04-34 Resolution No. 04-34
RESOLUTION
AUTHORIZING EXECUTION OF A SUB-RECIPIENT AGREEMENT WITH
THE YWCA OF ELGIN, INC.
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,ILLINOIS, that
David M.Dorgan, City Manager,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 the YWCA of
Elgin, Inc. for building improvements at 220 E. Chicago Street, a copy of which is attached hereto
and made a part hereof by reference.
s/Ed Schock
Ed Schock, Mayor
Presented: February 25, 2004
Adopted: February 25, 2004
Omnibus Vote: Yeas: 6 Nays: 0
Attest:
s/Dolonna Mecum
Dolonna Mecum, City Clerk
OF ft,
C,<C )" City of Elgin �-
Mayor
Ed Schock
Council Members
Juan Figueroa
Robert Gilliam
Brenda Rodgers
Thomas K. Sandor
John Walters
City Manager
David M. Dorgan
MEMORANDUM
To: Mayor and Members of the City Council
From: David Dorgan, City Manager
Amy Coyne, CDBG Program Coordinator
Date: February 19, 2004
Re: Resolution Authorizing Execution of a Sub-recipient
Agreement with the YWCA of Elgin
The Sub-recipient Agreement was approved by the Committee of the Whole on
Wednesday July 9, 2003. The agreement was scheduled to go to the City Council
on July 23, 2003. It was pulled from the agenda due to income documentation
issues with the U.S. Department of Housing and Urban Development (HUD).
Staff decided to hold the agreement until the outstanding issues could be resolved.
All HUD requirements are being met and HUD has signed off on the project, in a
letter dated, November 21, 2003.
150 Dexter Court• Elgin, IL 60120-5555 • Phone 847/931-6100• Fax 847/931-5610•TDD 847/931-5616
.. www.cityofelgin.org
:: Printed on recycled paper
SUB-RECIPIENT AGREEMENT
BETWEEN THE CITY OF ELGIN, AND
YWCA OF ELGIN
B-17-02-MC-0011
THIS AGREEMENT is made and entered into this 25th day of February,2004 by and
between,YWCA OF ELGIN,INC.a not-for-profit corporation incorporated pursuant to the
laws of the State of Illinois, (hereinafter referred to as the"Sub-recipient"),and the CITY OF
ELGIN, ILLINOIS, an Illinois municipal corporation, (hereinafter referred to as the
"Grantee").
WHEREAS, Grantee has applied for and received funds from the United States
Government pursuant to Title I of the Housing and Community Development Act of 1974,
Public Law 93-383, as amended; and
WHEREAS, Sub-recipient provides the community with social service, health and
fitness programs to persons whose income falls at or below 80%of the median family income;
and
WHEREAS,Sub-recipient's business is located at 220 E.Chicago Street,Elgin,Illinois
(herein referred to as the"Facility"); and
WHEREAS, Grantee has determined it to be in its best interest to enter into this
Agreement with Sub-recipient utilizing Community Development Block Grant(CDBG)funds
totaling $109,147.93 to renovate the Facility's interior in order to provide a safe and
comfortable environment for the persons utilizing the Facility.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein,the sufficiency of which is hereby acknowledged,the parties hereby agree
as follows:
1. Statement of Work
A. Activities
The Sub-recipient's performance of all the following activities must be performed in a
satisfactory manner. Whether performance is satisfactory shall be determined by the
Grantee in its sole discretion. Should Sub-recipient fail to perform in a satisfactory
manner, including but not limited to adhering to the Project Schedule detailed in
Section 1C of this Agreement,Grantee may terminate the Agreement and pursue 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 services to families whose income falls at or below 80%of
the median family income. Sub-recipient will be allocated a total of $109,147.93 in
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Program Year 2002-2003 CDBG funds for the renovation of the Facility. The CDBG
funds shall be used for,but not limited to,the following interior improvements to the
Facility:
1. Installation of lift for persons with disabilities.
2. Replace and install necessary hardware for two alley doors.
3. Replace all rusted hollow metal doors.
4. Replacement of ejector pump piping.
5. Install entrance hardware for main entrance doors.
6. Repair and replacement of existing locker room flooring.
7. Elevator rehabilitation.
8. Other costs associated with the above activities that are consistent with the
scope and intent of the project and as pre-approved by the Grantee.
Sub-recipient shall perform its activities in a satisfactory manner, as solely
determined by the Grantee, and consistent with any standards required as a
condition of providing these funds and shall comply with all applicable federal,state
and local statutes, rules and regulations governing such CDBG funds and in
accordance with the Project Schedule for the Facility set forth in Section 1C herein.
Such Project Schedule shall include the following activities eligible under the CDBG
Program:
Activity #1: Sub-recipient and Grantee shall oversee progress of the Facility's
renovation.Completed building improvements shall be approved by
the Sub-recipient in writing, prior to the City of Elgin's release of
payment to the contractor. Grantee shall inspect and approve
completed building improvements prior to release of payment to the
contractor.
Activity #2 Sub-recipient shall submit monthly Construction/Progress Reports to
Grantee each month,reporting on the status of the project in relation
to the Project Schedule. The reports shall begin upon the signing of
the Agreement and shall continue until the project is closed out. The
Sub-recipient shall use a form provided by the Grantee and shall
include all required information about the clients served each month
(by race and the number of female headed households).
Activity #3: Sub-recipient shall maintain records in accordance with Section 2 of
this Agreement and shall submit quarterly statements to the grantee
documenting number of clients and female-headed households
served, as required by the U.S. Department of Housing and Urban
Development.
B. Eligibility and National Objectives
Sub-recipient certifies that the activities undertaken pursuant to this Agreement will
be implemented in accordance with CDBG eligibility and national objectives criteria.
Sub-recipient is eligible to receive CDBG funds pursuant to 24 CFR 570.208(a)(2)(B)
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for improving public facilities which, upon completion, will provide a safer and
healthier facility for low and moderate income persons.
Rehabilitation of public facilities is eligible for CDBG funding pursuant to 24 CFR
57(1201 (c). Labor, materials and other costs of rehabilitating properties, including
repair directed toward an accumulation of deferred maintenance, replacement of
principal fixtures and components of existing structures and renovation through
alterations, additions to or enhancement of existing structures may be undertaken.
Sub-recipient shall provide documentation demonstrating that at least 51% of the
clients are low and moderate income households and documentation showing the
family size and income of its clients in accordance with the guidelines established in
Exhibit A, attached to and incorporated into this Agreement by reference.
C. Project Schedule
Time is of the essence in this Agreement.Sub-recipient will be responsible for meet-
ing the schedule deadlines listed below. Any milestone not achieve by the Sub-
recipient within two months of the listed date shall require the Sub-recipient to
submit a revised implementation schedule for approval by the Grantee. Failure to
achieve these deadlines may result in the loss or reduction of grant funds.
Milestones Date
1. Bid Specifications Completed 4/01/04
2. Submit Request for Bids 5/01/04
3. Award Contract 6/01/04
3. Construction/Clientele Reports Construction reports
shall be submitted to
Grantee monthly
beginning 2/25/04,and
on the first of each
month thereafter, until
the project has been
completed. Clientele
reports shall be
submitted
semiannually on
August 25th and
February 25th of each
year until 2009.
