that is sub- tract(s). The recipient is the.responsible with existing Federal, State, and local opportu- ject to copyright and was developed, or authority, without recourse to H D, re- laws,and regulations, economic for which ownershipwaspurchased, un- assistancesisgenerated by certaint HUD financial garding the settlement and satisfac ion of shall be directed to low- and der an award. HUD reserves a royalty- all contractual and administrative issues verylow-income persons. Solicitations free. nonexclusive and irrevocable right arising out of procurements enter into shall clearly set forth all requirements to reproduce, publish, or otherwise use in support of an award or other agree- the work for Federal purposes, and to ment.This includes disputes,claim.,pro- that the bidder or offeror shall fulfill in order for the bid or offer to be evaluated authorize others to do so. tests of award,source evaluation o, other (2) Recipients are subject to applicable matters of a contractual nature. atters by the recipient.Any and all bids or offers • regulations governing.patents and inven- concerning violation of statute are to be may be rejected when it is in the recipi tions, including government-wide regula- referred to such Federal, State o. local encs interest to do so. tions issued by the Department of Corn- authority as may have proper ju isdic- (e) Procurement procedures. (1) All re- merce at 37 CFR part 401, "Rights to tion. . cipients shall establish written procure- Inventions Made by Nonprofit Organiza- (c)Codes of conduct.The recipie shall ment procedures. These procedures shall tions and Small Business Firms Under maintain written standards of c.nduct provide for, at a minimum, that para- Government Grants. Contracts and Co- governing the performance of its a ploy- graphs (e)(1)(i), (e)(1)(ii) and (e)(1)(iii)of operative Agreements." ees engaged in the award and admi istra- this section apply. (3)Unless waived by HUD,the Federal tion of contracts.No employee,offi er,or (i) Recipients avoid purchasing unnec- Government has the right to paragraphs agent shall participate in the sel-ction, essary items. (f)(3)(i) and (f)(3)(ii) of this section. award, or administration of a co tract (ii) Where appropriate, an analysis is (i)Obtain, reproduce, publish or other- supported by Federal funds if a r al or made of lease and purchase alternatives wise use the data first produced under an apparent conflict of interest wou d be to determine which would be the most award. involved. Such a conflict would arise economical and practical procurement (ii) Authorize others to receive, repro- when the employee,officer,or agent, any for the recipient. duce, publish,or otherwise use such data member of his or her immediate 1.mily, (iii)Solicitations for goods and services for Federal purposes. his or her partner, or an organi ation provide for all of the following. (4) Title to intangible property and which employs or is about to empl.y any (A)A clear and accurate description of debt instruments acquired under an of the parties indicated herein, as a the technical requirements for the materi- award or subaward vests upon acquisition financial or other interest in the firm al, product or service to be procured. In in the recipient. The recipient shall use selected for an award. The officer-, em- competitive procurements, such a de- that property for the originally-author- ployees, and agents of the recipient shall scription shall not contain features which ized purpose. neither solicit nor accept gratuiti=., fa- unduly restrict competition. 09:1668 HOUSING AND DEVELOPMENT REPORTER (B) Requirements which the bidder/ under the terms and conditions of the quate and timely follow up of all pur- offeror must fulfill and all other factors to proposed procurement. Consideration chases. Recipients shall evaluate contrac- be used in evaluating bids or proposals. shall be given to such matters as contrac- for performance and document,as appro- (C) A description, whenever practica- tor inte3rity;compliance with public poli- priate, whether contractors have met the ble,of technical requirements in terms of cy,including,where applicable,Section 3 terms, conditions and specifications of functions to be performed or perfor- of the Housing and Urban Development the contract. mance required. including the range of Act of 1968 (12 U.S.C. 1701u); record of (i) Contract provisions. The recipient acceptable characteristics or minimum past performance;financial and technical shall include,in addition to provisions to acceptable standards. resources or accessibility to•other neces- define a sound and complete agreement, (D) The specific features of "brand sary resources. In certain circumstances, the following provisions in all contracts. name or equal" descriptions that bidders contracts with certain parties are restrict- The following provisions shall also be are required to meet when such items are ed by agencies' implementation of E.O.'s applied to subcontracts. included in the solicitation. 12549 and 12689, "Debarment and Sus- (1) Contracts in excess of the small (E)The acceptance, to the extent prac- pension,"as set forth at 24 CFR part 24. purchase threshold shall contain contrac- ticable and .onomically feasible, of (5) Recipients shall, on request, make tual provisions or conditions that allow products and services dimensioned in the available for the Federal awarding agen- for administrative, contractual, or legal metric system of measurement. cy, pre-award review and procurement remedies in instances in which a contrac- (F)Preference,to the extent practicable documents,such as requests for proposals for violates or breaches the contract and economically feasible, for products or invitations for bids, independent cost terms, and provide for such remedial and services that conserve natural re- estimates,etc.,when any of the following actions as may be appropriate. sources and protect the environment and conditions apply. (2)All contracts in excess of the small are energy efficient. (i) A recipient's procurement proce- purchase threshold shall contain suitable (2) Positive efforts shall be made by dures or operation fails to comply with provisions for termination by the recipi- recipients to utilize small businesses, mi- the procurement standards in HUD's ent, including the manner by which ter- nority-owned firms. and women's busi- implementation of Circular A-110. mination shall be effecteand the basis ness enterprises, whenever possible. Re- (ii) The procurement is expected to for settlement.In addition,such contracts cipients of Federal awards shall take all of• exceed $100,000 or the•small purchase shall describe conditions under which the the following steps to further this goal. threshold fixed at 41 U.S.C. 403 (11), contract may be terminated for default as (i)Ensure that small businesses,minor- whichever is greater,and is to be awarded well as conditions where the contract may ity-owned firms, and women's business without competition or only one bid or be terminated because of circumstances enterprises are used to the fullest extent offer is received in response to a solicita- beyond the control of the contractor. practicable. tion. (3) Except as otherwise required by (ii) Make information on forthcoming (iii)The procurement,which is expect- statute, an award that requires the con- opportunities available and arrange time ed to exceed the small purchase thresh- tracting (or suhz'ontractir^) for construe- frames for purchases and contracts to old, specifies a "brand name" product. tion or facility . iprove:nents shall pro- encourage and facilitate participation by (iv)The proposed award over the small vide for the recipient to follow its own small businesses, minority-owned firms, purchase threshold is to be awarded to requirements relating to bid guarantees, and women's business enterprises: other than the apparent low bidder under performance bonds, and payment bonds (iii) Consider in the contract process a sealed bid procurement. unless the construction contract or sub- whether firms competing for larger con- (v) A proposed contract modification contract exceeds S 100,000.For those con- tracts intend to subcontract with small changes the scope of a contract or in- tracts or subcontracts exceeding businesses, minority-owned firms, and creases the contract amount by more than $100,000, HUD may accept the bonding women's business enterprises. the amount of the small purchase thresh- policy and requirements of the recipient, (iv)Encourage contracting with consor- old. provided HUD has made a determination tiums of small businesses, minority- (f) Cost and price analysis. Some form that the Federal Government's interest is owned firms and women's business enter- of cost or price analysis shall be made and adequately protected. If such a determi- prises when a contract is too large for one documented in the procurement files in nation has not been made,the minimum of these firms to handle individually. connection with every procurement ac- requirements shall be as follows: (v) Use the services and assistance, as tion.Price analysis may be accomplished (i) A bid guarantee from each bidder • appropriate,of such organizations as the in various ways, including the compari- equivalent to five percent of the bid price. Small Business Administration and the son of price quotations submitted,market The "bid guarantee" shall consist of a Department of Commerce's Minority prices and similar indicia, together with firm commitment such as a bid bond, Business Development Agenc) in the discounts.Cost analysis is the review and certified check,or other negotiable instru- solicitation and utilization of small busi- evaluation of each element of cost to ment accompanying a bid as assurance nesses, minority-owned firms and wom- determine reasonableness, allocability that the bidder shall, upon acceptance of en's business enterprises. and allowability. his bid, execute such contractual docu- (3) The type of procuring instruments (g) Procurement records. Procurement ments as may be required within the time used (e.g., fixed price contracts, cost records and files'for purchases in excess specified. reimbursable contracts, purchase orders, of the small purchase threshold shall (ii)A performance bond on the part of and incentive contracts) shall be deter- include the following at a minimum: the contractor for 100 percent of the mined by the recipient but shall be appro- (I) Basis for contractor selection; contract price. A "performance bond" is priate for the particular procurement and (2)Justification for lack of competition one executed in connection with a con- for promoting the best interest of the when competitive bids or offers are not tract to secure fulfillment of all the con- program or project involved. The "cost- obtained; and tractor's obligations under such contract. plus-a-percentage-of-cost" or"percentage (3) Basis for award cost or price. (iii)A payment bond on the part of the of construction cost" methods of con- (h) Contract administration. A system contractor for 100 percent of the contract tracting shall not be used. for contract administration shall be main- price.A"payment bond"is one executed (4) Contracts shall be made only with tained to ensure contractor conformance in connection with a contract to assure responsible contractors who possess the with the terms, conditions and specifica- payment as required by statute of all potential ability to perform successfully tions of the contract and to ensure ade- persons supplying labor and material in Published by West Group r COMMUNITY DEVELOPMENT 09:1669 HDR RF-628 2-2-98 . the execution of the work provided for in (i)A comparison of actual accomplish- in order to avoid duplicate recordkeep- • the contract. ments with the goals and objectiv-s estab- ing, HUD may make arrangements for (iv) Where bonds are required in the lished for the period, the findin:s of the recipients to retain any records that are situations described herein, the bonds investigator,or both.Whenever a'propri- continuously_.needed for joint use. shall be obtained from companies holding ate and the output of prog ams or (5) HUD, the Inspector General, certificates of authority as acceptable projects can be readily quantifi d. such Comptroller General of the United sureties pursuant to 31 CFR part 223, quantitative data should be relates to cost .States, or any of their duly authorized "Surety Companies Doing Business with data for computation of unit costs. -representatives, have the right of timely the United States." (ii)Reasons why established gals were and unrestricted access to any books, (4) All negotiated contracts (except not met, if appropriate. documents, papers, or other records of those for less than the small purchase (5) Recipients shall not be re. ired to recipients that are pertinent to the threshold) awarded by recipients shall submit more than the original nd two awards, in order to make audits, exami- include a provision to the effect that the copies of performance reports. nations, excerpts, transcripts and copies recipient.HUD,the Comptroller General (6)Recipients shall immediate y notify of such documents. This right also in- of the United States,or any of their duly HUD of developments that have signifi- eludes timely and reasonable access to a authorized representatives,shall have ac- cant impact on the award-supported ac- recipient's personnel for the purpose of cess to any books,documents,papers and tivities. Also, notification shall oe given interview and discussion related to such records of the contractor which are direct- in the case of problems,delays,o adverse documents. The rights of access in this ly pertinent to a specific program for the conditions which materially im.air the paragraph (c)(5) are not limited to the purpose of making audits, examinations, ability to meet the objectives of the required retention period,but shall last as excerpts and transcriptions. award. This notification shalli elude a long as records are retained. (5) All contracts, including small pur- statement of the action taken or c.ntemp- (6) Unless required by statute, HUD chases, awarded by recipients and their lated, and any assistance neede, to re- shall not place restrictions on recipients contractors shall contain the procurement solve the situation. that limit public access to the records of provisions of Appendix A to this rule, as (7) HUD may make site v sits, as recipients that are pertinent to an award, applicable. needed. except when HUD can demonstrate that (8) HUD shall comply with c earance such records shall be kept confidential 85 Reports and records. requirements of 5 CFR part 13.0 when and would have been exempted from 84. § p° requesting performance data fro recipi- ents. Information Act (5 U.S.C. 552) if the (a)Purpose of reports and records.Para- (c) Retention and access requ rements records had belonged to HUD. graphs(b)and(c)of this section set forth for records. the procedures for monitoring and report- (I) This paragraph (c) sets .rth re- §84.86 Termination and enforcement. ing on the recipient's financial and pro- quirements for record retention and ac- gram performance and the necessary Stan- cess to records for awards to re•ipients. (a) Termination. (1) Awards may be dard reporting forms.They also set forth Federal awarding agencies shall of im- terminated in whole or in part only if record retention requirements. pose any other record retention .r access paragraphs(a)(1)(i),(a)(l)(ii),or(a)(1)(iii) (b) Monitoring and reporting program requirements upon recipients. of this section apply. performance. (2)Financial records,supporti g docu- (i) By HUD, if a recipient materially (I)Recipients are responsible for man- ments, statistical records, and .1 other fails to comply with the terms and condi- aging and monitoring each project, pro- records pertinent to an award hall be tions of an award. gram,subaward, function or activity sup- retained for a period of three ye.rs from (ii) By HUD with the consent of the ported by the award. Recipients shall the date of submission of the fina expen- recipient, in which case the two parties monitor subawards to ensure subreci- diture report or, for awards t at are shall agree upon the termination condi- pients have met the audit requirements as renewed quarterly or annually, f om the tions, including the effective date and,in delineated in §84.82(e). date of the submission of the qua erly or the case of partial termination, the por- (2)The Federal awarding agency shall annual financial report, as autho 'zed by tion to be terminated. prescribe the frequency with which the HUD.The only exceptions are th-follow- (iii) By the recipient upon sending to performance reports shall be submitted. ing. HUD written notification setting forth Except as provided in paragraph(b)(6)of (i) If any litigation, claim, or :udit is the reasons for such termination, the this section, performance reports shall started before the expiration of th 3-year effective date, and, in the case of partial not be required more frequently than period,the records shall be retain d until termination, the portion to be terminat- quarterly or less frequently than annually. all litigation, claims or audit endings ed. However, if HUD determines in the Annual reports shall be due 90 calendar involving the records have been esolved case of partial termination that the•re- days after the grant year, quarterly or and final action taken. duced or modified portion of the grant semi-annual reports shall be due 30 days (ii) Records for real prope y and will not accomplish the purposes for after the reporting period. The Federal equipment acquired with Feder.I funds which the grant was made, it may termi- awarding agency may require annual re- shall be retained for 3 years aft-r final nate the grant in its entirety under either ports before the anniversary dates of disposition. paragraphs (a)(1)(i) or (a)(I)(ii) of this multiple year awards in lieu of these (iii)When records are transferr:d to or section. requirements. The final performance re- maintained by the Federal a arding (2)If costs are allowed under an award, ports are due 90 calendar days after the agency, the 3-year retention requ rement the responsibilities of the recipient re- expiration or termination of the award. is not applicable to the recipienp. ferred to in §84.87(a)(1), including those (3)If inappropriate.a final technical or (3) Copies of original records ay be for property management as applicable, performance report shall not be required substituted for the original records if shall be considered in the termination of after completion of the project. authorized by HUD. the award, and provision shall be made (4) When required, performance re- (4) HUD shall request transfer of cer- for continuing responsibilities of the re- ports shall generally contain, for each tain records to its custody from re•ipients cipient after termination, as appropriate. award, brief information on each of the • when it determines that the recoro s poss- (3) If costs are allowed, the cost princi- following: ess long term retention value. H.wever, pies in §84.27 apply, even though the 09:1670 HOUSING AND DEVELOPMENT REPORTER award was made on a lump-sum basis. §84.87 Closeout procedures, subsequent entitled. The recipient shall report all sus- Alternatively, a termination settlement adjustments and continuing petted or reported violations to HUD. may be reached by prorating the grant responsibilities. 3. Davis-Bacon Act. as amended (40 amount against the percentage of comple- .,-..- . - U.S.C. 276a to a-7)— When required by tion or by some other method as deter- (a) Closeout procedures. . Federal program legislation,all construction mined by the Grant Officer,as long as the - (1) Recipients shall submit, within 90 contracts awarded by the recipients and method used results in an equitable settle- calendar days after the date of completion subrecipients of more than $2000 shall ment to both parties. of the award, all financial, performance, include a provision for compliance with the . (b)Enforcement. (1)Remedies for non- and other reports as required by the terms Davis-Bacon Act (40 U.S.C. 276a to a-7) compliance. If a recipient materially fails and conditions of the award. HUD may and _as supplemented by Department of to comply with the terms and conditions approve extensions when requested by Labor regulations (29 CFR part.5, "Labor Con- of an award, whether stated in a Federal the recipient. Standards Provisions Applicable to Con- (2)The recipient shall account for any tracts Governing Federally Financed and statute, regulation, assurance, applica- real and personal property acquired with Assisted Construction"). Under this Act, tion, or notice of award. HUD may, in Federal funds or received from the Feder- contractors shall be required to pay wages to i addition to imposing any of the special al Government in accordance with laborers and meet :cs at a rate not less 1 conditions outlined in §84.14. take one §84.83(b) through (g). than the minimum .. . es specified in a wage or more of the following actions, as (b)Subsequent adjustments and contin- determination made by the Secretary of appropriate in the circumstances. uing responsibilities. Labor. In addition, contractors shall be (i) Temporarily •withhold cash pay- (1)The closeout of an award does not required to pay wages not less than once a ments pending correction of the deficien- affect any of the following: week.The recipient shall place a copy of the cy by the recipient or more severe en- (i) Audit requirements in §84.26. current prevailing wage determination is- forcement action by HUD. (ii) Property management require- sued by the Department of Labor in each ments in §84.83(b) through (g). solicitation and the award of a contract shall (ii)Wholly or partly suspend or termi- (iii) Records retention as required in be conditioned upon the acceptance of the nate the current award. §84.53. wage determination. The recipient shall (iii) Withhold further awards for the (2) After closeout of an award, a rela- report all suspected or reported violations to • project or program. tionship created under an award may be HUD. (iv) Take other remedies that may be modified or ended in whole or in part 4. Contract Work Hours and Safety Stan- legally available. with the consent of HUD and the recipi- dards Act (40 U.S.C. 327 through 333)— (2) Hearings and appeals. In taking an ent. provided the responsibilities of the Where applicable, all contracts awarded by enforcement action. HUD shall provide recipient are considered and provisions recipients in excess of$2000 for construe- the recipient an opportunity for hearing, made for continuing responsibilities of tion contracts and in excess of$2500 for ( appeal, or other administrative proceed- the recipient, as appropriate. other contracts that involve thz employment ' ing to which the recipient is entitled of mechanics or laborers shall include a under any statute or regulation applicable Appendix A to Part 84—Contract provision for compliance with Sections 102 to the action involved. Provisions and 107 of the Contract Work Hours and (3) Effects of suspension and termina- Safety Standards Act (40 U.S.C. 327-333), lion. Costs of a recipient resulting from All contracts, awarded by a recipient as supplemented by Department of Labor obligations incurred by the recipient dur- including small purchases,shall contain the regulations(29 CFR part 5). Under Section ing a suspension or after termination of following provisions as applicable: 102 of the Act, each contractor shall be an award are not allowable unless HUD 1. Equal Employment Opportunity— All required to compute the wages of every expressly authorizes them in the notice of contracts shall contain a provision requiring mechanic and laborer on the basis of a suspension or termination or subsequent- compliance with E.O. 11246, "Equal Em- standard workweek of 40 hours. Work in ly. Other recipient costs during suspen- ployment Opportunity," as amended by excess of the standrd workweek is permissi- sion or after termination which are neves- E.O. l 1375, "Amending Executive Order ble provided that the worker is compensated 11246 Relating to Equal Employment Op- at a rate of not ':._ss than 1 1/2 times the sary and not reasonably avoidable are portunity." and as supplemented by regula- basic rate of pay for a:1 hours worked in allowable if paragraphs (b)(3)(i) and tions at 41 CFR part 60."Office of Federal excess of 40 hours in the workweek.Section (b)(3Xii) of this section'apply. Contract Compliance Programs, Equal Em- 107 of the Act is applicable to construction (i) The costs result from obligations ployment Opportunity. Department of La- work and provides that no laborer or me- which were properly incurred by the bor." chanic s:-: : be required to work in sur- recipient before the effective date of 2. Copeland "Anti-Kickback" Act (18 roll. . .r under working conditions suspension or termination, are not in U.S.C. 874 and 40 U.S.C. 2760— All which a;:: unsanitary, hazardous or danger- anticipation of it, and in the case of a contracts and subgrants in excess of$2000 ous.These requirements do not apply to the termination, are noncancellable. for construction or repair awarded by recipi- purchases of supplies or materials or articles (ii)The costs would be allowable if the ents and subrecipients shall include a provi- ordinarily available on the open market,or award were not suspended or expired sion for compliance with the Copeland contracts for transportation or transmission normally at the end of the funding period "Anti-Kickback" Act (18 U.S.C. 874), as of intelligence. in which the termination takes effect. supplemented by Department of Labor reg- 5. Rig.;:; to Inventions Made Under a (4) Relationship to debarment and sus- ulations (29 CFR part 3. "Contractors and Contract or Agreement—Contracts or agree- pension. The enforcement remedies iden- Subcontractors on Public Building or Public ments for the performance of experimental, Work Financed in Whole or in Part by developmental, or research work shall pro- titled in this section, including suspen- Loans or Grants from the United States"). vide for the rights of the Federal Govern- sion and termination, do not preclude a The Act provides that each contractor or ment and the recipient in any resulting recipient from being subject to debar- subrecipient shall be prohibited from induc- invention in accordance with 37 CFR part mcnt and suspension under E.O.s 12549 ing,by any means. any person employed in 401. "Rights to Inventions Made by Non- • and 12689 and HUD's implementing the construction, completion, or repair of profit Organizations and Srr all Business - regulations at 24 CFR part 24 (see public work, to give up any part of the Firms Under Government Grants, Con- §84.13). compensation to which he is otherwise tracts and Cooperative Agreements," and Published by West Group COMMUNITY DEVELOPMENT 09:1671 HDR RF-628 2-2-98 any implementing regulations issued by pay any person or organization for nfluenc- wise excluded by agencies, and contrac- HUD. ing or attempting to influence an i nicer or tors declared ineligible under statutory or 6. Clean Air.act (42 U.S.C. 7401 et req.) employee of any agency, a me bee of regulatory authority other than E.O. and the Federal Water Pollution Control Congress, officer or employee of I ongress, 12549. Contractors with awards that ex- Act(33 U.S.C. 1251 et.veg.). as amended— or an employee of a member of Co gress in ceed the small purchase threshold shall Contracts and subgrants of amounts in connection with obtaining any Fed ral con- provide the required certification regard- excess of S100.000 shall contain a provision tract, grant or any other award co ered by ing its exclusion status and that of its that requires the recipient to agree to com- 31 U.S.C. 1352. Each tier shall als. disclose 'principalemployees. ply with all applicable standards. orders or any lobbying with non-Federal fu ds that - 9. Drug-Free Workplace Require- regulations issued pursuant to the Clean Air takes place in connection with obtai ing any ments—The Drug-Free Workplace Act of Act(42 U.S.C. 7401 et seq.)and the Federal Federal award. Such disclosures are for- 1988 (42 U.S.C. 701) requires grantees Water Pollution Control Act as amended warded from tier to tier up to the ipient. (33 U.S.C. 1251 et seq.). Violations shall be 8. Debarment and Suspensio (E.O.s (including individuals) of federal agen- reported to HUD and the Regional Office of 12549 and 12689)—No contract shall be cies,as a prior condition of being award- the Environmental Protection Agency made to parties listed on the eneral ed a grant, to certify that they will pro- (EPA). Services Administration's List o Parties vide drug-free workplaces. Each potential 7. Byrd Anti-Lobbying Amendment (31 Excluded from Federal Procure ent- or recipient must certify that it will comply U.S.C. 1352)— Contractors who apply or Nonprocurement Programs in ac .rdance with drug-free workplace requirements in bid for an award of 5100.000 or more shall with E.O.s 12549 and 12689, `Debar- accordance with the Act and with HUD's file the required certification. Each tier ment and Suspension,"as set fo h at 24 'rules at 24 CFR part 24, subpart F. certifies to the tier above that it will not and CFR part 24.This list contains th names Dated: September 1, 1994. Henry G. has not used Federal appropriated funds to of parties debarred, suspended, .r other- Cisneros, Secretary. • Published by West Group Exhibit D: OMB Circular A-12• Cost Princi'les or Non-Pro it Ur•anizations )MB Circular A-122 hrqs;/lwww.whltchousC.$ov;UM13/clrcubks/af12/al11htrnl OFFICE OF MANAGEMENT AND B I GET Cost Principles for Non-Profit Organ' ations AGENCY: Office of Management and Budget ACTION:Final revision of OMB Circular A-122, "Cost Principles far Non-Profit Organizations" • SUMMARY:The Office of Management and Budget(OMB)revises OMB Circular A-122 by amending the definition for equipment;requiring the breakout of indirect costs ' to two categories(facilities and administration) for certain non-profit organizations;modifying the in tiple allocation basis;and,clarifying the treatment of certain cost items. • DATES:The revision is effective on June 1, 1598. • FOR FYJRTITER INFORMATION CONTACT:Federal agencies 'hould contact Gilbert Tran,Office of Federal Financial Management, Office of Management and Budget, ( 02)395-3993.Non-Federal organisations should contact the organization's Federal cognizant age 0 cy. SUPPLEMENTARY INFORMATION: A.Background On October 6, 1995,the Office of Management and Budget(OMB)i-sued a final revision to OMB Circular A-122, "Cost Principles for Non-Profit Organizations,"in th. Federal Register(60 FR 52516) regarding interest allowability.The revision was made in a continuin:. effort to increase consistency across OMB's cost principles cirentars A-122,A-21, "Cost Principles for Ed cational Institutions," and A-87, "Cost Principles for State,Local and Indian Tribal Governments." To further the goals of consistency, OMB proposed on the same date(60 FR 52522)to revise the definiti•n of equipment, to clarify the treatment of certain types of costs,to modify the multiple allocation •ase method for computing indirect cost rate(s),and to place an upper-limit on payments of administrativ expenses for certain non-profit organizations. With this final revision, Circular A-122 consists of the Circular as iss ed in 1980(45 FR 46022;July 8, 1980), as amended in 1984(49 FR 18260;April27, 1984),in 1987 ("2 FR 19788;May 27, 1987),in 1995 (60 FR 52516; October 6, 1995),in 1997(62 FR 45934;August 29, 997), and is this notice.A recompilation of the entire Circular A-122,with all its amendments, :ccompanies the notice.and is available in electronic form on the OMB Home Page at http://www. hitehouse.gov/OMB. B. Current Revisions Circular A-122 is revised in this notice to: 1.Amend the definition of equipment by increasing the capitalizatio threshold to the lesser amount used for financial statement purposes or$5,000(see paragraph 15). 2. Require major non-profit organizations (those receiving more th. • $10 million in direct Federal funding) to report indirect cost rates by two major component categories: facil ties and administration(sec paragraph D,Attachment A). • 3.Modify the multiple allocation base method(MAB)to be consiste it with OMB Circular A-21 (sec 1 of 61 05/09/2000 11:15 AM JnOt,.1(I:41aiA'tL.L. llllkJ.rr w w won,olu.uaua...al.re varWIVlIGYwAtyalLLl4ILL.U41. paragraph D.3). However,major non-profit organizations are not required to use the multiple allocation base method. MAB remains one of the three available methodologies for computing indirect costs. 4. Clarify the treatment of the following cost items to provide consistency across OMB's cost principles circulars(A-21 and A-87)and the Federal Acquisition Regulations,where applicable: • Alcoholic beverages • Advertising and public relations costs • Organization-furnished automobiles • Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringements • Housing and living expenses • Insurance • Memberships • Selling or marketing of goods and services • Severance pay for foreign nationals OMB is not implementing the proposed restrictions on trustees'travel expenses at non-profit organizations. In line with this decision,and to further consistency between cost circulars, OMB will be amending Circular A-21 to allow trustees'travel expenses. OMB defers considering an upper-limit on payment of administrative expenses until better data on indirect costs at non-profit organizations are collected. C.Comments and Responses OMB received about 185 comments from non-profit organizations,Federal agencies,professional organizations and accounting firms. A summary of comments and OMB's responses are included in this notice. Several comments resulted in modifications to OMB's original proposal. • The comments and OMB's responses are summarized by section as follow. Equipment Definition Comment: Clarification is needed on the treatment of depreciation of those assets which had costs between the old$500 threshold and the new$5,000. Response:In order to clarify the accounting for the undepreciated portion of any equipment costs as a result of a change in capitalization levels,paragraph 15 has been added to explain that the undepreciated amount may be recovered by continuing to claim otherwise allowable use allowanc s or depreciation on the equipment, or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. Comment:Clarification is needed on whether equipment under the$5,000 threshold, as established by the . non-profit organizations'policy,requires Federal approval prior to acquisition. Response: Equipment under the$5,000 threshold, as established by the non-profit organization's policy, can be directly charged to sponsored agreements (subparagraph 15.b)without prior Federal approval. Comment: Current subparagraph 13.b requires prior approval for special purpose equipment, as direct costs, with a unit cost of$1,000 or more. This requirement is not consistent with the higher threshold of $5,000 allowed in the proposed revision. This requirement should be revised to be consistent with the 2 of 61 05/09/2000 11:15 AM UYSli etrculurA-111 napuiwww.wmtcnousc.gov,vmuxcircwarynicunicL. utu proposed revision. Response: OMB agrees.The Circular is revised to require prior Feder: approval only for special purpose equipment with a unit cost of$5,000 or more. • Unallowable Cost Items These ten revised cost items arc already unallowable under OMB Cir•ulars A-21, "Cost Principles for Educational Institutions," and A-87, "Cost Principles for State,Local = d Indian.Tribal Governments," and/or the Federal Acquisition Regulations. OMB addressed the issue of trustees'travel in response to the comments received.For the other items, consistency across Federal c•st regulations was a More significant issue than most of the commenters'concerns. Comments related to sp cific cost items are presented below, followed by OMB's responses. Advertising and Public Relations Costs Comment:Current paragraph 37,Public information service.costs, she uld be combined with the "Advertising" paragraph to be consistent with other OMB cost princi ples in Circulars A-21 and A-87. Response:The commenter is correct.The treatment of public inform.tion service costs is now addressed in revised paragraph 1,Advertising and public relations costs.Current agraph 37 is deleted. Comment: CIarify the types of activities that are allowable as public elations costs.Public relations costs to carry out certain functions, such as legitimate program outreach,t at arc required under svonsored programs and contracts should be allowable. - - Response:The Circular is revised to clarify that certain public relatio• costs for the purpose of communicating specific activities related to the sponsored programs o the public or the press are allowable costs.When they are necessary for program outreach effort as required by sponsored programs,public relations costs are allowable. Costs of advertising and public relatio • incurred solely to promote the organization are unallowable. • Comment: Clarify whether advertising media costs such as radio and television are allowable. Response:As long as the public relations costs are specifically req ' ed by the sponsored programs or are related to the promotion of sponsored programs, any reasonable adv, i sing media,including magazines, newspapers,radio,television,direct mail, exhibits, and the like,can e used and its costs are allowable. See paragraph 1.a." Comment:Community relation costs should be allowable as part of program outreach effort for Federal sponsored programs. Response: Community relations are defined in subparagraph 112 as " osc activities dedicati.d to maintain the image of the organization or promoting understanding and favor.ble relations with the community or public at large or any segment of the public." Costs related to comm nity relations are allowable when the costs are required or necessary to the performance of the sponsored •rograms. Organization-furnished automobiles for personal use Comment:For security and economic reasons,non-profit organizati•ns often furnish automobiles and housing for its personnel working on Federal projects(e.g.,overseas projects sponsored by'the U.S. 3 of 61 05/09/2000 11:15 AM QMBCircularA-12Z u , i....v.nu..... p. . •.. _._-._- -...... Agency for International Development or the U.S. State Department).These costs should be allowable as direct costs. Response:The Circular is revised to allow these costs when they are necessary to perform the Federal projects,particularly the overseas sponsored projects with prior approval by the Federal awarding agency. These costs arc allowable only as direct costs to the Federal projects, and not as fringe benefit or indirect costs. Comment: The.Circular should specify which types of automobiles arc allowable or unalloviable(e.g., cars,vans,trucks and buses). Response:The types of automobiles are irrelevant for the purpose of determining the allowability of automobile costs.Rather, the determinant factors should be whether the automobile costs arc reasonable and necessary for the performance of ti a Federal projects and authorized by the Federal awarding agency. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements Comment: Current paragraph 35.d,Professional service costs, should be combined with nci••paragraph 10. Response: OMB agrees. Current paragraph 35.d is deleted.Professional service costs related to defense of antitrust suits,prosecution of claims against the Federal Government and patent infringement litigation arc discussed in new paragraph 10.Professional service costs incurred for organization and reorganization are discussed in paragraph 31, Organization costs. • Comment: Clarification is needed as to when legal costs related to claims,appeals or proceeding become unallowable. Commenters noted that Federal agencies are inconsistent in the determination of the allowability of legal costs as one agency would allow legal Costs up to the point where the ease goes out of the Federal agency appeal process and to the courts,whereas other agencies would only allow legal costs through the first phase of appeals within the Federal agency. Response: The policy makes unallowable legal and related costs for either defending againe't claims made by the Federal Government or prosecuting claims against the Government.As such,once a:inal management decision letter is issued by the agency(for example, a disallowance letter), all legal and related costs are unallowable from that point forward.Unallowable costs would include claims and •defenses pursued through agencies' formal appeal procedures such as administrative law judges and agency appeal boards.Note that legal and related costs may be allowable if the non-profit organization's position is sustained by the administrative appeal process or an agreement is reached between the organization and the Federal Government(see subparagraghs 10.b, 10.c, 10.d and 10.e).This revision is consistent with the language contained in OMB Circular A-21, "Cost Principles for Educational Institutions," Comment:Some commenters objected to the proposed 80 percent limitation itation on reire'eursen ent when the institution is found innocent. Response:The proposed revision was retained because it provides consistency with procurement contracts. This limitation is based on the statutory language of Public Law 100-700,Major Fraud Act of 1988, November 19, 1988 (41 U.S.C.,256 (k)(5)),which only allows recovery of 80 percent of the legal costs. Comment:Legal expenses to defend against lawsuits brought by a foreign government for violation of that country's law should be allowable. Response:The Circular is revised in subparagraph 10.d to authorize Federal agencies to allow legal 4°1'61 05/0912000 11:15 AM OMB CiTculer A-122 napuiwww.wanenouse.goworazucircuillTSJ a I to uuL.nuu1 expenses to defend against lawsuits brought by a foreign govemmen for violation of its law when such costs were necessary or were direct results of the performance of F •eral sponsored programs.The same authorizations apply for legal costs for defense against lawsuits brou:•t by state or local governments. • . Comment:Legal fees to defend against lawsuits filed by former em•1 oyccs for termination or by subrecipients should be allowable. ' Response:Legal fees incurred in defense of lawsuits not brought by: Federal,State,local or foreign government, except when the suits are brought by former employee-under Section 2 of the Major Fraud Act of 1988 (Pub.L. 100-700), arc allowable. - Housing and living expenses Comment:For security and economic reasons,non-profit organizati•ns often furnish automobiles and housing for its personnel working on overseas Federal projects (e.g. overseas projects sponsored by the U.S.Agency for International Development).These costs should be allowable as direct costs. • Response:As previously noted(in the discussion of automobiles), .c Circular is revised to allow these costs when they are necessary to perform the Federal projects and •en they are approved by the Federal awarding agency.These costs are allowable only as direct costs to e Federal projects,and not as fringe benefit or indirect costs. Insurance • Comment: General and casualty liability insurance costs for organi Lion's directors and administrators should be allowable. • Response: General and casualty liability insurance costs for organization's directors and administrators are allowable,subject to limitations, as described in subparagraph 22.a. 2).New subparagraph 22.a.(2).f, • Insurance against defects,prohibits the reimbursement of costs ag - st Federally sponsored awards for product(or services) liability insurance costs. Comment: Medical liability insurance costs for participants in Fede al training programs should be allowable_ Response:Medical liability insurance costs associated with particip. .ts in federal training programs are allowable to Federal programs as direct costs. Comment: Malpractice insurance costs for physicians should be dir-ct charged to Federal programs while malpractice insurance costs for nurses or laboratory assistants,whish are immaterial in most cases,should be charged as indirect costs. • Response: Subparagraph B2 of Attachment A provides that when • direct cost is of minor amounts,it may be treated as an indirect cost for reasons of practicality and efficien y,provided that the accounting treatment for such cost is consistently applied to all final cost objec:ves. Therefore,when malpractice insurance costs for nurses or lab technicians are immaterial in relal.n to its effect on the overall indirect cost rates of the organization,they may be treated as indirect costs. Memberships Comment:Membership costs in civic and community organizatio• . should be allowable. 