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D. Budget
1. Sub-recipient expenditures are not to exceed the following budget as
provided by the City of Elgin through the Community Development Block
Grant Program:
Line Item: Amount:
Renovation: Materials and Labor $109,147.93
Total Project Budget $109,147.93
2. For final payment work will have been performed in a satisfactory manner
and in conformance with the contract.
2. Records and Reports
A. Types and Schedules
Sub-recipient certifies that it will make all records pertaining to this Agreement
available to the Grantee, U. S. Department of Housing and Urban Development,
Comptroller General of the United States, or any of their duly authorized
representatives,until such time as they are no longer required under this Agreement.
Sub-recipient shall maintain the following records which are necessary to guarantee
project eligibility and for reporting/monitoring purposes.Sub-recipient will retain all
records pertinent to this Agreement for a period of five years from the date of this
Agreement, starting 2/25/04 and ending 2/25/09.
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 Requirements
Sub-recipient certifies that they will comply with applicable administrative requirements as
set forth in 24 CFR Part 570.502(b),said regulations being attached to and incorporated into
this Agreement as Exhibit B. These specifically include:
1. OMB Circular A-110, "Uniform Administrative Requirements for Grants and
Agreements With Institutions of Higher Education,Hospitals,and Other Non-Profit
Organizations," implemented at 24 CRF Part 84, said regulations being attached to
and incorporated into this Agreement as Exhibit C.
2. OMB Circular A-122,"Cost Principles for Non-Profit Organizations,"said principles
being attached to and incorporated into this Agreement as Exhibit D.
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3. OMB Circular A-133, "Audits of Institutions of Higher Education and Other Non-
Profit Institutions," said auditing guidelines being attached to and incorporated into
this Agreement as Exhibit E.
4. Other Program Requirements
Sub-recipient will conduct activities authorized under this Agreement in compliance with all
federal laws and regulations described in 24 CFR Part 570, Subpart K and Federal Labor
Standard Provisions HUD 1040 Form. said regulations being attached to and incorporated
into this Agreement as Exhibit F and Exhibit H. Sub-recipient may not, however, assume
Grantee's environmental responsibilities described at 570.604 or assume Grantee's
responsibility for initiating reviews required pursuant to 24 CFR Part 52, said regulations
being attached to and incorporated into this Agreement as Exhibit G. The applicable laws and
regulations include:
570.600 General.
570.601 Public Laws 88-352/90-284;affirmatively furthering fair 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 replacement of housing.
570.607 Employment and contracting opportunities.
570.608 Lead-based paint.
570.609 Use of debarred, suspended, or ineligible contractors or sub-recipients.
570.610 Uniform administrative requirements and cost principles.
570.611 Conflict of interest.
570.612 Executive Order 12372.
570.613 Eligibility restrictions for certain resident aliens.
5. Suspension and Termination of Agreement
This Agreement may,in accordance with the provisions of 24 CFR Part 85.43,be suspended or
terminated by Grantee if Sub-recipient materially fails to comply with any term of this award.
The award may also be terminated for convenience, in writing, by either Grantee or Sub-
recipient,pursuant to 24 CFR Part 85.44,providing a minimum of 30 days prior notice. The
Sub-recipient shall repay to the Grantee all funds used for ineligible activities in accordance
with the provisions of Section 6,below.
6. Reversion of Assets
In the event the services identified in Section 1, Statement of Work of this Agreement or other
eligible services for low and moderate income individuals are no longer provided at the
Facility due to actions by the Sub-recipient, the Sub-recipient shall reimburse the U.S.
Department of Housing and Urban Development or the City for all CDBG funds expended
5
for the renovation activities made with CDBG funds in an amount equal to 6.7%for each year
and portion of each year remaining on the five-year useful life of the Facility improvements.
The compliance period shall begins on the commencement date of this Agreement. This
provision shall not be construed as limiting the Grantee from asserting any claims against the
Sub-recipient for the breach of any other terms of this Agreement.
Upon project completion as specified in Section 1, Statement of Work, any remaining CDBG
project funds shall be available for reallocation by the Grantee to another eligible CDBG
project. If Sub-recipient materially fails to comply with any term of this award, 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 basis shall be at or below 80% of the
Median Family Income, as set forth in Exhibit A,in order for the Sub-recipient to maintain
eligibility for the CDBG funds provided by this Agreement. Said income levels shall be
updated and revised annually to conform to levels set by the U. S. Department of Housing
and Urban Development.The Sub-recipient's failure to meet the aforementioned minimum
51% threshold shall require Sub-recipient to reimburse Grantee for funds expended,in whole
or in part,for the renovation activities performed at the Facility.
Changes in the scope of services, budget, or method of compensation contained in this
Agreement,unless otherwise noted,may only be made through a written amendment to this
Agreement, executed by the Sub-recipient and Grantee.
7. Indemnification
To the fullest extent permitted by law,Sub-recipient agrees to indemnify, defend and hold
harmless the Grantee,its officers,employees,boards and commissions from and against any
and all claims,suits,judgments,costs,attorney's fees, damages or other relief arising out of
or resulting from or through or alleged to arise out of any reckless or negligent acts or
omissions of Sub-recipient's officers, employees or agents in the performance of this
Agreement. In the event of any action against the Grantee, its officers, employees, agents,
boards or commissions covered by the foregoing duty to indemnify, defend and hold
harmless, such action shall be defended by legal counsel of the Grantee's choosing.
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8. Severability
The terms of this Agreement shall be severable. In the event any of the terms or provisions of
this Agreement are deemed to be void or otherwise enforceable for any reason, the
remainder of this agreement shall remain in full force and effect.
9. Independent Contractor Status
This Agreement shall not be construed so as to create a partnership, 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 Grantee shall be charged personally or
held contractually liable under any term or 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 February 25,2004 through February 25,
2009
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IN WITNESS WHEREOF,the parties hereto have executed this Agreement on the date and
year written above.
CITY OF ELGIN YWCA of Elgin,Inc.
By: C/a-7' By:
David M. Dorgan / Julia McClendon
City Manager Executive Director
Attest: A.l t t InAt (,!/nit
( Dolonna Mecum
\ s
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F:\Legal Dept\A reement\\YWCA Subrecip Agrt.doc
8
HUD Income Guidelines
Effective February 20, 2003
Household Extremely Very Low Other Low Median
Size Low Income Income Income Family
(0-30% MFI) (31-50% MFI) (51-80% MFI) Income
1 $15,850 $26,400 $39,550 $52,800
2 $18,100 $30,150 $45,200 $60,300
3 $20,350 $33,950 $50,850 $67,900
4 $22,600 $37,700 $56,500 $68,700
5 $24,450 $40,700 $61,000 $81,400
6 $26,250 $43,750 $65,550 $87,500
7 $28,050 $46,750 $70,050 $93,500
8 or more $29,850 $49,750 $74,600 $99,500
MFI = Median Family Income
MFI for all household sizes for 2003 is $68,700
Coyne_aH. M FI2001
Maximum Allowable Fair Market Rents for Community Development Block
Grant Projects
Effective February 20, 2003
0 Bdrm 1 Bdrm 2 Bdrm 3 Bdrm 4 Bdrm 5 Bdrm
FMR $649 $778 $928 $1,160 $1,298 $1,493
NOTES:
* These are maximum rents, including utilities. If the tenant is to pay
utilities, a utility allowance must be subtracted from the figures in this
table to determine the maximum contract rent.
09:0634 nvv0ii' nl.� .,�, . ,- --- .-
_4
(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 agent-
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 applicable.
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 area administration.
reallocated under section 106(c)or(d)of and implement a HUD approved area
the Act: revitalization strategy pursuant to
(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 the eluding existing local public agencies,
by the U.S. Treasury-, Secretary to require the Section 108 bon- may be designated by the chief executive
officer of the recipient to undertake activ-
(ii) Interest earned on loans or other rower to pledge such amounts as security ides assisted by this part.A public agency
forms of assistance provided with CDBG for the guaranteed loan. The determina- so designated shall be subject to the same
funds that are used for activities deter= tion whether such amounts shall consti- requirements as are applicable to subreci-
mined by HUD either to be ineligible or Lute program income shall be governed by requir.
to fail to meet a national objective in the provisions of the contract required at (b) The recipient is responsible for
accordance with the requirements of sub- §570.705(bxl).. ensuring that CDBG funds are used in
part C of this part,or that fail substantial- (5)Examples of other receipts that are accordance with all program require-
ly to meet any other requirement of this not considered program income are pro- ments.The use of designated public agen-
part; and ceeds from fund raising activities carried cies, subrecipients, or contractors does
(iii) Interest earned on the investment out by subrecipients receiving CDBG not relieve the recipient of this responsi-
of amounts reimbursed to the CDBG assistance (the costs of fundraising are bility.The recipient is also responsible for
program account prior to the use of the generally unallowable under the applica- determining the adequacy of performance
reimbursed funds for eligible purposes. ble OMB circulars referenced in 24 CFR under subrecipient agreements and pro-
(3) The calculation of the amount of 84.27), funds collected through special 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 real §570.910. Where a unit of general local
its subrecipients)shall exclude payments property acquired or improved with government is participating with, or as
made by subrecipients of principal and/or CDBG funds when the disposition occurs part of, an urban county, or as part of a
interest on CDBG-funded loans received after the applicable time period specified 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, tent-controlled property. as are applicable to subrecipients,except
the subrecipient shall be deemed to have (b) Revolving fund means a separate that the five-year period identified under
transferred program income to the grant- fund (with a set of accounts that are §570.503(bx8)(i) shall begin with the
eel 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 carrying ment is no longer considered by HUD to
used for reporting purposes,for purposes out specific activities which, in turn, be a part of the metropolitan.city or
of applying the requirement under generate payments to the fund for the use urban county, as applicable, instead of
§570.504(bx2Xiii), and in determining in carrying out the same activities. Each the date that the subrecipient agreement
limitations on planning and administra- revolving loan fund's cash balance must expires.
tion and public services activities to be be held in an interest-bearing account,
paid for with CDBG funds. and any interest paid on CDBG funds
(4)Program income does not include: held in this account shall be considered §570.502 Applicability of uniform
(i) Any income received in a single interest earned on grant advances and administrative requirements.
program year by the recipient and all its must be remitted to HUD for transmittal
subrecipients if the total amount of such to the U.S. Treasury no less frequently (a) Recipients and subrecipients that
income does not exceed $25,000; and than annually. (Interest paid by borrow- are governmental entities(including pub-
(ii) Amounts generated by activities ers on eligible loans made from the lic agencies) shall comply with the re-
that are financed by a loan guaranteed revolving loan fund shall be program quirements and standards of OMB Circu-
under Section 108 of the Act and meet income and treated accordingly.) tar No. A-87, "Cost Principles for State,
one or more of the public benefit criteria (c) Subrecipient means a public or Local, and Indian Tribal Governments";
specified at §570.209(bx2Xv)or are car- private nonprofit agency, authority, or OMB Circular A-128, "Audits of State
vied out in conjunction with a grant under organization,or a for-profit entity author- and Local Governments" (implemented
Section 108(q) in an area determined by ized under§570.201(o),receiving CDBG at 24 CFR part 44);and with the follow-
HUD to meet the eligibility requirements funds from the recipient or another subre- ing sections of 24 CI-K part 85"Uniform
for designation as an Urban Empower- cipient to undertake activities eligible for Administrative Requirements for Grants
ment Zone pursuant to 24 CFR part 597, such assistance under subpart C of this and Cooperative Agreements to State and
subpart B.Such exclusion shall not apply part. The term excludes an entity receiv- Local Governments" or the related
Published by Warren Gorham Lamont
COMMUNITY DEVELOPMENT . 09:0635
HDR RP-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 fine- Matching"; basis for the recipient effectively to moni-
cial management systems," except pars- (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 lar records the subrecipient must main-
(6) Section 85.22, `Allowable costs"; and Program Plans"; " tame 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
i
(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 shalt be retained after corn-
reporting down, or cash or investments held for
paragraphs(b)through(d)and paragraph pensating the recipient; Section 108 security needs).
(vii)Section 84.51 (b),(c),(d),(e), (f), (4) Uniform administrative require-
(15)(15)Section 85.41, "Financial report- (g), and (b), "Monitoring and Reporting ments. The agreement shall require the
ing," except paragraphs (a), (b), and (e); Program Performance"; subrecipient to comply with applicable
(16) Section 85.42, "Retention and (viii)Section 84.52,"Financial Report- uniform administrative requirements, as
access requirements for records," except ing.'; described in §570.502.
that the period shall be four years; (ix) Section 84.53(b), "Retention and (5) Other program requirements. The
» access requirements for records."Section agreement shall require the subrecipient
(17) Section 85.43, "Enforcement"; 84.53(b)applies with the following excep-
(18) Section 85.44, "Termination for to carry out each activity in compliance
convenience"; lions: 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 tions, except that:
wances and adjustments" and s>
activities shall be four years; and i The subrecipient does not assume
(20) Section 85.52, "Collection of (i)
amounts due." (B)The retention period starts from the the recipient's environmental responsibil-
date of submission of the annual perfor- ities described at 570.604; and
(b)Subrecipients, except subrecipients mance and evaluation report, as pre- §
that are governmental entities,shall com- (ii) The subrecipient does not assume
scribed in 24 CFR 91.520, in which the the recipient's responsibility for initiating
with the requirements and standards P Y g
of OMB Circular No.A-122,"Cost Prin- spec 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 final expenditure re- (6) Conditions for religious organiza-
for Educational Institutions,"as applica- pow for the award; tions. Where applicable, the conditions
ble,and OMB Circular A-133,"Audits of (x) Section 84.61, "Termination. In prescribed by HUD for the use of CDBG
Institutions of Higher Education and
lieu of the provisions of§84.61, CDBG funds by religious organizations shall be
" subrecipients shall comply with included in the agreement.