5of 61 05/09/2000 11:15 AM • Response: Membership costs are allowable for business and professional organizations.The Circular is further revised to allow membership costs in civic and community organizations when associations with these organizations are essential to the performance of the Federal programs(as an outreach function). These membership costs must be approved by the Federal cognizant agency. Comment: Costs of membership in organizations that lobby should be unallowable. Response:Paragraph 25 of the Circular disallows lobbying costs.Membership dues to lobbing organizations are therefore unallowable.The unallowable portion of membership dues is determined by the percentage of lobbying activities versus other allowable activities of the lobbying organization. Selling or Marketing of Goods and Services Comment: Clarification is needed for what types of activities are considered to be the selling or marketing of goods and services. Response: Selling or marketing of goods and services generally include an organization's efforts to market the organization's products or services such as through advertising,organizational image enhancement, market planning and direct selling. Direct selling efforts are those-acts or actions used to induce particular customers to purchase particular products or services of the organization.The allowability provisions for advertising costs are described in paragraph 1. Comment: The guidelines for selling or marketing of goods and services should be consistent with those in FAR 31.205.38(c)(1). _ Response:FAR 31.205.38(c)(1) allows direct selling costs at commercial contractors if they are reasonable in amount.By contrast to the commercial contract context, direct selling costs are general.);not considered to be necessary costs for the performance of Federal sponsored programs by non-profit organizations.In those cases where they are essential for certain Federal sponsored programs,these costs can be charged as direct costs to the Federal sponsoredprograms if they arc approved by the Federal awarding agency. Comment: Given that the Bayh Dole Act encouraged technology transfer, selling or marketing costs of goods or services should be allowable costs.At the minimum, these costs should be allowable as direct costs to the Federal projects, Response:The Circular is revised to allow selling or marketing costs as direct costs to some:Federal sponsored programs when approved by the Federal awarding agency. Severance Pay • Comment:Early retirement benefit's should be allowable costs. Response:Early retirement benefit costs are allowable costs, subject to limitations, and are discussed in subparagraph 6.f,Fringe Benefits, along with other forms of fringe benefits.Paragraph 49, Severance Pay, deals only with severance policy,i.e., dismissal, and the reimbursement of its costs. Comment: Guidelines for costs of severance pay to foreign nationals in excess of customary or prevailing practices should be consistent with section 2151 of the Federal Acquisition Streamlining Act of 1994 (FASA). 6 o f 61 05/09!2000 11:15 AM OMBCircular A-122 ...,... . ... ____—_.,_ .-••—• - -- Response: OMB agrees.The Circular is revised to be consistent with FASA guidelines for severance pay to foreign nationals in excess of customary or prevailing practices.A. a result, the Federal awarding agency may allow these costs when they are necessary for the perfo '•ance of the Federal sponsored programs. • Trustees' Travel Comment: Several commenters opposed the proposal to disallow ' tees'travel costs citing the difficulty of retaining or obtaining members to serve voluntarily on the Board o f Trustees(or Directors)of a non-profit organization,if Board members have to pay for their own travel expenses to attend Board meetings.The commenters added that since serving on a non-profit •rganization's Board is often not as prestigious and desirable as serving on a University's Board(where ' stees'travel costs are.nnattowablc under Circular A-21),non-reimbursement of the travel costs would', ibit the recruitment of Board members. • Response:OMB concurs that disallowing the reimbursement of. ccs'travel costs could inhibit the recruitment of qualified Board members(particularly at smaller non profit organizations),thereby hampering the operations of a non-profit organization.OMB also r ognizes that trustees'travel costs arc reasonable and necessary business costs.As a result,trustees'travel osts remain allowable. Comment:Trustees'travel costs should be allowable if they are reas•nable. Some suggested tests for reasonableness of trustees'travel costs are: limit number of allowed • ••s per year,restriction of trips to organization's principal place of business or reasonable surroundin:., distinction between scheduled Board meetings and emergency Board meetings,and disallowance of first lass airfare travels. Response:All costs charged to Federal projects must satisfy a reaso' ..leness test.Although some of the • suggested reasonableness tests appear to be good,OMB does not b=lieve it is necessary at this time to impose specific restrictions on trustees' travel expenses.The reaso. :bleness of a particular travel expense remains at the judgement of Federal negotiators. Comment: At Head Start organizations,some Trustee members arc first sent for training in the operations of a Head Start program.These travel costs related to training sho d be allowable. Response: Travel costs related to training and education are allowa o le,subject to limitations,and are addressed in paragraph 53 of the Circular,Training and education osts. Comment: At Head.Start organizations,there often are several ad ory boards in addition to the Board of Trustees(or Directors). These advisory boards are involved in day- a-day operations of the organizations and often incur travel costs.Are these costs subject to the same re 'ctions as trustees'travel? Response:Travel costs for members of advisory groups arc allowa le,subject to the limitations in paragraph 55,Travel costs. Multiple Allocation Basis (MAB) Comment: The multiple allocation method for calculating indirect osts rates is much more complicated and burdensome than the simplified method and it will cost non-pr fit organizations much more to prepare the indirect cost proposal. Several commenters recommended the exibility of using one of the three different allocation methods as they are currently described in the ' ircular. The multiple allocation basis (MAB) should remain an optional allocation methodology rather .. a required methodology for certain organizations. 7 of 6I 05/092000 I I:l5 AM Response:The use of MAB for major non-profit organizations promotes consistency in the calculation and the reporting of indirect costs.It would facilitate the accumulation of indirect cost data by cost components (i.e.,facilities and administration) and provide comparable rates between major research non-;profit • organizations and universities.However,OMB recognizes that a conversion to MAB may require some substantial changes in the organization's accounting system and that MAB is not practical for single-function organizations.Therefore,the Circular continues to allow non-profit organizations to use any of the current three allocation methodologies. -. Comment: Several commenters suggested raising the threshold for the requirement to$25 million in direct Federal funding. Several commenters also suggested an exemption from this requirement for single-function organizations regardless of Federal funding levels. Response:The Circular is revise`o allow the use of the current three allocation methodologies for all non-profit organizations.For organizations that receive more than$10 million in direct Federal funding, a breakout of indirect costs into two components,facilities and adminisration,is required regardless of the selected allocation methodology. Comment:The allocation methodology for general administration under MAB on the basis of modified total direct costs conflicts with the required methodology under Co:t Accounting Standard(CAS)410 applicable to contracts using the salaries and wages basis.One commenter suggested that a fully CAS-covered non-profit organization be exempted front the MAB requirement. Response:MAB is not a requirement for non-profit organizations and remains one of the three available methodologies in the Circular for computing indirect costs.In addition,CAS-covered non-profit organizations should continue to follow CAS with respect to the measurement,assignment and allocation of costs. • Comment:The revision should clarify that the modified total direct cost base should only include the first $25,000.of a subcontract regardless of the period during which the project is started(consistent with OMB Circular A-21). Response: The modified total direct cost base, described in subparagraph D.3.f of the Circular,includes the first$25,000 of each subgrant or subcontract regardless of the period covered by the subgrant or subcontract. Subgrant or subcontract costs above$25,000 shall be excluded from the modified total direct cost base. For example, for a$300,000 subgrant that lasts three years,only the first$25,000 incurred on the award should be included in the modified total direct cost base. • Administrative Cap of 26 percent • Comment:Most commenter:: strongly opposed the 26 percent administrative cap stating that such limitation on cost reimbursement is arbitrary,capricious, and unnecessary.Some argued that a cap would be financially disastrous to non-profit organizations because they receive most of their funding from Federal sources (unlike universities). A detailed analysis is urged to determine the average administrative costs applicable to non-profit organizations,if an administrative cap is to be implemented at non-profit organizations. Response: Based on the comments against the implementation of an administrative cap at non-profit organizations, OMB defers the consideration of establishing any administrative cap until better data on indirect costs at non-profit organizations can be collected.If OMB believes that an administrative cap should be implemented, it would be proposed in a subsequent notice. B 0(.61 05/09/2000 11:15 AM OMB Circular A-122 nrtp•r/www.wnucnousc.guvrvriorunuuunraicacc.IIuLII Other Comment: Attachment C of the Circular should be updated since a f= listed organisations no longer exist. • . Response: OMB agrees.Attachment C is updated to delete those org .' ations that no longer exist or are no longer exempted from OMB Circular A-122. • Franklin D.Raines Director Attachments A,B and C of Circular A-122 are revised as follows: A.Attachment A 1.Add subparagraph 3 to paragraph C("Indirect Costs"). • 3.Indirect costs shall be classified within two broad categories: "Fa;lities" and"Administration." "Facilities" is defined as depreciation and use allowances on buildin:s,equipment and capital improvement,interest on debt associated with certain buildings,eq pment and capital improvements,and operations and maintenance expenses. "Administration"is defined . . general administration and general expenses such as the director's office,accounting,personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories o "Facilities" (including cross allocations from other pools, where applicable). Sec indirect cost ra - reporting requirements in subparagraphs D.2.e and D.3.g. 2.Add subparagraph 2.e to paragraph D. e.For an organization that receives more than $10 million in Fede •1 funding of direct costs in a fiscal year,a breakout of the indirect cost component into two broad cate .ries,Facilities and Administration as . defined in subparagraph C.3,is required.The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category(i.e.,Facilities or A. .' tration)is of the distribution base identified with that category. 3.Replace subparagraph D.3 with the following: 3. Multiple allocation base method. a. General.Where an organization's indirect costs benefit its major actions in varying degrees,indirect costs shall be accumulated into separate cost groupings,as describe• in subparagraph b.Each grouping shall then be allocated individually to benefitting functions by me. of a base which best measures the relative benefits. The default allocation bases by cost pool arc des �bed in subparagraph c. b. Identification of indirect costs. Cost groupings shall be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. each grouping shall constitute a pool of expenses that are of like character in terms of functions they benefi and in terms of the allocation base which best measures the relative benefits provided to each function The groupings are classified within the two broad categories: "Facilities" and"Administration," as describ.d in subparagraph C.3. The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this hea. •g are the portion of thJ!costs of the 9 of 61 05/09/200011:15 AM • organization's buildings, capital improvements to land and buildings, and equipment which arc computed in accordance with paragraph 11 of Attachment B ("Depreciation and use allowances"). (2) Interest.Interest on debt associated with certain buildings, equipment and capital improvements are . computed in accordance with paragraph 23 of Attachment B ("Interest,fund raising, and investment management costs"). (3) Operation and maintenance expenses.The expenses under this heading arc those that have been incurred for the administration,operation,maintenance,preservation,and protection of the organization's physical plant.They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings,furniture and equipment;care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety;hazardous waste disposal;property,liability and other insurance relating to property; space and capital leasing;facility planning and management; and,central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs, depreciation and use allowances,and interest costs. (4) General administration and general expenses.The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization.This category shall also include its allocable share of fringe benefit costs,operation and maintenance expense,depreciation and use allowances,and interest costs.Examples of this category include central offices, such as the director's office,the office of finance,business services,budget and planning,personnel,safety and risk management,general counsel,management information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs.For example, salaries of technical staff,project supplies,project publication,telephone toll charges,computer costs, travel costs,and specialized services costs shall be treated as direct costs wherever identifiable to a particular program.The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity.Items such as office supplies,postage,local telephone costs, • periodicals and memberships should normally be treated as indirect costs. • c.Allocation bases. Actual conditions shall be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions.The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason,where neither the cause nor the effect of the relationship is determinable.When an allocation can'be made by . assignment of a cost grouping directly to the function benefited,the allocation shall be r_.- 2.de in that manner.When the expenses in a cost grouping are more general in nature,the allocation shall be made through the use of a selected base which produces results that are equitable to both the Federal Government and the organization.The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards.The results of special cost studies (such as an engineering utility study) shall not be used to determine and allocate the indirect costs to sponsored awards. (1)Depreciation and use allowances.Depreciation and use allowances expenses shall be allocated in the following manner: 10 of 61 05/09200011:15 AM OMBCircular A-122 4 , . ....,. ....�,.. ., .. (a)Depreciation or use allowances on buildings used exclusively in e conduct of a single function, and on capital improvements and equipment used in such buildings, shall be assigned to that function. (b)Depreciation or use allowances on buildings used for more than o e function, and on capital improvements and equipment used in such buildings, shall be allocat d to the individual functions performed in each building on the basis of usable square feet of spac-, excluding common areas,such as hallways, stairwells, and restrooms. (c)Depreciation or use allowances on buildings,capital improvemen s and equipment relatOd space(e.g., individual rooms, and laboratories)used jointly by more than one ction(as:determined by the users of the space)shall be treated as follows.The cost of each jointly used. •'t of space shall be allocated to the benefitting functions on the basis of: (i)the employees and other users on a full-time equivalent(FTE)basis or salaries and wage§of those individual functions benefitting from the use of that space; or • (ii)organization-wide employee FTEs or salaries and wages applica•le to the benefitting functions of the organization. (d)Depreciation or use allowances on certain capital improvements 'o land,such as paved parking areas, fences, sidewalks, and the like,not included in the cost of buildings,shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the S. aries and wages of all employees applicable to the functions. (2)Interest.Interest costs shall be allocated in the same manner as •e depreciation or use allowances on the buildings,equipment and capital equipments to which the intere•t relates. (3)Operation and maintenance expenses. Operation and maintenanc expenses shall be allocated in the same manner as the depreciation and use allowances. (4)General administration and general expenses. General adminis• •tion and general expenses shall be allocated to benefitting functions based on modified total direct cost. (MTDC), as described in subparagraph D.3.f.The expenses included in this category could b: grouped first according to major functions of the organization to which they render services or provi• - benefits.The aggregate expenses of each group shall then be allocated to benefitting functions based on TDC. d. Order of distribution. (1)Indirect cost categories consisting of depreciation and use allow •ces,interest,operation and maintenance, and general administration and general expenses shall be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organization.Other cost categories could be allocated in the order determined to be most ap.ropriate by the organization.When cross allocation of costs is made as provided in subparagraph(2), • s order of allocation does not apply. • • (2)Normally, an indirect cost category will be considered closed o•ce it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it.How-ver,a cross allocation of costs between two or more indirect costs categories could be used if such allocati. will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate mo. fication to the composition of the indirect cost categories is required. 11 of 61 05/09/2000 11:15 AM e. Application of indirect cost rate or rates.Except where a special indirect cost rate(s)is required in accordance with subparagraph D.5,the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function.The costs in the common pool shall then be distributed to individual awards in,luded in that function by use of a single indirect cost rate. £ Distribution basis. Indirect costs shall be distributed to applicable sponsored awards and other benefitting . activities within each major function on the basis of MTDC.MTDC consists of all salaries and wages, • fringe benefits,materials and supplies,services,travel,and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures,charges for patient care,rental costs and the portion in excess of$25,000 shall be excluded from MTDC.Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g.Individual Rate Components.An indirect cost rate shall be determined for each separ`:indirect cost pool developed.The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pooL Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and"Administration," as described in subparagraph C.3. • B.Attachment B Revise the following cost items in Attachment B to Circular A-122("Selected Items of Cost"). 1. Revise the Table of Contents for Attachment B to read: 1.Advertising and public relations costs 2.Alcoholic beverages 3.Bad debts 4. Bid and proposal costs(reserved) 5.Bonding costs 6. Communication costs • • • 7. Compensation for personal services 8, Contingency provisions • 9.Contributions • 10. Defense and prosecution of criminal and civil proceedings, claims,appeals and patent infringement ' 11.Depreciation and use allowances 12.Donations 13.Employee morale,health,and welfare costs and credits 14.Entertainment costs 15. Equipment and other capital expenditures 16.Fines and penalties • 17.Fringe benefits 18. Goods or services for personal use 19.Housing and personal living expenses • 20.Idle facilities and idle capacity 21. Independent research and development(reserved) ' • 22. Insurance and indemnification • 23_Interest,fund raising,and investment management costs 24.Labor relations costs 12 of 6l 05/09/2000 11:15 AM DMB Circular A-122 25.Lobbying costs 26.Losses on other awards 27.Maintenance and repair costs 28.Materials and supplies • . 29.Meetings and conferences 30.Memberships, subscriptions,and professional activity costs 31. Organization costs 32. Overtime, extra-pay shift, and multi-shift premiums 33.Page charges in professional journals 34. Participant support costs 35. Patent costs 36.Pension plans 37.Plant security costs . 38.Pre-award costs 39.Professional service costs 40.Profits and losses on disposition of depreciable property or other .pital assets 41. Publication and printing costs 42. Rearrangement and alteration costs 43.Reconversion costs 44.Recruiting costs • 45. Relocation costs 46.Rental costs . 47.Royalties and other costs for use of patents and copyrights 48. Selling and marketing • 49. Severance pay 50. Specialized service facilities 51.Taxes 52.Termination costs 53.Training and education costs 54.Transportation costs 55.Travel costs '56.Trustees • 2.Revise and retitle paragraph 1 to read: 1.Advertising and public relations costs. . a.The term advertising costs means the costs of advertising media d corollary administrative costs. Advertising media include magazines,newspapers, radio and tele ' ion programs, direct mail,exhibits, and the like, . b.The term.public relations includes community relations and me. I s those activities dedicated to maintaining the image of the organization or maintaining or promo n g understanding and favorable relations with the community or public at large or any segment of e public. c. The only allowable advertising costs are those which are solely fl r (1)The recruitment of personnel required for the performance by t e organization of obligations arising under a sponsored award,when considered in conjunction with all ther recruitment costs,as set forth in paragraph 44("Recruiting costs"); 13 of 61 05/09/2000 11:15 AM (2)The procurement of goods and services for the performance of a sponsored award; ' (3)The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at•a predetermined amount in accordance with OMB Circular A-110, Sec. .34, "Equipment"; or (4)Other specific purposes necessary to meet the requirements of the sponsored award. d.The only allowable public relations costs are: (1) Costs specifically required by sponsored awards; (2) Costs of communicating with the public and press pertaining to specific activities er accomplishments which result from performance of sponsored awards(these costs are considered necess-ry;IS part of the outreach effort for the sponsored awards);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 contract/grant awards, financial matters, etc. e.Costs identified in subparagraphs c and d if incurred for more than one sponsored award.or for both sponsored work and other work of the organization, are allowable to the extent that the principles in paragraphs B("Direct Costs")and C("Indirect Costs")of Attachment A are observed. f.Unallowable advertising and public relations costs include the following: (1) All advertising and public relations costs other than as specified in subparagraphs c, d,and e; (2) Costs of meetings or other events related to fund raising or other organisational activities including: (i) Costs of displays,demonstrations, and exhibits; (ii) Costs of meeting rooms,hospitality suites, and other special facilities used in conjunction with shows and other special events; and (iii) Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; (3)Costs of promotional items and memorabilia,including models,gifts, and souvenirs; (4) Costs of advertising and public relations designed solely to promote the organization. 3. Renumber current paragraphs 2 through 8 as paragraphs 3 through 9,respectively. 4.Add the following new paragraph 2: 2. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 5. In paragraph 7 ("Compensation for personal services"), as renumbered above in item 3,rename the-- current subparagraph g("Pension costs"), as subparagraph h.Add a new subparagraph g: 14 oC61 05109/2000 11:15 AM OMB Circular A-122 uttp://www.wnitenousagoviUm.d/circularaia 111/3 1 LL.D lml g. Organization-furnished automobiles.That portion of the cost o i organization-furnished automobiles that relates to personal use by employees (including transportation t. and from work)is unallowable as fringe benefit or indirect costs regardless of whether the cost is repo ed as taxable income to the employees.These costs are allowable as direct costs to sponsored a and when necessary for the • performance of the sponsored award and approved by awarding ages cics. 6. Renumber current paragraphs 9 through 15 as paragraphs 11 thro gh 17,respectively. 7. Add new paragraph 10: • 10.Defense and prosecution of criminal and civil proceedings, c •is s, appeals and patent infringement. a. Definitions. (1)Conviction, as used herein,means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a.plea, 1.eluding a conviction due to a plea of nolo contendere. (2)Costs include,but arc not limited to,administrative and clerical • .encs;the cost of legal services, whether performed by in-house or private counsel; and the costs of is e services of accountants,consultants, or others retained by the organization to assist it;costs of employee', officers and trustees, and any similar costs incurred before,during,and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings. (3)Fraud, as used herein,means(i) acts of fraud corruption or att. SS pts to defraud the Federal Government or to corrupt its agents,(ii)acts that constitute a cause for debarme. or suspension(as specified in agency regulations), and(iii)acts which violate the False Claims Act,31 U S.C., sections 3729-3731,or the Anti-Kickback Act,41 U.S.C., sections 51 and 54. (4)Penalty does not include restitution,reimbursement,or compen..,tory damages. • (5)Proceeding includes an investigation. b. (1)Except as otherwise described herein, costs incurred in conne tion with any criminal,civil or • administrative proceeding(including filing of a false certification) •ommencedby the Federal Government, or a State,local or foreign government, are not allowable if the pro seeding: (1)relates to a violation of,or failure to comply with,a Federal, State,local or foreign statute or r•gulation by the organization(including its agents and employees), and(2)results in any of the following di..ositions: (a)In a criminal proceeding, a conviction. (b)In a civil or administrative proceeding involving an allegation o fraud or similar misconduct, a • determination of organizational liability. (c)In the case of any civil or administrative proceeding,the imposi 'on of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or s •end the organization, to rescind or void an award, or to terminate an award for default by reason of a 'olation or failure to col:nply with a Jaw or regulation. • 15 of 61 05/09/2000 11:15 AM • (e)A disposition by consent or compromise,if the action could have resulted in any of the dispositions described in(a),(b),(c) or(d). (2)If more than one proceeding involves the same alleged misconduct,the costs of all such proceedings • shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(1). c. If a proceeding referred to in subparagraph b is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement entered into by the organization and the Federal Government,then the costs incurred by the organization in connection with such proceedings that are otherwise not allowable under subparagraph b may be allowed to the extent specifically provided in such agreement. d.If a proceeding referred to in subparagraph b is commenced by a State,local or foreign government,the authorized Federal official may allow the costs incurred by the organization for such proceedings,if such authorized official determines that a costs were incurred as a result of(1) a sr ecific term or condition of a federally-sponsored award,or(2) specific written direction of an authorized orificial of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b,but which are not made unallowable by that subparagraph,may be allowed by the Federal Government,but only to the extent that: • (1)The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action; (2)Payment of the costs incurred,as allowable and allocable costs,is not prohibited by any other provision(s)of the sponsored award; (3)The costs are not otherwise recovered from the Federal Government or a third party,either directly as a result of the proceeding or otherwise; and, (4)The percentage of costs allowed does not exceed the percentage determined by an authorized Federal . official to be appropriate,considering the complexity of the litigation, generally accepted principles governing the award of legal fees in civil actions involving the United States as a party,and such other factors as may be appropriate. Such percentage shall not exceed 80 percent.However,if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage, then the full amount of costs resulting from that agreement shall be allowable. f. Costs incurred.by the organization in connection with the defense of suits brought by its employees or ex-employees under section 2 of the Major Fraud Act of 1988 (Pub.L. 100,-700),including the cost of all r::lief necessary to make such employee whole,where the organization was found liable or settled,are unallowable. . g. Costs of legal, accounting, and consultant services,and related costs,incurred in connection with defense against Federal Government claims or appeals, antitrust suits,or the prosecution of claims or appeals against the Federal Government, are unallowable. h. Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent infringement litigation,.are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph,including directly associated costs, shall be segregated and accounted for by the organization separately.During the pendency of any proceeding 16 of 61 05/09/2000 11:15 AM OMBCircular A-122 .y�. ..... ..._.---a • covered by subparagraphs b and f,the Federal Government shall gen. •lly withhold payment of such costs. However,if in the best interests of the Federal Government,the Fed al Government may provide for conditional payment upon provision of adequate security, or other •• uatc assurance, and'agreements by the organization to repay all unallowable costs,plus interest,if the c.sts are subsequently determined to be unallowable. 8.In paragraph 15("Equipment and other capital expenditures"), as enumbered in item 6 above,replace subparagraphs 15.a.(1) and 15.b.(2) to read: • 15.a.(1) "Equipment"means an article of nonexpendable,tangible p sonal property having a useful life of more than one year and an acquisition cost which equals or exceeds lc lesser of(a)the capitalization level established by the organization for the financial statement purposes, or(b)55000.The unamortizcd portion of any equipment written off as a result of a change in capitalizatio levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on e equipment, or by amortizing the amount to be written off over a period of years as negotiated with •e Federal cognizant agency. 15.b.(2)Capital expenditures for special purpose equipment are all.wable as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of•warding agency. 9. Renumber current paragraphs 16 through 36 as paragraphs 20 •,ough 40,respectively. 10. Add new paragraph 18: 18. Goods or services for personal use.Costs of goods or service• for personal use of the organization's employees are unallowable regardless of whether the cost is report • as taxable income to the employees. 11.Add new paragraph 19: 19.Housing and personal living expenses. a. Costs of housing(e.g., depreciation,maintenance,utilities, . hings,rent,etc.),housing allowances and personal living expenses for/of the organization's officers are .allowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income o the employees.These costs are allowable as direct costs to sponsored awards when necessary for .e performance of the sponsored award and approved by awarding agencies. b.The term"officers"includes current and past officers and empl•yees. 12.Add to paragraph 22.a..(2)("Insurance and indemnification"), : renumbered in item 9,subparagraphs (f)and(g): • (f)Insurance against defects. Costs of insurance with respect to . .y costs incurred to correct defects in the organization's materials or workmanship are unallowable. (g)Medical liability(malpractice)insurance.Medical liability' urance is an allowable cost of Federal research programs only to the extent that the Federal research pr.grams involve human subjects or training of participants in research techniques.Medical liability insuranc: costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in hich the insurer allocate:3 the risk to the • population covered by the insurance. 13.Revise paragraph 30, as renumbered in item 9,to read: 17 of 61 05/09/2000 11:15 AM WM42S-41641411 ••-r- 30.Memberships, subscriptions and professional activity costs. a, _osts of the organization's membership in business,technical, and professional organizations are . allowable. b. Costs of the organization's subscriptions to business,professional, and technical periodicals are allowable. c. Costs of meetings and conferences,when the primary purpose is the dissemination of technical information,are allowable.This includes costs of meals,transportation,rental of facilities, and other items incidental to such meetings or conferences. d. Costs of membership in any civic or community organization are allowable with prior approval by Federal cognizant agency. • e. Costs of membership in any country club or social or dining club or organization are unallowable. 14.Delete subparagraph 39.d, as renumbered in item.9. 15.Delete current paragraph 37("Public service costs"). 16.Renumber current paragraphs 38 through 44 as paragraphs 41 through 47,respectively. 17.Revise paragraph 44,as renumbered in item 16,to read: 44.Recruiting costs. a. Subject to subparagraphs b,c, and d, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of"help wanted" advertising, operating costs of an employment office necessary to secure and maintain an adequate staff,costs of operating an aptitude and edacational testing program,travel costs of employees while engaged in recruiting personnel,travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment program. Where the organization uses employment agencies, costs that are not in excess of standard commercial rates for such services are allowable. b.In publications, costs of help wanted advertising that includes color,includes advertising material for other than recruitment purposes,or is excessive in size(taking into consideration recruitment purposes for which intended and normal organizational practices in this respect),are unallowable. c. Costs of help wanted advertising, special emoluments,fringe benefits,and salary allowances incurred to attract professional personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization, are unallowable. • d.Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost,and the newly hired employee resigns for reasons within his control within twelve months after being hired,the organization will be required to refund or credit such relocation • costs to the Federal Government. 18.Renumber current paragraphs 45 through 51 as paragraphs 49 through 55,respectively. 18 of 61 05/09/2000 11:15 AM OMB Circular A-122 _ 19. Add new paragraph 48: 48. Selling and marketing. Costs of selling and marketing any produ is or services of the organization (unless allowed under paragraph 1 as allowable public relations costs)are unallowable.These costs, however,are allowable as direct costs,with prior approval by awar ' agencies,when they are necessary for the performance of Federal programs. •20.Add new subparagraphs c, d and e to paragraph 49("Severance pay"), as renumbered in item 18, as follow: c. Costs incurred in certain severance pay packages(commonly Imo as "a golden parachute"payment) which arc in an amount in excess of the normal severance pay paid b the organization to an employee upon termination of employment and are paid to the employee contin:ent upon a change in management control over,or ownership o the organization's assets arc unallowab e. d. Severance payments to foreign nationals employed by the organiz.tion outside the United States,to the extent that the amount exceeds the customary or prevailing practices •r the organization in the United States are unallowable,unless they are necessary for the performanc: of Federal programs and approved by awarding agencies. e. Severance payments to foreign nationals employed by the organiztion outside the United States due to the termination of the foreign national as a result of the closing ofi o' curtailment of activities by,the organization in that country,are unallowable,unless they are necess- for the performance of Federal programs and approved by awarding agencies. • 21.Add new paragraph 56: 56.Trustees. Travel and subsistence costs of trustees (or directors) . - allowable.The costs are subject to restrictions regarding lodging,subsistence and air travel costs provi'ed in paragraph 55. C. Attachment C • 1.Delete the following organizations from Attachment C.These•organizations either no longer exist or are no longer exempted from complying with Circular A-122. • • Associated Universities,Incorporated,Washington,D.C. • • 'Associated Universities for Research and Astronomy,Tucso ,Arizona • Center for Energy and Environmental Research(CEER), (U versity of Puerto Rico), Commonwealth of Puerto Rico • • Comparative Animal Research Laboratory(CARL), (Univ 'ty of Tennessee), Oak Ridge, Tennessee . • Institute of Gas Technology, Chicago,Illinois • Montana Energy Research and Development Institute,Inc., RDI),Butte,Montana • Project Management Corporation,Oak Ridge,Tennessee 19 of G I 05/09/200011:15 AM IM..B CircularA-122 ---- — • • Sandia Corporation,Albuquerque,New Mexico • Universities Corporation for Atmospheric Research,Boulder, Colorado 2. Change Argonne Universities Association,Chicago,Illinois to Argonne National Laboratory,Chicago, Illinois. •• 3. Change the location of the Institute for Defense Analysis in Virginia from Arlington to Alexandria. • 4.Replace Midwest Research Institute,Headquartered in Kansas City,Missouri to National Renewable • Energy Laboratory,Golden, Colorado. D. A recompilation of the entire Circular A-122,with all its amendments, follows: -- • . • _.. . - CIRCULAR NO. A-122 Revised • • TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISH.M.ENTS SUBJECT: Cost Principles for Non-Profit Organizations 1. Purpose.This Circular establishes principles for determining costs of grants,contracts and other agreements with non-profit organizations.It does not apply to colleges and universities which are covered by Office of Management and Budget(OMB) Circular A--21, "Cbst Principles for Educational Institutions"; State,local, and federally-recognized Indian t.ibal governments which are covered by OMB Circular A-87, "Cost Principles for State,Local,and Indian.Tribal Governments"; or hospitals.The • principles are designed to provide that the Federal Government bear its fair share of costs except where restricted or prohibited by law.The principles do not attempt to prescribe the extent of cost sharing or matching on grants,contracts, or other agree:j.ents.However, such cost sharing or matching shall not be accomplished through arbitrary limitations on individual cost elements by Federal agencies.Provision for profit or other increment above cost is outside the scope of this Circular. 2. Supersession,This Circular supersedes cost principles issued by individual agencies for non-profit organizations. • 3. Applicability: a.These principles shall be used by all Federal agencies in determining the costs of work.perforrned by non-profit organizations under grants,cooperative agreements,cost reimbursement contracts, and other contracts in which costs are used in pricing, administration,or settlement.All of these instruments are hereafter referred to as awards.The principles do not apply to awards under which an organization is not • required to account to the Federal Government for actual costs incurred. b. All cost reimbursement subawards (subgrants,subcontracts, etc.)are subject to those Federal cost principles applicable to the particular organization concerned.Thus,if a subaward is to a non-profit organization, this Circular shall apply;if a subaward is to a commercial organization,the cost principles applicable to commercial concerns shall apply;if a subaward is to a college or university, Circular A-21 • shall apply; if a subaward is to a State, local, or federally-recognized Indian tribal government, Circular A-87 shall apply. 20 o(61 05/09/200011:1 5 AM OMB Circular A-122�.. __ . ., _.. 4.Definitions. a. Non-profit organization means any corporation,trust, association, cooperative,or other organization • which: • (1)is operated primarily for scientific, educational, service,charitable, or similar purposes in the public interest; (2)is not organized primarily for profit; and (3)uses its net proceeds to maintain,improve, and/or expand its op- :tions. For this purpose, the term "non-profit organization" excludes(i)colleges and universities; (ii) .spitals;(iii)State,local, and federally-recognized Indian tribal governments; and(iv)those non-p ofit organizations which are excluded from coverage of this Circular in accordance with paragraph 5. b. Prior approval means securing the awarding agency's permissio• in advance to incur cost for those items that are designated as requiring prior approval by the Circular. Generally this permission will be in writing.Where an item of cost requiring prior approval is specified the budget of an award,approval of the budget constitutes approval of that cost 5.Exclusion of some non-profit organizations.Some non-profit o iganizations,because of their size and nature of operations,can be considered to be similar to commercial 'onccrns for purpose of applicability of cost principles. Such non-profit organi7ations shall operate under Fes eral cost principles applicable to commercial concerns.A listing of these organizations is contained' Attachment C.Other organizations may be added from time to time. 6.Responsibilities.Agencies responsible for administering pro that involve awards to non-profit organizations shall implement the provisions of this Circular.Upon equest,implementing instruction shall be furnished to OMB. Agencies shall designate a liaison official to erve as the agency representative on matters relating to the implementation of this Circular.The name a d title of such representative shall be furnished to O?�ZB within 30 days of the date of this Circular. 7.Attachments.The principles and related policy guides are set fo in the following Attachments: Attachment A- General Principles Attachment B - Selected Items of Cost .