Other Nonprofit Institutions (as set §570.503(bx7); and
forth in 24 CFR part 45).Audits shall be (7) Suspension and termination. The
(4) Subpart D-"After-the-Award Re- agreement shall specify that, in accor-
conducted annually. Such subrecipients g
shall also comply with the following pro- quirements," except for §84.71, "Close- dance with 24 CFR 85.43,suspension or
out Procedures." termination may occur if the subrecipient
visions of the Uniform Administrative Y
requirements of OMB Circular A-110 materially fails to comply with any term
(implemented at 24 CFR part 84, "Uni- §570503 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
(I) 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
Published by Warren Gorham Lamont
Exhibit C:
24 CFR 84
Grants and Agreements With Institutions of Higher Education,Hospitals and Other Non-
Profit Organizations
COMMUNITY DEVELOPMENT 09:1651
HDR RF-628
2-2-98
GRANTS AND AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION,
HOSPITALS, AND OTHER NON-PROFIT ORGANIZATIONS
(24 CFR 84)
Office of the Secretary 84.32 Real property. Source: 59 FR 47011, Sept. 13, 1994;
84.33 Federally-owned and exempt prop- 61 FR 61617, Nov. l8, 1997.
24-CFR Part 84 erty.
84.34 Equipment. . Subpart A-General
Uniform Administrative Requirements 84.35 Supplies and other expendable
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 standards. non-profit organizations. Additional or
84.41 Recipient responsibilities. inconsistent requirements shall not be
PART 84--GRANTS AND 84.42 Codes of conduct. imposed, except as provided in §§84.4,
AGREEMENTS
PART N WITH INSTITUTIONS 84.43 Competition. and 84.14 or unless specifically required
OF HIGHER EDUCATION, 84.44 Procurement procedures. by Federal statute or executive order.
OF HIGHER, AND OTHER NON- 84.45 Cost and price analysis. Non-profit organizations that implement
HOSPITALS,LS, AND OTHER 84.46 Procurement records. Federal programs for the States are also
84.47 Contract administration. subject to State requirements.
84.48 Contract provisions.
Subpart A-General §84.2 Definitions.
Sec. Reports and Records
Accrued expenditures means the
84.1 Purpose. 84.50 Purpose of reports and records. charges incurred by the recipient during a
84.2 Definitions. 84.51 Monitoring and reporting program 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 property
84.5 Subawards. 84.53 Retention and access requirements received;
for records. (2) Services performed by employees,
Subpart B-Pre-Award 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 and en- der programs for which no current ser-
84.1 1 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 to purchasers;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 and 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 due. Acquisition cost of equipment means the
Requirements - net invoice price of the equipment, in-
Subpart E-Use of Lump Sum eluding 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 Lump Sum the purpose for which it was acquired.
management. (fixed price or fixed amount)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 lump sum tective in-transit insurance, shall be in-
84.22 Payment. grants. eluded or excluded from the unit acquisi-
84.23 Cost sharing or matching. 84.83 Property standards, lion 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 enforcement. Treasury check or other appropriate pay-
84.26 Non-Federal audits. 84.87 Closeout procedures, subsequent ment mechanism to a recipient upon its
84.27 Allowable costs_ adjustments and continuing 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-Contract 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
Published by West Group
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 pet_
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, capita) 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
ante; 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 lions of the award,program income does
lions. - 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 of 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 meats 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- eyed 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 lions during a given period that require purtenances thereto, but excludes mova-
which all work under an award is coin- payment by 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 any supplement or amendment Outlays or expenditures means charges ceiving financial assistance directly from
thereto, on which HUD sponsorship made to the project or program. They BUD to carry out a project or program.
ends. may be reported on a cash or accrual The term includes public and private
basis. For reports prepared on a cash institutions of higher education, public
Disa/loned costs means those charges to
an award that HUD determines to be basis, outlays are the sum of cash dis- and private hospitals, and other quasi-
an that t accordance with the a be bursements for direct charges for goods public and private non-profit organiza-
unallowable,ble, in nl coo accordance with
or other and services, the amount of indirect ex- tions such as,but not limited to,commu-
terms and conditions principles in the pence charged,the value of third party in- nity action agencies, research institutes,
awmd. kind contributions applied and the educational associations, and health cen-
Egrripmen►means tangible nonexpend- amount of cash advances and payments tern.The term includes commercial orga-
Equipment
personal ipmt property tangible o exempt made to subrecipients. For reports pre- nizations, international organizations
able charged directly including the exempt pared on an accrual basis,outlays are the when operating domestically (such as
having property a charged
life of more than one sum of cash disbursements for direct agencies of the United Nations)which are
and an acquisition uuseful life cost of than or mean charges for goods and services, the recipients, subrecipients, or contractors
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 payees and other owned or controlled,or are designated as
its needs or the discharge of its responsi- amounts becoming owed under programs federally-funded research and develop-
bilities. for which no current services or perfor- ment centers. The term does not include
Exempt property means tangible per- mance are required. mortgagors that receive 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 has any kind except real property. It may be project owners that receive capital ad-
statutory authority to vest title in the tangible, having physical existence, or vances from HUD under the Section 202
recipient without further obligation to 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 RP-628
2-2-98
gained from research directed toward the Suspension of an award is a separate approved by OMB, except for those re-
production of useful materials, devices, action from suspension under HUD regu- quirements which are statutory. Excep-
systems. or methods, including design lations implementing E.O. 12549 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 cancellation of §845 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 contributions exclude subrecipients from coverage, the
in the instruction function. means the value of non-cash contribu- provisions of this part shall be applied to
Small awards means a grant or cooper- tions provided by non-Federal third par- subrecipients performing work under
alive agreement not exceeding 5100,000 ties. Third party in-kind contributions awards if such subrecipients are institu-
or the small purchase threshold fixed at may be in the form of real property, lions of higher education,hospitals,corn-
41 U.S.C. 403(11), whichever is greater. equipment, supplies and other expenda- mercial organizations and international
Subaward means: ble property, and the value of goods and organizations operating domestically, or
(I)An award of financial assistance in services directly benefiting and specifical- other non-profit organizations. State, lo-
the form of money,or property in lieu of ly identifiable to the project or program. cal and Federally recognized Indian tribal
money,made under an award by a recipi- Unliquidated obligations, for financial government subrecipients are subject to
ent to an eligible subrecipient or by a . reports prepared on a cash basis, means the provisions of regulations implement-
subrecipient to a lower tier subrecipient. . the amount of obligations incurred by the ing the grants management common rule,
The term includes financial assistance recipient that have not been paid. For "Administrative Requirements for
when provided by any.legal agreement, reports prepared on an accrued expendi- Grants and Cooperative Agreements to
even if the agreement is called a contract, ture basis, they represent the amount of State, Local and Federally Recognized
but does not include procurement of obligations incurred by the recipient for Indian Tribal Governments," (24. CFR
goods and services nor does it include any which an outlay has not been recorded. part 85).
form of assistance which is excluded from Unobligated balance means the portion
the definition of"award". of the funds authorized by HUD that has
(2) For Community Development not been obligated by the recipient and is . Subpart B—Pre Award
Y P Requirements
Block Grants,the term "subaward" does determined by deducting the cumulative
not include the arrangement whereby the obligations from the cumulative funds
prime recipient transfers funds to another authorized. §84.10 Purpose.
entity and that entity is the project. A Unrecovered indirect cost means 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 have been forms and instructions and other pre-
recipient's goals and the transfer of funds awarded under the recipient's approved award matters to be used in applying for
negotiated indirect cost rate.
to a subrecipient who carries out prim- HUD awards.