• Attachment C-Non-Profit Organizations Not Subject To This Circular 8. Requests for exceptions. OMB may grant exceptions to the req irements of this Circular when permissible under existing law. However, in the interest of achievi g maximum uniformity,exceptions will be permitted only in highly unusual circumstances. • 9.Effective Date.The provisions of this Circular are effective ' ediately.Implementation shall be phased in by incorporating the provisions into new awards made er the start of the organization's next fiscal year. For existing awards, the new principles may be applied if an organization and the cognizant Federal agency agree.Earlier implementation, or a delay in imple entation of individual provisions, is also permitted by mutual agreement between an organi7ation and a cognizant Federal agency. 21 of 61 ! OS/09/200011:1 S A.MI OMB Circular A-122 10. Inquiries.Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, OMB,Washington,DC 20503,telephone(202)395-3993. Attachments ATTACHMENT A Circular No.A-122 GENERAL PRINCIPLES Table of Contents • A.Basic Considerations • 1. Composition of total costs 2.Factors affecting allowability of costs 3.Reasonable costs 4.Allocable costs 5. Applicable crcdits 6. Advance understandings 7. Conditional exemptions B.Direct Costs C. Indirect Costs _ . D.Allocation of Indirect Costs and Determination of Indirect Cost Rates 1. General 2. Simplified allocation method 3.Multiple allocation base method 4. Direct allocation method 5. Special indirect cost rates • E.Negotiation and Approval of Indirect Cost Rates 1. Definitions 2. Negotiation and approval of rates ATTACHMENT A Circular No. A-122 GENERAL PRINCIPLES A.Basic Considerations 1. Composition of total costs.The total cost of an award is the sum of the allowable direct and allocable indirect costs less any applicable credits. 22 of 61 OS/09n000 11:15 AM OMB CircularA-l22 .,..,,..... _.___—e_.._...—•---�._.. 2.Factors affecting allowability of costs.To be allowable under an a ard, costs must meet the following general criteria: a.Be reasonable for the performance of the award and be allocable th reto under these principles. b. Conform to any limitations or exclusions set forth in these principl s or in the award as to types or amount of cost items. c.Be consistent with policies and procedures that apply uniformly to oth federally-financed and other activities of the organization. • d.Be accorded consistent treatment. e. Be determined in accordance with generally accepted accounting p ..ciples(GAAP). f.Not be included as a cost or used to meet cost sharing or matching quirements of any other federally-financed program in either the current or a prior period. g.Be adequately documented. 3.Reasonable costs. A cost is reasonable if,in its nature or amount, t does not exceed that which would be incurred by a prudent person under the circumstances prevailing at e time the decision was made to incur the costs. The question of the reasonableness of specific costs must •e scrutinized with particular care in connection with organizations or separate divisions thereof which r- eive the preponderance of their support from awards made by Federal agencies.In determining the r asonableness of a given cost, consideration shall be given to: - a.Whether the cost is of a type generally recognized as ordinary an. necessary for the operation of the organization or the performance of the award. b.The restraints or requirements imposed by such factors as general y accepted sound business practices, arms length bargaining,Federal and State laws and regulations, and terms and conditions of the award. c. Whether the individuals concerned acted with prudence in the cir umstances,considering their responsibilities to the organization,its members, employees, and cli nts,the public at large, and the • Federal Government. • d. Significant deviations from the established practices of the org tion which may unjustifiably increase the award costs. • • 4.Allocable costs. a.A cost is allocable to a particular cost objective,such as a grant, ontract,project,service, or other activity, in accordance with the relative benefits received.A cost is llocablc to a Federal award if it is treated consistently with other costs incurred for the same purpose i lice circumstances and if it: • (1)Is incurred specifically for the award. (2)Benefits both the award and other work and can be distributed' reasonable proportion.to the benefits received,or 23of61 •• 05/09/200011:15 AM OMB Circular A-122 ....,. ...»... .»._. _ _.._.----._.. (3) Is necessary to the overall operation of the organization, although a direct relationship to any particular cost objective cannot be shown. b.Any cost allocable to a particular award or other cost objective under these principles may not be shifted • to other Federal awards to overcome funding deficiencies,or to avoid restrictions imposed by law or by the terms of the award. 5.Applicable credits. -. a.The term applicable credits refers to those receipts,or reduction of expenditures which operate to offset or reduce expense items that arc allocable to awards as direct or indirect costs.Typical examples of such transactions are:purchase discounts,rebates or allowances,recoveries or indemnities on losses,insurance refunds, and adjustments of overpayments or erroneous charges.To the extent that such credits accruing or received by the organization relate to allowable cost,they shall be credited to the Federal Government either as a cost reduction or cash refund,as appropriate. b.In some instances,the amounts received from the Federal.Government to finance organizational activities or service operations should be treated as applicable credits.Specifically,the concept of netting such credit items against related expenditures should be applied by the organization in determining the rates or amounts to be charged to Federal awards for services rendered whenever the facilities or other resources used in providing such services have been financed directly,in whole or in part,by Federal funds. c.For rules covering program income(i.e., gross income earned from federally-supported`activities)see Sec._.24 of Office of Management and Budget(OMB) Circular A-110, "Uniform Administrative _ Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals,and Other Non-Profit Organizations." 6.Advance understandings.Under any given award,the reasonableness and allocability of certain items of costs may be difficult to determine.This is particularly true in connection with organizations that receive a . preponderance of their support from Federal agencies.In.order to'avoid subsequent disallowance or dispute based on unreasonableness or nonallocabi]ity,it is often desirable to seek a written agreement with the cognizant or awarding agency in advance of the incurrence of special or unusual costs. The absence of an advance agreement on any element of cost will not,in itself affect the reasonableness or allocability of that element. 7. Conditional exemptions. a. OMB authorizes conditional exemption from OMB administrative requirements and cost principles circulars for certain Federal programs with statutorily-authorized consolidated planning and consolidated administrative funding,that are identified by a Federal agency and approved by the head of the Executive department or establishment_A Federal agency shall consult with 0MB during its consideration of whether to grant such an exemption. b. To promote efficiency in State and local program administration,when Federal non-entitlement programs with common purposes have specific statutorily-authorized consolidated planning and consolidated administrative funding and where most of the State agency's resources come from non-Federal sources,Federal agencies may exempt these covered State-administered,non-entitlement grant programs from certain OMB grants management requirements.The exemptions would be from all but the allocability of costs provisions of OMB Circulars A-87(Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for 24 of 61 05/09/2000 11:15 AM OMB Circular A•122 Educational Institutions," and A-122 (Attachment A, subsection A.4 , "Cost Principles for Non-Profit Organizations," and from all of the administrative requirements prov ions of OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements 'th Institutions of Higher Education, Hospitals,and Other Non-Profit Organizations," and the agencies' : . is management common rule. • c.When a Federal agency provides this flexibility,as a prerequisite a State's exercising this option, a State must adopt its own written fiscal and administrative requireme•is for expending and accounting for all fiords,which are consistent with the provisions of OMB Circular - -87,and extend such policies to all subrecipients.These fiscal and administrative requirements must be . fficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory - .d regulatory provisions,costs are reasonable and necessary for operating these programs,and funds ar not be used for general expenses required to carry out other responsibilities of a State or its subrecipi=nts. B. Direct Costs 1.Direct costs are those that can be identified specifically with a p- ':cular final cost objective,i.e.,a particular award,project,service,or other direct activity of an or:• • ation.However, a cost may not be assigned to an award as a direct cost if any other cost incurred for • - same purpose, in like circumstance, has been allocated to an award as an indirect cost.Costs identified •ecifically with awards are direct costs of the awards and are to be assigned directly thereto.Costs identifi- • specifically with other final cost objectives of the organization are direct costs of those cost objectiv-s and are not to be assigned to other awards directly or indirectly. 2.Any direct cost of a minor amount may be treated as an indirect •st for reasons of practicality where the accounting treatment forsuch cost is consistently applied to all fin• cost objectives. 3.The cost of certain activities are not allowable as charges to Fed al awards(see,for example, fundraising costs in paragraph 23 of Attachment B).However,e en though these costs are unallowable for purposes of computing charges to Federal awards, they nonethe ess must be treated as direct costs for purposes of determining indirect cost rates and be allocated their sh: e of the organizations indirect costs if they represent activities which(1) include the salaries of personnel, (2) occupy space,and(3)benefit from the organization's indirect costs. 4. The costs of activities performed primarily as a service to memo rs, 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. So a examples of these types of activities include: a.Maintenance of membership rolls, subscriptions,publications, d related functions. b.Providing services and information to members, legislative or a inistrative bodies, or the public. • c. Promotion,lobbying, and other forms of public relations. d. Meetings and conferences except those held to conduct the gene administration of the organization. c.Maintenance,protection, and investment of special funds not us din operation of the organization. f. Administration of group benefits on behalf of members or clien , including life and hospital insurance, annuity or retirement plans,financial aid,etc. 25 of 61 05/09/2000 11:15 AM C. Indirect Costs 1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective.Direct cost of minor amounts may be treated as indirect • costs under the conditions described in subparagraph B.2.After direct costs have been determined and assigned directly to awards or other work as appropriate,indirect costs are those remaining to be allocated to benefiting cost objectives.A cost may not be allocated to an award as an indirect cost if any other cost incurred for the same purpose,in like circumstances,has been assigned to an award as a direct cost. 2.Because of the diverse characteristics and accounting practices of non-profit organizations,it is not possible to specify the types of cost which may be classified as indirect cost in allsituations.However, typical examples of indirect cost for many non-profit organizations may include depreciation or use allowances 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. 3.Indirect costs shall be classified within two broad categories: "Facilities" and"Administration." "Facilities" is defined as depredation and use allowances on buildings,equipment and capital improvement,interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. "Administration"is defined as general administration and general expenses such as the director's office, accounting,personnel,library expenses and all other types of expenditures not listed specifically under one of the subcategories of"Facilities"(including cross allocations from other pools,where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g. • D.Allocation of Indirect Costs and Determination of Indirect Cost Rates • 1.General. • a. Where a non-profit organization has only one major function,or where all its major functions benefit from its indirect costs to approximately the samedegree,the allocation of indirect costs and the . computation of an indirect cost rate may be accomplished through simplified allocation procedures, as described in subparagraph 2. b.Where an organization has several major functions which benefit from its indirect costs in varying degrees, allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to benefiting functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function arc then distributed to individual awards and other activities included in that function by means of an indirect cost rate(s). c.The determination of what constitutes an organization's major functions will depend on its purpose in being; the types of services it renders to the public, its clients,and its members; and the amount of effort it devotes to such activities as fundraising,public information and membership activities. d. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described in subparagraphs 2 through 5. e.The base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to work performed in that period. The base period normally should coincide with the organization's fiscal year but, in any event, shall be so selected as to avoid inequities in the allocation of the costs. • 26o161 05/09/200011:15 AM OMBCircular A-IT2 ...,._. »_..._.__-___.o._••--•—•_-._.._. 2.Simplified allocation method. a. Where an organization's major functions benefit from its indirect 4sts to approximately the same degree, the allocation of indirect costs may be accomplished by(i) s arating the organization's total costs for the base period as either direct or indirect,and(ii)dividing the to al allowable indirect costs(net of applicable credits)by an equitable distribution base.The result of thi process is an indirect cost rate which is used to distribute indirect costs to individual awards. The rate sho ld be expressed as the percentage which the total amount of allowable indirect costs bears to the base s lected.This method should also be used where an organization has only one major funcrion encompassi g a number of individual projects or activities, and may be used where the level of Federal awards to anorganization is relatively small. b.Both the direct costs and the indirect costs shall exclude capital a 1.enditures and unallowable costs. However,unallowable costs which represent activities must be inclu.ed in the direct costs under the conditions described in subparagraph B3. c. The distribution base may be total direct costs(excluding capital -xpenditures and other distorting items, such as major subcontracts or subgrants),direct salaries and wages, •r other base which results in an equitable distribution.The distribution base shall generally exclude ,articipant support costs as defined in paragraph 34 of Attachment B. d.Except where a special rate(s)is required in accordance with sub aragraph 5,the indirect cost rate developed under the above principles is applicable to all awards at ii a organization. If a special rate(s)is required,appropriate modifications shall be made in order to develo• the special rate(s). e. For an organisation that receives more than S10 million in Feder. funding of direct costs in a fiscal year,a breakout of the indirect cost component into two broad cate yeries,Facilities and Administration as defined in subparagraph C.3, is required.The rate in each case sh• be stated as the percentage which the amount of the particular indirect cost category(i.e.,Facilities or A. ..nistration)is of the distribution base identified with that category. 3.Multiple allocation base method . a. General.Where an organization's indirect costs benefit its major I •etions in varying degrees,indirect • costs shall be accumulated into separate cost groupings,as describe• in subparagraph b. Each grouping shall then be allocated individually to benefitting functions by me. . of a base which best measures the relative benefits.The default allocation bases by cost pool are des bed in subparagraph c. b. Identification of indirect costs. Cost groupings shall be establish:* so as to permit the allocation of each grouping on the basis of benefits provided to the major functions.E-ch grouping shall constitute a pool of 1 expenses that are of like character in terms of functions they benefi I and in terms of the allocation base which best measures the relative benefits provided to each fiinctio• The groupings are classified within the two broad categories: "Facilities" and"Administration," as describ-d in.subparagraph C3.The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this hea gaze the portion of the costs of the organization's buildings, capital improvements to land and building , and equipment which are computedeprecuse allowances"). in accordance with paragraph 11 of Attachment B ("Diatio and (2) Interest.Interest on debt associated with certain buildings, equi went and capital improvements arc computed in accordance with paragraph 23 of Attachment B ("In erest, fundraising, and investment 27of61 05/09n000 11:15 AM management costs"). (3)Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration,operation,maintenance,preservation, and protection of the organization's - physical plant.They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings,furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness;environmental safety;hazardous waste disposal;property,liability and other insurance relating to property; space and capital leasing; facility planning and management; and,—central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs,depreciation and use allowances,and interest costs. (4) General administration and general expenses.The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization.This category shall- also include its allocable share of fringe benefit costs,operation and maintenance expense, depreciation and use allowances,and interest costs.Examples of this category include cen'--al offices,such as the director's office,the office of finance,business services,budget and planning,personnel, safety and risk management, general counsel,management information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs.For example, salaries of technical staf project supplies,project publication,telephone toll charges,computer costs, travel costs,and specialized services costs shall be treated as direct costs wherever identifiable to a particular program.The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs.Direct charging of these costs may be appropriate where a major project or activity • explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity.Items such as office supplies,postage,local telephone costs, periodicals and memberships should normallybe treated as indirect costs. • c.Allocation bases.Actual conditions shall be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions.The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason,where • neither the cause nor the effect of the relationship is determinable.When art allocation can be made by assignment of a cost grouping directly to the function benefited,the allocation shall be made in that manner. When the expenses in a cost grouping are more general in nature,the allocation shall be made through the use.of a selected base which produces results that are equitable to both the Federal Government and the organization.The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards. The results of special cost studies(such as an engineering utility study) shall not be used to determine and allocate the indirect costs to sponsored awards. (1)Depreciation and use allowances.Depreciation and use allowances expenses shall be allocated in the following manner: (a)Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings,shall be assigned to that function. (b)Depreciation or use allowances on.buildings used for more than one function, and on capital 28 of G l 05/09/2000 11:15 AM OMB Circular A-122 improvements and equipment used in such buildings, shall be allocated to the individual fpinctions performed in each building on the basis of usable square feet of space, excluding common areas,such as hallways, stairwells, and restrooms. (c)Depreciation or use allowances on buildings,capital improvem is and equipment related space(e.g., individual rooms,and laboratories)used jointly by more than one ction(as determined by the users of the space)shall be treated as follows.The cost of each jointly used nit of space shall be allocated to the benefitting functions on the basis of: _ • (i)the employees and other users on a full-time equivalent(FTE)b is or salaries and wages of those individual functions benefitting from the use of that space; or - • (ii)organization-wide employee FTEs or salaries and wages applic ble to the benefitting functions of the organization. (d)Depreciation or use allowances oa certain capital improvement to land,such as paved parking areas, fences,sidewalks,and the like,not included in the cost of buildin , shall be allocated to user categories on • a FTE basis and distributed to major functions in proportion to the alaries and wages of all employees applicable to the functions. (2)Interest.Interest costs shall be allocated in the same manner as .e depreciation or use allowances on the buildings, equipment and capital equipments to•which the inter st relates. (3)Operation and maintenance expenses. Operation and mainten e expenses shall be allocated in the same manner as the depreciation and use allowances. (4)General administration and general expenses. General adnninis IR •tion.and general expenses shall be allocated to benefitting functions based on modified total direct co• (MTDC), as described in subparagraph D.3.f.The expenses included in this category coul. be grouped first according to major functions of the organization to which they render services or pro de benefits.The aggregate expenses of each group shall then be allocated to benefitting functions based o MTDC. • d. Order of distribution. ' (1)Indirect cost categories consisting of depreciation and use allo antes,interest,operation and maintenance, and general administration and general expenses sh. 1 be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organization.Other cost ii categories could.bc allocated in the order determined to be most a•1• •priate by the organization.When cross allocation of costs is made as provided in subparagraph (2) this order of allocation does not apply. i (2)Normally, an indirect cost category will be considered closed o ice it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it.Ho ver, a cross allocation of costs between two or more indirect costs categories could be used if such allocati n will result in a more equitable allocation of costs.If a cross allocation is used,an appropriate mo f cation to the composition of the indirect cost categories is required. e.Application of indirect cost rate or rates.Except where a special indirect cost rate(s)is required in accordance with subparagraph D.5,the separate groupings of ind ect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual awards included in that fine 'on by use of a single indirect cost rate. 29 of 61 05/09!2000 11:15 AM f.Distribution basis.Indirect costs shall be distributed to applicable sponsored awards and other benefitting activities within each major function on the basis of MTDC.MTDC consists of all salaries and wages, hinge benefits,materials and supplies, services,travel,and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). • Equipment,capital expenditures, charges for patient care,rental costs and the portion in excess of$25,000 shall be excluded from MTDC.Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g,Individual Rate Components.An indirect cost rate shall be determined for each separate indirect cost pool developed.The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pooL Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool'as well as the overall indirect cost rate.The indirect cost pools shall be classified within two broad categories: "Facilities"and"Administration," as described in subparagraph C.3. • 4. Direct allocation method. • a. Some non-profit organizations treat all costs as direct costs except general administration and general expenses.These organizations generally separate their costs into three basic categories:(i) General administration and general expenses, (ii)fundraising,and(iii)other direct functions(including projects performed under Federal awards).Joint costs,such as depreciation,rental costs,operation and maintenance of facilities,telephone expenses, and the like are prorated individually as direct costs to each category and to each award or other activity using a base most appropriate to the particular cost being prorated. b.This method is acceptable,provided each joint cost is prorated using a base which accurately measures the benefits provided to each award or other activity.The bases must be established in accordance with reasonable criteria,and be supported by current data.This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations issued jointly by the National Health Council,Inc.,the National Assembly of Voluntary Health and Social Welfare Organ»ations, and the United Way of America. c.Under this method,indirect costs consist exclusively of general administration and general expenses.In all other respects, the organ'7ation's indirect cost rates shall be computed in the same mariner as that described in subparagraph 2. 5. Special indirect cost rates.In some instances, a single indirect cost rate for all activities of an organization or.for each major function of the organization may not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs applicable to a. particular segment of work.For this purpose,a particular segment of work may be that performed under a single award or it may consist of work under a group of+:wards performed in a common environment. These factors may include the physical location of the work,the level of administrative support required, the nature of the facilities or other resources employed,the scientific disciplines or technical skills involved,the organizational arrangements used,or any combination thereof When a particular segment of work is performed in an environment which appears to generate a significantly different level of indirect • costs,provisions should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom should be used,provided it is determined that(i)the rate differs significantly from that which would have been obtained under subparagraphs 2,3,and 4, and(ii)the volume of work to which the rate would apply is material. 30 of 61 05/09/200011:15 AM )MB Circular A-122 E.Negotiation and Approval of Indirect Cost Rates 1.Definitions. As used in this section,the following teams have the meanings set forth below: • a. Cognizant agency means the Federal agency responsible for nego 'acing and approving indirect cost rates for a non-profit organization on behalf of all Federal agencies. b.Predetermined rate means an indirect cost rate,applicable to a sp cified current or future period, usually the organization's fiscal year. The rate is based on an estimat of the costs to be incurred during the period. A predetermined rate is not subject.to adjustment. c.Fixed rate means an indirect cost rate which has the same charact: 'sties as a predetermined rate,except . that the difference between the estimated costs and the actual costs o the period covered by the rate is carried forward as an adjustment to the rate computation of a subsea eat period. d.Final rate means an indirect cost rate applicable to a specified p.• period which is based on the actual costs of the period.A final rate is not subject to adjustment. e.Provisional rate or billing rate means a temporary indirect cost .to applicable to a specified period which is used for funding,interim reimbursement,and reporting in a ect costs on awards pending the establishment of a final rate for the period. E Indirect cost proposal means the documentation prepared by an rganization to substantiate its claim for the reimbursement of indirect costs.This proposal provides the asis for the review and negotiation leading to the establishment of an organization's indirect cost rate. . g. Cost objective means a function,organizational subdivision, con ct, grant,or other work unit for which cost data are desired and for which provision is made to ace ulate and measure the cost of processes,projects,jobs and capitalized projects. 2.Negotiation and approval of rates. a.Unless different arrangements are agreed to by the agencies cone •ed, the Federal agency with the largest dollar value of awards with an organization will be designat d as the cognizant agency for the negotiation and approval of the indirect cost rates and,where neces.ary,other rates such as fringe benefit and computer charge-out rates. Once an agency is assigned cogniz. e for a particular non-profit organization,the assignment will not be changed unless there is a a ajor long-term shift in the dollar volume of the Federal awards to the organization.All concerned F"eral agencies shall be given the opportunity to participate in the negotiation process but, after a rat-has been agreed upon,it will be accepted by all Federal agencies.When a Federal agency has reaso to believe that special operating factors affecting its awards necessitate special indirect cost rates in accordance with subparagraph D.5,it will,prior to the time the rates are negotiated,notify the cognizant :gency. b. A non-profit organization which has not previously established indirect cost rate with a Federal agency shall submit its initial indirect cost proposal immediately er the organization is advised that an award will be made and, in no event, later than three months after e effective date of the award. • c. Organizations that have previously established indirect cost ratc must submit a new indirect cost proposal to the cognizant agency within six months after the close f each fiscal year. d.A predetermined rate may be negotiated for use on awards where there is reasonable assurance,based on 31 of 61 • 05/09/2000 11:1 S AM MB Circular A-122 past experience and reliable projection of the organization's costs,that the rate is not likely to exceed a rate based on the organization's actual costs. e.Fixed rates may be negotiated where predetermined rates are not considered appropriate.A fixed rate, however,shall not be negotiated if(i)all or a substantial portion of the organization's awards are expected to expire before the carry-forward adjustment can be made; (ii)the mix of Federal and non-Federal work at the organization is too erratic to permit an equitable carry-forward adjustment; or(iii)the organization's operations fluctuate significantly from year to year. f. Provisional and final rates shall be negotiated where neither predetermined nor fixed rates are appropriate. g.The results of each negotiation shall be formalized in a written agreement between the cdgnizant agency and the nc,n-profit organization.The cognizant agency shall distribute copies of the agrrvernent to all concerned Federal agencies. h.If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency and the non-profit organization,the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency. i.To the extent that problems are encountered among the Federal agencies in connection with the negotiation and approval process,0MB will lend assistance as required to resolve such prtiblems in a timely manner. ATTACHMENT B , Circular No.A-122 SELECTED ITEMS OF COST Table of Contents 1.Advertising and public relations costs 2.Alcoholic beverages 3. Bad debts 4.Bid and proposal costs(reserved) 5.Bonding costs 6. Communication costs 7. Compensation for personal services 8. Contingency provisions 9. Contributions 10.Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringement 11.Depreciation and use allowances 12.Donations 13.Employee morale,health, and welfare costs and credits 14.Entertainment costs 15. Equipment and other capital expenditures 16.Fines and penalties 17. Fringe benefits • 18. Goods or services for personal use 19.Housing and personal living expenses 32 of 6l - 05/09/2000 11:15 AM DMB Circular A-122 20. Idle facilities and idle capacity 21.Independent research and development(reserved) 22.Insurance and indemnification 23.Interest, fund raising, and investment management costs 24.Labor relations costs • 25.Lobbying • 26. Losses on other awards 27.Maintenance and repair costs 28.Materials and supplies 29.Meetings and conferences 30.Memberships,subscriptions,and professional activity costs 31.Organization costs • 32. Overtime,extra-pay shift, and multi-shift premiums 33.Page charges in professional journals 34.Participant support costs 35.Patent costs 36.Pension plans 37. Plant security costs 38.Pre-award costs 39.Professional service costs 40.Profits and losses on disposition of depreciable property or other capital assets 41.Publication and printing costs 42.Rearrangement and alteration costs 43.Reconversion costs 44.Recruiting costs 45.Relocation costs 46.Rental costs 47.Royalties and other costs for use of patents and copyrights . • 48. Selling and marketing 49. Severance pay • 50. Specialized service facilities • 51.Taxes 52.Termination costs 53.Training and education costs 54.Transportation costs 55.Travel costs 56.Trustees ATTACHMENT B Circular No.A-122 • SELECTED ITEMS OF CO • Paragraphs 1 through 56 provide principles to be applied in esta fishing the allowability of certain items of cost.These principles apply whether a cost is treated as direct indirect.Failure to mention a particular item of cost is not intended to imply that it is unallowable;rather, etermination as to allowability in each case should be based on the treatment or principles provided for si filar or related items of cost. • 1.Advertising and public relations costs. • a.The term advertising costs means the costs of advertising medi and corollary administrative costs. 33 of 61 • 05/09/200011:15 AM Advertising media include magazines,newspapers,radio and television programs, direct mail, exhibits, and the like. b.The term public relations includes community relations and means those activities dedicated to • . maintaining the image of the organization or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. c.The only allowable advertising costs are those which are solely for: (1)The recruitment of personnel required for the performance by the organization of obligations arising under a sponsored award,when considered in conjunction with all other recruitment costs,as set forth in paragraph 44("Recruiting costs"); (2) The procurement of goods and services for the performance of a sponsored award; (3)The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at a predetermined amount in accordance with OMB Circular A-110,Scc. .34, "Equipment";or (4) Other specific purposes necessary to meet the requirements of the sponsored award. d.The only allowable public relations costs are: (1)Costs specifically required by sponsored awards; • (2)Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of sponsored awards (these costs are considered necessary as part of the outreach effort for the sponsored awards);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 contract/grant awards,financial matters, etc. e. Costs identified in subparagraphs c and d if incurred for more than one sponsored award or for both sponsored work and other work of the organization, are allowable to the extent that the principles in paragraphs B('Direct Costs")and C("Indirect Costs")of Attachment A are observed. f. Unallowable advertising and public relations costs include the following: (1)All advertising and public relations costs other than as specified in subparagraphs c,d,and e; • (2)Costs of meetings or other events related to fund raising or other organizational activitit,including: (i)Costs of displays, demonstrations, and exhibits; (ii) Costs of meeting rooms,hospitality suites, and other special facilities used in conjunction with shows and other special events; and (iii) Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, • making demonstrations, and providing briefings; 34 of 61 05109/200011:15M4 )MB Circular A-122 . (3)Costs of promotional items and memorabilia,including models, - , and souvenirs; (4)Costs of advertising and public relations designed solely to promo a the organization. . 2.Alcoholic beverages. Costs of alcoholic beverages are unallowabl . 3. Bad debts. Bad debts,including losses(whether actual or estimate ) arising from uncollectible accounts and other claims,related collection costs, and related legal costs, are nallowable. • 4.Bid and proposal costs. (reserved) 5.Bonding costs. a.Bonding costs arise when the Federal Government requires assur ce against financial kiss to itself or . others by reason of the act or default of the organization.They arise so in instances where the . organization requires similar assurance.Included arc such bonds as id,performance,payment, advance . • payment,infringement,and fidelity bonds. b. Costs of bonding required pursuant to the terms of the award are aiilowable. c.Costs of bonding required by the organization in the general cond of its operations are allowable to the extent that such bonding is in accordance with sound business p lice and the rates and premiums are reasonable under the circumstances. - 6. Communication costs. Costs incurred for telephone services, loc and long distance telephone calls, telegrams,radiograms,postage and the like arc allowable. 7. Compensation for personal services. • a. Definition. Compensation for personal services includes all comensation paid currently or accrued by • the organisation for services of employees rendered during the peri of the award(except as otherwise provided in subparagraph h).It includes,but is not limited to, sa 'es,wages,director's and executive committee member's fees,incentive awards, fringe benefits,pensio plan costs, allowances for off-site pay, incentive pay, location allowances,hardship pay,and cost of living ifferentials. • b.Allowability. Except as otherwise specifically provided in this p agraph, the costs of such compensation are allowable to the extent that: 1 (1)Total compensation to individual employees is reasonable forth services rendered and conforms to the established policy of the organization consistently applied to both Federal and non-Federal activities; and (2)Charges to awards whether treated as direct or indirect costs are determined and supported as required in this paragraph. c.Reasonableness. • (1)When the organization is predominantly engaged in activities o er than those sponsored by the Federal Government, compensation for employees on federally-sponsored ork will be considered reasonable to the extent that it is consistent with that paid for similar work in the rganization's other activities. (2)When the organization is predominantly engaged in federally-s onsored activities and in cases where 35 of 61 05109/2000 11:15 AM OMB CirculatA-122 .. • the kind of employees required for the Federal activities are not found in the organization's other activities, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved. d. Special considerations in determining allowability.Certain conditions require special consideration and possible limitations in determining costs under Federal awards where amounts or types of compensation appear unreasonable.Among such conditions are the following: (1)Compensation to members of non-profit organizations,trustees,directors, associates,officers, or the immediate families thereof.Determination should be made that such compensation is reasonable for the actual personal services rendered rather than a dist ibution of earnings in excess of costs. (2)Any change in an organization's compensation policy resulting in a substantial increase'in the organization's level of compensation,particularly when it was concurrent with an increase in the ratio of Federal awards to other activities of the organization or any change in the treatment of allowability of specific types of compensation due to changes in Federal policy. e.Unallowable costs.Costs which are unallowable under other paragraphs of this Attachment shall not be allowable under this paragraph solely on the basis that they constitute personal compensation. 1.Fringe benefits. (1)Fringe benefits in the form.of regular compensation paid to employees during periods of authorized absences from the job,such as vacation leave, sick leave,military leave,and the like, are allowable, provided such costs are absorbed by all organ:ration activities in proportion to the relative amount of time or effort actually devoted to each. (2)Fringe benefits in the form of employer contributions or expenses for social security, employee insurance,workmen's compensation insurance,pension plan costs(see subparagraph h), and the like,are allowable,provided such benefits are granted in accordance with established written organization policies. Such benefits whether treated as indirect costs or as direct costs,shall be distributed to particular awards . and other activities in a manner consistent with the pattern of benefits accruing to the individuals or group of employees whose salaries and wages are chargeable to such awards and other activities. (3)(a)Provisions for a reserve under a self-insurance program for unemployment compensation or workers'compensation are allowable to the extent that the provisions represent reasonable estimates of the liabilities for such compensation,and the types Of coverage, extent of coverage, and rates and premiums would have been allowable had insurance been purchased to cover the risks.However,provisions for self-insured liabilities which do not become payable for more than one year after the provision is made shall not exceed the present value of the liability. (b)Where an organization follows a consistent policy of expensing actual payments to, or on.behalf of, employees or former employees for unemployment compensation or workers'compensation, such payments are allowable in the year of payment with the prior approval of the awarding agency,provided they are allocated to all activities of the organization. (4) Costs of insurance on the lives of trustees, officers,or other employees holding positions of similar responsibility are allowable only to the extent that the insurance represents additional compensation.-The costs of such insurance when the organization is named as beneficiary arc unallowable. • 36 of 61 05/09/200011:15 AM OMB Circular A-122 g. Organization-furnished automobiles.That portion of the cost of rganization-furnished automobiles that relates to personal use by employees (including transportation to d from work)is unallowable as fringe benefit or indirect costs regardless of whether the cost is report d as taxable income to the employees.These costs arc allowable as direct costs to sponsored aw d when necessary for the performance of the sponsored award and approved by awarding ager ies. h. Pension plan costs. • (1) Costs of the organization's pension plan which are incurred in acc rdancc with the established policies of the organization are allowable,provided: (a)Such policies meet the test of reasonableness; (b)The methods of cost allocation are not discriminatory; (c)The cost assigned to each fiscal year is determined in accordance with generally accepted accounting principles(GAAP),as prescribed in Accounting Principles Board 0 inion No. 8 issued by the American . Institute of Certified Public Accountants;and (d)The costs assigned to a given fiscal year are funded for all plan p 'cipants within six months after the end of that year.However,increases to normal and past service pens on costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year t which such costs are assignable are unallowable. (2)Pension plan termination insurance premiums paid pursuant to •e.Employee Retirement Income Security Act(ERISA)of 1974(Pub.L. 93-406)are allowable.Late .ayment charges on such premiums are unallowable. (3)Excise taxes on accumulated funding deficiencies and other pe..,lties imposed under ERISA arc unallowable. i.Incentive compensation.Incentive compensation to employees .ased on cost reduction,or efficient performance, suggestion awards, safety awards, etc.,are allowable io the extent that the overall compensation is determined to be reasonable and such costs are pai• or accrued pursuant to an agreement entered into in good faith between the organization and the employ,es before the services were rendered, or pursuant to an established plan followed by the organization so insistently as to imply,in effect,an agreement to make such payment. , j. Overtime,extra-pay shift,and multi-shift premiums. See paragraph 32. k. Severance pay. See paragraph 49. 1.Training and education costs. Sec paragraph 53. 1 m. Support of salaries and wages. • (1)Charges to awards for salaries and wages,whether treated as di ect costs or indirect costs,will be based on documented payrolls approved by a responsible official(s)of th organization.The distribution of salaries and wages to awards must be supported by personnel acti ty reports, as prescribed in subparagraph (2),except when a substitute system has been app ved in writing by the cogni>ant agency. • (See subparagraph E.2 of Attachment A.) 37 of 61 05/09/2000 11:15 AM • • (2)Reports reflecting the distribution of activity of each employee must be maintained for all staff members(professionals and nonprofessionals)whose compensation is charged,in whole or in part,directly to.awards.In addition,in order to support the allocation of indirect costs,such reports must also be • maintained for other employees whose work involves two or more functions or activities if a distribution of their compensation between such functions or activities is needed in the determination of the organization's indirect cost rate(s)(e.g.,an employee engaged part-time in indirect cost activities and part:time in a direct function).Reports maintained by non-profit organizations to satisfy these requirements must meet the following standards: (a)The reports must reflect an after-the-fact determination of the actual activity of each employee.Budget estimates(i.e., estimates determined before the services arc performed) do not qualify as support for charges to awards. (b)Each report must account for the total activity for which employees are compensated and which is required in fulfillment of their obligations to the organization. (c)The reports must be signed by the individual employee,or by a responsible supervisory official having first hand knowledge of the activities performed by the employee,that the distribution of activity represents a reasonable estimate of the actual work performed by the employee during the periods covered by the reports. (d)The reports must be prepared at least monthly and must coincide with one or more pay periods. (3)Charges for the salaries and wages of nonprofessional.employees,in addition to the supporting documentation described in subparagraphs(1) and(2),must also be supported by records indicating the total number of hours worked each day maintained in conformance with Department of Labor regulations implementing the Fair Labor Standards Act(FLSA) (29 CFR Part 516).For this purpose,the term "nonprofessional employee" shall have the same meaning as"nonexempt employee,"under FLSA. (4)Salaries and wages of employees used in meeting cost sharing or matching requirements on awards must be supported in the same manner as salaries and wages claimed for reimbursement from awarding. agencies. 8. Contingency provisions.Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time,intensity,or with an assurance of their happening, are nnallowable.The term"contingency reserve" excludes self-insurance reserves(see subparagraphs 7.f(3) and 22.a(2)(d);pension funds(see subparagraph 7.h); and'reserves for normal severance pay(see subparagraph 49.b(1)). 9. Contributions.Contributions and donations by the organization to others arc unallowable. 10.Defense and prosecution of criminal and civil proceedings, claims,appeals and patent infringement. • a. Definitions. (1) Conviction, as used herein,means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a plea,including a conviction due to a plea of nolo contendere. 38 of 61 05/09/2000 11:15 AM DMD Circular A-122 . (2)Costs include,but arc not limited to, administrative and clericalerases;the cost of legal services, whether performed by in-house or private counsel;and the costs of th services of accountants, consultants, or others retained by the organization to assist it; costs of employees, Hicers and trustees,and any similar costs incurred before,during,and after commencement of a judicial o administrative proceeding that bears . a direct relationship to the proceedings. . • (3)Fraud, as used herein,means(i)acts of fraud corruption or attempts to defraud the Federal Government . or to corrupt its agents,(ii) acts that constitute a cause for debarment or suspension(as specified in agency regulations), and(iii) acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54. (4)Penalty does not include restitution,reimbursement,or compensa tory damages. (5)Proceeding includes an investigation. b. (1)Except as otherwise described herein,costs incurred in connec 'on with any criminal,civil or administrative-proceeding(including filing of a false certification) c encedby the Federal Government, or a State,local or foreign government,are not allowable if the pros ding: (1)relates to a violation of or failure to comply with, a Federal, State,local or foreign statute or re ation by the organization(including its agents and employees), and(2)results in any of the following ' ositions: (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 organizational liability. . (c)In the case of any civil or administrative proceeding,the imposi on of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or s pend the organization, to rescind or void an award,or to terminate an award for default by reason of a vi lation or failure to comply with a law or regulation. (e)A disposition by consent or compromise,if the action could hav resulted in any of the dispositions described in(a), (b), (c)or(d). (2)If more than one proceeding involves the same alleged miscond ct,the costs of all such proceedings shall be unallowable if any one of them results in one of the disposi 'ons shown in subparagraph b.(1). c.If a proceeding referred to in subparagraph b is commenced by a Federal Government and is resolved i by consent or compromise pursuant to an agreement entered into b the organisation and the Federal Government,then the costs incurred by the organization in connec on with such proceedings that are otherwise not allowable under subparagraph b may be allowed to a extent specifically provided in such agreement. . d. If a proceeding referred to in subparagraph b is commenced by a State,local or foreign government, • the authorized Federal official may allow the costs incurred by the rganization for such proceedings,if such authorized official determines that the costs were incurred as result of(1) a specific term or condition of a federally-sponsored award, or(2)specific written d' ction of an authorized official of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b,but which are not mads_ 39 o161 05i09rz000 11:15 AM I V1,tOVttt.YIMt% s�.r unallowable by that subparagraph,may be allowed by the Federal Government,but only to the extent that: (1)The costs are reasonable in relation to the activities required to deal with the proceeding,and the underlying cause of action; (2)Payment of the costs incurred, as allowable and allocable costs,is not prohibited by any other provision(s)of the sponsored award; (3)The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise;and, (4)The percentage of costs allowed does not exceed the percentage determined by an authorized Federal official to be appropriate, considering the complexity of the litigation,generally accepted principles governing the award of legal fees in civil actions involy"g the United States as a party,and snch other factors as may be appropriate. Such percentage shall nc c exceed 80 percent.However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage,then the full amount of costs resulting from that agreement shall be allowable. f. Costs incurred by the organization in connection with the defense of suits brought by its'employees or ex-employees under section 2 of the Major Fraud Act of 1988(Pub.L. 100-700),including the cost of all relief necessary to make such employee whole,where the organization was found liable or settled,are unallowable. g. Costs of legal, accounting, and consultant services,and related costs,incurred in connection with defense against Federal Government claims or appeals,antitrust suits,or the prosecution of claims or appeals against the Federal Government,are unallowable. h. Costs of legal, accounting, and consultant services, and related costs,incurred in connection with patent infringement litigation, are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph,including directly associated costs,shall be segregated and accounted for by the organization separately.During the pendency of any proceeding covered by subparagraphs b and f,the Federal Government shall generally withhold payment of such costs.However,if in the best interests of the Federal Government,the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance,and agreements by the organization to repay all unallowable costs,plus interest,if the costs are subsequently determined to be unallowable. • 11.Depreciation and use allowances. a. Compensation for the use of buildings,other capital improvements, and equipment on hand may be made through use allowances or depreciation.However,except as provided in subparagraph f,a combination of the two methods may not be used in connection with a single class of fixed assets(e.g., buildings, office equipment,computer equipment,etc.). • b.The computation of use allowances or depreciation shall be based on the acquisition cost of the assets involved.The acquisition cost of an asset donated to the organization by a third party shall be its fair market value at the time of the donation. c. The computation of use allowances or depreciation will exclude: ao or61 05109/200011:15 A OMB Circular A-122 (1)The cost of land; (2)Any portion of the cost of buildings and equipment borne by or do ated by the Federal Government irrespective of where title was originally vested or where it presently ides; and (3)Any portion of the cost of buildings and equipment contributed by or for the organi7stie.n in satisfaction of a statutory matching requirement_ d.Where the use allowance method is followed, the use allowance fo.buildings and improvement (including land improvements,such as paved parking areas,fences, • o d sidewalks)will be computed at an annual rate not exceeding two percent of acquisition cost The use allowance for equipment will be computed at an annual rate not exceeding six and two-thirds percent •f acquisition cost.When the use allowance method is used for buildings, the entire building must be tr-=ted as a single asset;the building's components (e.g.,plumbing system,heating and air conditioning,etc cannot be segregated from the building's shell.The two percent limitation,however,need not be ap•lied to equipment which is merely attached or fastened to the building but not permanently fixed to it an. which is used as furnishings or decorations or for specialized purposes(e.g., dentist chairs and den . treatment units,counters,laboratory benches bolted to the floor,dishwashers,carpeting,etc.). Such equip cnt will be considered as not being permanently fixed to the building if it can be removed without the ne d for costly or extensive alterations or repairs to the building or the equipment.Equipment that meets th .c criteria will be subject to the six • and two-thirds percent equipment use allowance limitation. e.Where depreciation method is followed, the period of useful servi•e(useful life) established in each case for usable capital assets must take into consideration such factors as •e of construction,nature of the equipment used,technological developments in the particular pro . _ area,and the renewal and replacement policies followed for the individual items or classes of.•sets involved.The method of depreciation used to assign the cost of an asset(or group of assets)t• accounting periods shall reflect the pattern of consumption of the asset during its useful life.In the abse cc of clear evidence indicating that the expected consumption of the asset will be significantly greater o lesser in the early portions of its 'useful life than in the later portions, the straight-line method shall be presumed to be the appropriate method.Depreciation methods once used shall not be changed unles approved in advance by the cognizant Federal agency.When the depreciation method is introdu•ed for application to assets previously subject to a use allowance,the combination of use allowances and d' •rcciation applicable to such assets must not exceed the total acquisition cost of the assets. When the d-oreciation method is used for buildings, a building's shell may be segregated from each building component(e.g.,plumbing system, heating,and air conditioning system,etc.) and each item depreciate s over its estimated useful life;or the entire building(i.e.,the shell and all components)may be treated as : single asset and depreciated over a single useful life: £ When the depreciation method is used for a particular class of ass:ts,no depreciation may be allowed on any such assets that,under subparagraph e,would be viewed as fu y depreciated.However,a reasonable use allowance may be negotiated for such assets if warranted after . :•g into consideration the amount of depreciation previously charged to the Federal Government,the esti •ated useful life remaining at time of negotiation,the effect of any increased maintenance charges or decr ased efficiency due to age, and any other factors pertinent to the utilization of the asset for the purpose •ontemplated. g. Charges for use allowances or depreciation must be supported by adequate property records and physical inventories must be taken at least once every two years(a statistical sampling basis is acceptable)to ensure that assets exist and arc usable and needed. When the depreciation .i ethod is followed, adequate depreciation records indicating the amount of depreciation taken ea•h period must also be maintained. • • 41 of 61 05/09!2000 1 I:1 5 AM 12.Donations. • a.Services received. • (1)Donated or volunteer services may be furnished to an organization by professional and technical personnel,consultants,and other skilled and unskilled labor.The value of these services is not reimbursable either as a direct or indirect cost. (2)The value of donated services utilized in the performance of a direct cost activity shall be considered in the determination of the organization's indirect cost rate(s)and, accordingly, shall be allocated a proportionate share of applicable indirect costs when the following circumstances exist: (a)The aggregate value of the services is material; (b)The services are supported by a significant amount of the indirect costs incurred by the-organization; (c)The direct cost activity is not pursued primarily for the benefit of the Federal Government, (3)In those instances where there is no basis for determining the fair market value of the services rendered, the recipient and the cognizant agency shall negotiate an appropriate allocation of indirect cost to the services. (4)Where donated services directly benefit a project supported by an award,the indirect costs allocated to the services will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the award or used to meet cost sharing or matching requirements. (5)The value of the donated services may be used to meet cost sharing or matching requirements under conditions described in Sec._,23 of Circular A-110.Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. (6)Fair market value of donated services shall be computed as follows: (a)Rates for volunteer services.Rates for volunteers shall be consistent with those regular rates paid for similar work in other activities of the organization.In cases where the kinds of skills involved are not found in other activities of the organization,the rates used shall be consistent with those paid for similar work in the labor market in which the organization competes for such skills. (b)Services donated by other organizations.When an employer donates the services of an employee, these services chalk be valued at the employee's regular rate of pay(exclusive of fringe benefits and indirect costs),provided the services are in the same skill for which the employee is normally paid.If the services are not in the same skill for which the employee is normally paid,fair market value shall be computed in accordance with subparagraph(a). b. Goods and space. (1)Donated goods;i.e., expendable personal property/supplies,and donated use of space may be furnished to an organization. The value of the goods and space is not reimbursable either as a direct or indirect cost. '(2)The value of the donations maybe used to meet cost sharing or matching share requirements under the conditions described in Sec. .23 of Circular A-110.The value of the donations shall be determined in • accordance with Sec._;23 of Circular A-110.Where donations are treated as indirect costs,indirect cost 42 of 61 05/09/2000 11:15 AM OMB Circular A-122 _ rates will separate the value of the donations so that reimbursement will not be made. 13.Employee morale,health, and welfare costs and credits. The co is of house publications,health or first-aid clinics,and/or infirmaries,recreational activities, employees' unscling services,and other expenses incurred in accordance with the organization's established pr ctice or custom for the improvement of working conditions, employer-employee relations, employee moral ,and employee performance are allowable. Such costs will be equitably apportioned to all activities of a organization.Income generated from any of these activities will be credited to the cost thereof unless ch income has been irrevocably set over to employee welfare organizations. 14. Entertainment costs. Costs of amusement,diversion, social acti • 'es, ceremonials, and costs relating thereto,such as meals,lodging, rentals,transportation,and gratuities a unallowable(but see paragraphs 13 and 30). II 15. Equipment and other capital expenditures. . a.As used in this paragraph, the following terms have the meanings set forth below: (1) "Equipment"means an article of nonexpendable,tangible persona property having a useful life of more than one year and an acquisition cost which equals or exceeds .e lesser of(a)the capitalization level established by the organization for the financial statement purposes, ., (b)$5000.The=amortized portion of any equipment written off as a result of a change in capitalization 1 cis may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on th- equipment, or by amortizing the amount to be written off over a period of years as negotiated with the t ederal cognizant agency. (2)Acquisition cost means the net invoice unit price of an item of e. 'pment,including the cost of any . modifications,attachments, accessories, or auxiliary apparatus neces•ary to make it usable'for the purpose for which it is acquired.Ancillary charges,such as taxes, duty,prot-• 've in-transit insurance, freight,and ' installation shah be included in or excluded from acquisition cost in ccordance with the organization's regular written accounting practices. (3)Special purpose equipment means equipment which is usable o y for research,medical, scientific, or• technical activities.Examples of special purpose equipment include icroscopes,x-ray machines,surgical instruments,and spectrometers. (4) General purpose equipment means equipment which is usable or other than research,medical, scientific, or technical activities,whether or not special modificatio are needed to make them suitable for a particular purpose. Examples of general purpose equipment includ office equipment and furnishings,air conditioning equipment,reproduction and printing equipment,moto vehicles,and automatic data . processing equipment b. (1) Capital expenditures for general purpose equipment arc unallowable as a direct cost except with the prior approval of the awarding agency. . (2)Capital expenditures for special purpose equipment are allowabl as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of away ' g agency. c. Capital expenditures for land or buildings are unallowable as a d' act cost except with the prior approval of the awarding agency. . d. Capital expenditures for improvements to land,buildings, or equipment which materially increase their 43 of 61 05/09/200011:15 AM value or useful life are unallowable as a direct cost except with the prior approval of the aw[irding agency. e. Equipment and other capital expenditures are unallowable as indirect costs.However, see paragraph 11 for allowability of use allowances or depreciation on buildings,capital improvements,and equipment. - Also, see paragraph 46 for allowability of rental costs for land,buildings, and equipment. 16.Fines and penalties. Costs of fines and penalties resulting from violations of, or failure of the organization to comply with Federal, State, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in-writing from the awarding agency. 17. Fringe benefits. See subparagraph 7.f. 18. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees arc unallowable regardless of whether the cost is reported as taxable income to the employees. 19.Housing and personal living expenses. a. Costs of housing(e.g.,depreciation,maintenance,utilities,furnishings,rent, etc.),housing allowances and personal living expenses for/of the organization's officers are unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees.These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. b.The term"officers" includes current and past ocers and employees. 20.Idle facilities and idle capacity. a.As used in this paragraph, the following terms have the meanings set forth below: (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 organization. (2)Idle facilities means completely unused facilities that are excess to the organization's current needs. (3)Idle capacity means the unused capacity of partially used facilities.It is the difference between 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 the extent to which the facility was actually used to meet demands during the accounting period.A multi-shift basis may be used if it can be shown that this amount of usage could normally be expected for the type of facility involved. (4) Costs of idle facilities or idle capacity means costs such as maintenance,repair,housing,rent,and other related costs, e.g.,property taxes,insurance,and depreciation or use allowances. • b. The costs of idle facilities are unallowable except to the extent that (1)They arc necessary to meet fluctuations in workload; or (2)Although not necessary to meet fluctuations in.workload,they were necessary when acquired and arc now idle because of changes in program requirements, efforts to achieve more economical operations, 44 of 61 05/092000 11:15 AM OMB Circular A-122 1 — - - reorganization,termination,or other causes which could not have be reasonably foreseen:Under the exception stated in this subparagraph, costs of idle facilities arc allow le for a reasonable period of time, ordinarily not to exceed one year,depending upon the initiative taken to use,lease, or dispose of such facilities(but see subparagraphs 48.b and d). c.The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are al owable,provided the capacity is reasonably anticipated to be necessary or was originally reasonable d is not subject to reduction or • elimination by subletting,renting, or sale,in accordance with sound usiness, economics,or security practices.Widespread idle capacity throughout an entire facility or ong a group of assets having substantially the same function may be idle facilities. 21.Independent research and development. (Reserved] 1 22.Insurance and indemnification. . a.Insurance includes insurance which the organization is required to cavy,or which is approved,under the terms of the award and any other insurance which the organization aintains in connection with the general conduct of its operations. This paragraph does not apply to i urance which represents fringe benefits for employees(see subparagraphs 7.1 and 7.h(2)). (1)Costs of insurance required or approved,and maintained,pursu t to the award are allowable. (2)Costs of other insurance maintained by the organization in conn ction with the general'conduct of its operations are allowable subject to the following limitations: • (a)Types and extent of coverage shall be in accordance with sound business practice and the rates and premiums shall be reasonable under the circumstances. - (b)Costs allowed for business interruption or other similar insurance shall be limited to exclude coverage of management fees. (c)Costs of insurance or of any provisions for a reserve covering the risk of loss or damage to Federal property are allowable only to the extent that the organization is liable for such loss or damage. (d)Provisions for a reserve under a self-insurance program are allo able to the extent that types of coverage,extent of coverage,rates, and premiums would have been allowed had insurance been purchased to cover the risks.However,provision for known or reasonably es . ated self-insured liabilities,which do not become payable for more than one year after the provision is m de, shall not exceed the present value of the liability. (e) Costs of insurance on the lives of trustees,officers, or other em loyees holding positions of similar i responsibilities arc allowable only to the extent that the insurance r resents additional compensation(see subparagraph 7.f(4)).The cost of such insurance when the org . ation is identified as the beneficiary is unallowable. (f)Insurance against defects. Costs of insurance with respect to any costs incurred to corri!ct defects in the organization's materials or workmanship arc unallowable. (g)Medical liability(malpractice)insurance.Medical liability ins ce is an allowable cost of Federal research programs only to the extent that the Federal research pro anis involve human subjects or training 45 of 61 05/09/200011:15 AM of participants in research techniques.Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. • (3)Actual losses which could have been covered by permissible insurance(through the purchase of • insurance or a self-insurance program)are unallowable unless expressly provided for in the award,except: (a) Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound business practice are allowable. (b)Minor losses not covered by insurance,such as spoilage,breakage,and disappearance of supplies, which occur in the ordinary course of operations,are allowable. b.Indemnification includes securing the organization against liabilities to third persons and any other loss or damage,not compensated by insurance or otherwise.The Federal Government is obligated to indemnify the organization only to the extent expressly provided in the award. 23.Interest, fundraising,and investment management costs. a. Interest. • (1)Costs incurred for interest on borrowed capital or temporary use of endowment funds,however represented, are unallowable.However,interest on debt incurred after the effective date of this revision to acquire or replace capital assets(including renovations,alterations,equipment,land, and capital assets acquired through capital leases), acquired after the effective date of this revision and used in support of sponsored agreements is allowable,provided that: (a)For facilities acquisitions(excluding renovations and alterations)costing over$10 million where the . Federal Government's reimbursement is expected to equal or exceed 40 percent of an asset's cost,the non-profit organization prepares,prior to the acgnicition or replacement of the capital asset(s), a justification that demonstrates the need for the facility in the conduct of federally-sponsored activities. Upon request,the needs justification must be provided to the Federal agency with cost cognizance authority as a prerequisite to the continued allowability of interest on debt and depreciation related to the facility.The needs justification for the acquisition of a facility should include, at a mininutm,the following: A statement of purpose and justification for facility acquisition or replacement A statement as to why current facilities are not adequate A state--tent of planned future use of the facility A description of the financing agreement to be arranged for the facility A summary of the building contract with estimated cost information and statement of source and use of funds A schedule of planned occupancy dates (b)For facilities costing over$500,000,the non-profit organization prepares,prior to the acquisition or replacement of the facility,a lease/purchase analysis in accordance with the provisions of Sec._.30 46 of 61 05/09/200011:15 AM MB Circular A-122 . through_.37 of Circular A-110,which shows that a financed purchas or capital lease is less costly to the organization than other leasing alternatives,on a net present value basi _Discount rates used should be equal to the non-profit organization's anticipated interest rates and sho d be no higher than the fair market rate available to the non-profit organization from an unrelated("arm's ength")third-party.The . lease/purchase analysis shall include a comparison of the net presentue of the projected total cost comparisons of both alternatives over the period the asset is expected t be used by the non-profit organization.The cost comparisons associated with purchasing the fa lity shall include the estimated purchase price, anticipated operating and maintenance costs (includin: property taxes, if applicable)not included in the debt financing,less any estimated asset salvage value •t the end of the period defined above.The cost comparison for a capital lease shall include the estim• • total lease payments, any estimated bargain purchase option,operating and maintenance costs, d taxes not included in the capital leasing arrangement,less any estimated credits due under the lease at .e end of the period defined above. Projected operating lease costs shall be based on the anticipated cost •f leasing comparable facilities at fair market rates under rental agreements that would be renewed or reesta.lished over the period defined above, and any expected maintenance costs and allowable property taxes to •e borne by the non-profit organization directly or as part of the lease arrangement- (c)The actual interest cost claimed is predicated upon interest rates at are no higher than the fair market 1 rate available to the non-profit organization from an unrelated("armL length")third party. . (d)Investment earnings,including interest income, on bond or loan p 'ncipal,pending payment of the , construction or acquisition costs, are used to offset allowable interest cost.Arbitrage earnings reportable to the Internal Revenue Service are not required to be offset against all able interest costs. . (e)Reimbursements are limited to the least costly alternative bascdo the total cost analysis required under subparagraph(b).For example,if an operating lease is determined o be less costly than purchasing through debt financing,then reimbursement is limited to the amount determined if leasing had been used. In all cases where a lease/purchase analysis is performed,Federal re' bursement shall be based upon the least expensive alternative. (f)Non-profit organizations are also subject to the following conditions: (i)Interest on debt incurred to finance or refinance assets acquired b fore or reacquired after the effective date of this Circular is not allowable. (ii)For debt arrangements over Si million,unless the non-profit or:. -tion makes an initial equity contribution to the asset purchase of 25 percent or more,non-profit •rganizations shall reduce claims for interest expense by an amount equal to imputed interest earnings o. excess cash flow,which is to be calculated as follows.Annually,non-profit organizations shall prep. a cumulative(from the inception of the project).report of monthly cash flows that includes inflows and •utflows,regardless of the funding source.Inflows consist of depreciation expense, amortization of ca•italized construction interest,and annual interest expense.For cash flow calculations,the annual infl• figures shall be divided by the number of months in the year(usually 12)that the building is in s 'ce for monthly amounts. Outflows consist of initial equitycontributions, debt principal payments(less the pro rata share attii`butable to the unallowable costs of land) and interest payments.Where cumulativ- inflows exceed cumulative outflows, interest shall be calculated on the excess inflows for that period an, be treated as a reduction to allowable interest expense. The rate of interest to be used to compute earning on excess cash flows shall be the three month Treasury Bill closing rate as of the last business day of that onth. (iii) Substantial relocation of federally-sponsored activities from a agility financed by indebtedness,the cost of which was funded in whole or part through Federal reimb ements,to another facility prior to the 47 0(61 05109/2000 11:15 AM expiration of a period of 20 years requires notice to the Federal cognizant agency.The extent of the relocation, the amount of the Federal participation in the financing,and the depreciation and interest charged to date may require negotiation and/or downward adjustments of replacement space charged to Federal programs in the future. (iv)The allowable costs to acquire facilities and equipment are limited to a fair market value available to the non-profit organization from an unrelated("arm's length")third party. (2)For non-profit organizations subject to"full coverage"'under the Cost Accounting Standards(CAS)as defined at 48 CFR 9903.201,the interest allowability provisions of subparagraph a do not apply.Instead, these organizations'sponsored agreements are subject to CAS 414(48 CFR-9903.414), cost of money as an clement of the cost of facilities capital,and CAS 417(48 CFR 9903.417),cost of money as an element of the cost of capital assets under const uction. (3)The following definitions are to be used for purposes of paragraph 23: (a)Re-acquired assets means assets held by the non-profit organization prior to the effective date of this revision that have again come to be held by the organization,whether through repurchase or refinancing.It does not include assets acquired to replace older assets. (b)initial equity contribution means the amount or value of contributions made by non-Federal entities for the acquisition of the asset or prior to occupancy of facilities. (c)Asset costs means the capitalizable.costs of an asset,including construction costs, acquisition costs,and other such costs capitalized in accordance with GAAP. b. Costs of organized fundraising,including financial campaigns,endowment drives,solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions are unallowable. c. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are unallowable. d.Fundraising and investment activities shall be allocated an appropriate share of indirect costs under the conditions described in.subparagraph B.3 of Attachment A. 24.Labor relations costs. Costs incurred in maintaining satisfactory relations between the orga»igation . and its employees,including costs of labor management committees,employee publications,and other related activities are allowable. 25.Lobbying. a.Notwithstanding other provisions of this Circular,costs as:ociated with the following activities are unallowable: (1)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; (2) Establishing, administering,contributing to,or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections; • 48 of 61 05/09/2000 11:15 AM (3)Any attempt to influence:(i)The introduction of Federal or State le 'slation, or(ii)the enactment or modification of any pending Federal or State legislation through co 'cation with any member or employee of the Congress or State legislature(including efforts to infl ence State or local ocials to engage in similar lobbying activity),or with any Government official employee in connection with a - decision to sign or veto enrolled legislation; (4)Any attempt to influence: (i)The introduction of Federal or State 1 gislation;or(ii)the enactment or modification of any pending Federal or State legislation by preparing, 'stributing or using publicity or propaganda,or by urging members of the general public or any segm t thereof to contribute to or participate in any mass demonstration,march,rally,fundraising drive,lobbying campaign Craletter writing or telephone campaign;or (5)Legislative liaison activities,including attendance at legislative se sions or committee bearings, gathering information regarding legislation,and analyzing the effect o legislation,when such activities are . carried on in support of or in knowing preparation for an effort to eng gc in unallowable lobbying. b.The following activities are excepted from the coverage of subparagraph a: (1)Providing a technical and factual presentation of information on a . •is directly related to the performance of a grant,contract or other agreement through hearing t-. :•.ony, statements or letters to the . Congress or a State legislature,or subdivision,member,or cognizant,taffmember thereof in response to a ; documented request(including a Congressional Record notice request•g testimony or statements for the record at a regularly scheduled hearing)made by the recipient memb. ,legislative body or subdivision,or a cognizant staff member thereof;provided such information is rea.' , obtainable and can be readily put in deliverable form; and further provided that costs under this section fo travel, lodging or meals are unallowable unless incurred to offer testimony at a regularly schedul,. Congressional hearing pursuant to a written request for such presentation made by the Chairman or ' . . :•g Minority Member of the Committee or Subcommittee conducting such hearing. - (2)Any lobbying made unallowable by subparagraph a(3)to influe ce State legislation in order to directly reduce the cost,or to avoid material impairment of the organ ration's authority to perform the grant,contract,or other agreement. (3)Any activity specifically authorized by statute to be undertaken with funds from the grant,contract,or other agreement. c.(1)When an organization seeks reimbursement for indirect costs, otal lobbying costs shall be separately identified in the indirect cost rate proposal,and thereafter treated as thcr unallowable activity costs in accordance with the procedures of subparagraph B.3 of Attachme t A. (2) Organizations shall submit, as part of the annual indirect cost rat proposal, a certification that the requirements and standards of this.paragraph have been complied th. (3) Organizations shall maintain adequate records to demonstrate 't the determination of costs as being allowable or unallowable pursuant to paragraph 25 complies with a requirements of this Circular. (4)Time logs, calendars, or similar records shall not be required to c created for purposes of complying with this paragraph during any particular calendar month when: (1) he employee engages in lobbying(as defined in subparagraphs (a) and(b)) 25 percent or less of the em loyee's compensated hours of employment during that calendar month,and(2)within the prece ' g five-year period,the organization has not materially misstated allowable or unallowable costs of any ature,including legislative lobbying 49 of 61 05/09200011:15 AM costs.When conditions(1) and(2) arc met,organizations are not required to establish records to support the allowabliliy of claimed costs in addition to records already required or maintained.Also,when conditions (1) and(2) 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. (5) Agencies shall establish procedures for resolving in advance,in consultation with OMB,any significant questions or disagreements concerning the interpretation or application of paragraph 25.Any such • advance resolution shall be binding in any subsequent settlements,audits or investigations with respect to that grant or contract for purposes of interpretation of this Circular,provided,however,that this shall not be construed to prevent a contractor or grantee from contesting the lawfulness of such a determination. 26.Losses on other awards.Any excess of costs over income on any award is unallowable as a cost of any other award.This includes,but is not limited to,the organization's contributed portion by reason of cost sharing agreements or any under-recoveries through negotiation of lump sums for,or ceilings on, indirect costs. 27.Maintenance and repair costs.Costs incurred for necessary maintenance,repair,or upkeep of buildings and equipment(including Federal property unless otherwise provided for)which neither add to the permanent value of the property nor appreciably prolong its intended life,but keep it in an efficient operating condition, are allowable.Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life shall be treated as capital expenditures(see paragraph 15). 28.Materials and supplies.The costs of materials and supplies necessary to carry out an award are allowable. Such costs should be charged at their actual prices after deducting all cash discounts,trade . discounts,rebates,and allowances received by the organization.Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing consistently applied. Incoming transportation charges may be a proper part of material cost.Materials and supplies charged as a direct cost should include only the materials and supplies actually used for the performance of the contract or grant,and due credit should be given for any excess materials or supplies retained,or returned to vendors. 29.Meetings and conferences. a. Costs associated with the conduct of meetings and conferences include the cost of renting facilities, meals,speakers'fees, and the like.But see paragraph 14,Entertainment costs,and paragraph 34, • Participant support costs. b. To the extent that these costs are identifiable with a particular cost objective,they should be charged to that objective(see paragraph B of Attachment A).These costs arc allowable,provided that they meet the • general tests of allowability, shown in paragraph A of Attachment A to this Circular. c. Costs of meetings and conferences held to conduct the general administration of the organization are allowable. 30.Memberships, subscriptions, and professional activity costs. a. Costs of the organization's membership in business,technical,and professional organizations are - allowable. 50 of 61 05/09/2000 11:15 AM OMB Circular A-122 b. Costs of the organization's subscriptions to business,professional, d technical periodicals arc allowable. • c. Costs of meetings and conferences,when the primary purpose is th dissemination of technical • information, are allowable.This includes costs of meals,transportatio rental of facilities, and other items incidental to such meetings or conferences. d.Costs of membership in any civic or community organization are aai�lowable with prior approval by . Federal cognizant agency. c. Costs of membership in any country club or social or dining club o organization are 1m:,llowablc. 31. Organization costs.Expenditures, such as incorporation fees,b kers' fees,fees to prof voters, organizers or management consultants,attorneys, accountants,or inv stment counselors,whether or not employees of the organization,in connection with establishment or organization of an organization,are unallowable except with prior approval of the awarding agency. 