Working capital advance means a pro-
ties and is accountable to the prime cedure whereby funds are advanced to the
recipient.For example,in a CDBG award 84.11 Pre award policies.
where a prime recipient has as its pro- recipient to cover its estimated disburse- § po
gram goal the revitalization of a down- ment needs for a given initial period.
town area, the funds transferred-to a (a) Use of Grants and Cooperative
business in the downtown area to remodel §843 Effect on other issuances. 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-
Sttbrecipient means the legal entity to administrative requirements of 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 nonregulatory 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 be 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 authorized in pal purpose of a transaction is to accom-
Nations). accordance with the deviations provision 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 and Budget ment is expected between the executive
practice in the performance of work un- (OMB) may grant exceptions for classes agency and the State, local government,
der a funding agreement ("subject inven- of grants or recipients subject to the or other recipient when carrying out the
[ions"), as defined in 37 CFR part 401, requirements of this rule when exceptions activity contemplated in the agreement."
"Rights to Inventions Made by Nonprofit are not prohibited by statute.However,in Contracts shall be used when the princi-
Organizations and Small Business Firms the interest of maximum uniformity, ex- pal purpose is acquisition of property or
Under Government Grants, Contracts, ceptions from the requirements of this services for the direct benefit or use of the
and Cooperative Agreements." rule shall be permitted only in unusual Federal Government.
Suspension means an action by HUD circumstances. HUD may apply 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 OMB.HUD ed funding priorities for discretionary
tive action by the recipient or pending a may apply less restrictive requirements grant programs, unless funding priorities
decision to terminate the award by HUD. when awarding small awards and when are established by Federal statute.
Published by West Group
09:1654 HOUSING AND DEVELOPMENT REPORTER
if
§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 Metric Conversion Act,as amend- Program management.
forms used by HUD in place of or as a ed by the Omnibus Trade and Com titi-
(SF.424) st to the Standard Form 424 veness Act(15 U.S.C. 205) declares that Sections 84.21 through 84.28 prescribe
(SF-424) series. the metric system is the preferred mea- standards for financial management sys-
(b) Applicants shall use the SF-424 surement system for U.S.trade and corn- terns,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
E.O. 12372, "Intergovernmental Review consultation with the Secretary of Corn- Program income,budget revision approv-
of Federal Programs,"the applicant shall merce, when the metric system of mea- als,making audits,determining aJlowabil-
complete the appropriate sections of the surement will be used in the agency's ity of cost, and establishing fund avail-
SF-424 (Application for Federal Assis- procurements,grants,and other business- ability.
lance) indicating whether the application related activities.Metric implementation
m2l Standards for financial
was subject to review by the State Single may take longer where the use of the anagement systems.
Point of Contact (SPOC). The name and system is initially impractical or likely to
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 SPOC 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
84.16 Resource Conservation and. systems shall provide for the following:
§84.13 Debarment and suspension; Recovery Act. disclosure ure of the current and complete of each
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 subdivision of a State accrual basis, the recipient shall not be .
rule implementing E.O.s 12549 and which is using appropriated 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'tee-
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, unobligated 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) Has a history of poor performance; recycled products pursuant to the EPA (4)Comparison of outlays with budget
(b) Is not 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; data.
(d)Has not conformed to the terms and representations. (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 ante with the pertinent requirements. dures codified at 31 CFR part 205,
Published by West Group
COMMUNITY DEVELOPMENT 09:1655
HDR RF-628
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"Withdrawal of Cash from the Treasury needs for all awards made by HUD to the paragraphs(hXI)or(hX2)of this section
for Advances under Federal Grant and recipient. apply.
Other Programs." (1)Advance payment mechanisms in- (1) A recipient has failed to comply
(6)Written procedures for determining dude, but are not limited to, Treasury with the project objectives,the terms and
the reasonableness,allocability and allow- check and electronic funds transfer. conditions of the award, or Federal re-
ability of costs in accordance with the (2)Advance payment mechanisms 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 authorized to delinquent in a debt to the United States
of the award_ submit requests for advances and reim- as defined in OMB Circular A-129,
(7) Accounting records including cost bursements at least monthly when elec- "Managing Federal Credit Programs.".
accounting records that are supported by tronic fund transfers are not used Under such conditions,HUD may,upon
source documentation. (d) Requests for Treasury check ad- reasonable notice, inform the recipient
(c) Where the Federal Government vance payment shall be submitted on SF- that payments shall not be made for
guarantees or.insures the repayment of 270, "Request for Advance or Reim- obligations incurred after a specified date
money borrowed by the recipient, HUD, bursement," or other forms as may be until the conditions are corrected or the
at its discretion, may require adequate . authorized by OMB_ This form is not to indebtedness to the Federal Government
bonding and insurance if the bonding and be used when Treasury check advance is liquidated.
insurance requirements of the recipient payments are made to the recipient,auto- (1) Standards governing the use of
are not deemed adequate to protect the matically through the use of a predeter- banks and other institutions as deposito-
interest of the Federal Government. mined payment schedule or if precluded 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 tacks is funds transfer. 1I) Except for situations described in
sufficient coverage to protect the Federal (e) Reimbursement is the preferred paragraph (iX2) of this section, HUD
Government's interest. method when the requirements in 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 method on any or establish any eligibility requirements
shall be obtained from companies holding construction agreement, or if the major for depositories for funds provided to a
certificates of authority as acceptable portion of the construction project is recipient. However, recipients must be
sureties, as prescribed in 31 CFR part accomplished through private market fi- . 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-
(1)When the reimbursement method is counts whenever possible.
§ Payment. used, HUD shall make payment within (j)Consistent with the nation
84.22 Pa ent. al"goal of
30 days after receipt of the billing,unless expanding the opportunities for women-
(a) Payment methods shall minimize the billing is improper. owned and minority-owned business en-
the time elapsing between the transfer of (2) Recipients shall be authorized to terprises, recipients shall be encouraged
funds from the United States Treasury submit request for reimbursement 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 (1)If a recipient cannot meet the crite- group members).
agencies or instrumentalities shall be con- ria for advance payments and HUD has (k) Recipients shall maintain advances .