32. Overtime,extra-pay shift,and multi-shift premiums.Premis for overtime, extra-pay shifts,and multi-shift work are allowable only with the prior approval of the a ing agency except: a.When necessary to cope with emergencies, such as those resulting from accidents, natural disasters, breakdowns of equipment, or occasional operational bottlenecks of sporadic nature. b.When employees are performing indirect functions,such as admi r istration,maintenance,or accounting. c.In the performance of tests,laboratory procedures,or other simil operations which are continuous in nature and cannot reasonably be interrupted or otherwise completed. d.When lower overall cost to the Federal Government will result. 33.Page charges in professional journals.Page charges for professional journal publications are allowable as a necessary part of research costs,where: . a.The research papers report work supported by the Federal Gov ent; and b.The charges are levied impartially on all research papers publishe by the journal,whether or not by • federally-sponsored authors. 34.Participant support costs.Participant support costs are direct sts for items such as stipends or subsistence allowances,travel allowances, and registration fees pat to or on behalf of participants or trainees(but not employees)in connection with meetings,conferee es,symposia,or training projects. - These costs are allowable with the prior approval of the awarding a envy. 35.Patent costs. a. Costs of(i)preparing disclosures, reports, and other documents r quircd by the award and of searching the art to the extent necessary to make such disclosures,(ii)prep ' g documents and any other patent costs in connection with the filing and prosecution of a United Stats patent application where title or royalty-free license is required by the Federal Government to be co veyed to the Federal Government,and (iii) general counseling services relating to patent and copyright ma ers,such as advice on patent and ; copyright laws,regulations, clauses,and employee agreements are owable(but see paragraph 39). 51 of 61 05109/200011:15 A.H b. Cost of preparing disclosures,reports, and other documents and of searching the art to the extent necessary to make disclosures,if not required by the award, are unallowable. Costs in connection with(i) filing and prosecuting any foreign patent application, or(ii)any United States patent application,where the • - award does not require conveying title or a royalty-free license to the Federal Government,are unallowable (also see paragraph 47). 36. Pension plans. Sec subparagraph 7.h. 37.Plant security costs.Necessary expenses incurred to comply with Federal security requirements or for facilities protection, including wages,uniforms,and equipment of personnel are allowable. 38.Pre-award costs.Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the writ' 1.approval of the awarding agency. 39.Professional service costs. a. Costs of professional and consultant services rendered by persons who arc members of aparticular profession or possess a special skill, and who are not officers or employees of the organization,.are allowable, subject to subparagraphs b and c when reasonable in relation to the services rendered and • when not contingent upon recovery of the costs from the Federal Government. b.In determining the allowability of costs in a particular case,no single factor or any special 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 organization's capability in the particular . area. (3)The past pattern of such costs,particularly in the years prior to Federal awards. (4)The impact of Federal awards on the organization's business(i.e.,what new problems have arisen). (5)Whether the proportion of Federal work to the organization's total business is such as to influence the organization 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 grants and contracts. (6)Whether the service can be performed more economically by direct employment rather than contracting. • (7)The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-Federal awards. • (8)Adequacy of the contractual agreement for the service(e.g.,description of the service, estimate of time required,rate of compensation,and termination provisions). c.In addition to the factors in subparagraph b,retainer fees to be allowable must be supported by 52 of 61 OS/092000 11:15 AM )MB Circular A-122 . evidence of bona fide services available or rendered. 40. Profits and losses on disposition of depreciable property or othr capital assets. . a. (1) Gains and losses on sale,retirement, or other disposition of deer ciable property shalf be included in the year in which they occur as credits or charges to cost grouping(s) ' which the depreciation applicable to such property was included.The amount of the gain or loss to be in uded as a credit or charge to the appropriate cost grouping(s)shall be the difference between the amo realized on the property and the undepreciated basis of the property. ! - (2)Gains and losses on the disposition of depreciable property shall ndt be recognized as a separate credit or charge under the following conditions: (a)The gain or loss is processed through a depreciation reserve acco t and is reflected in the depreciation allowable under paragraph 11. • (b)The property is given in exchange as part of the purchase price of similar item and the gain or loss is taken into account in determining the depreciation cost basis of the n item. (c)A loss results from the failure to maintain permissible insurance,except as otherwise provided in subparagraph 22.a(3). (d) Compensation for the use of the property was provided through use allowances in lieu of depreciation in accordance with paragraph 11. (e)Gains and losses arisingfrom mass or extraordinarysales,retirements,or other dispositions shall be p considered on a case-by-case basis. Gains or losses of naturefrom sale any arising the or exchange of roPertY other than the property covered in subparagraph a shall be excluded in computing award sts. 41.Publication and printing costs_ a.Publication costs include the costs of printing(including the proce ses of composition,plate-making, press work,binding, and the end products produced by such process s),distribution,promotion,mailing, and general handling. . b.If these costs are not identifiable with a particular cost objective,they should be allocated as indirect costs to all benefiting activities of the organisation. c. Publication and printing costs are unallowable as direct costs except with the prior approval of the • awarding agency. d.The cost of page charges in journals is addressed paragraph 33. 42. Rearrangement and alteration costs. Costs incurred for ordin or normal rearrangement and alteration of facilities are allowable. Special arrangement and altera 'on costs incurred specifically for the project are allowable with the prior approval of the awarding agenc . 43.Reconversion costs. Costs incurred in the restoration or rehab' tation of the organization's facilities to approximately the same condition existing immediately prior to co encement of Federal awards, fair 53of61 05/09/2000 l l:l S AM • wear and tear excepted, are allowable. 44.Recruiting costs. a. Subject to subparagraphs b, c, and d, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of"help wanted" advertising, operating costs of an employment office necessary to secure and maintain an adequate staff, costs of operating an aptitude and educational testing program,travel costs of employees while engaged in recruiting personnel,travel costs of applicants for interviews for prospective employment,and relocation costs incurred incident to recruitment of new employees,are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment program. Where the organization uses employment agencies,costs that are not in excess of standard commercial rates for such services are allowable. b.In publications, costs of help wanted advertising that includes color,includes advertising material for other than recruitment purposes, or is excessive in size(taking into consideration recruitment purposes for . which intended and normal organizational practices in this respect), are unallowable. c. Costs of help wanted advertising, special emoluments,fringe benefits,and salary allowances incurred to attract professibnal personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization,are unallowable. d.Where relocation costs incurred incident to recruitment of a new employee have been altowed either as an allocable direct or indirect cost,and the newly hired employee resigns for reasons witli n his control within twelve months after being hired,the organization will be required to refund or credit such relocation costs to the Federal Government. 45."elocation costs. a.Relocation costs are costs incident to the permanent change of duty assignment(for an indefinite period or for a stated period of not less than 12 months)of an existing employee or upon recruitment of anew employee.Relocation costs are allowable, subject to the limitation described in subparagraphs b, c, and d,provided that:' (1)The move is for the benefit of the employer. (2)Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. (3)The reimbursement does not exceed the employee's actual(or reasonably estimated) expenses. b. Allowable relocation costs for current employees are limited to the following: (1)The costs of transportation of the employee,members of his immediate family and hishousehold, and personal effects to the new location. . (2)The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transition period,up to maximum period of 34 days,including advance trip time. (3) Closing costs, such as brokerage,legal,and appraisal fees,incident to the disposition of the employee's former home. These costs,together with those described in(4), are limited to 8 per cent of the sales price • 54 of 61 05/09/2000 11:15 AM OMB Circular A-122 of the employee's former home. (4) The continuing costs of ownership of the vacant former home after the settlement or lease date of the employee's new permanent home,such as maintenance of buildings grounds (exclusive of fixing up . expenses),utilities,taxes,and property insurance. (5)Other necessary and reasonable expenses normally incident to relocation, such as the costs of canceling an unexpired lease, disconnecting and reinstalling household applianc , 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 escribed in(1) and(2) of subparagraph b.When relocation costs incurred incident to the r itmcnt of new employees have been allowed either as a direct or indirect cost and the employee resigns fo reasons within his control within 12 months after hire,the organization shall refimd or credit the Federal vernment for its share of the cost. However,the costs of travel to an overseas location shall be consider d travel costs in accordance with paragraph 55 and not relocation costs for the purpose of this para h if dependents arc not permitted at the location for any reason and the costs do not include costs of rting household goods. d.The following costs related to relocation are unallowable: • (1)Fees and other costs associated with acquiring a new home. (2) A loss on the sale of a former home. (3) Continuing mortgage principal and interest payments on a home jeing sold. (4)Income taxes paid by an employee related to reimbursed relocation costs. 46. Rental costs. a.Subject to the limitations described in subparagraphs b through d,rental costs are allowable to the extent that the rates are reasonable in light of such factors as:rental osts of comparable property,if any; market conditions in the area; alternatives available; and the type, ' expectancy, condition,and value of the property leased. b.Rental costs under sale and leaseback arrangements are allowable only up to the amount that would be allowed had the organization continued to own the property. c.Rental costs under less-than-arms-length leases are allowable on1 up to the amount that would be allowed had title to the property vested in the organization.For this urpose, a less-than-arms-length lease . is one under which one party to the lease agreement is able to contr 1 or substantially influence the actions of the other. Such leases include,but axe not limited to those betwe (i) divisions of an organization;(ii) organizations under common control through common officers, dirt tors, or members; and(iii) an organization and a director,trustee,officer,or key employee of the rganization or his immediate family either directly or through corporations,trusts,or similar arrangeme s in which they hold a controlling interest. d. Rental costs under leases which=required to be treated as capi al leases under GAAP, are allowable only up to the amount that would be allowed had the organization p chased the property on the date the . lease agreement was executed,i.e.,to the amount that minimally w uld pay for depreciation or use 55 of 61 05/09/2000 11:15 AM ltit$Circular A-122 allowances,maintenance,taxes, and insurance.Interest costs related to capitalized leases are allowable to the extent they meet criteria in subparagraph 23.a.Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had.he organization purchased the facility. 47.Royalties and other costs for use of patents and copyrights. a.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 perfomiance of the award arc allowable unless: (I)The Federal Government has a license or the right to free use of the patent or copyright, (2)The patent or copyright has been adjudicated to be invalid, or has been administratively determined to be invalid, (3)The patent or copyright is considered to be unenforceable. (4)The patent or copyright is expired. b. Special care should be exercised in determining reasonableness where the royalties may have arrived at as a result of less-than-arm's-length bargaining, e.g.: (1)Royalties paid to persons,including corporations,affiliated with the organization. (2)Royalties paid to unaffiliated parties,including corporations,under an agreement entered into in contemplation that a Federal award would be made. (3)Royalties paid under an agreement entered into after an award is made to an organization. c.In any case involving a patent or copyright formerly owned by the organization,the amount of royalty allowed should not exceed the cost which would have been allowed had the organization retained title thereto. 48. Selling and marketing. Costs of selling and marketing any products or services of the organization (unless allowed under paragraph 1 as allowable public relations costs) are unallowable.These costs, however, are allowable as direct costs,with prior approval by awarding agencies,when they are necessary for the performance of Federal programs. 49. Severance pay. a. Severance pay, also commonly referred to as dismissal wages,is a payment in addition to regular salaries and wages,by organizations to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in each case,it is required by(i)law, (ii) employer-employee agreement, (iii) established policy that constitutes,in effect,an implied agreement on the organization's • part, or(iv)circumstances of the particular employment. b. Costs of severance payments are divided into two categories as follows: (1)Actual normal turnover severance payments shall be allocated to all activities;or,where the organization provides for a reserve for normal severances, such method will be acceptable if the charge to current operations is reasonable in light of payments actually made for normal severances,over a representative past period, and if amounts charged are allocated to all activities of the organization 56 of b1 05/09/2000 11:15 A.. OMB Circular A•122 1 . (2)Abnormal or mass severance pay is of such a conjectural naturet measurement of costs by means of an accrual will not achieve equity to both parties. Thus, accruals for 's purpose are not allowable. t However,the Federal Government recognizes its obligation to partici ate,to the extent of its fair share,in - any specific payment.Thus, allowability will be considered on a cas by-case basis in the event or occurrence. v packages(commonlyparachute"payment) c. Costs incurred in certain severance pay pack g s kno I as "a golden p ym ) which arc in an amount in excess of the normal severance pay paid b the organization to an employee upon termination of employment and are paid to the employee con ' gent upon a change in management control over, or ownership of,the organization's assets are unallowa lc. - d. Severance payments to foreign nationals employed by the organiz tion outside the United States,to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable, unless they are necessary for the perfonnanc of Federal programs and approved by awarding agencies. e.Severance payments to foreign nationals employed by the org ' 'on outside the United States due to the termination of the foreign national as a result of the closing oli o curtailment of activities by,the organization in that country,are unallowable,unless they are necess for the performance of Federal programs and approved by awarding agencies. 50. Specialized service facilities. a.The costs of services provided by highly complex or specialized :cilities operated by the organization, such as electronic computers and wind tunnels, are allowable,provi ed the charges for the services meet the conditions of either subparagraph b or c and,in addition,take 1 to account any items of income or Federal financing that qualify as applicable credits under subpara• aph A.5 of Attachment A. b.The costs of such services,when material,must be charged direc, y to applicable awards based on actual • usage of the services on the basis of a schedule of rates or establish-• methodology that(i) does not discriminate against federally-supported activities of the organizati.n,including usage by the organization . for internal purposes, and(ii)is designed to recover only the aggre_.to costs of the services.The costs of each service shall consist normally of both its direct costs and its . ocable share of all indirect costs. Advance agreements pursuant to subparagraph A.6 of Attachme 1 t A are particularly important in this situation. c.Where the costs incurred for a service are not material,they may be allocated as indirect costs. 51. Taxes. a.In general, taxes which the organization is required to pay and w 'ch are paid or accrued in accordance with GAAP,and payments made to local governments in lieu of t es which are commensurate with the local government services received are allowable, except for(i)t s from which exemptions are available to the organization directly or which are available to the organizati n based on an exemption afforded the Federal Government and in the latter case when the awarding agen y makes available the necessary exemption certificates, (ii) special assessments on land which repr sent capital improvements, and(iii) Federal income taxes. b. Any refund of taxes, and any payment to the organization of int rest thereon,which were allowed as award costs,will be credited either as a cost reduction or cash re d, as appropriate, to the Federal 57 of 61 05109/2000 11:15 AM Government. 52. Termination costs.Termination of awards generally give rise to the incurrence of costs,or the need for special treatment of costs,which would not have arisen had the award not been terminated. Cost . principles covering these items are set forth below.They are to be used in conjunction with the other provisions of this Circular in termination situations. • a. Common items.The cost of items reasonably usable on the organization's other work shall not be allowable unless the organization submits evidence that it would not retain such items at cost without sustaining a loss.In deciding whether such items are reasonably usable on-other work of the organization, the awarding agency should consider the organization's plans and orders for:current and scheduled activity. Contemporaneous purchases of common items by the organization shall be regarded as evidence that such items are reasonably usable on the organization's other work.Any acceptance of common items as allocable to the terminated portion of the award shall be limited to the extent that the quantities of such items on hand,in transit,and on order are in excess of the reasonable quantitative requirements of other work. b. Costs continuing after termination.If in a particular case,despite all reasonable effort by the organization,certain costs cannot be discontinued immediately after the effective date of termination,such costs are generally allowable within the limitations set forth in this Circular,except that any such costs continuing after termination due to the negligent or willful failure of the organisation to discontinue such costs shall be unallowable. c.Loss of useful value.Loss of useful value of special tooling,machinery and equipment which was not charged to the award as a capital expenditure is generally allowable ift (1)Such special tooling,machinery,or equipment is not reasonably capable of use in the other work of the organization. (2)The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the awarding agency; d.Rental costs.Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance of the terminated award less the residual value of such leases,if(i)the amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the award and such further period as maybe reasonable, and(ii)the organization makes all reasonable efforts to terminate, assign, settle,or otherwise reduce the cost of such lease.There . also may be included the cost of alterations of such leased property,provided such alterations were necessary for the performance of the award,and of reasonable restoration required by the provisions of the lease. e. Settlement expenses.Settlement expenses including the following are generally allowable: (1)Accounting, legal, clerical, and similar costs reasonably necessary for: (a)The preparation and presentation to awarding agency of settlement claims and supporting data with respect to the terminated portion of the award, unless the termination is for default(see Sec. .61 of Circular A-110); and • (b)The termination and settlement of subawards. • • 5S 0161 05/09/2000 11:15 A.ti1 OMB Circular A-122 . p (2)Reasonable costs for the storage,transportation,protection, and disposition of property provided by the Federal Government or acquired or produced for the award,except wh n grantees or contractors are . reimbursed for disposals at a predetermined amount in accordance wi Sec._.30 through_.37 of Circular A-110. (3)Indirect costs related to salaries and wages incurred as settlement expenses in subparagraphs(1) and (2).Normally, such indirect costs shall be limited to fringe benefits, occupancy cost,and immediate supervision. 1 • f. Claims under subawards. Claims under subawards,including the ocable portion of claims which are common to the award, and to other work of the organization are gen y allowable.An appropriate share of the organization's indirect expense may be allocated to the amount f settlements with subcontractors and/or subgrantees,provided that the amount allocated is otherwise c nsistent with the basic guidelines contained in Attachment A.'The indirect expense so allocated shall a elude the same and similar costs I claimed directly or indirectly as settlement expenses. 53.Training and education costs. a. Costs of preparation and maintenance of a program of inshuction i i eluding but not limited to on-the-job, classroom,and apprenticeship training,designed to increase the voca:onal effectiveness of employees, including training materials,textbooks,salaries or wages of trainees 'excluding overtime compensation which might arise therefrom), and(i)salaries of the director of• .' II g and staff when the training program is conducted by the organization; or(ii)tuition and fees when the . . .•s g is in an institution not operated by the organization, are allowable. b. Costs of part-time education, at an undergraduate or post-graduate college level,including that provided at the organization's own facilities,are allowable only when the cour a or degree pursued is relative to the field in which the employee is now working or may reasonably be e ected to work,and arc limited to: - (1)Training materials. (2) Textbooks. (3) Fees charges by the educational institution. (4)Tuition charged by the educational institution or,in lieu.of tuitio instructors' salaries and the related share of indirect costs of the educational institution to the extent tha the sum thereof is not in excess of the tuition which would have been paid to the participating educational stitution. (5) Salaries and related costs of instructors who arc employees of th organization_ • (6)Straight-time compensation of each employee for time spent att ding classes during working hours not in excess of 156 hours per year and only to the extent that circumst hies do not permit the operation of classes or attendance at classes after regular working hours; oth se,such compensation is unallowable. c. Costs of tuition, fees, training materials, and textbooks(but not s bsistence, salary, or any other emoluments) in connection with full-time education, including that rovided at the organization's own facilities, at a post-graduate.(but not undergraduate) college level, a allowable only when the course or degree pursued is related to the field in which the employee is now orking or may reasonably be expected to work,and only where the costs receive the prior approval of thewarding agency. Such costs are limited to the costs attributable to a total period not to exceed one school y ar for each employee so trained.In 59 0'61 05/09/2000 11:15 AM unusual cases the period may be extended. d. Costs of attendance of up to 16 weeks per employee per year at specialized programs specifically designed to enhance the effectiveness of executives or managers or to prepare employees for such positions . are allowable. Such costs include enrollment fees,training materials, textbooks and related charges, employees' salaries, subsistence,and travel. Costs allowable under this paragraph do not in:,ludc those for courses that are part of a degree-oriented curriculum,which are allowable only to the extent set forth in subparagraphs b and c. c.Maintenance expense, and normal depreciation or fair rental, on facilities owned or leased by the organization for training purposes are allowable to the extent set forth in paragraphs 11,21,and 46. . f. Contributions or donations to educational or training institutions,including the donation of facilities or other properties, and scholarships or fellowships,are unallowable. g.Training and education costs in excess of those otherwise allowable under subparagraphs b and c may be allowed with prior approval of the awarding agency.To be considered for approval,the organization must demonstrate that such costs are consistently incurred pursuant to an established training and education program, and that the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work. 54.Transportation costs.Transportation costs include freight, express, cartage,and postage charges relating either to goods purchased,in process,or delivered.These costs are allowable.When such costs can readily be identified with the items involved,they may be directly charged as transportation costs or added to the cost of such items(sec paragraph 28).Where identification with the materials received cannot readily be made,transportation costs may be charged to the appropriate indirect cost accounts if the organization follows a consistent, equitable procedure in this respect. 55.Travel costs. a.Travel costs are the expenses for transportation,lodging,subsistence, and related items incurred by employees who are in travel status on official business of the organization.Travel costs are allowable subject to subparagraphs b through e,when they arc directly attributable to specific work under an award or ate incurred in the normal course of administration of the organ17ation. b. Such costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs incurred,or on a combination of the two,provided the method used results in charges consistent with those normally allowed by the organization in its regular operations. • c. The difference in cost between first-class air accommodations and less than first-class air accommodations is unallowable except when less than first-class air accommodations are r.ot reasonably available to meet necessary mission requirements,such as where less than first-class accommodations would(i) require circuitous routing,(ii) require travel during unreasonable hours, (iii) greatly increase the duration of the flight,(iv)result in additional costs which would offset the transportation savings, or(v) offer accommodations which are not reasonably adequate for the medical needs of the :aveler. • d.Necessary and reasonable costs of family movements and personnel movements of a special or mass nature are allowable,pursuant to paragraphs 44 and 45, subject to allocation on the basis of work or time • period benefited when appropriate.Advance agreements are particularly important. e.Direct charges for foreign travel costs are allowable only when the travel has received prior approval of 60 of 61 05/09/200011:15 Al, ws LirculfrA-!i1 HUinilwww.wWwiwusa11141VMD/Uuw1arn+�+4l............. the awarding agency.Each separate foreign trip must be approved.For urposes of this provision, foreign travel is defined as any travel outside of Canada and the United States d its territories and possessions. However, for an organization located in foreign countries,the term"fo ign travel"means travel outside that country. 56.Trustees.Travel and subsistence costs of trustees (or directors) are allowable. The costa are subject to restrictions regarding lodging, subsistence and air travel costs provided)in paragraph 55. ATTACHMENT C . Circular No. A-122 NON-PROFIT ORGANIZATIONS NOT SUBJECT TO THIS CIRCULAR Aerospace Corporation,El Segundo,California Argonne National Laboratory, Chicago,Illinois Atomic Casualty Commission,Washington, D.C. Battelle Memorial Institute,Headquartered in Columbus,Ohio Brookhaven National Laboratory,Upton,New York - Charles Stark Draper Laboratory,Incorporated, Cambridge,Massachusetts - Environmental Institute of Michigan,Ann Arbor,Michigan •• • Hanford Environmental Health Foundation,Richland,Washington • IIT Research Institute,Chicago,Illinois Institute for Defense Analysis,Alexandria,Virginia Mitre Corporation,Bedford,Massachusetts_ • National Radiological Astronomy Observatory,Green Bank, West Virginia • National Renewable Energy Laboratory, Golden, Colorado • Oak Ridge Associated Universities,Oak Ridge,Tennessee = Rand Corporation, Santa Monica, California • - Research Triangle Institute,Research Triangle Park,North Carolina Riverside Research Institute,New York,New York Southern Research Institute,Birmingham,Alabama . Southwest Research Institute, San Antonio,Texas SRI International, Menlo Park, California Syracuse Research Corporation, Syracuse,New York Universities Research Association,Incorporated(National Acceleration Lab),Argonne,Illinois Non-profit insurance companies, such as Blue Cross and Blue Shield Organisations • Other non-profit organizations as negotiated with awarding agencies BILLING CODE 3110-01 OMB Home Page)Budget Information I Legislative Information I Managgment Reforrn/GPR A,I 1 Grants Management I Financial Management I Procurement Policy l Information &Regulatory Policy I Special Topics I . Read our Privacy Policy • • 61 01'61 05/09/2000 11:15 AM . • ISI Exhibit E: OMB Circular A-133 Audits of Institutions of Higher Education and Other Non-Profit Institutions COMMUNITY DEVELOPMENT 09:1601 HDR RF-628 2-2-98 OMB CIRCULAR A-133: AUDITS OF STATES LOCAL GOVERNMENTS, • AND NON-PROFIT ORGANI : ATIONS OFFICE OF MANAGEMENT AND eral entities shall apply to audits o fiscal can be easily scanned into a computer BUDGET ' years beginning after June 30, 199.,with format. the exception that § 305(b) •pplies FOR FURTHER INFORMATION Audits of States, Local to audits of fiscal years beginnin: after CONTACT: Recipients should contact Governments, and Non-Profit June 30. 1998. The requirements •f Cir- Organizations cular A-128. although the Circ lar is -their cognizant or oversight agency for rescinded,and the 1990 version o Circu- audit,or Federal awarding agency,as may AGENCY: Office of Management and lar A-133 continue to apply for a dits of be appropriate in the circumstances. Su- Budget. fiscal years beginning on or befo June brecipients should contact their pass- 30,ACTION: Final revision of OMB Circu- All 1996. through entity. Federal agencies should Man- lar No. A-133, final rescission of OMB All comments on the provision.I "Cir- contact Sheila O. Conley, Office of No. A-128, and notice of docu- cular A-133 Compliance Supplement" agement and Budget, Office of Federal Circular availability of the Provisional Cir- should be in writing, and must be re- Financial Management, Financial Stan- ment A-133 Compliance Supplement. ceived by November 30, 1997. La corn- dards and Reporting Branch, telephone cularp ments will be considered to the extent (202) 395-3993. practicable. SUMMARY: This revision of Office of ADDRESSES: A copy of the circular Management and Budget(OMB)Circular may be obtained from the 0 B fax No. A-133. re-titled "Audits of States, information line, 202-395-9068, docu- 1. OMB rescinds Circular A-128 July Local Governments, and Non-Profit Or- ment number 1133; OMB home .age on 30, 1997. ganizations." establishes uniform audit the Internet which is currently loc.ted at 2. OMB revises Circular A-133 to read requirements for non-Federal entities http /www.whitehouse.gov EOP/ as follows: that administer Federal awards and im- omb, under the captions "OMB Docu- plements the Single Audit Act Amend- ments,"and then"Grants Manage ent;" [Circular No. A-133 Revised] ments of 1996, which were signed into or by writing or calling the 0 ice of law on July 5, l996 (Public Law 104- Administration, Publications Office, To the Heads of Executive 156). OMB Circular No. A-128, "Audits room 2200,New Executive Office Build- Departments-and Establishments of States and Local Governments,"issued ing, Washington, DC 20503, tel phone in 1985, is rescinded, as a result of the (202) 395-7332. A single copy of the Subject: Audits of States, Local Govern- consolidation of audit requirements un- provisional "Circular A-133 Com•liance ments, and Non-Profit Organiza- der Circular A-133. Supplement"may be obtained fro EOP tions. One of the more significant revisions is. Publications, Office of Adminis ration, I. Purpose. This Circular is issued that the threshold for when an entity is 2200 NEOB, Washington, DC 20503 pursuant to the Single Audit Act of 1984, required to have an audit is raised from (telephone 202-395-7332).The prevision- P.L. 98-502, and the Single Audit Act $25,000 to $300,000. This will signifi- al "Circular A-133 Compliance ',upple- Amendments of 1996, P.L. 104-156. It candy reduce audit costs for many small ment" is also available from th= OMB sets forth standards for obtaining consis- entities. Other significant changes are: a home page. tency and uniformity among Federal report submission due date which is Comments on the provisional Circu- agencies for the audit of States, local shortened from 13 to 9 months and a lar A-133 Compliance Supplement" governments, and non-profit organiza- report submission process that includes a should be mailed to the Office of anage- tions expending Federal awards. data collection form and streamlined fit- ment and Budget, Office of Fed-ral Fi- 2. Authority. Circular A-133 is issued ing requirements(§ .320);a new risk- nancial Management, Financial Stan- under the authority of sections 503, 1 1 11, based approach for major program deter- dards and Reporting Branch,Roo 6025, and 7501 et seq.of title 31,United States mination (§ .520); and, additional New Executive Office Building,Washing- Code, and Executive Orders 8248 and guidance for program-specific audits ton, DC 20503. Where possible corn- 11541. (§ .235). audit findings (§ .510), ments should reference the ap•licable 3. Rescission and Supersession. This and audit findings follow-up(§ .315). page numbers. When comments of five Circular rescinds Circular A-128,"Audits This Notice also offers interested par- pages or less are sent in by facsimi (fax), of State and Local Governments,"issued tics an opportunity to comment on the they should be faxed to (202) 39 -4915. April 12, 1985, and supersedes the prior provisional "Circular A-133 Compliance Electronic mail comments may ee sub- Circular A-133,"Audits of Institutions of Supplement," provided as Appendix B to mitted via the Internet to RAM EY— Higher Education and Other Non-Profit Circular A-131 However, due to its T@nAI.EOP.GOV. Please include he full Institutions," issued April 22, 1996. For length, the provisional "Circular A-133 body of electronic mail comment- in the effective dates, see paragraph 10. • Compliance Supplement" is not included text of the message and not as an attach- 4. Policy. Except as provided herein, in this Notice. See ADDRESSES for ment. Please include the nam-, title, the standards set forth in this Circular information about how to obtain a copy. organization, postal address, and E-mail shall be applied by all Federal agencies.If DATES:The revised Circular is effective address in the text of the messa:e. any statute specifically prescribes policies July 30, 1997. Federal agencies shall To facilitate conversion of the corn- or specific requirements that differ from adopt the standards set forth in this ments into a computer format fo analy- the standards provided herein, the provi- revised Circular in codified regulations sis, it would be helpful if resp.ndents sions of the subsequent statute shall go- not later than August 29. 1997. would send a copy of comments o either vern. The standards set forth in § .400, a 3.5 or 5.25 inch diskette in either Federal agencies shall apply the provi- which apply directly to Federal agencies, WordPerfect 5.1 or 6.0, WordPe ect for sions of the sections of this Circular to shall apply to audits of fiscal years begin- Windows,or ASCII format.When a disk- non-Federal entities, whether they are ping after June 30, 1996,except as other- ette cannot be provided, it wo Id be recipients expending Federal awards re- wise specified in § .400(a).The stan- helpful if the comments were pri ted in ceived directly from Federal awarding dards set forth in this Circular which pica or an equivalent 10 charact-rs per agencies, or are subrecipients expending Federal agencies shall apply to non-Fed- inch type on white paper so the do.ument -Federal awards received from a pass- Published by West Grouo 09:1602 HOUSING AND DEVELOPMENT REPORTER r...:.... through entity (a recipient or another PART —AUDITS OF STATES, Auditor means an auditor, that is a - ; subrecipient). LOCAL GOVERNMENTS, AND NON- public accountant or a Federal, State or ' This Circular does not apply to non- PROFIT. ORGANIZATIONS local government audit organization, U.S. based entities expending Federal which meets the general standards speci- awards received either directly as a recipi- Subpatt_A-General fled in generally accepted government ent or indirectly as a subrecipient, auditing standards (GAGAS)..The term 5. Definitions. The definitions of key Sec, .._..- ._ • auditor does not include internal auditors terms used in this Circular are contained .100 Purpose.. of non-profit organizations. in § .105 in the Attachment to this A0.5 Definitions. • Audit finding means deficiencies which Circular, the auditor is required by § •.510(a ) 6. Required Action. The specific re- Subpart B=Audits. :, to report in the schedule of findings and quirements and responsibilities of Feder- questioned costs. .200 Audit requirementsCFDA number means the number as- al agencies and non-Federal entities are 2s for,ederal entitBasis Federal signed to a Federal program in the Cata- set forth in the Attachment to this Circu- .awards expended. log of Federal Domestic Assistance lar. Federal agencies making awards to .210 Subrecipient and vendor deter- (CFDA). non-Federal entities, either directly or minations. Closter of programs means a grouping indirectly,shall adopt the language in the ' .215 Relation to other:audit require- of closely related programs that share Circular in codified regulations as provid- ments, common compliance requirements. The ed in Section 10(below), unless different .220. Frequency of audits. . types of clusters of programs are research provisions are required by Federal statute .225 Sanctions. and development (R&D), student finan- or are approved by the Office of Manage- .230 Audit costs. cial aid(SFA),and other clusters. "Other ment and Budget (OMB). .235 Program-specific audits. clusters" are as defined by the Office of 7. OMB Responsibilities. OMB will . . Management and Budget (OMB)..in the review Federal agency regulations and Subpart C—Auditees compliance supplement or as designated implementation of this Circular,and will by a State for Federal awards the State provide interpretations of policy require .305 Auditee responsibilities. provides to its subrecipients that meet the 305 Auditor selection. definition of a cluster of programs.When ments and assistance to ensure uniform, ,310 Financial statements. designating an "other cluster," a State effective and efficient implementation. 315 Audit findings follow-up, shall identify the Federal awards included 8. Information Contact. Further infor- 320 Report submission. in the cluster and advise the subrecipients mation concerning Circular A-133 may of compliance requirements applicable be obtained by contacting the Financialto the cluster, consistent with Subpart D—Fideral Agencies and " Standards and Reporting Branch, Office Pass-Through Entities. §___..400(d)(1)and§ .400(d)(2),re- of_Federal Financial Management,Office , spectively.A cluster of programs shall be of Management and Budget,Washington. ' .400 Responsibilities. considered as one program for determin- DC 20503. telephone (202) 395-3993. • .405 Management decision, ing major programs, as described in 9. Review Date.This Circular will have ••` § .520, and, with the exception of a policy review three years from the date Subpart E—Auditors • R&D as described in § .200(c), of issuance. •• whether a program-specific audit may be • • 10. Effective Dates. The standards set ,300'Sco elected. . - pe of audit. . Cognizant agency for audit means-the forth in § .400 of the Attachment to .505 Audit reporting. Federal agency designated to carry,out this Circular, which apply directly to .510 Audit findings. the . responsibilities described.. in Federal agencies,shall be effective July 1, .515'Audit working papers. § .400(a). 1996.'and shall apply to audits of fiscal .520 Major.program determination. Compliance supplement refers to the years beginning after June 30; 1996, .525 Criteria for Federal program Circular A-133 Compliance Supplement, risk except as otherwise specified in included as Appendix B to Circular A- § .400(a). .. •.530 Criteria for a low-risk auditee. 133, or such documents as OMB or its The standards set forth.jn this Circular designee may issue to replace it. that.Federal agencies shall apply to non- Appendix A to Part —Data This document is available from the Federal entities shall be adopted by Fed- Collection Form (Form SF-SAC) Government Printing Office,Superinten- eral agencies in codified regulations not dent of Documents, Washington, DC Appendix B to Part —Circular 20402-9325. later than 60 days after publication of this A-133 Compliance SupplementCorrective action means action taken final revision in the Federal Register, so that they will apply to audits of fiscal Subpart A—General by the auditee that: years beginning afterJune 30. 1996,with (l) Corrects identified deficiencies; the exception that § .305(b) of thePu • (2) Produces recommended improve- Attachment applies to audits of fiscal § .100- �OSe' menu; or years beginning after June 30, 1998. The (3) Demonstrates that audit findings g g This part sets forth standards for ob- are either invalid or do not warrant requirements of Circular A-128, although taming consistency and uniformity auditee action. the Circular is rescinded, and the 1990 among Federal agencies for the audit of Federal agency has the same meaning version of Circular A-133 remain in effect non-Federal entities expending Federal as the term agency in Section 551(1) of for audits of fiscal years beginning on or awards. title 5, United States Code. - before June 30. 