sistent with Treasury-State CMIA agree- determined that reimbursement is not of Federal funds in interest bearing ac-
ments or default procedures codified at feasible because the recipient lacks suffi- counts,unless paragraphs(kx1),(kX2),or
31 CFR part 205. cient working capital,HUD may provide (k)(3) of this section apply.
(b) Recipients are to be paid in ad- cash on a working capital advance basis. (1) The recipient receives less than
vance,provided they maintain or demon- Under this procedure, HUD shall ad- 5120,000 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 disbursement.needs for an ini- est bearing account would not be expect-
the time elapsing-between the transfer of tial period generally geared to the awar- ed to earn interest in excess of S250 per
funds and disbursement by the recipient; dee's disbursing cycle. Thereafter, 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 working capital average or minimum balance so high that
meet the standards for fund control and advance method of payment shall not be it would not be feasible within the expect-
accountability as established in §84.21. used for recipients unwilling or unable to ed Federal and non-Federal cash- re-
Cash advances to a recipient organization provide timely advances to their subreci- sources. -
shall be limited to the minimum amounts pient to meet the subrecipient'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, recipients ply, interest earned on Federal advances
ments of the recipient organization in shall disburse funds available from repay- deposited in interest bearing accounts
carrying out the purpose of the approved ments to and interest earned on a revolv- shall be remitted annually to Department
program or project. The timing and ing fund, program income, rebates, re- of Health and Human Services,Payment
amount of cash advances shall be as close funds, contract settlements, audit recov- Management System, P.O. Box 6021,
as is administratively feasible to the actu- cries and interest earned on such funds Rockville, MD 20852. In keeping with
at disbursements by the recipient organi- before requesting additional cash 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 required by star- 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 recipients at FEDWiRE Deposit system. Recipients
be consolidated to cover anticipated cash any time during the project period unless which do not have this capability should
Published by West Group
09:1656 HOUSING AND DEVELOPMENT REPORTER
use a check.interest amounts up to S250 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(cX I)or(cX2)of be determined in accordance with the
CM IA, as it pertains to interest. If an this section. usual accounting policies of the recipient,
entity subject to CMIA uses its own funds (I)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 donated 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-27I 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 (e) When an employer other than the (ii)The basis for determining the valu-
provides adequate information to meet recipient 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 accomplishment 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 the applicable cost sharing or matching for donated. (1) Added to funds committed to the
cost principles. equipment,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(gXI)or (gX2)of this section (2) Used to finance-the non-Federal
used for cost sharing or matching. apply. share of the
(6) Are provided for in the approved (1) If the purpose of the award is to project or program.
(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(bXI)or(bX2)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
. ,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(bX3)of months,or a 25 percent reduction in time Federal funds.
this section shall apply automatically to devoted to the project, by the approved (iii)The extension involves any change
all projects or programs except research. project director or principal investigator. in the approved objectives or scope of the
For awards that support research, para- (4) The need for additional Federal project.
graph (b)(1) of this section shall apply funding. (3)Carry forward unobligated balance's
automatically unless HUD indicates in (5) The transfer of amounts budgeted to subsequent funding periods.
the terms and conditions another alterna- for indirect costs to absorb increases in (4) For awards that support research,
live on the award or the recipient is direct costs, or vice versa, if approval 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 waived by requirements described in paragraph (e)
(e) Unless HUD regulations or the HUD,of costs that require prior approval of this section are automatically waived
terms and conditions of the award pro-. in accordance with OMB Circular 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 Circular A-I 22, included in paragraph (eX2) of this sec-
regarding program income earned after "Cost Principles for Non-Profit Organi- Lion applies.
the end of the project period. zations,"or_45 CFR part 74 Appendix E, (f)HUD may,at its option,restrict the
(f)If authorized by HUD regulations or "Principles for Determining Costs Appli- transfer of funds among direct cost Cate-
the terms and conditions of the award, cable to Research and Development un- gories or programs, functions and activi-
costs incident to the generation of pro- der Grants and Contracts with Hospi- ties for awards in which the Federal share
gram income may be deducted from gross tals,"or 48 CFR part 31,"Contract 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 allotted for of the total budget as last approved by
(g) Proceeds from the sale of property training allowances (direct payment to HUD. HUD shall not permit a transfer
shall be handled in accordance with the trainees) to other categories of expense. that would cause any Federal appropria-
requirements of the Property Standards (8)Unless described in the application Lion or part thereof to be used for pur-
(See §§84.30 through 84.37). and funded in the approved awards, the poses other than those consistent with the
(h) Unless HUD regulations or the subaward, transfer or contracting out of original intent of the appropriation. •
terms and condition of the award provide any work under an award.This provision (g) All other changes to nonconstruc-
otherwise.recipients shall have no obliga- does not apply to the purchase of sup- Lion budgets, except for the changes de-
tion to the Federal Government with plies,material,equipment or general 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 approval require- (h)For construction awards,recipients
material, patents, patent applications, ments for specific items may be imposed shall request prior written approval
trademarks,and inventions produced un- unless a deviation has been approved by promptly from HUD for budget revisions
der an award. However, Patent and OMB. whenever paragraphs (hXl), (hX2) or
Trademark Amendments (35 U.S.C. 18) (e) Except for requirements listed in (h)(3) of this section apply.
apply to inventions made under an exper- paragraphs (cX I) and (cX4) of this sec- (1)The revision results from changes in
imental, developmental, or research lion,HUD is authorized,at its option,to the scope or the objective of the project or
award. waive cost-related and administrative pri- program_ -
or written approvals required by Circular (2)The need arises for additional Fed-
§84.25 Revision of budget and program A-I 10 and OMB Circulars A-21 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 or 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 (I) Incur pre-award costs 90 calendar consistent with applicable OMB cost
approved during the award process. It days prior to award or more than 90 principles listed in §84.27.
may include either the Federal and non- calendar days with the prior approval of (i) No. other.-prior approval require-
Federal share,or only the Federal share, HUD.All pre-award costs are incurred at ments for specific items may be imposed
depending upon HUD requirements. It the recipient's risk(i.e.,HUD is under no unless a deviation has been approved by
shall be related to performance for pro- obligation to reimburse such costs if for OMB.
gram evaluation purposes whenever ap- any reason the recipient does not receive (j) 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 cover 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 extension of the approval from HUD before making any
budget and program plan revisions, in expiration date of the award of up to 12 fund or budget transfers between the two
accordance with this section. months unless one or more of the follow- types of work supported.
(c)For nonconstruction awards,recipi- ing conditions apply. For one-time exten- (k)For both construction and noncon-
ents shall request prior approvals from sions, the recipient must notify 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 least 10 days promptly whenever the amount of Feder-
())Change in the scope or the objective before the expiration date specified in the al authorized funds is expected to exceed
of the project or program (even if there is award. This one-time extension may not the needs of the recipient for the project
no associated budget revision requiring be exercised merely for the purpose of period by more than $5000 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 conditions of award greater. This notification shall not be
the application or award document. prohibit the extension. required if an application for additional
Published by West Group
09:1658 HOUSING AND DEVELOPMENT REPORTER
funding is submitted for a continuation signs of OMB Circular A-87, "Cost Prin- a Title Ti t e to real property shall vest in
award. ciples for State and Local Governments." the recipient subject to the condition that
(I) 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 Applicable to Re- awards) or programs that have purposes
sign. search and Development Under Grants consistent with those authorized for sup-
and Contracts with Hospitals." The al- port by HUD.