1996. Federal award means Federal financial D. Raines. §-105 Definitions. assistance and Federal cost-reimburse- Franklinment contracts that non-Federal entities _ Director. Auditee means any non-Federal entity receive directly from Federal awarding that expends Federal awards which must agencies or indirectly from pass-through Attachment be audited under this part. entities. it does not include procurement Published by West Group COMMUNITY DEVELOPMENT I 09:1603 HDR RF-628 • I 2-2-98 contracts,used (3) Compliance with applicable laws OMB means the Executive Office of contracts,under grants or p pP to buy goods or services from vendors. and regulations. the President,Office of Management and Any audits of such vendors shall be Internal control pertaining to the cam- Budget. covered by the terms and conditions of pliance requirements for Federal pro:rams Oversight agency for audit means the the contract.Contracts to operate Federal (Internal control over Federal prog his) Federal awarding agency that provides Government owned, contractor operated means a process—effected by an e tity's the predominant amount of direct fund- facilities(GOCOs)are excluded from the management and other personnel •e- ing to a recipient not assigned a cognizant requirements of this part. signed to provide reasonable assu •nce agency for audit. When there is no direct Federal awarding agency means the regarding the achievement of the f.flow- funding, the Federal agency with the Federal agency that provides an award ing objectives for Federal program.: predominant indirect funding shall as- directly to the recipient. (I)Transactions are properly rec•rded sume the oversight responsibilities. The Federal financial assistance means as- and accounted for to: duties of the oversight agency for audit sistance that non-Federal entities receive (i) Permit the preparation of re iable are described in § .400(b). - or administer in the form of grants,loans, financial statements and Federal re.•rts; Pass-through entity means a non-Feder- loan guarantees. property (including do- (ii)Maintain accountability over•ssets; al entity that provides a Federal award to nated surplus property), cooperative and a subrecipient to carry out a Federal agreements, interest subsidies, insurance. (iii) Demonstrate compliance with program. food commodities.direct appropriations, laws, regulations, and other comp iance Program-specific audit means an audit and other assistance,but does not include of one Federal program as provided for in requirements; amounts received as reimbursement for § 200(c) and § 235. (2) Transactions are executed in com- services rendered to individuals as de- Questioned cost means a cost that is scribed in § .205(h) and pliance with: (i) Laws, regulations, and.the „rovi- questioned by the auditor because of an 205(i). audit finding: § sions of contracts or grant agree ents Federal program means: that could have a direct and m.terial (1)Which resulted from a violation or (1)All Federal awards to a non-Federal effect on a Federal program; and possible violation of a provision of a law, entity assigned a single number in the (ii)Any other laws and regulation• that regulation, contract, grant, cooperative CFDA.(2) hen no CFDA number is as- eement or docu- are identified in the compliance s mole- (2) ment governing the reement, or ruserof Federal funds, asigned,all Federal awards from the same merit;and including funds used to match Federal agency made for the same purpose should (3) Funds, property, and other :ssets funds; be combined and considered one pro- are safeguarded against loss from nau- (2) Where the costs , at the time of the thorized use or disposition. gram. audit, are not supported by adequate Loan means a Federal loan o loan (3)Notwithstanding paragraphs(1)and documentation; or (2) of this definition, a cluster of pro- guarantee received or administere• by a (3) Where the costs incurred appear non-Federal entity. grams.The types of clusters of programs Local government means any u it of unreasonable and do not reflect the sc- are: tions a prudent person would take in the local government within a State, i�clud- (i) Research and development (R&D); circumstances. (ii) Student financial aid (SFA); and ing a county,borough,municipalit city, Recipient means a non-Federal entity (iii) "Other clusters," as described in town, township, parish, local publ c au- that expends Federal awards received • the definition of cluster of programs in thority, special district, school di.trict, directly from a Federal awarding agency intrastate district, council of g.vern- this section. to carry out a Federal program. G9GAS means generally accepted gov- ments, and any other instrumenta'ty of Research and development (R&D) ernment auditing standards issued by the local government. means all research activities, both basic Comptroller General of the United Major program means a Federa pro- and applied, and all development activi- States, which are applicable to financial gram determined by the auditor t• be a ties that are performed by a non-Federal audits. major program in accordancewith entity.Research is defined as a systematic Generally accepted accounting princi- § .520 or a program identifie. as a study directed toward fuller scientific pies has the meaning.specified in general- major program by a Federal age cy or knowledge or understanding of the sub- ly accepted auditing standards issued by pass-through entity in accordanc with 215( ject studied. The term research also in- the American Institute of Certified Public c). eludes activities involving the training of Accountants (AICPA). Management decision means the valu- individuals in research techniques where Indian tribe means any Indian tribe, ation by the Federal awarding age cy or• such activities utilize the same facilities band.nation,or other organized group or pass-through entity of the audit fi dings as other research and development activi- community, including any Alaskan Na- and corrective action plan and t e is- ties and where such activities are not tive village or regional or village corpora- suance of a written decision as to what included in the instruction function. De- tion (as defined in, or established under, corrective action is necessary. velopment is the systematic use of knowl- the Alaskan Native Claims Settlement Non-Federal entity means a State local edge and understanding gained from re- Act) that is recognized by the United government, or non-profit organization. search directed toward the production of States as eligible for the special programs Non-profit organization means: useful materials, devices, systems, or , and services provided by the United (1) any corporation, trust, association, methods, including design and develop- States to Indians because of their status as cooperative, or other organization that: ment of prototypes and processes. Indians. (i) Is operated primarily for scie tific, Single audit means an audit which Internal control means a process,effect- educational,service,charitable,or s milar includes both the entity's financial state- ed by an entity's management and other purposes in the public interest; ments and the Federal awards as de- personnel,designed to provide reasonable (ii)Is not organized primarily fo prof- scribed in § .500. assurance regarding the achievement of it; and State means any State of the United objectives in the following categories: (iii) Uses its net proceeds to mai talo, States, the District of Columbia, the (I)Effectiveness and efficiency of oper- improve, or expand its operation and Commonwealth of Puerto Rico, the Vir- ations: (2) The term non-profit organi ation gin Islands,Guam,American Samoa,the (2) Reliability of financial reporting; includes non-profit institutions of igher Commonwealth of the Northern Mariana and education and hospitals. Islands, and the Trust Territory of the 09:1604 HOUSING AND DEVELOPMENT REPORTER (_,, Pacific Islands,any instrumentality there- not require a financial statement audit of (c) Loan and loan guarantees(loans)at of.any multi-State. regional,or interstate the auditee,the auditee may elect to have institutions of higher education. When entity which has governmental functions, a.program-specific audit conducted in loans are made to students of an institu- and any Indian tribe as defined in this accordance with § .235: A program- tion of higher education but the institu- section. specific audit may notbe elected for tion does not make the loans, then only Student Financial Aid (SFA) includes R&D unless all of the Federal awards the value of loans made during the year those programs of general student assis- expended were received from the same shall be considered Federal awards ex- tance, such as those authorized by Title Federal agency,or the same Federal agen- pended in that year.The balance of loans IV of the Higher Education Act of 1965, cy and the same pass-through entity, and for previous years is not included as as amended. (20 U.S.C. 1070 et seq.) that Federal agency,or pass-through enti- Federal awards expended because the which is administered by the U.S. De- ty in the case of a subrecipient, approves lender accounts for the prior balances. partment of Education, and similar pro- in advance a program-specific audit. (d) Prior loan and loan guarantees grams provided by other Federal agen- (d) Exemption when Federal awards (loans). Loans, the proceeds of which cies. It does not include programs which expended are less than $300,000. Non- were received ,rid expended in prior- provide fellowships or similar Federal Federal entities that expend less than years, are not :nsidered Federal awards awaids to students on a competitive ba- S300,000 a year in Federal awards are expended unc:.; this part when the laws, sis, or for specified studies or research. exempt from Federal audit requirements regulations, and the provisions of con- Subrecipient means a non-Federal enti- for that year, except as noted in tracts or grant agreements pertaining to ty that expends Federal awards received § .215(a), but records must be avail- such loans impose no continuing compli- from a pass-through entity to carry out a able for review or audit by appropriate ance requirements other than to repay the Federal program,but does not include an officials of the Federal agency, pass- loans. individual that is a beneficiary of such a through entity, and General Accounting (e) Endowment funds. The cumulative program. A subrecipient may also be a Office (GAO). balance of Federal awards for endowment recipient of other Federal awards directly (e) Federally Funded Research and De- funds which are federally restricted are from a Federal awarding agency. Guid- velopment Centers (FFRDC). Manage- considered awards expended in each year ance on distinguishing between a subreci- ment of an auditee that owns or operates in which the funds are still restricted. picnt and a vendor is provided in a FFRDC may elect to treat the FFRDC (1)Free rent. Free rent received by itself § .210. as a separate entity for purposes of this is not considered a Federal award ex- Types of compliance requirements re- part. pended under this part. However, free fers to the types of compliance require- rent received as part of an award to carry merits listed in the compliance supple- §_.205 Basis for determining out a Federal program shall be included merit. Examples include: activities al- Federal awards expended, in determining Federal awards expended lowed or unallowed; al::wable costs/cost and subject to audit under this part. principles: cash manag::nent; eligibility; - (g)Valuing non-cash assistance.Federal matching. level of effort, earmarking; (a) Determining Federal awards ex- non-cash assistance, such as free rent, and, reporting. pended. The determination of when an food stamps, food commodities, donated Vendor means a dealer, distributor, award is expended should be based on property, or donated surplus property, merchant.or other seller providing goods when the activity related to the award shall be valued at fair market value at the or services that are required for the occurs. Generally,the activity pertains to time of receipt or the assessed value conduct of a Federal. program. These events that require the non-Federal entity provided by the Federal agency. • goods or services may be for an organiza- to comply with laws, regulations,and the (h) Medicare. Medicare payments to a tion's own use or for the use of beneficiar- provisions of contracts or grant agree- non-Federal entity for providing patient ies of the Federal program. Additional ments, such as: expenditure/expense care services to Medicare eligible individ- guidance on distinguishing between a transactions associated with grants, cost- uals are not considered Federal awards subrecipient and a vendor is provided in reimbursement contracts, cooperative expended under this part. § .210. agreements, and direct appropriations; (i) Medicaid. Medicaid payments to a the disbursement of funds passed through subrecipient for providing patient care Subpart [i—Audits to subrecipients;the use of loan proceeds services to Medicaid eligible individuals under loan and loan guarantee programs; are not considered Federal awards ex- 200 Audit requirements. the receipt of property; the receipt of pended under this part unless a State § surplus property; the receipt or use of requires the funds to be treated as Federal program income; the distribution or con- awards expended because reimbursement (a' Iudit required. Non-Federal entities sumption of food commodities; the dis- is,on a cost-reimbursement basis. that .pend$300.000 or more in a year in bursement of amounts entitling the non- (j) Certain loans provided by the Na- Federal awards shall have a single or Federal entity to an interest subsidy;and. tional Credit Union Administration. For program-specific audit conducted for that the period when insurance is in force. purposes of this part, loans made from year in accordance with the provisions of ' (b) Loan and loan guarantees (loans). the National Credit Union Share Insur- this part. Guidance on determining Fed- Since the Federal Government is at risk ance Fund and the Central Liquidity cral awards expended is provided in for loans until the debt is repaid, the Facility that are funded by contributions § .205. following guidelines shall be used to cal- from insured institutions are not consid- (b) Single audit. Non-Federal entities culate the value of Federal awards ex- ered Federal awards expended. that expend$300,000 or more in a year in pended under loan programs, except as Federal awards shall have a single audit noted in paragraphs (c) and (d) of this 210 Subrecipient and vendor conducted in accordance with§ .500 section: §— except when they elect to have a program- (1) Value of new loans made or re- determinations. specific audit conducted in accordance ceived during the fiscal year, plus with paragraph (c) of this section. (2) Balance of loans from previous (a) General. An auditee may be a (c) Program-.specific audit election. years for which the Federal Government recipient, a subrecipient, and a vendor. When an auditee expends Federal awards imposes continuing compliance require- Federal awards expended as a recipient or - under only one Federal program (exclud- ments; plus a subrecipient would be subject to audit ing R&D) and the Federal program's (3) Any interest subsidy, cash, or ad- under this part. The payments received laws, regulations. or grant agreements do ministrative cost allowance received. for goods or services provided as a vendor Published by West Group • COMMUNITY DEVELOPMENT 09:1605 HDR RF-628 2-2-98 would not be considered Federal awards. compliance requirements normall do § .220 Frequency of audits. • . The guidance in paragraphs(b)and(c)of not pass through to vendors. Ho ever, . this section should be considered in deter- the auditee is responsible for ens ring Except for the provisions for biennial mining whether payments constitute a compliance for vendor transactions hich audits provided in paragraphs(a)and(b) Federal award or a payment for goods are structured such that the vendor•is of this section, audits required by this and services. responsible for program complian.e or part shall be performed annually. Any (b) Federal award. Characteristics in- the vendor's records must be revie d to biennial audit shall cover both years dicative of a Federal award received by a determine program compliance. •Iso, ivithin the biennial period. subrecipient are when the organization: when these vendor transactions relat to a (a)A State or local government that is (I) Determines who is eligible to re- major program, the scope of the <udit required by constitution or statute, in ceive what Federal financial assistance; shall include determining whether these effect on January 1, 1987, to undergo its (2) Has its performance measured transactions are in compliance with laws, audits less frequently than annually, is against whether the objectives of the regulations, and the provisions of con- permitted to undergo its audits pursuant Federal program are met; tracts or grant agreements. to this part biennially. This requirement (3)Has responsibility for programmat- must still be in effect for the biennial is decision making; §_.215 Relation to other audit period under audit. (4) Has responsibility for adherence to requirements. (b) Any non-profit organization that applicable Federal program compliance had biennial audits for all biennial peri- requirements; and ods ending between July 1, 1992, and (5)Uses the Federal funds to carry out (a)Audit under this part in lieu o other January 1, 1995, is permitted to undergo a program of the organization as corn- audits.An audit made in accordant-with its audits pursuant to this part biennially. pared to providing goods or services for a this part shall be in lieu of any fin•ncial audit required under individual F-decal • program of the pass-through entity. §_.225 Sanctions. (c) Paymentawards. To the extent this audit m•ets a for goods and services. , Characteristics indicative of a payment Federal agency's needs, it shall rely upon for goods and services received by a provisio s of No audit costs may be charged to and use such audits. The this part neither limit the author ty of Federal awards when audits required by vendor are when the organization: this part have not been made or have Federal agencies, including their I spec- (I) Provides the goods and services tors General, or GAO to condu t or been made but not in accordance with within normal business operations: arrange for additional audits (e.g., inan- this part. In cases of continued inability (2) Provides similar goods or services or unwillingness to'have an audit Ion- tial audits, performance audits, :valu- to many different purchasers; ations,inspections,or reviews)nor •utho- ducted in accordance with this part, Fed-. (3) Operates in a competitive environ- rize any auditee to constrain F-decal eral agencies and pass-through entities menta agencies from carrying out addi ional shall take appropriate action using sane- (4) Provides goods or services that are audits. Any additional audits sh•11 be tions such as: ancillary to the operation of the Federal planned and performed in such a ay as (a)Withholding a percentage of Federal program; and to build upon work performed by other awards until the audit is completed satis- (5) Is not subject to compliance re- auditors. factorily; quircments of the Federal program. (b)Federal agency pay (b) Withholding or disallowing over- (d) to for addi Tonal (d) Use ofjudgment in making determi- audits. A Federal agency that condu is or head costs; • nation. There may be unusual circum- contracts for additional audits shall con- (c)Suspending Federal awards until the stances_or exceptions to the listed charac- sistent with other applicable law• and audit is conducted; or. teristics. In making the determination of regulations, arrange for funding th full (d) Terminating the Federal award. whether a subrecipient or vendor rela- cost of such additional audits. • tionship exists, the substance of the rela- (c)Request for a program to be a dited §—.230 Audit.costs. . tionship is more important than the form as a major program. A Federal a:ency of the agreement. It is not expected that may request an auditee to have a p.rticu- (a) Allowable costs. Unless prohibited all of the characteristics will be present lar Federal program audited as a ajor by law, the cost of audits made in accor- and judgment should be used in deter- program in lieu of the Federal a:ency dance with the provisions of this part are mining whether an entity is a subrecipient conducting or arranging for the addition- allowable charges to Federal awards.The or vendor. al audits. To allow for planning, such charges may be considered a direct cost or (e) For-profit .subrecipient. Since this requests should be made at least 181 days • an allocated indirect cost, as determined part does not apply to for-profit subreci- prior to the end of the fiscal year to be in accordance with the provisions of pients. the pass-through entity is respon- audited. The auditee, after consul ation applicable OMB cost principles circulars, sible for establishing requirements. as with its auditor,should promptly re pond the Federal Acquisition Regulation necessary. to ensure compliance by for- to such request by informing the Federal (FAR)(48 CFR parts 30 and 31),or other profit subrecipients. The contract with agency whether the program would other- applicable cost principles or regulations. the for-profit subrecipient should de- wise be audited as a major program using (b) Unallowable costs. A non-Federal scribe applicable compliance require- the risk-based audit approach described entity shall not charge the following to a ments and the for-profit subrecipient's in § .520 and, if not, the esti ated Federal award: compliance responsibility. Methods to incremental cost. The Federal a:ency (I) The cost of any audit under the ensure compliance for Federal awards shall then promptly confirm to the audi- Single Audit Act Amendments of 1996 made to for-profit subrecipients may in- tee whether it wants the program a dited (31 U.S.C. 7501 et seq.)not conducted in elude pre-award audits, monitoring dur- as a major program. If the progra is to accordance with this part. ing the contract. and post-award audits. be audited as a major program cased (2) The cost of auditing a non-Federal (f) Compliance responsibility for yen- upon this Federal agency request,a d the entity which has Federal awards expend- dors. In most cases, the auditee's compli- Federal agency agrees to pay th full ed of less than $300,000 per year and is ance responsibility for vendors is only to incremental costs, then the auditeshall thereby exempted under § .200(d) ensure that the procurement, receipt,and have the program audited as a ajor from having an audit conducted under payment for goods and services comply program. A pass-through entity m•y use this part. However,this does not prohibit with laws,regulations.and the provisions the provisions of this paragraph for a a pass-through entity from charging Fed- of contracts or grant agreements. Program subrecipient. eral awards for the cost of limited scope 09:1606 HOUSING AND DEVELOPMENT REPORTER audits to monitor its subrecipients in audit findings prepared by the auditee, auditee shall submit to the Federal award- _ accordance with§ .400(d)(3),provid- and report, as a current year audit find- ing agency or pass-through entity the -ed the subrecipient does not have a single ing, when the auditor concludes that the reporting required by the program-specif- audit. For purposes of this part, limited srintmary schedule of prior audit findings is audit guide. scope audits only include agreed-upon materially misrepresents the status of any (3) When a program-specific audit procedures engagements conducted in ac- prior audit finding in accordance with the guide is not available,the reporting pack- cordance with either the AICPA's gener- requirements of § .500(e). age for a program-specific audit shall ally accepted auditing standards or atter- ' (4) The auditor's report(s) may be in consist of the financial statement(s)of the tation standards. that are paid for and the form of either combined or separate Federal program, a summary schedule of arranged by a pass-through entity and reports and may be organized differently prior audit findings, and a corrective address only one or more of the following from the manner presented in this sec- action plan as described in paragraph types of compliance requirements:activi- tion. The auditor's report(s) shall state (b)(2) of this section, and the auditor's ties allowed or unallowed; allowable that the audit was conducted in accor- report(s) described in paragraph (b)(4)of costs/cost principles;eligibility;matching, dance with this part and include the . this section. The data collection form level of effort, earmarking; and, report- following: prepared in accordance with ing. (i) An opinion (or disclaimer of opin- $ .320(b),as applicable to a program- ion) as to whether the financial state- specific audit, and one copy of this re- §,.235 Program-specific audits. ment(s)of the Federal program is present- porting package shall be submitted to the ed fairly in all material respects in con- Federal clearinghouse designated by (a) Program-specific auditguide avail- formity with the stated accounting poli- OMB to be retained as an archival copy. cies; Also, when the schedule of findings and able. In many cases, a program-specific (ii)A report on internal control related questioned costs disclosed audit findings audit guide will be available to provide to the Federal program, which shall de- or the summary schedule of prior audit spccific guidance to the auditor with scribe the scope of testing of internal findings reported the status of any audit respect to internal control, compliance control and the results of the tests; findings, the auditee shall submit one requirements, suggested audit proce- (iii) A report on compliance which copy of the reporting package to the dures, and audit reporting requirements. includes an opinion (or disclaimer of Federal clearinghouse on behalf of the The auditor should contact the Office of opinion) as to whether the auditee coin- Federal awarding agency, or directly to Inspector General of the Federal agency lied with laws, regulations, and the pro- the pass-through entity in the case of a to determine whether such a guide is plied of contractgs'or grant agreemnts subrecipient. Instead of submitting the available. When a current program-spe- which could have a direct and material reporting package to the pass-through cific audit guide is available, the auditor effect on the Federal program; and entity, when a subrecipient is not re- shall follow GAGAS and the guide when quired to submit a reporting package to performing a program-specific audit. (iv) A schedule of findings and ques-P g tioned costs for th' Federal program that the pass-through entity, the subrecipient (b) Program-specific audit guide not shall provide written notificati n to the available. (1) When a program-specific i:�c[L _s a summary of the auditor's re- audit guide is not available, the auditee sults relative to the Federal program in a pass-through entity, consistent with the and auditor shall have basicallythe same format consistent with § .505(d)(1) requirements of § .320(eX2). A su- and findings and questioned costs consis- brecipient may submit a copy of the responsibilities for the Federal program tent with the requirements of reporting package to the pass-through as they would have for an audit of a major program in a single audit. § .505((1)(3), entity to comply with this notification requirement. (2)The auditee shall prepare the finan- (c) Report submission for program-spe- (d) "Other sections ofthis cial statement(s) for the Federal program cific audits. (1) The audit shall be corn- pail may that includes. at a minimum, a schedule hedule Pleted and the reporting required by apply. Program-specific audits are subject of expenditures of Federal awards for the paragraph (c)(2) or (c)(3) of this section to § .100 through § .215(b), ro ram and notes that describe the sig- submitted within the earlier of 30 days § .220 through §_230, P g § 300 through § 305, nificant accounting policies used in pre- after receipt of the auditor's report(s), or § .315, § 320(f) through paring the schedule. a summary schedule nine months after the end of the audit .320(j), § .400 through of prior audit findings consistent with the period,unless a longer period is agreed to Z .405, .510 through requirements of .315(b). and a cor- in advance by the Federal agency that § § .515, and other referenced provi- rective action plan consistent with the provided the funding or a different period sions of this part unless contrary to the requirements of§ .315(c). is specified in a program-specific audit provisions of this section,a program-spe- 3) The a,:'icor shall: guide. (However, for fiscal years begin- cific audit guide, or program laws and (i) Perfor.:n an audit of the financial ning on or before June 30, 1998,the audit regulations. statement(s) for the Federal program in shall be completed and the required re- accordance with GAGAS; porting shall be submitted within the (ii)Obtain an understanding of internal earlier of 30 days after receipt of the Subpart C—Auditees control and perform tests of internal auditor's report(s),or 13 months aft=:the control over the Federal program consis- end of the audit period,unless a dif; ent §______.300 Auditee responsibilities. tent with the requirements of period is specified in a program-sp fic § .500(c) for a major program; audit guide.) Unless restricted by l:, or The auditee shall: (iii) Perform procedures to determine regulation, the auditee shall make report (a) Identify, in its accounts, a!; Federal whether the auditee has complied with copies available for public inspection. awards received and expended and the laws, regulations, and the provisions of (2) When a program-specific audit Federal programs under which 'hey were contracts or grant agreements that could guide is available, the auditee shall sub- received. Federal program and award have a direct and material effect on the mit to the Federal clearinghouse designat- identification shall include,as applicable, Federal program consistent with the re- ed by OMB the data collection form the,CFDA title and number,award num- quirements of§ .500(d) for a major prepared in accordance with ber and year,name of the Federal agency, program; and § .320(b),as applicable to a program- and name of the pass-through entity. (iv) Follow up on prior audit findings, specific audit,and the reporting required (b)Maintain internal control over Fed- perform procedures to assess the reason- by the program-specific audit guide to be eral programs that provides reasonable ableness of the summary schedule of prior retained as an archival copy. Also, the assurance that the auditee is managing • Published by West Group COMMUNITY DEVELOPMENT 09:1607 HDR RF-628 1 2-2-98 Federal awards in compliance with laws. auditee during the prior year excee•ed S I (4) Include notes that describe the • regulations, and the provisions of con- million. This restriction applies o the significant accounting policies used in • tracts or grant agreements that could have base year used in the preparation of the preparing the schedule. a material effect on each of its Federal indirect cost proposal or cost all ation (5) To the extent practical, pass- programs. plan and any subsequent years in which through entities should identify in the (c)Comply with laws, regulations. and the resulting indirect cost agreem-nt or schedule the total amount provided to the provisions of contracts or grant agree- cost allocation plan is used to r cover subrecipients from each Federal program. ments related to each of its Federal costs. To minimize any disrupt •n in - (6) Include, in either the schedule or a programs. existing contracts for audit servic-, this note to the schedule, the value of the (d) Prepare appropriate financial state- paragraph applies to audits of fisca years Federal awards expended in the form of ments,including the schedule of expendi- beginning after June 30, 1998. non-cash assistance,the amount of insur- tures of Federal awards in accordance (c) Use of Federal auditors. ederal ance in effect during the year, and loans with § .310. auditors may perform all or part .f the or loan guarantees outstanding at year (e) Ensure that the audits required by work required under this part i they end. While not required, it preferable this part are properly performed and comply fully with the requirements .f this to present this information in the sched- submitted when due.When extensions to part. ule. the report submission due date required • by§ .320(a)are granted by the cogni- zant or oversight agency for audit. §—.310 Financial statements. §—.315 Audit findings follow-up. promptly notify the Federal clearinghouse designated by OMB and each pass- (a) Financial statements..The a ditee (a) General. The auditee is responsible through entity providing Federal awards shall prepare financial statementthat for follow-up and corrective action on all of the extension. reflect its financial position, res its of audit findings.As part of this responsibil- (1)Follow up and take corrective action operations or changes in net.asset,and, ity, the auditee shall prepare a summary on audit findings, including preparation where appropriate, cash flows f.r the schedule of prior audit findings. The of a summary schedule of prior audit fiscal year audited. The financial state- auditee shall also prepare a corrective findings and a corrective action plan in ments shall be for the same organi,ation- action plan for current year audit find- accordance with § .315(b) and al unit and fiscal year that is cho.en to ings. The summary schedule of prior § .315(c). respectively. meet the requirements of this part. How- audit findings and the corrective action also include depart ever, organization-wide financial state- plan shall include the reference numbers p the auditor assigns to audit findings un- . § .305 Auditor selection. ments mayents, der § .510(c). Since the summary agencies, and other organizational units schedule may include audit findings from (a) Auditor procurement. In procuring that have separate audits in acco dance multiple years, it shall include the fiscal with § .500(a) and prepare se.arate audit services, auditees shall follow the year in which the finding initially oc- procurement standards prescribed by the financial statements. (b)Schedule of expenditures of deral curred. Grants Management Common Rule awards. The auditee shall also pre a (b) Summary schedule of prior audit (hereinafter referred to as the "A-102 schedule of expenditures of F real findings. The summary schedule of prior Common Rule") published March 11, awards for the audit findings shall report the status of all 1988 and amended April 19, 1995,Circu- period covered .y the audit findings included in the prior au- lar A-110. "Uniform Administrative Re- auditee's financial statements. White not dit's schedule of findings and questioned quirements for Grants and Agreements required, the auditee may choose t. pro- costs relative to Federal awards. The with Institutions of Higher Education, vide information requested by F deral summary schedule shall also include au- Hospitals and Other Non-Profit Organi- awarding agencies and pass-throug enti- dit findings reported in the prior audit's zations,'or the FAR(48 CFR part 42),as ties to make the schedule easier t• use. summary schedule of prior audit findings applicable (OMB Circulars are available For example,when a Federal progr& has except audit findings listed as corrected from the Office of Administration,Publi- multiple award years,the auditee m.y list in accordance with paragraph (b)(1) of cations Office, room 2200, New Execu- the amount of Federal awards exp nded this section, or no longer valid or not tive Office Building, Washington, DC for each award year separately. At a warranting further action in accordance 20503).Whenever possible,auditees shall minimum, the schedule shall: with paragraph (b)(4) of this section. make positive efforts to utilize small (1)List individual Federal progra s by (I) When audit findings were fully businesses, minority-owned firms, and Federal agency. For Federal pro:rams corrected, the summary schedule need women's business enterprises, in procur- included in a cluster of program., list - only list the audit findings and state that ing audit services as stated in the A-IO2 individual Federal programs wit in a corrective action was taken. Common Rule. OMB Circular A-110, or cluster of programs. For R&D, tota Fed- (2) When audit findings were not cor- the FAR(48 CFR part 42),as applicable. eral awards expended shall be - own rected or were only partially corrected, In requesting proposals for audit services, either by individual award or by F.deral the summary schedule shall describe the the objectives and scope of the audit agency and major subdivision with n the planned corrective action as well as any should be made clear. Factors to be Federal agency. For example,the N:tion- partial corrective action taken. considered in evaluating each proposal al Institutes of Health is a major su'divi- (3) When corrective action taken is for audit services include the responsive- sion in the Department of Healt and significantly different from corrective ac- ness to the request for proposal, relevant Human Services. tion previously reported in a corrective experience, availability of staff with pro- (2) For Federal awards received as a action plan or in the Federal agency's or fessional qualifications and technical subrecipient. the name of the pass- pass-through entity's management deci- abilities, the results of external quality through entity and identifying n mber sion,the summary schedule shall provide control reviews, and price. assigned by the pass-through entity shall an explanation. . (b) Restriction on auditor preparing be included. (4)When the auditee believes the audit indirect cost proposals. An auditor who (3) Provide total Federal awards ex- findings are no longer valid or do not prepares the indirect cost proposal or cost pended for each individual Federa pro- warrant further action, the reasons for allocation plan may not also be selected gram and the CFDA number or other this position shall be described in the to perform the audit required by this part identifying number when the CFD• in- summary schedule. A valid reason for when the indirect costs recovered by the formation is not available. I considering an audit finding as not war- Published by West Grouo 09:1608 HOUSING AND DEVELOPMENT REPORTER ranting further action is that all of the (2) The data collection form shall in- (L) Reporting. following have occurred: dude the following data elements: (M) Subrecipient monitoring. (i) Two years have passed since the (i)The type of report the auditor issued (N) Special tests and provisions. audit report in which the finding occurred on the financial statements of the auditee (xiii) Auditee Name, Employer Identi- was submitted to the Federal clearing- (i.e.,unqualified opinion, qualified opin- fication Number(s), Name and Title of house: ion, adverse opinion, or disclaimer of Certifying Official, Telephone Number, (ii)The Federal agency or pass-through opinion). Signature, and Date. entity is not currently following up with (ii) Where applicable, a statement that (xiv)Auditor Name,Name and Title of the auditee on the audit finding; and reportable conditions in internal control Contact Person, Auditor Address, Audi- (iii) A management decision was not were disclosed by the audit of the Finan- for Telephone Number, Signature, and issued. cial statements and whether any such Date. (c) Corrective action plan. At the corn- conditions were material weaknesses. (xv) Whether the auditee has either a plction of the audit, the auditee shall (iii)A statement as to whether the audit cognizant or oversight agency for audit. prepare a corrective action plan to ad- disclosed any noncompliance which is (xvi) The name of the cognizant or dress each audit finding included in the material to the financial statements of the oversight agency for audit determined in current year auditor's reports.The correc- auditee. accordance with § .400(a) and tivc action plan shall provide the name(s) (iv)Where applicable,a statement that § .400(b), respectively. of the contact person(s) responsible for reportable conditions in internal control (3) Using the information included in corrective action, the corrective action over major programs were disclosed by the reporting package described in para- planned, and the anticipated completion the audit and whether any such condi- graph(c)of thi: section,the auditor shall date. If the auditee does not agree with tions were material weaknesses. complete the applicable sections of the the audit findings or believes corrective (v) The type of report the auditor form. The auditor shall sign a statement action is not required,then the corrective issued on compliance for major programs to be included as part of the data collec- action plan shall include an explanation (i.e.,unqualified opinion, qualified opin- tion form that indicates, at a minimum, and specific reasons. ion, adverse opinion, or disclaimer of the source of the information included in opinion)..•. - the form, the auditor's responsibility for §,320 Report submission. (vi) A list- of the Federal awarding the information, that the form is not a agencies which will receive a copy of the substitute for the reporting package de- (a) General. The audit shall be com- reporting package pursuant to scribed in paragraph (c) of this section, pleted and the data collection form de- § .320(dx2). and that the content of the form is limited scribed in paragraph (b) of this section (vii) A yes or no statement as to to the data elements prescribed by OMB. and reporting package described in para- whether the auditee qualified as a low- (c) Reporting package. The reporting graph (c) of this section shall be submit- risk auditee under § .530. package shall include the: ( ted within the earlier of 30 days after (viii) The dollar threshold used to (1) Financial statements and schedule receipt of the auditor's report(s), or nine distinguish between Type A and Type B of expenditures of Federal awards dis- months after the end of the audit period, programs as defined in § .520(b). cussed in § .310(a) and unless a longer period is agreed to in (ix) The Catalog of Federal Domestic § .310(b), respectively; advance by the cognizant or oversight Assistance(CFDA)number for each Fed- (2) Summary schedule of prior audit agency for audit. (However, for fiscal eral program, as applicable. findings discussed in § .3 I5(b); years beginning on or before June 30, (x)The name of each Federal program (3) Auditor's report(s) discussed in 1998. the audit shall be completed and and identification of each major program. § .505; and . the data collection form and reporting Individual programs within a cluster of (4)Corrective action plan discussed in package shall be submitted within the programs should be listed in the same § .315(c). earlier of 30 days after receipt of the level of detail as they are listed in the (d) Submission to clearinghouse. All auditor's report(s).or 13 months after the schedule of expenditures of Federal auditees shall submit to the Federal clear- end of the audit period.)Unless restricted awards. inghouse designated by OMB the data by law or regulation. the auditee shall . (xi)The amount of expenditures in the collection form described in paragraph make copies available for public inspec- schedule of expenditures of Federal (b) of this section and one copy of the tion. awards associated with each Federal pro- • reporting package described in paragraph (b) Data Collection..(1) The auditee gram. (c) of this section for: shall submit a data collection form which (xii)For each Federal program,a yes or (1)The Federal clearinghouse to retain • states whether the audit was completed in no statement as to whether there are audit as an archival copy; and accordance with this part and provides findings in each of the following types of (2)Each Federal awarding agency when information about the auditee,its Federal compliance requirements and the total the sell'dule of findings and questioned programs, and the results of the audit. amount of any questioned costs: costs disclosed audit findings relating to The form shall be approved by OMB, (A) Activities allowed or unallowed. Federal awards that the Federal awarding available from the Federal clearinghouse (B) Allowable costs/cost principles. agency provided directly or the summary designated by OMB, and include data (C) Cash management. schedule of prior audit findings reported elements similar to those presented in (D) Davis-Bacon Act. the status of any audit findings relating to this paragraph. A senior level representa- (E) Eligibility. - Federal awards that the Federal awarding tive of the auditee (e.g.. State controller, (F) Equipment and real property man- agency provided directly. director of finance, chief executive offi- agement. (e) Additional submission by subreci- cer,or chief financial officer)shall sign a (G) Matching, level of effort, earmark- pients.(I)In addition to the requirements statement to be included as part of the ing. discussed in paragraph(d)of this section, form certifying that:the auditee complied (H) Period of availability of Federal auditees that are also subrecipients shall with the requirements of this part. the funds. submit to each pass-through entity one form was prepared in accordance with (I) Procurement and suspension and copy of the reporting package described . this part (and the instructions accompa- debarment. in paragraph (c) of this section for each nying the form), and the information (J) Program income, pass-through entity when the schedule of included in the form, in its entirety, are (K)Real property acquisition and relo- findings and questioned costs disclosed accurate and complete. cation assistance. audit findings relating to Federal awards Published by West Group COMMUNITY DEVELOPMENT 09:1609 HDR RF-628 2-2-98 that the pass-through entity provided or may pilot test methods of electr.nic sub- taken,the cognizant agency for audit shall the summary schedule of prior audit missions. notify the auditor,the auditee,and appli- findings reported the status of any audit cable Federal awarding agencies and pass- findings relating to Federal awards that Subpart D--Federal Agencie and through entities of the facts and make the pass-through entity provided. Pass-Through Entities recommendations for follow-up action. (2) Instead of submitting the reporting Major inadequacies or repetitive substan- package to a pass-through entity, when a dard performance b subrecipient is not required to submit a §-400 Responsibilities. - referred to appropriate auditorsSateshall be reporting package to a pass-through entity ppropiona State licensing pursuant to paragraph (e)(1) of this sec- (a)Cognizant agency for audit esponsi- agencies and professional bodies for disci- .(.a). the subrecipient shall provide writ- bilrties. Recipients expending mere than plinary action. $25 million a year in Federal aw.rd.s shall (6)Coordinate, to the extent practical, ten notification to the pass-through entity have a cognizant agency for a dit. The audits or reviews made by or for Federal that: an audit of the subrecipient was designated cognizant agency •r audit agencies that are in addition to the audits conducted in accordance with this part shall be the Federal awarding agency that made pursuant to this part, so that the (including the period covered by the audit and the name,amount, and CFDA num- provides the predominant amou t of di- additional audits or reviews build upon ber of the Federal award(s) provided by rect funding to a recipient uni- s OMB audits performed in accordance with this makes a specific the pass-through entity); the schedule of cognizant ag ncy for part. findings and questioned costs disclosed audit assignment.To provide for ontinu- (7)Coordinate a management decision no audit findings relating to the Federal ity of cognizance, the determi •tion of for audit findings that affect the Federal award(s)that the pass-through entity pro- the predominant amount of dir-ct fund- programs of more than one agency. vided; and, the summary schedule of ing shall be based upon direct Federal (8) Coordinate the audit work and prior findings did not report on the awards expended in the recipien's fiscal reporting responsibilities among auditors prior audit any auditinfindings relatingeportto the years ending in 1995, 2000, 2t05, and to achieve the most cost-effective audit. sFederal award(s) that the pass-through audeveit ognififth izanceear hfor aperiods e dingfter. For le, (9) .F220 consider audits auditee permitted under entity provided.A subrecipient may sub- g § 220, consider requests to mit a copy of the reporting package 1997 through 2000 will be net rmined quali as a low-risk auditee under p p g based on Federal awards expe ded in described in paragraph (c)of this section § .530(a). 1995. (However, for States a d local to a pass-through entity to comply with (b) Oversight agency for audit responsi- governments that expend more t an $25 this notification requirement. bifities.An auditee which does not have a (0 Requests for report copies. In re- million a year in Federal awards •nd have designated cognizant agency for audit will sponse to requests byFederal agencypreviously assigned cognizant =genciebeunderthe P q a or for audit, the requirements of t is para-- general oversight of the pass-through entity,auditees shall submit graph are not effective until fis.al years Federal agency determined in accordance the appropriate copies of the reporting beginning after June 30, 2000.) otwith- with§. .105.The oversight agency for package described in paragraph(c)of this standing the manner in which a dit cog- audit: section and, if requested, a copy of any nizance is determined, a Federa award- (1) Shall provide technical advice to management letters issued by the auditor. ing agency with cognizance for an auditee auditees and auditors as requested. (g) Report retention requirements. Au- may reassign cognizance to anot er Fed- (2) May assume all or some of the ditecs shall keep one copy of the data eral awarding agency which provi les sub- responsibilities normally performed by a collection form described in paragraph stantial direct funding and agrees to be cognizant agency for audit. (b) of this section and one copy of the the cognizant agency for audit.W thin 30 (c) Federal awarding agency responsi- reporting package described in paragraph days after any reassignment, both the old bilities. The Federal .awarding agency (c) of this section on file for three years and the new cognizant agency fir audit shall perform the folloing for the Feder- from the date of submission to the Feder- shall notify the auditee, and, if known, al awards it makes: al clearinghouse designated by OMB. the auditor of the reassignme i t. The (1) Identify Federal awards made by Pass-through entities shall keep subreci- cognizant agency for audit shall informing each recipient of the CFDA pients'submissions on file for three years (1) Provide technical audit ad ice and title and number, award name and num- from date of receipt. liaison to auditees and auditors. (h) Clearinghouse responsibilities. The ber, award year, and ifh the award is for (2)Consider auditee requests fo exten- R&D. When some of this information is Federal ' clearinghouse designated by sions to the report submission d e date not available, the Federal agency shall OMBshall distributeue the reportingrtipack-k- required by§ .320(a). The c._nizant provide information necessary to clearly agesagency for audit may grant extens ons for describe the Federal award. graph (dX2) of this section and good cause. § .235(c)(3) to applicable Federal g (3) Obtain or conduct quality control (2) Advise recipients of requirements awarding agencies, maintain a data base reviews of selected audits made .y non- imposed on them by Federal laws,regula- of completed audits, provide appropriate Federal auditors, and provide the results, tions, and the provisions of contracts or information to Federal agencies, and fol- when appropriate, to other in'crested grant agreements. low up with known auditees which have organizations. (3) Ensure that audits are completed not submitted the required data collec- (4) Promptly inform other •ffected and reports are received in a timely tion forms and reporting packages. Federal agencies and appropriate ederal manner and in accordance with the re- (i) Clearinghouse address. The address law enforcement officials of an direct quirements of this part. of the Federal clearinghouse currently reporting by the auditee or its au,itor of (4) Provide technical advice and coun- designated by OMB is Federal Audit irregularities or illegal acts,as req ired by sel to auditees and auditors as.requested. Clearinghouse, Bureau of the Census, GAGAS or laws and regulations. (5) Issue a management decision on . 1201 E. IOth Street, Jeffersonville, IN (5) Advise the auditor and, wh re ap- audit findings within six months after 47132. propriate, the auditee of any defi•iencies receipt of the audit report and ensure that (j) Electronic filing. Nothing in this found in the audits when the defi•iencies the recipient takes appropriate and timely part shall preclude electronic submissions require corrective action by the auditor. corrective action. to the Federal clearinghouse in such man- When advised of deficiencies,the uditee (6) Assign a person responsible for ner as may be approved by OMB. With shall work with the auditor to take orrec- . providing annual updates of the compli- OMB approval,the Federal clearinghouse tive action. If corrective action is not ance supplement to OMB. 09:1610 HOUSING AND DEVELOPMENT REPORTER (d) Pass-through entity responsibilities. agency is responsible for issuing a man- (ii) Perform testing of internal control _- A pass-through entity shall perform the agement decision for findings that relate as planned in paragraph (c)(2)(i) of this following for the Federal awards it makes: to Federal awards it makes to recipients. section. (1) Identify Federal awards made by Alternate arrangements may be made on (3)When internal control over some or informing each subrecipient of CFDA a case-by-case basis by agreement among all of the compliance requirements for a title and number. award name and num- the Federal agencies concerned. major program are likely to be ineffective her,award year,if the award is R&D,and (c) Pass-through entity. As provided in in preventing or_ detecting noncompli- name of Federal agency. When some of § .400(d)(5), the pass-through entity ance, the planning and performing of this information is not available,the pass- shall be responsible for making the man- testing described in paragraph (c)(2) of through entity shall provide the best agement decision for audit findings that this section are not required for those information available to describe the Fed- relate to Federal awards it makes to compliance requirements. However, the eral award. subrecipients. auditor shall report a reportable condi- (2) Advise subrecipients of require- (d) Time requirements. The entity re- tion (including whether any such condi- ments imposed on them by Federal laws, sponsible for making the management tion is a material weakness)in accordance regulations, and the provisions of con- decision shall do so within six months of with§ .510,assess the related control tracts or grant agreements as well as any receipt of the audit report. Corrective risk at the maximum, and consider supplemental requirements imposed by action should be initiated within six whether additional compliance tests are the pass-through entity. months after receipt of the audit report required because of ineffective internal (3) Monitor the activities of subreci- and proceed as rapidly as possible. control. pients as necessary to ensure that Federal (e) Reference numbers. Management (d) Compliance..(1) In addition to the awards are used for authorized purposes decisions shall include the reference num- requirements of GAGAS, the auditor in compliance with laws, regulations,and bers the auditor assigned to each audit shall determine whether the auditee has the provisions of contracts or grant agree- finding in accordance with§_____.510(c)- complied with laws, regulations, and the ments and that performance goals are provisions of contracts or grant agree- achieved. Subpart E—Auditors meats that may have a direct and materi- (4)Ensure that subrecipients expending • al effect on each of its major programs. $300,000 or more in Federal awards § 500 Scope of audit. (2) The principal compliance require- during the subrecipient's fiscal year have ments applicable to most Federal pro- mct the audit requirements of this part and the compliance requirements for that fiscal year. (a)General.The audit shall be conduct- s of the largest Federal programs are i (5) Issue a management decision on ed in accordance with GAGAS.The audit eluded in the compliance su ' shall cover the entire operations of the P pp'ement. audit findings within six months after P (3) For the compliance requirements receipt of the subrecipient's audit report auditee; or, at the option of the auditee, P P P related to Federal programs contained in and ensure that the subrecipient takes such audit shall include a series of audits the compliance supplement, an audit of appropriate and timelycorrective action. that cover departments, agencies, and other organizational units which ex end- the-e compliance requirements will meet (6) Consider whether subrecipient au- g P the requirements of this part.Where there dits necessitate adjustment of the pass- ed or otherwise administered Federal awards during such fiscal year, provided have been changes to the compliance through entity's own records. requirements and the changes are not (7)Require each subrecipient to permit that each such audit shall encompass the q the pass-through entity and auditors to financial statements and schedule of ex- reflected in the compliance supplement, have access to the records and financial penditures of Federal awards for each the auditor shall determine the current statements as necessary for the pass- such department,agency,and other orga- compliance requirements and modify the through entity to comply with this'part. nizational'unit,which shall be considered audit procedures.accordigglyy. Tor those to be a non-Federal entity. The financial Federal programs not covered in the 405 Management decision. statements and ds schedulehfor theisuresame shoud compliance use the ylof,complianceptre- § g of Federal awards shall be for same types fiscal year. quirements contained in the compliance (a) General. The management decision (b) Financial statements. The auditor supplement as guidance for identifying shall clearly state whether or not the audit shall determine whether the financial the types of compliance requirements to finding is sustained, the.reasons for the statements of the auditee are presented test,and determine the requirements gov- decision,and the expected auditee action fairly in all material respects in conformi- • erning the Federal program by reviewing to repay disallowed costs, make financial ty with generally accepted accounting the provisions of contracts and grant adjustments, or take other action. If the principles. The auditor shall also deter- agreements and the laws and regulations auditee has not completed corrective ac- mine whether the schedule of expel-1,1i- referred to in such contracts and grant tion,•a timetable for follow-up should be tures of Federal awards is presented fairly agreements. given. Prior to issuing the management in all material respects in relation to the (4) The compliance testing shall in- decision, the Federal agency or pass- auditee's financial statements taken as a dude tests of transactions and such other through entity may request additional whole. auditing procedures necessary to provide information or documentation from the (c) Internal control. (1) In addition to the auditor sufficient evidence to support auditee, including a request for auditor the requirements of GAGAS, the auditor an opinion on compliance. assurance related to the documentation, shall perform procedures to obtain an (e) Audit follow-up. The auditor shall as a way of mitigating disallowed costs. understanding of internal control over follow-up on prior audit findings, per- The management decision should de- Federal programs sufficient to plan the form procedures to assess the reasonable- scribe any appeal process available to the audit to support a low assessed level of ness of the summary schedule of prior auditee. control risk for major programs. audit findings prepared by the auditee in (b) Federal agency. As provided in (2) Except as provided in paragraph accordance with §_____-315(b), and re- § .400(ax7),the cognizant agency for (c)(3) of this section, the auditor shall: port,as a current year audit finding,when audit shall be responsible for coordinat- (i) Plan the testing of internal control the auditor concludes that the summary ing a management decision for audit over major programs to support a low schedule of prior audit findings material- _ findings that affect the programs of more assessed level of control risk for the ly misrepresents the status of any prior than one Federal agency. As provided in assertions relevant to the compliance re- audit finding. The auditor shall perform § .400(cx5), a Federal awarding quirements for each major program; and audit follow-up procedures regardless of Published by West Group , COMMUNITY DEVELOPMENT 09:1611 HDR RF-628 2-2-98 i". • whether a prior audit finding relates to a over major programs were disci'sed by relation to a type of compliance require- • major program in the current year. the audit and whether any such condi- ment for a major program or an audit (f) Data Collection Form. As required tions were material weaknesses; objective identified in the compliance in § .320(b)(3). the auditor shall (v) The type of report the auditor supplement. complete and sign specified sections of issued on compliance for major p ograms (3) Known questioned costs which are the data collection form. (i.e., unqualified opinion, qualifi-d opin- greater than S 10.000 for a type of compli- ion, adverse opinion, or discla'mer of . ance requirement for a major program. §_505 Audit reporting. opinion); - Known questioned costs are those specifi- (vi)A statement as to whether t e audit cally identified by the auditor. In The auditor's report(s) may be in the evaluat- disclosed any audit findings w ich the ing the effect of questioned costs on the of either combined or separate auditor is required to report under opinion on compliance, the auditor con- formfoand maybe organized differently § • 510(a); siders the best estimate of total costs ga (vii) An identification of maj•r pro- questioned (likely questioned costs), not from the manner presented in this sec- grams; just the questioned costs specifically iden- tion. The auditor's report(s) shall state (viii) The dollar threshold sed to tilled (known questioned costs). The au- that the audit was conducted in accor- distinguish between Type A and ype B ditor shall also report known questioned dance with this part and include the programs, as described in § 520(b); costs when likely questioned costs are following: and greater than S 10,000 for a type of compli- (a) An opinion (or disclaimer of opin- (ix) A statement as to whet er the ance requirement for a major program.In ion) as to whether the financial state- auditee qualified as a low-risk auditee reporting questioned costs, the auditor ments are presented fairly in all material under § .530. shall include information to provide respects in conformity with generally ac- (2) Findings relating to the nancial proper perspective for judging the preva- cepted accounting principles and an opin- statements which are required t• be re- lence and consequences of the questioned ion (or disclaimer of opinion) as to ported in accordance with GAG S. costs. whether the schedule of expenditures of (3) Findings and questioned costs for (4) Known questioned costs which are Federal awards is presented fairly in all Federal awards which shall inclu•a audit greater than 510,000 for a Federal pro- material respects in relation to the finan- findings as defined in § .511(a). gram which is not audited as a major cial statements taken as a whole. (i)Audit findings(e.g.,internal control (b)A report on internal control related findings,compliance findings, program.uditorisExcept uir daun er this follow-up, the p qu.stioned auditor not required under this part to to the financial statements and major costs, or fraud) which relate to t,e same perform audit procedures for such a Fed- programs. This report shall describe the issue should be presented as a sin_le audit eral program; therefore, the auditor will scope of testing of internal control and finding. Where practical, audit indings normally not find questioned costs for a the results of the tests, and, where appli- should be organized by Federal a:ency or program which is not audited as a major cable, refer to the separate schedule of pass-through entity. program. However, if the auditor does findings and questioned costs described which relate to both(ii)Audit findings in paragraph (d) of this section. section. tbecome aware of questioned costs for a (c) A report on compliance sec with laws, the financial statements and Federal Federal program which is not audited as a regulations, and the provisions of con- awards, as reported under pa .graphs major program (e.g., as part of audit tracts orgrant agreements.roenoncompli-on (d)(2) and (d)(3) of this section, respec- follow-up or other audit procedures) and lively,should be reported in both .ections the known questioned costs are greater ance with which could have a material of the schedule.However,the repo rtingin effect on the financial statements. This ' one section of the schedule ma be in than 510,000, then the auditor shall re- report shall also include an opinion (or port this as an audit finding. disclaimeY tifsopinion) as to whether the summary form with a referen•e, to :a (5)The circumstances concerning why auditee complied with laws, regulations,thene detailed reporting in the other se 'tion of the auditor's report on compliance for ? the schedule. J programs unquali- agreements rams or ro is other than an and the provisions of contracts or grant ma which could have a direct and fled opinion, unless such circumstances material effect on each major program, §_.510 Audit findings. are otherwise reported as audit findings and, where applicable, refer to the sepa- • in the schedule of findings and ques- rate schedule of findings and questioned (a)Audit findings reported. The auditor tioned costs for Federal awards. costs described in paragraph (d) of this shall report the following as au•it find- (6) Known fraud affecting a Federal section. ings in a schedule of findings a d ques- award, unless such fraud is otherwise (d) A schedule of findings and ques- tioned costs: reported as an audit finding in the sched- tioned costs which shall include the fol- (1) Reportable conditions in nternal ule of findings and questioned costs for lowing three components: control over major programs. T e audi- Federal awards. This paragraph does not (1) A summary of the auditor's results tor's determination of whether a •eficien- require the auditor to make an additional which shall include: cy in internal control is a reportable reporting when the auditor confirms that (i)The type of report the auditor issued condition for the purpose of repo ing an the fraud was reported outside of the on the financial statements of the auditee audit finding is in relation to a type of auditor's reports under the direct report- (i.e.. unqualified opinion, qualified opin- compliance requirement for a major pro- ing requirements of GAGAS. ion, adverse opinion, or disclaimer of gram or an audit objective iden ified in (7) Instances where the results of audit opinion); the compliance supplement. The auditor follow-up procedures disclosed that the (ii) Where applicable, a statement that shall identify reportable conditio s which summary schedule of prior audit findings reportable conditions in internal control are individually or cumulatively aterial prepared by the auditee in accordance were disclosed by the audit of the finan- weaknesses. with § .315(b) materially.misrepre- cial statements and whether any such (2) Material noncompliance ith the sents the status of any prior audit finding. conditions were material weaknesses; provisions of laws, regulations,c.ntracts, (b)Audit finding detail. Audit findings (iii)A statement as to whether the audit or grant agreements related to , major shall be presented in sufficient detail for disclosed any noncompliance which is program. The auditor's determin:tion of the auditee to prepare a corrective action material to the financial statements of the whether a noncompliance with th provi- plan and take corrective action and for auditee: sions of laws, regulations, contracts, or Federal agencies and pass-through enti- (iv)Where applicable, a statement that grant agreements is material for he pur- .ties to arrive at a management decision. reportable conditions in internal control pose of reporting an audit findi g is in The following specific information shall t 09:1614 HOUSING AND DEVELOPMENT REPORTER Pk 6 C...• • Y agency for audit may judge that an opin- audit periods) in which they were classi- may be received from the Office of Manage- ion qualification does not affect the man- lied as Type A programs: ment and Budget by calling 202-395-3080. agement of Federal awards and provide a (I) Internal control deficiencies which In addition, a reproduction of Form SF- werewaiver. identified as material weaknesses; SAC may be received by contacting: Refer- (c)There were no deficiencies in inter- (2)Noncompl•iance with the provisions ence Editor, Housing and Development nal control which were identified as mate- or laws, is which np hh, contracts, grant reemenReporter, 1255 23rd Street, N.W., Suite eq onnthe Type A wAcprogram; or D.C.rial weaknesses under the requirements of oave a material effect 655, Washington, 20037. GAGAS.However,the cognizant or over- (3) Known or likely questioned costs sight agency for audit may judge that any that exceed five percent of the total Appendix B to Part —Circular identified material weaknesses do not Federal awards expended for a Type A A-133 Compliance Supplement affect the management of Federal awards program during the year. and provide a waiver. Note: Provisional OMB Circular A-I33 (d) None of the Federal programs had Appendix A to Part —Data p g Collection Form (Form SF-SAC) Compliance Supplement is available from audit findings from any of the following the Office f Administration, Publications in either of the preceding two years(or,in Form SF-SAC (OMB No. 0348-0000) is Office, room 2200, New.Executive Office the case of biennial audits, preceding two not included in this reference file. Copies Building, Washington, DC 20503. • • • • • Published by West Group Exhibit F: 24 CFR Part 570. Subpart K-Other Prosram Requirements 09:0642 HOUSING AND DEVELOPMENT REPORTER 11 25 percent threshold, the justification for Treasury obligations at constant maturi- Subpart K—Other Program -the recipient's determination shall be ty. Requirements included in the program file. Should use (B) When an agreement sets a fixed of deposited funds not start within 45 interest rate for the entire term of the §570.600 General.- days, or substantial disbursement from agreement, the rate should be based on such fund not occur within 180 days, the the rate at the time the agreement is (a) This subpart K enumerates laws recipient may be required by HUD to executed. that the Secretary will treat as applicable return all or part of the deposited funds to (C)The agreement may provide for an to grants made under section 106 of the the recipient's letter of credit. Act, other than grants to States made interest rate that would fluctuate periodi- (5) Program-activity. Recipients shall tally during the term of the agreement, pursuant to section 106(d)of the Act,for review the level of program activity on a purposes of the Secretary's determina- yearly basis.Where activity is substantial- but at no time shall the rate be established tions under section 104(e)(1) of the Act, ly below that anticipated,program funds at more than three points below the rate including statutes expressly made appli- shall be returned to the recipient's letter on one year Treasury obligations at con- cable by the Act and certain other statutes of credit. start maturity. _ and Executive Orders for which the Sec- (6) Termination of agreement. In the (ii) In addition•to the payment o ' retary has enforcement -:responsibility. case of substantial failure by a private interest, at least one of the following This subpart K applies to•grants made financial institution to comply with the benefits must be provided by the finan- under the Insular areas program-' in terms of a lump sum drawdown agree- tial institution: §570.405, ` 'with the exception of ment, the recipient shall terminate its (A)Leverage of the deposited funds so §570.612.The absence of mention herein agreement, provide written justification that the financial institution commit of any other statute for which the Secre- for the action, withdraw all unobligated private funds for loans in the rehabilita tary does not have direct enforcement deposited funds from the private finan- tion program.in an amount substantial) responsibility isnot intended to be taken cial institution, and return the funds to as an'indication that, in the Secretary's in excess of the amount of the lump su the recipient's letter of credit. - opinion, such statute or Executive Order (7) Return of unused deposits. At the deposit; is not applicable to activities assisted end of the period specified in the agree- (B) Commitment of private funds b under the Act.For laws that the Secretary ment for undertaking activities, all uno- the financial institution for rehabilitatio will treat as applicable to grants made to bligated deposited funds shall be returned loans at below market interest rates, a' States under section 106(d)of the Act for to the recipient's letter of credit unless the higher than normal risk, or with longe u purposes of the determination required to recipient•enters into a new agreement than normal repayment periods; or be made by the Secretary pursuant' to conforming to the requirements of this (C) Provision of administrative ser section 104(e)(2) of the Act, see IL section. In addition, the recipient shall vices in support of the rehabilitatio §570.487. •. reserve the right to withdraw any unobli- program by the participating financi. (b)This subpart also sets forth certain gated deposited funds required by HUD institution at no cost or at lower tha additional program requirements which in the exercise of corrective or remedial actual cost. the Secretary has determined to be appli- actions authorized under §§570.910(b), (c)Program income. Interest earned o I cable to grants provided under the Act as 570.911, 570.912 or 570.913. ' lump sum deposits andyments-p a o a matter of administrative discretion. (8)Rehabilitation loans made with non- loans made from such deposits are pro (c)In addition to grants made pursuant CDBG funds. If the deposited funds orito section 106(b)'and 106(d)(2)(B)of the gram ncome and, during the period o program income derived from deposited the agreement,shall be used for rehabili Act(Subparts D and F, respectively),the funds are used to subsidize-or guarantee requirements of this Subpart K are appli- repayments of rehabilitation loans made talion activities under the-provisions o cable to grants made pursuant to sections with non-CDBG funds, or to provide a this section. 107 and 119 of the Act (Subparts E and supplemental loan or grant to the borrow- (d) Outstanding findings. Notwith G,'respectively), and to loans guaranteed er of the non-CDBG funds,the rehabilita- standing any other provision of this sec • pursuant to Subpart M.• • - tion activities are 'considered to be tion, no recipient shall enter into a ne • -• • • - - - - CDBG-assisted activities subject to the agreement during any period of time i §570.601 Public Law 88-352 and • requirements applicable to such activi- which an audit or monitoring finding on . Public Law 90-284; affirmatively ties,except that repaymeht of non-CDBG previous lump sum drawdown agreemen furthering fair housing; Executive Order funds shall :.ot be treated as program remains unresolved. 11063. income. (e) Prior notification. The recipien . (9) Provision of consideration. In con- shall providetheHUD field office wit (a) The following requirements apply sideration for the lump sum deposit by written notification•of the amount o according to sections 104(b) and 107 of the recipient in a private financial institu- funds to be distributed to a private finan the Act: tion,the deposit must result in appropri- cial institution before distribution unde (1)Public Law 88-352,which is title VI ate benefits in support of the recipient's of the Civil Rights Act of 1964(42 U.S.C. the provisions of this.section. local rehabilitation program. Minimum 2000d et seq.), and implementing regula- (f) Recordkeeping requirements. Th requirements for such benefits are: tions in 24 .CFR part I. (i) Grantees shall require the financial recipient shall maintain in its files a cop (2) Public Law 90-284, which is the institution to pay interest on the lump of the written agreement and relate' Fair Housing Act(42 U.S.C. 3601-3620). sum deposit. . documents establishing conformanc, Inaccordancewith the Fair Housing Act, (A)The interest rate paid by the finan- with this section and concerning perfo the Secretary requires that grantees cial institution shall be no more than mance by a financial institution in acco administer all programs and activities three points below the rate on one year dance with the agreement. related to housing and community devel- Published by West Group I COMMUNITY DEVELOPMENT 09:0643 HDR RF-668 8-16-99 opment. in a manner to affirmatively §570.604 Environmental standards. an assisted activity includes a permanent further the policies of the Fair Housing move from real property that is made: Act. Furthermore, in accordance with For purposes of section 104(g) of the (A)After notice by the grantee(or the section I04(b)(2) of the Act, for each Act, the regulations in 24 CFR part 58 state recipient, if applicable) to move community receiving a grant under sub- specify the other provisions of law which . permanently from the property, if the part D of this part, the certification that further the purposes of the National Envi- move occurs after the initial official sub- the grantee will affirmatively further fair ronmental Policy Act of 1969, and the mission to HUD(or the State,as applica- housing shall- specifically require the procedures by which grantees must fulfill: ble) for grant, loan, or loan guarantee grantee to assume the responsibility of their environmental responsibilities. In funds under this part that are later pro- fair housing planning by conducting an certain cases,grantees assume these envi- vided or granted. ronmental review, decisionmaking, and (B)After notice by the property owner analysis'to identify impediments to fair action responsibilities byexecution of to move housing choice within its jurisdiction, po permanently from the property, h ggrant agreements with the Secretary. if the move occurs after the date of the taking appropriate actions to overcome submission of. a request for financial the effects of any impediments identified §570.605 National Flood Insurance assistance by the property owner .(or through that analysis, and maintaining pm, ro - person in control of the site)that is later records reflecting the analysis and actions - approved for the requested activity. in this regard. Notwithstanding the date of HUD ap- (C) Before the date described in para- (b)Executive Order 11063,as amended proval of the recipient's application (or, graph(b)(2Xi)(A) or(B)of this section,if by Executive Order 12259(3 CFR, 1959- in the case of grants made under subpart either HUD or the grantee (or State, as 1963 Comp.,p.652;3 CFR, 1980 Comp., D of this part or HUD-administered applicable) determines that the displace- . p. 307)(Equal Opportunity in Housing), small cities recipients in Hawaii,the date ment directly resulted from acquisition, and implementing regulations in 24 CFR of submission ofthe grantee's consoli- rehabilitation, or demolition for the re- part 107, also apply. dated plan, in accordance with-24 CFR quested activity. part 91), section 202(a) of the Flood (D) After the "initiation of negotia- Disaster§570.602 Section 109 of the Act. Protection Act of 1973 (42 tions"if the person is the tenant-occupant U.S.C. 4106) and the regulations in 44 of a dwelling unit and any one of the CFR parts 59 through 79 apply to funds following three situations occurs: Section 109 of the Act requires that no provided under this part 570. (1) The tenant has not been provided person in the United States shall on the with a reasonable opportunity to lease j ground of race, color, religion, national §570.606 Displacement, relocation, and occupy a suitable decent, safe, and origin,or sex,be excluded from participa- acquisition, and replacement of housing. sanitary dwelling in the same building/ tion in, be denied the benefits of, or be complex upon the completion of the subjected to discrimination under any (a) General policy for minimizing dis- project, including a monthly rent that program or activity receiving Federal placement. Consistent- with the other does not exceed the greater of the tenant's financial assistance made available pursu- goals and objectives of this part,grantees monthly rent and estimated average utili- ant to the Act. Section 109 also directs (or States or state recipients, as applica- ty costs before the initiation of negotia- that.the prohibitions against discrirnina- ble) shall assure that they have taken all tions or 30 percent of the household's tion on the basis of age under the Age reasonable steps to minimize the dis- average monthly gross income; or Discrimination Act and the prohibitions placement of persons(families, individu- (2) The tenant is required to relocate against discrimination on the basis of als, businesses, nonprofit organizations, temporarily for the activity but the tenant disability under section 504 apply to and farms)as a result of activities assisted is not offered payment for all reasonable or activitiessec504 shallreceiving Federalto under this part. out-of-pocket expenses incurred in con- programspaassistance under Title I pro- (b) Relocation assistance for displaced nection with the temporary relocation, . persons at URA levels. (1) A displaced including the cost of moving to and from grams.The policies and procedures neces- person shall be provided with relocation the temporary location and any increased sary to ensure enforcement of section 109 assistance at the levels described in, and housing costs, or other conditions of the are codified in 24 CFR part 6. in accordance with the requirements of temporary relocation are not reasonable; - 49 CFR part 24, which contains the and the tenant does not return to the §570.603 Labor,standards. government-wide regulations implement- building/complex; or ing the Uniform Relocation Assistance ` (3) The tenant is required to move to (a) Section 110(a) of the contains and Real Property Acquisition Policies another unit in the building/complex,but tabor to Act contains Act of 1970 (URA) (42 U.S.C. 4601- is not offered reimbursement for all rea- labor standards r bor that in applywhtole noin part 4655). sonable out-of-pocket expenses incurred tewith assistancefina receiveddunder Act.In (2)Displaced person.(i)For purposes of in connection with the move. with section I 10(a)theothe Act,n paragraph (b) of this section, the term (ii) Notwithstanding the provisions of accordance Contract with Woct Hours andf Safety displcced person" means any person paragraph (b)(2)(i) of this section, the y (family, individual, business, nonprofit term "displaced person-" does not in- Standards Act(40 U.S.C. 327 et seq.)also organization, or farm) that moves from dude: applies.However, these requirements ap- real property,or moves his or her person- (A) A person who is evicted for cause ply to the rehabilitation of residential al property from real property, perma- based upon serious or repeated violations property only if such property contains nently and involuntarily,as a direct result of material terms of the lease or occupan- not less than 8 units. of rehabilitation, demolition, or acquisi- cy agreement.To exclude a person on this (b)The regulations in 24 CFR part 70 tion for an activity assisted under this basis,the grantee(or State or state recipi- apply to the use of volunteers. part. A permanent, involuntary move for ent, as applicable) must determine that Published by West Group 09:0644 HOUSING AND DEVELOPMENT REPORTER the eviction was not undertaken for the rehabilitation,or demolition for an assis- tion, or acquisition of real property, the •purpose of evading the obligation to ted activity.To exclude a person on this term "initiation of negotiations" means provide relocation assistance under this basis,HUD must concur in that determi- the execution of the grant or loan agree- section; nation. ment between the grantee (or State or (B) A person who moves into the (iii)A grantee(or State or state recipi- state recipient, as applicable) and the property after the date of the notice ent, as applicable) may, at any time, person owning or controlling the real described in paragraph(b)(2)(i)(A)or(B) request HUD to determine whether a property. of this section,but who received a written person is a displaced person under this notice of the expected displacement be- section. (c) Residential antidisplacement and fore occupancy. (3) Initiation of negotiations. For pur- 1elocation assistance plan. The grantee (C) A person who is not displaced as poses of determining the type of replace- shall comply with the requirements of 24 described in 49 CFR 24.2(gx2). ment housing assistance to be provided CFR part 42, subpart B.1 . , (D)A person who the grantee(or State, under paragraph(b)of this section,if the — as applicable)determines is not displaced displacement is the direct result of pri- `See p. 09:1001 for text of 24 CFR.42. as a direct result of the acquisition, vately undertaken rehabilitation, demoli- [Text continues on p. 09:0647] • €. :::.... • • , • Published by West Group HDR RF-597 11-25-96 (d) Optional relocation assistance. Un- (3) The grantee (or State and state ate abatement procedures may be under- der section 105(a)(11) of the Act, the recipient, as applicable) must maintain taken. grantee may provide (or the State may records in sufficient detail to demonstrate (c)Elimination of lead-based paint ha:- permit the state recipient to provide, as compliance with the provisions of this ards.The purpose of this paragraph is to applicable)relocation payments and oth- section. implement the provisions of section 302 er relocation assistance to persons dis- of the Lead-Based Paint Poisoning Pre- placed by activities that are not subject to §570.607 Employment and contracting vention Act,42 U.S.C.4822,by establish- paragraphs(b)or(c) of this section.The opportunities. ing procedures to eliminate as far as grantee may also provide (or the State _ practicable the hazards due to the pres- may also permit the state recipient to ence of paint which may contain lead and provide, as applicable) relocation assis- Grantees shall comply with: to which children under seven years of tance to persons receiving assistance un- (a)Executive Order 11246,as amended age may be exposed in existing housing der paragraphsby Executive Orders 11375, 11478, (b)or(c)of this sectich at 12086, and 12107 (3 CFR, 1964-1965 which is rehabilitated with assistance levels in excess of those required by these Comp.,p.339;3 CFR, 1966-1970 Comp:, provided under this part. The Secretary paragraphs.Unless such assistance is pro- p.684;3 CFR, 1966-1970 Com has promulgated requirements regarding vided under State or local law,the granteep•,p.803' the elimination of lead-based paint haz- (or state recipient, as applicable) shall 1978 Comp.,p. 2 (Equal Employment Opportunity)and the implementing regu- ands in HUD-associated housing at 24 provide such assistance only upon the lations at 41 CFR chapter 60; and CFR Part 35, Subpart C. This paragraph basis cf a written determination that the (b)Section 3 of the Housing and Urban is promulgated pursuant to the authoriza- assistz:ce is appropriate (see, e.g., 24 Development Act of 1968 (12 U.S.C. tion granted in 24 CFR 35.24(bX4) and CFR 570.201(i), as applicable). The 1701u) and implementing regulations at supercedes,with respect to all housing to grantee (or state recipient, as applicable) 24 CFR part 135. which it applies, the requirements pre- must adopt a written policy available to scribed by Subpart C of 24 CFR Part 35. the public that describes the relocation (1) Applicability. This paragraph ap- assistance that the grantee(or state recip•i- §570.608 Lead-based paint. plies to the rehabilitation of applicable ent, as applicable)has elected to provide surfaces in existing housing which is and that provides for equal relocation (a) Prohibition against the use of lead- assisted under this part. The following assistance within each class of displaced based paint. Section 401(b) of the Lead- activities assisted under the Community persons. Based Paint Poisoning Prevention Act Development Block Grant program are (e) Acquisition of real property. The (42 U.S.C.4831(b))and regulations in 24 not covered by this paragraph: acquisition of real property for an assts- CFR part 35,subpart B apply to residen- (i) Emergency repairs (not including ted activity is subject to 49 C1YR part 24, tial structures constructed or rehabilitat- lead-based paint-related emergency re- -" subpart B. ed with assistance provided under this per); (I)Appeals. If a person disagrees with part 570. (ii) Weatherization; the determination of the grantee (or the (b)Notification of hazards of lead-based (iii) Water or sewer hook-ups; state recipient, as applicable) concerning paint poisoning. (1) The Secretary has (iv) Installation of security devices; the person's eligibility for,or the amount promulgated requirements regarding no- (v) Facilitation of tax exempt bond tification to purchasers and tenants of of, a relocation payment under this sec- issuances which provide funds for reha- tion,the person may file a written appeal HUD-associated housing constructed pri- bilitation; of that determination with thegrantee(or or to 1978 of the hazards of lead-based (vi) Other similar types of single-pur- aint state recipient,as applicable).The appeal Subpart poisoningA. paragraph FR oPart 35: pose programs that do not include physi- procedures to be followed are described ed pursuant to the authorization granted cal repairs or remodeling of applicable in 49 CFR 24.10. In addition, a low- or surfaces(as defined in 24 CFR 35.22)of in 24 CFR 35.5(c) and supersedes, with moderate-income household that has residential structures; and been displaced from a dwelling may file a respect to all housing reto which it applies, (vii)Any non-single purpose rehabilita- written request for review of the grantee's the notification requirements prescribed tion that does not involve applicable decision to the HUD Field Office. CFR Part For by Subpart A of 35. surfaces (as defined in 24 CFR 35.22) (2) For properties constructed prior to purposes of the State CDBG program, a 1978, applicants for rehabilitation assis- that does not exceed $3,000 per unit. low- or moderate-income household may tance provided under this part and ten- (2) Definitions. file a written request for review of the "Applicable surface." All intact and y state recipient's decision with the State. ants r purchasersteeot of properties and c- nonintact interior and exterior painted p the grantee or its subrecipient and ac- (g) Responsibility of grantee or State. quiredor rehabilitated with assistance surfaces of a residential structure. (1)The grantee(or State, if applicable)is provided under this part shall be notified: "Chewable surfaces."All chewable pro- responsible for ensuring compliance with (i)That the property may contain Iead- truding painted surfaces up to five feet the requirements of th s section,notwith- based paint; from the floor or ground, which are standing any third .