§84.26 Non-Federal audits. - lowability of costs incurred by commer- (c)When the real property is no 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 accor- 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 3I. 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
(1)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
lions." 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-
and part 800 series)and not a related or uniform standards governing manage- sonable 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. §84.31 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. (I) 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- Lions of the award. their custody to HUD. Upon completion
lowable 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- meets for recipients concerning the use (2)If HUD has no further need for the
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
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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 permissible if au- ment in good condition.
provided by the Federal Technology thorized by HUD. User charges 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 replacement equip- sales procedures shall be established
and non-profit organizations in accor- ment, the recipient may use the equip- which provide for competition to the
dance with E.O. 12821, "Improving ment to be replaced as trade-in or 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 equipment (g)When the recipient no longer needs
Goals.")Appropriate instructions shall be subject to the approval of HUD. the equipment, the equipment may be
issued to the recipient by HUD.
(b) Exempt property. When statutory (� The recipient's property manage- used
the following in accordance
authority exists. HUD has the option statutory merit standards for equipment acquired g standards. For equip-
vest title to property acquired with Feder-
with Federal funds and federally-owned ment with a current per unit fair-market
a equipment shall include all of the follow-
al funds in the recipient without further value of$5000 or more,the recipient may
in retain the equipment for other uses pro-
obligation to the ons B Government (I) Equipment records shall be main- vided that compensation is made to HUD
and under conditions HUD considers
appropriate. Such property is "exempt tained accurately and shall include 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 equipment. 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 other identify- 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 requirements. If no requirement exists
recipient with Federal funds shall vest in or the Federal Government. within HUD, the availability of the
the recipient,subject to conditions of this (v)Acquisition date (or date received, equipment shall be reported to the Gener-
section. if the equipment was furnished by the al Services Administration by HUD to
Federal Government) and cost.
(b) The recipient shall not use equip- determine whether a requirement for the
ment acquired with Federal funds to (vi) Information from which one can equipment exists in other Federal agen-
provide services to non-Federal outside calculate the percentage of Federal panic- Gies. HUD shall issue instructions to the
organizations for a fee that is less,than ipation in the cost of the equipment(not recipient no later than 120 calendar days
private companies charge for equivalent applicable to equipment furnished 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 condition of the (1) If so instructed or if disposition
Government retains an interest in the equipment and the date the information 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 data, includ- merit and reimburse HUD an amount
it was acquired as long as needed,wheth- ing date of disposal and sales price or the computed by applying to the sales pro-
er or not the project or program continues method used to determine current fair ceeds the percentage of Federal participa-
to be supported by Federal funds and market value where a recipient compen- Lion in the cost of the original project or
shall not encumber the equipment with- sates HUD for its share.
out approval of HUD. When the equip- (2) Equipment owned b the Federal program. However, the recipient shall be
merit is no longer needed for the original ( ) y permitted to deduct and retain from the
g Government shall be identified to indi- Federal share 5500 or ten percent of the
project or program,the recipient shall use cate Federal ownership.
the equipment in connection with its proceeds,whichever is less,for the recipi-
the equipment sponsored activities,with its (3)A physical inventory of equipment ent's selling and handling expenses.
the following order of priority: shall be taken and the results reconciled (2)If the recipient is instructed to ship
(I)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 differences 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 in the ac- ed by applying the percentage of the
(d)During the time that equipment is counting records shall be investigated to recipient's participation in the cost of the
used on the project or program for which determine the causes of the difference. original project or program to the current
it was acquired, the recipient shall make The recipient shall, in connection 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 continued 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 in effect to otherwise dispose of the equipment, the
originally acquired. First preference for insure adequate safeguards to prevent recipient shall be reimbursed by HUD for
such other use shall be given to other loss, damage, or theft of the equipment. such costs incurred in its disposition.
projects or programs sponsored by HUD Any loss, damage, or theft of equipment (4) HUD may reserve the right to
that financed the equipment;.second pref- shall be investigated and fully document- transfer the title to the Federal Govern-
erence shall be given to projects or pro- ed; if the equipment was owned by the merit or to a third party named by the
grams sponsored by other Federal award- Federal Government, the recipient shalt Federal Government when such third
ing agencies. If the equipment is owned promptly notify HUD. party is otherwise eligible under existing
Published by West Group
09:1660 HOUSING AND DEVELOPMENT REPORTER
.tea.
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
.(1)The equipment shall be appropriate- award. referred to such Federal, State or local
Iv 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 lion.
(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-owned §84.34(g). flict would arise when the employee,
equipment. officer, or agent, any member of his or
§8437 Property trust relationship. her immediate family,his or her partner,
§8435 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
$5000 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. §84.43 Competition.
(b)The recipient shall not use supplies
acquired with Federal funds to provide Sections 84.41 through 84.48 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 l the
companies charge for equivalent services, ..ishing procedures for the procurement of maximum extent practical,open and free
unless specifically authorized by Federal supplies and other expendable property, competition. The recipient shall be alert
unless specifically ifca as authorized rued by Govern-Federal equipment, real property and other ser- to organizational conflicts of interest as
ment retains an interest in the supplies. vices with Federal funds.These standards well as noncompetitive practices among
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.
§8436 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-
work that is subject to copyright and was curement standards or requirements shall velop or draft specifications, require-
developed, or for which ownership was be imposed by HUD upon recipients, ments,statements of work,invitations for
purchased, under in award. HUD re- unless specifically required by Federal bids and/or requests for proposals shall be
series a royalty-free, nonexclusive and statute or executive order or approved by excluded from competing for such pro-
irrevocable right to reproduce,publish,or OMB. curements. Awards shall be made 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 considered. The
lions, including government-wide regula- do not relieve the recipient of the contrac- other factors shall include the bidder's or
tions issued by the Department of Corn- 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)(l) and (cX2) of this section. tests of award,source evaluation or other taro 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 process other than the apparent low bidder under
persons. Solicitations shall clearly set whether firms competing for larger 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 firms, 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 consor- the amount of the small purchase thresh-
when it is in the recipient's interest to do tiums of small businesses, minority- old_
so. owned firms and women's business enter- -
prises when a contract is too large for one §84.45 Cost and price analysis.
§84.44 Procurement procedures. of these firms to handle individually.
(5) Use the services and assistance, 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
Small Business Administration and the Procurement files in connection with ev-
procurement procedures. These proce-
Department of Commerce's Minority ery procurement action. Price analysis
dures shall provide for, at a minimum, Business Development Agency in the may be accomplished in various ways,
that paragraphs(aXI),(aX2)and(aX3)of solicitation and utilization of small bust- including the comparison of price quota-
this section apply. . nesses, minority-owned firms and worn- tions submitted, market prices and simi-
(1)Recipients avoid purchasing unnec- en's business enterprises. tar indicia,together with discounts. Cost
essary items. (c) The type of procuring instruments analysis is the review and evaluation of
(2) Where appropriate, an analysis is used (e.g., fixed price contracts, cost each element of cost to determine reason-
made of lease and purchase alternatives reimbursable contracts, purchase orders, ableness, allocability and allowability.
to determine which would be the most and incentive contracts) shall be deter
economical and practical procurement §84.46 Procurement records. - •
for the Federal Government. mined by the recipient but shall be appro-
.