-srty's contractual (ii)Of the hazards of lead-based paint; readily accessible to children under seven obligation to the grantee to comply with (iii)Of the symptoms and treatment of years of age, e.g., protruding corners, the provisions of this section. For pur- lead-based poisoning; windowsills and frames, doors and poses of the State CDBG program, the (iv) Of the precautions to be taken to frames, and other protruding woodwork. State shall require state recipients to avoid lead-based paint poisoning(includ- "Defective paint surface. Paint on ap- certify that they will comply with the ing maintenance and removal techniques plicable surfaces that is cracking, scaling, requirements of this section. for eliminating such hazards); chipping, peeling or loose." (2) The cost of assistance required (v) Of the advisability and availability "Elevated blood lead level or EBL." under this section may be paid from local of blood lead level screening for children Excessive absorption of lead, that is, a public funds, funds provided under this under seven years of age; and confirmed concentration of lead in whole part, or funds available from other (vi) That in the event of lead-based blood of 25 }/dl(micrograms of lead per sources. paint is found on the property, appropri- deciliter of whole blood) or greater. Published by Warren Gorham Lamont 09:0648 HOUSING AND DEVELOPMENT REPORTER "Lead-based paint surface." A paint painted surfaces as described in 24 CFR (iv)Disposal of lead-based paint debris. surface,whether or not defective, identi- 35.24(bX2Xii). ad-based paint and defective paint de- fied as having a lead content greater than (6) Funding for inspection, testing and b 's shall be disposed of in accordance or equal to 1 mg/cm2. abatement. Program requirements and ith applicable Federal, State or local (3) Inspection and Testing—(i) Defec- local program design will determine r quirements.(See e.g.,40 CFR Parts 260 tive paint surfaces. The grantee shall in- whether the cost of inspection, testing or rough 271.) spect for defective paint surfaces in all abatement is to be borne by the owner/ units constructed prior to 1978 which are developer and the grantee. • 570.609 Use of debarred, suspended occupied by families with children under (7) Tenant protection. The owner/de- „ ineligible contractors or seven years of age and which are pro- veloper shall take appropriate action to brecipients. posed for rehabilitation assistance. The protect tenants from hazards associated inspection shall occur at the same time with abatement procedures.Where neces- The requirements set forth in 24 CFR the property is being inspected for reha- sary, these actions may include the tern- q bilitation. Defective paint conditions porary relocation of tenants during the 'art 5 apply to this program. shall be included in the work write-up for abatement process. The owner/developer the remainder of the rehabilitation work. shall notify the grantee of all such actions • 570.610 Uniform administrative (ii) Chewable surfaces. The grantee taken. equirements and cost principles. shall be required to test the lead content (8) Records. The grantee shall keep a of chewable surfaces if the family residing copy of each inspection and/or test report The recipient, its agencies or instru- in a unit, constructed prior to 1978 and for at least three years. entalities, and subrecipients shall corn- receiving rehabilitation assistance, in- (9)Monitoring and enforcement. HUD ,ly with the policies, guidelines, and cludes a child under seven years of age field office monitoring of rehabilitation equirements of 24 CFR part 85 and with an identified EBL condition. Lead programs includes reviews for compli- 9 MB Circulars A-87,A-110(implement- content shall be tested by using an X-ray ance with applicable program require- d at 24 CFR part 84), A-122, A-133 fluorescence analyzer (XRF) or other ments for lead-based paint. The CPD implemented at 24 CFR part 45),and A- method approved by HUD.Test readings Field Monitoring Handbook which cur- 282(implemented at 24 CFR part 44),as of lmg/cm2 or higher using an XRF shall rently includes instructions for monitor- :pplicable, as they relate to the accep- be considered positive for presence of ing lead-based paint requirements will be ance and use of Federal funds under this lead-based paint. amended as appropriate. In cases of non- •art. The applicable sections of 24 CFR (iii)Abatement without testing. In lieu compliance, HUD may impose condi- ,arts 84 and 85 are set forth at§570.502. of the procedures set forth in paragraph tions or sanctions on grantees to encour- '> (c)(3Xii) of this section, in the case of a age prompt compliance. ' •�',' residential structure constructed prior to (10) Compliance with other program 570.611 Conflict of interest. 1978, the grantee may forgo testing and requirements, Federal, State and local abate all applicable surfaces in actor- laws. (a)Applicability.(1)In the procurement dance with the methods set out in 24 (i) Other program requirements.To the i f supplies,equipment,construction,and CFR 35.24(b)(2)(ii). extent that assistance from any of the services by recipients and by subreci- (4)Abatement Actions. (1) For inspec- programs covered by this section is used pients, the conflict of interest provisions tions performed under §570.608(c)(3)(i) in conjunction with other HUD program in 24 CFR 85.36 and 24 CFR 84.42, and where defective paint surfaces are assistance which have lead-based paint respectively, shall apply. found, treatment shall be provided to requirements which may have more or (2)In all cases not governed by 24 CFR. defective areas. Treatment shall be per- less stringent requirements, the more 85.36 and 84.42, the provisions of this formed before final inspection and op- stringent requirements will prevail. section shall apply.Such cases include the proval of the work. (ii)HUD responsibility. If HUD deter- acquisition and disposition of real prop- (ii) For testing performed under mines that a State or local law,ordinance, erty and the provision of assistance by the §570.608(cx3)(ii) and where interior code or regulation provides for lead- recipient or by its subrecipients to indi- chewable surfaces are found to contain based paint testing or hazard abatement viduals, businesses, and other private lead-based paint, all interior chewable in a manner which provides a level of entities under eligible activities that au- surfaces in any affected room shall be protection from the hazards of lead-based thorize such assistance (e.g., rehabilita- treated.Where exterior chewable surfaces paint poisoning at least comparable to tion, preservation, and other improve- are found to contain lead-based paint,the that provided by the requirements of this ments of private properties or facilities entire exterior chewable surface shall be section and that adherence to the require- pursuant to §570.202; or grants, loans, treated. Treatment shall be performed ments of this subpart would be duplica- and other assistance to businesses, indi- before final inspection and approval of tive or otherwise cause inefficiencies, viduals, and other private entities pursu- the work. HUD may modify or waive the require- ant to §§570.203, 570.204, 570.455, or (iii)When weather prohibits repainting ments of this section in such manner as 570.703(i)). exterior surfaces before final inspection, may be appropriate to promote efficiency (b) Conflicts prohibited. The general the grantee may permit the owner to while ensuring such comparable level of rule is that no persons described in para- abate the defective paint or chewable protection. graph (c) of this section who exercise or lead-based paint as required by this sec- (iii) Grantee responsibility. Nothing in have exercised any functions or responsi- tion and agree to repaint by a specified this section is intended to relieve any bilities with respect to CDBG activities date. A separate inspection is required. grantee in the programs covered by this assisted under this part, or who are in a (5)Abatement methods.At a minimum, section of any responsibility for compli- position to participate in a decisionmak- treatment of the defective areas and ance with State or local laws, ordinances, ing process or gain inside information chewable lead-based paint surfaces shall codes or regulations governing lead-based consist of covering or removal of the paint testing or hazard abatement. T See footnote 1 at Sec. 570.200(ax5). Published Warren Gorham Lamont by COMMUNITY DEVELOPMENT 09:0649 HDR RF-618 9-15-97 with regard to such activities,may obtain to receive generally the same interests or (1) Have income eligibility require- a financial interest or benefit from a benefits as are being made available or ments limiting the benefits exclusively to CDBG-assisted activity, or have a finan- provided to the group or class; low and moderate income persons; or cial interest in any contract, subcontract, (iv) Whether the affected person has (2) Are targeted geographically or oth- or agreement with respect to a CDBG- withdrawn from his or her functions or erwise to primarily benefit low and mod- assisted activity, or with respect to the responsibilities, or the decisionmaking erate income persons(excluding activities proceeds of the CDBG-assisted activity, process with respect to the specific assis- serviing the public at large, such as sew- either for themselves or those with whom ted activity in question; .ers,roads,sidewalks,and parks),and that they have business or immediate family (v)Whether the interest or benefit was -provide benefits to persons on the basis of ties, during their tenure or for one year present before the affected person was in an application. thereafter. For the UDAG program, the a position as described in paragraph(b)of (c)Limitation on coverage.The restric- above restrictions shall apply to all activi- this section; tions under this section apply only to ties that are a part of the UDAG project, (vi)Whether undue hardship will result applic•nts for new benefits not being and shall cover any such financial interest either to the recipient or the person received by covered resident aliens as of or benefit during, or at any time after, affected when weighed against the public the effective date of this section. such person's tenure. interest served by avoiding the prohibited (d) Compliance. Compliance can be (c) Persons covered. The conflict of conflict; and accomplished by obtaining certification interest provisions of paragraph (b) of (vii)Any other relevant considerations. as provided in 24 CFR 49.20. this section apply to any person who is an (e)Programs affected. (1)The Commu- employee, agent, consultant, officer, or §570.612 Executive Order 12372. nity Development Block Grant program elected official or appointed official of the for small cities, administered under sub- recipient, or of any designated public (a) General. Executive Order 12372, part F of part 570 of this title until agencies, or of subrecipients that are Intergovernmental Review of Federal closeout of the recipient's grant. receiving funds under this part. Programs, and the Department's imple- (2) The Community Development (d) Exceptions. Upon the written re- menting regulations at 24 CFR Part 52, Block Grant program for entitlement quest of the recipient,HUD may grant an allow each State to establish its own grants, administered under subpart D of exception to the provisions of paragraph process for review and comment on pro- part 570 of this title. (b)of this section on a case-by-case basis posed Federal financial assistance pro- (3) The Community Development when it has satisfactorily met the thresh- grams. Block Grant program for States,adminis- old requirements of(d)(1)of this section, (b) Applicability. Executive Order tered under subpart I of part 570 of this taking into account the cumulative effects 12372 applies to the CDBG Entitlement title until closeout of the unit of general of paragraph (d)(2) of this section. program and the UDAG program. The local government's grant by the State. (1) Threshold requirements. HUD will Executive Order apciies to all activities (4) The Urban Development Action consider an exception only after the recip- proposed to be assisted under UDAG,but Grants program,administered under sub- ient has provided the following documen- it applies to the Entitlement program only part G of part 570 of this title until tation: where a grantee proposed to use funds for closeout of the recipient's grant. (i) A disclosure of the nature of the the planning or construction (reconstruc- conflict, accompanied by an assurance tion or installation) of water or sewer §570.614 Architectural Barriers Act that there has been public disclosure of facilities. Such facilities include storm and the Americans with Disabilities the conflict and a description of how the sewers as well as all sanitary sewers, but Act. public disclosure was made; and do not include water and sewer lines (ii)An opinion of the recipient's attor- connecting a structure to the lines in the (a) The Architectural Barriers Act of ney that the interest for which the excep- public right-of-way or easement. It is the 1968(42 U.S.C.4151-4157)requires cer- tion is sought would not violate State or responsibility of the grantee to initiate the tain Federal and Federally funded build- local law. Executive Order review process if it pro- ings and other facilities to be designed, (2)Factors to be considered for excep- poses to use its CDBG or UDAG funds constructed,or altered in accordance with tions. In determining whether to grant a for activities subject to review, standards that insure accessibility to,and requested. exception-after the recipient use by,physically handicapped people.A has satisfactorily mgt the requirements of §570.613 Eligibility restrictions for building or facility designed,constructed, paragraph (d)(1) of this section, HUD certain resident aliens. or altered with funds allocated or reallo- shall conclude that such an exception will cated under this part after December 11, serve to further the purposes of the Act (a)Restriction. Certain newly legalized 1995 and that meets the definition of and the effective and efficient administra- aliens, as described in 24 CFR part 49, "residential structure" as defined in 24 tion of the recipient's program or project, are not eligible to apply for benefits under CFR 40.2 or the definition of"building" taking into account the cumulative effect covered activities funded by the programs as defined in 41 CFR 101-19.602(a) is of the following factors, as applicable: listed in paragraph (e) of this section. subject to the requirements of the Archi- (i) Whether the exception would pro- "Benefits" under this section means fi- tectural Barriers Act of 1968 (42 U.S.C. vide a significant cost benefit or an nancial assistance, public services, jobs 4151-4157) and shall comply with the essential degree of expertise to the pro- and access to new or rehabilitated hous- Uniform Federal Accessibility Standards gram or project that would otherwise not ing and other facilities made available (Appendix A to 24 CFR part 40 for be available; under covered activities funded by pro- residential structures,and Appendix A to (ii) Whether an opportunity was pro- grams listed in paragraph (e) of this 41 CFR part 101-19, subpart 101-19.6, vided for open competitive bidding or section."Benefits"do not include reloca- for general type buildings). - negotiation; tion services and payments to which (b) The Americans with Disabilities (iii) Whether the person affected is a displacees are entitled by law. Act (42 U.S.C. 12131; 47 U.S.C. 155, member of a group or class of low- or (b) Covered activities. "Covered activi- 201, 218 and 225) (ADA) provides corn- moderate-income persons intended to be ties" under this section means activities prehensive civil rights to individuals with the beneficiaries of the assisted activity, meeting the requirements of§570.208(a) disabilities in the areas of employment, and the exception will permit such person that either. public accommodations, State and local Published by West Group 09:0650 HOUSING AND DEVELOPMENT REPORTER 1. government services, and telecommuni- §570.702 Eligible applicants. costs associated with private sector fi- cations. It further provides that discrimi- nancing of debt obligations under this nation includes a failure to design and The following public entities may apply subpart. construct facilities for first occupancy no for loan guarantee assistance under this (h) Housing rehabilitation eligible un- later than January 26, 1993 that are subpart. der §570.202. - readily accessible to and usable by indi- (a) Entitlement public entities. (i) The following economic develop- viduals with disabilities. Further, the (b) Nonentitlement public entities that ment activities: ADA requires the removal of architectur- are assisted in the submission of applica- (1) Activities eligible under §570.203; al barriers and communication barriers tions by States that administer the CDBG and that are structural in nature in existing program (under subpart I of this part). (2)Community economic development facilities, where such removal is readily Such assistance shall consist, at a mini- projects eligible under §570.204. achievable-that is, easily accomplishable mum,of the certifications required under (j)Construction of housing by nonprof- and able to be carried out without much §570.704(b)(9) (and actions pursuant it organizations' for homeownership un- difficulty or expense. thereto). der section 17(d) of the United States (c)Nonentitlement public entities eligi- Housing Act of 1937 (Housing Develop- ble to apply for grant assistance under ment Grants Program, 24 CFR part 850) Subpart M-Loan Guarantees subpart F of this part. or title VI of the Housing and Communi- ty Purpose. §570.703 Eligible activities. Houusin lopt Act of 1987 (Nehemiah § g Opportunity Grants Program, Guaranteed loan funds may be used for 24 CFR part 280). This subpart contains requirements the. following activities, provided such (k)A debt service reserve to be used in governing the guarantee under section activities meet the requirements of accordance with requirements specified 108 of the Act of debt obligations as §570.200. However, guaranteed loan in the contract entered into pursuant to defined in §570.701. funds may not be used to reimburse the §5b0.705(b)(1). CDBG program account or line of credit (1) Acquisition, construction, recon- §570.701 Definitions. for costs incurred by the public entity or struction,rehabilitation,or installation of . designated public agency and paid with public facilities (except for buildings for • CDBG grant funds or program income. the general conduct of government),pub- Borrower means the public entity or its lic streets, sidewalks, and other site im- (a) Acquisition of improvedor unim- designated public agency.that issues debtproved real property in fee or by long- provements and public utilities. obligations under this subpart. term lease, including acquisition for eco- (m) In the case of applications by Debt obligation means a promissory nomic development purposes. public entities which are, or which con- note or other obligation issued by a public (b) Rehabilitation of real property tain,"colonias"as defined in section 916 entity or its designated public agency and owned or acquired by the public entity or of the Cranston-Gonzalez National Af- guaranteed by HUD under this subpart, its designated public agency. fordable Housing Act (42 U.S.C. 5306 or a trust certificate or other obligation (c) Payment of interest on obligations note), as amended by section 810 of the offered by HUD or by a trust or other guaranteed under this subpart. Housing and Community Development offeror approved for-purposes of this (d) Relocation payments and other Act of 1992, acquisition, construction, subpart by HUD which.is guaranteed by relocation assistance for individuals,fam- reconstruction, rehabilitation or installa- HUD under this subpart and is based on ilies, businesses, nonprofit organizations, tion of public works and site or other and backed by a trust or pool composed and farm operations who must relocate improvements which serve the colonia. of notes or other obligations issued by permanently or temporarily as a result of public entities or their designated public an activity financed with guaranteed loan §570.704 Application requirements. agencies and guaranteed or eligible for funds, where the assistance is: guarantee by HUD under.this subpart. (1) Required under the provisions of Designated public agencymeans a pub- §570.606(b) or (c); or . Presubmission and citizen participa- lic agency designated by a public entity to (2) Determined by the public entity to tion requirements. issue debt obligations as borrower under be appropriate under the provisions of (1)Before submission of an application this subpart. §570.606(d). for loan guarantee assistance to HUD,the (e)Clearance,demolition and removal, public entity must: Entitlement public entity means a met- (i)Developa proposed application that ropolitin city or an urban county receiv- er sites, of buildings and improvements includes the following items: ing a grant under subpart D.of this part. on real property acquired or rehabilitated (A) The community development ob- Guaranteed loan funds means the pro- pursuant to paragraphs(a)and(b)of this jectives the public entity proposes to ceeds payable to the borrower from the section. pursue with the guaranteed loan funds. issuance of debt obligations under this (f)Site preparation,including construc- (B) The activities the public entity subpart. tion, reconstruction, or installation of proposes to carry out with the guaranteed Nonentitlement public entity means any public and other site improvements,utili- loan funds. Each activity must be de- unit of general local government in a ties, or facilities (other than buildings), scribed in sufficient detail, including the nonentitlement area. which is: specific provision of §570.703 under Public entity shall have the meaning (1)Related to the redevelopment or use which it is eligible and the national provided for the term "Eligible public of the real property acquired or rehabili- objective to be met, amount of guaran- entity" in section 108(o) of the Act. tated pursuant to paragraphs (a) and (b) teed loan funds expected to be used, and State-assisted public entity means a unit of this section, or location, to allow citizens to determine of general local government in a nonenti- (2) For an economic development pur- the degree to which they will be affected. tlement area which is assisted by a State pose. The proposed application must indicate _ as required in §570.704(b)(9) and (g) Payment of issuance, underwriting, which activities are expected to generate §570.705(bX2). servicing, trust administration and other program income. The application must Published by West Group Exhibit't G. 24 CFR 52 Intergovernmental Review of HUD Programs and Activities 09:1722 HOUSING AND E)EYELOPMENT REPORTER §52.7 How does the Secretary §52.9 How does the Secretary receive may also supplement the written explana- communicate with state and local and respond to comments? tion by providing the explanation to the officials concerning the Department's single point of contact by telephone,other programs and activities? (a) The Secretary follows the proce telecommunication, or other means. dures in §52.10 if— (b)In any explanation under paragraph (a) For those programs and activities (1)A state office or official is designat (a)(3) ofthis section, the Secretary in- covered by a state process.under §52.6 ed to act as a single point of contac forms the single point of contact that— the Secretary,to the extent permitted by between a state process and all fede (1) The Department will not imple- law— agencies, and ment its decision for at least ten days . (1)Uses the state process to determine (2) That office or official transmits . after the single point of contact receives views of state and local elected officials; state process recommendation for a pr. the explanation; or and, gram selected under §52.6. (2) The Secretary has reviewed the (2)Communicates with state and local 03.)(1)The single point of contact is net decision and determined that,because of elected officials, through the state pro- obligated to transmit comments fro , unusual circumstances, the waiting peri- cess,as early in a program planning cycle state, areawide, regional or local Old• s od of at least ten days is not feasible. as is reasonably feasible to explain specif- and entities where there is no state pr• ( For purposes of computing the is plans and actions. cess recommendation. waiting period under paragraph(bx1)of (b) The Secretary provides notice to (2) If a state process recommendatio this section, a single point of contact is directly affected state,areawirovide e regional, is transmitted by a single point of contac, presumed to have received written notify all comments from state, areawide, r.- cation 5 days after the date of mailing of and local entities in a state of proposed gional,and local officials and entities ,.t. such notification. federal financial assistance or direct fed- differ from it must also be transmitte•. eral development if— . (c) If a state has not established a §52.11 What are the Secretary's (1)The state has not adopted a process process, or is unable to submit a sta e obligations in interstate situations? under the Order, or process recommendation,state,areawid , (2) The assistance or development in- regional and local officials and entiti s (a) The Secretary is responsible for— volves a program or activity not selected may submit comments either to the app'- (1) Identifying proposed federal fman- for the state process. cant or to the Department. cial assistance and direct federal develop- This notice may be made by publica- (d) If a program or activity is n•t ment that have an impact on interstate tion in the Federal Register or other selected for a state process, state, are:- areas; appropriate means, which the Depart- wide, regional and local officials •i d (2) Notifying appropriate officials and ment in its discretion deems appropriate. entities may submit comments either o entities in states which have adopted a the applicant or to the Department. n process and which select the Depart- §52.8 How does the Secretary provide addition, if a state process recommen•a- ment's program or activity. (1'.., states an opportunity to comment on tion for a nonselected program or activ, (3)Mating efforts to identify and noti- proposed federal financial assistance is transmitted to the Department by t.e fy the affected state, areawide, regional, and direct federal development? single point of contact, the Secret.ry and local officials and entities in those follows the procedures of§52.10 of i s states that have not adopted a process Part. under the Order or do not select the (a) Except in unusual circumstances, (e) The Secretary considers comme,is Department's program or activity; the Secretary gives state processes or which do not constitute a state pro ,ss (4) Responding pursuant to §52.10 of directly affected state, areawide,regional recommendation submitted under th...e this Part if the Secretary receives a recom- and local officials and entities— regulations and for which the Secret. is mendation from a designated areawide (1) At least 30 days from the date not required to apply the procedures of agency transmitted by a single point of established by the Secretary to comment §52.10 of this Part,when such comme its contact,in cases in which review,coordi- on proposed Federal financial assistance are provided by a single point of cont. t, nation, and communication with the De- under. (i) A covered mortgage insurance by the applicant, or directly to the N e- partment have been delegated. programs, (ii) the Urban Development partment by a commenting party. (b) The Department uses the proce- Action Grant Program,or(iii)the Hous- dures in§52.10 if a state process provides ing Development Grant Program. §52.10 How does the Secretary mak• a state process recommendation to the (2) At least 60 days: from the date efforts to accommodate Department through a single point of established by the Secretary to comment intergovernmental concerns? contact. on proposed Federal financial assistance other than under a program covered by (a) If a state process provides a s ,to §52.12 [Reserved] paragraph (axl). process recommendation to the Dep. - (b) This section also applies to corn- ment through its single point of cont.ct, §52.13 May the Secretary waive any ments in cases in which the review, the Secretary either— provision of these regulations? coordination, and communication with (1) Accepts the recommendation; the Department have been delegated. (2) Reaches a mutually agreeable s•lu- Upon determination of good cause,the (c)Applicants for programs and activi- tion with the state process; or Secretary may waive any provision of ties subject to section 204 of the Demon- (3)Provides the single point of con act these regulations.Every waiver is in writ- stration Cities and Metropolitan Act shall with such written explanation of its d ci- ing and sets forth the facts and reasons allow areawide agencies a 60-day oppor- sion,as the Secretary in his or her dis re- upon which the Secretary relies in waiv-• tunity for review and comment. tion deems appropriate. The Secre ary ing the provisions. Published by Warren Gorham Lamont COMMUNITY DEVELOPMENT 09:1721 HDR RF-602 2-3-97 INTERGOVERNMENTAL REVIEW OF HUD PROGRAMS AND ACTIVITIES (24 CFR 52) PART 52 INTERGOVERNMENTAL and a strengthened Federalism by relying proposed federal financial assistance and REVIEW OF DEPARTMENT OF on state processes and on state,areawide, direct federal development that are corn- HOUSING AND URBAN regional and local coordination for review municated through the state process; DEVELOPMENT PROGRAMS AND of proposed federal financial assistance. (4) Allows the states to simplify and ACTIVITIES and direct federal development. - consolidate existing federally required (c) These regulations are intended to state plan submissions; Sec. aid the internal management of the De- (5)Where state planning and budgeting 52.1 What is the purpose of these regula- partment, and are not intended to create systems are sufficient and where permit- tions? any right or benefit enforceable at law by ted by law,encourages the substitution of 52.2 What definitions apply to these a party against the Department or its state plans for federally required state regulations? officers. plans; 52.3 What programs and activities of the (6) Seeks the coordination of views of Department are subject to these §52.2 What definitions apply to these affected state and local elected officials in regulations? regulations? one state with those of another state when 52.4 What are the Secretary's general proposed federal financial assistance or responsibilities under the Order? "Order" means Executive Order direct federal development has an impact 52.5 What is the Secretary's obligation 12372,issued July 14, 1982,and amend- of interstate metropolitan urban centers with respect to federal interagency ed April 8, 1983 and titled"Intergovem- or other interstate areas; and coordination? mental Review of Federal Programs." (7) Supports state and local govern- 52.6 What procedures apply to the selec- "Secretary"means the Secretary of the ments by discouraging the reauthoriza- tion of programs and activities un- U.S. Department of Housing and Urban tion or creation of any planning organiza- der these regulations? Development or an official or employee tion which is federally-funded,which has 52.7 How does the Secretary communi- of the Department acting for the Secre- a limited purpose, and which is not tate with state and local officials tary under a delegation of authority: adequately representative of, or account- concerning the Department's pro- "State"means any of the 50 states,the able to, state or local elected officials. grams and activities? District of Columbia,the Commonwealth 52.8 How does the Secretary provide of Puerto Rico,the Commonwealth of the §52.5 What is the Secretary's states an opportunity to comment Northern Mariana Islands,Guam,Ameri- obligation with respect to federal on proposed federal fmancial assis- can Samoa,the U.S.Virgin Islands,or the interagency coordination? tance and direct federal develop- Trust Territory of the Pacific Islands. ment?. ' 52.9 How does the Secretary receive and §523 What programs and activities of The Secretary, to the extent practica- respond to comments? the Department are subject to these ble, consults s th and seeks advice from 52.10 How does the Secretary make ef- regulations? all other substantially affected federal forts to accommodate intergovem- departments and agencies inan effort to mental concerns? The Secretary publishes in the Federal assure full coordination between such ing 52.11 What are the Secretary's obliga- Register a list of the Department'sagencies and the Department regard pro- ro sand activities covered under tions in interstate situations? grams and activities that are subject to phos ere gula . 52.12 [Reserved] these regulations and identifies which of ions. 52.13 May the Secretary waive any provi- these are subject to the requirements of sion of these regulations? section 204 of the Demonstration Cities §52.6 What procedures apply to the Authority:Executive Order 12372,July and Metropolitan Development Act. selection of programs and activities 14, 1982 [47 FR 30959), amended April under these regulations? 8, 1963(48 FR 15887);sec.401,Intergo- §52.4 What are the Secretary's general vernmental Cooperation Act of 1968, as responsibilities under the Order? (a)A state may select any program or amended (31 U.S.C. 6506); sec. 204 of activity published in the Federal Register the Demonstration Cities and Metropoli- (a) The Secretary provides opportuni- in accordance with§52.3 of this Part for tan Development-Act of 1966,as amend- ties for consultation by elected officials of intergovernmental review under these ed (42 U.S.C. 3334); sec. 7(d), Depart- those state and local governments that regulations. Each state, before selecting ment of Housing and Urban Develop- would provide the non-federal funds for, programs and activities shall consult with went Act (42 U.S.C. 3535(d)). or that would be directly affected by, local elected officials. Source: 48 FR 29206, June 24, 1983. proposed federal financial assistance (b) Each state that adopts a process from, or direct federal development by, shall notify the Secretary of the Depart- §52.1 What is the purpose of these the Department. ment's programs and activities selected regulations? (b)If a state adopts a process under the for that process. Order to review and coordinate proposed (c)A state may notify the Secretary of ' (a) The regulations in this part Imple- federal financial assistance and direct changes in its selections at any time. For ment Executive Order 12372, "Intergo- federal development,the Secretary,to the each change,the state shall submit to the vernmental Review of Federal Pro- extent permitted by law: Secretary an assurance that the state has grams,"issued July 14, 1982 and amend- (1) Uses the state process to deter- consulted with local elected officials re- ed on April 8, 1983. These regulations mined official views of state and local garding the change.The Department may also implement applicable provisions of elected officials; establish deadlines by which'states are section 401 of the Intergovernmental Co- (2)Communicates with state and local required to inform the Secretary of operation Act of 1968 and section 204 of elected officials as early in a program changes in their program selections. the Demonstration Cities and Metropoli- planning cycle as is reasonably feasible to (d)The Secretary uses a state's process tan Development Act of 1966. explain specific plans and actions; as soon as feasible,depending on individ- (b) These regulations are intended to (3)Makes efforts to accommodate state ual programs and activities, after the foster an intergovernmental partnership and local elected officials' concerns with Secretary is notified of its selections. Published by Warren Gorham Lamont City of Elgin Agenda Item No. 1 � O �, c4.47-no. I .. L :: t May 4 , 2001 IIll tL� N TO: Mayor and Members of the City Council SAFE COMMUNITY FROM: Joyce A. Parker, City Manager SUBJECT: Sub-recipient Agreement Betwee the City of Elgin and Senior Services Associates PURPOSE The purpose of this memorandum is to prov. de the Mayor and members of the City Council with information nec ssary to consider a Sub- recipient Agreement between the City of lgin and Senior Services Associates . BACKGROUND The City Council allocated $31, 879 . 00 in 1998-1999 Community Development Block Grant (CDBG) funds to S-nior Services Associates for capital improvements to the Senior Ce ter, located at 101 South Grove in Elgin. At that time, a Sub recipient Agreement was executed for the project which consiste• of improvements to the Center' s second story windows . Since the Senior Center is eligible for listing on the National Register of Historic Places, City staff worked with the Illinois Historic Prese vation Agency to develop specifications that were consistent wiuh the Secretary of the Interior' s Standards for Rehabilitati.n and Guidelines for Rehabilitating Historic Buildings. T e City advertised and distributed a Request for Bids on two separate occasions . No proposals were received from the first •id request and one over- priced bid was received from the secon. request . Therefore, a contract for the window replacement couls not be awarded. It was later determined that the lack of bids was potentially due to the need for specialized contractor. to perform the window repairs and storm window installation. A so, with the high rate of construction in the region, contractors w=re not available for this project . Therefore, Senior Services Asso iates requested a change in the project focus from window to flo.ring improvements which (lb* were also needed due to the deteriorate. condition of the floor coverings . The project scope was revisQd and specifications for the flooring improvements were prepared .y the project architect . (aw c. c. Sub-recipient Agreement - Senior Service Associates May 4 , 2001 Page 2 Since the original Sub-recipient Agreemen has expired and the work scope has been revised, a new agreement ust be executed. The new Sub-recipient Agreement contains the wo k scope for the flooring improvements and outlines both the sub-recipient responsibilities and the Reversion of Assets process . Tie City of Elgin' s Legal Department has reviewed and approved this Sub-recipient Agreement . The City Council recently allocated $30, 000 in 2001-2002 CDBG funds to Senior Services Associates for their W'ndow Replacement Project. City staff has determined that the pool of contractors has grown since the last Request for Bids was distributed and anticipate greater success with the next bidding process . COMMUNITY GROUPS INTERESTED PERSONS CONT' CTED • Beth McClory, Business Manager, Senior S-rvices Associates. Mike Sutter, Architect, Sutter Architect.. Ltd. FINANCIAL IMPACT Currently, $31, 623 . 77 remains in the project budget and is available to Senior Services Associates f•r flooring renovations at the Senior Center. Project expenditures ,ill be charged to account number 230-0000-791 . 93-36 (Buildings/Stru tures) and project number 154408 . 0>i/7 LEGAL IMPACT In order to comply with the U.S . Depart ent of Housing and Urban Development' s (HUD) Code of Federal Regu ations (CFR) 570 . 203 and HUD directives, Senior Services Associat-s and the City of Elgin must enter into a Sub-recipient Agreement before funds are expended for the proposed activity. This Ag eement identifies data reporting requirements based on househol.; size and income as well as conditions for repayment of funds if t e activity assisted with CDBG funds does not comply with federal •;uidelines for at least a five-year period. c. c Sub-recipient Agreement - Senior Services Associates May 4 , 2001 Page 3 ALTERNATIVES The Mayor and City Council can approve th- attached Sub-recipient Agreement or choose not to approve the Su•-recipient Agreement and reallocate the project funds to another IDBG project or eligible activity. RECOMMENDATION The recommendation is that the Mayor and ity Council approve the attached Sub-recipient Agreement with Senior Services Associates . Respectfully submitted, J a yce 1 . Parker City Manager JAP/jaw t