(3)Solicitations for goods and services priate for the particular procurement and
g for promoting the best interest of the Procurement records and files for put-
for for all of the following. program or project involved. The "cost- chases in excess of the small purchase
(i)A clear and accurate description of plus a-percentage-of cost"or"percentage threshold shall include the following at a
the technical requirements for the materi- minimum.
al. product or service to be procured. In of construction cost" methods of con- (a) Basis for contractor selection;
competitive procurements, such a de- trading shall not be used. -
scrip on shall not contain features which (d) Contracts shall be made only with when competitive bids or offers competition
not
responsible contractors who possess the
unduly restrict competition. obtained; and
(ii) Requirements which the bidder/
potential ability to perform successfully (c) Basis for award cost or price.
offeror must fulfill and all other factors to under the terms and conditions of the
be used in evaluating bids or proposals. proposed procurement. Consideration §84.47 Contract administration.
(iii) A description, whenever practica- shall be given to such matters as contrac- -
ble,of technical requirements in terms of for integrity;compliance with public poli= A system for contract administration
functions to be performed or perfor- cy,including,where applicable,Section 3 shall be maintained to ensure contractor
mance required, including the range of of the Housing and Urban Development conformance with the terms, conditions
acceptable characteristics or minimum
Act of 1968(12 U.S.C. 1701u);record of and specifications of the contract and to
acceptable standards. past performance; financial and technical ensure adequate and timely follow up of
(iv) The specific features of "brand resources or accessibility to other neces- all purchases. Recipients shall evaluate
name or equal"descriptions that bidders sary resources. in certain circumstances, contractor performance and document,as
are required to meet when such items are contracts with certain parties are restrict- appropriate, whether contractors have
ed by implementation of E.O.s 12549 and
included in the solicitation. met the terms, conditions and specifica-
(v)The acceptance,to the extent practi- 12689, "Debarment and Suspension," at Lions 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 procurement The recipient shall include,in addition
ble and economically feasible, for prod- documents,such as requests for proposals to provisions to define a sound and
ucts and services that conserve natural or invitations for bids, independent cost complete agreement, the following pro-vi-
resources and protect the environment estimates,etc.,when any of the following lions 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 proce- 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 HUD's purchase threshold shall contain contrac-
ness enterprises, whenever possible. Re- implementation of Circular A-I10. tual provisions or conditions that allow
cipients of Federal awards shall take all of (2) The procurement is expected to for administrative, contractual, or legal
the following steps to further this goal- exceed 5100,000 or the small purchase remedies in instances in which a contrac-
(1) Ensure that small businesses, mi- threshold fixed at 41 U.S.C. 403 (1/), for violates or breaches the contract
nority-owned firms, and women's busi- whichever is greater,and is to be awarded terms, and provide for such remedial
ness enterprises are used to the fullest without competition or only one bid or actions as may be appropriate.
extent practicable. offer is received in response to a solicita- (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 expected provisions for termination by the recipi-
frames for purchases and contracts to to exceed the small purchase threshold, 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 small for settlement.In addition,such contracts
and women's business enterprises_ purchase threshold is to be awarded to shall describe conditions under which the
Published by West Group
09:1662 HOUSING AND DEVELOPMENT REPORTER
(1-14-2:-.:-.:
contract may be terminated for default as Reports and Records laced, and any assistance needed to re-
-well as conditions where the contract may solve the situation.
be terminated because of circumstances §8450 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
trading(or subcontracting) for construc- 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. §8452 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-
$100,000, HUD may accept the bonding (a)Recipients are responsible for man- mat ion from recipients.
policy and requirements of the recipient, aging and monitoring each project, pro- (1) SF-269 or SF-269A, Financial Sta-
provided HUD has made a determination gram,subaward,function or activity sup tus Report.
that.the Federal Government's interest is ported by the award. Recipients shall
adequately protected. If such a determi- monitor subawards to ensure subreci- (i) HUD requires recipients to use the
eq Y 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. option
programs.
SF-269A ms. HUD has the opt of not
(1) A bid guarantee from each bidder (b)HUD shall prescribe-the frequency
requiring the SF-269 or S when
equivalent to five percent of the bid price. with which the performance reports shall the SF-270, Request for Advance or
The "bid guarantee" shall consist of a be submitted. Except as provided in q
g §84.51(f), performance reports shall not Reimbursement, or SF-272, Report of
firm commitment such as a bid bond, be required more frequently than quarter- Federal Cash Transactions,is determined
certified check,or other negotiable instru- ly or Iess frequently than annually.Annu- to provide adequate information to meet
mcnt accompanying a bid as assurance al reports shall be due 90 calendar days its needs, except that a final SF-269 or
that the bidder shall,upon acceptance of after the grant year, quarterly or semi- SF-269A shall be required at the comple-
his bid, execute such contractual docu- annual reports shall be due 30 days after tion of the project when the SF-270 is
ments as may be required within the time 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 part of dates of multiple year awards in lieu of report shall be on a cash or accrual basis.
the contractor for 100 percent of the these requirements. The final perfor- If HUD requires accrual information and
contract price. A "performance bond" is mance reports are due 90 calendar days the recipient's accounting records are not
one 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
tractor's obligations under such contract. (c)If inappropriate,a final technical or its accounting system, but shall develop
(3)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 bon_d"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 (I)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 ate and the output of programs or
certificates atestaof authority as acceptable projects can be readily quantified, such ofreport e agreementuired at the completion
sureties pursuant to 31 CFR part 223, quantitative data should be related to cost (iv)HUD requires recipients to submit
data for computation of unit costs. original and
"Surety Companies Doing Business with the SF-269 or SF-269A (an origi
(2)Reasons why established goals were
the United States." no more than two copies)no later than 30
not met, if appropriate.
(d) All negotiated contracts (except (3)Other pertinent information includ- days after the end of each specified
those for less than the small purchase ing, when appropriate, analysis and ex- reporting period for quarterly and semi-
threshold) awarded by recipients shall planation of cost overruns or high unit annual reports, and 90 calendar days for
include a provision to the effect that the 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 necessary,
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,supporting 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 shall be tion plans, and any similar accounting
(iii)When practical and deemed neces- retained for a period of three years from computations of the rate at which a
sary. HUD may require recipients to the date of submission of the final expen- 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, from the or composite fringe benefit rates),
retained in excess of three days_ Recipi- date of the submission of the quarterly or (I) If submitted for negotiation. If the
ents shall provide short narrative expla- annual financial report, as authorized by recipient submits to HUD or the subreci-
nations of actions taken to reduce the HUD.The only exceptions are the follow- 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 audit 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 retained until records starts on the date of such submis-
following the end of each quarter. HUD all litigation, claims or audit findings sion.
may require a monthly report from those involving the records have been resolved (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 property 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 after final plan, or other computation for negotia-
of the following reasons: disposition. lion purposes, then.the 3-year retention
(A) When monthly advances do not (3)When records are transferred to or period for the proposal, plan, or other
exceed $25,000 per recipient, provided maintained by HUD,the 3-year retention computation and its supporting records
that such advances are monitored requirement is not applicable to the recip- starts at the end of the fiscal year (or
through other forms contained in this Tent. other accounting period) covered by the
section: (4) Indirect cost rate proposals, cost proposal, plan, or other computation.
(B) !f, in HUD's opinion, the recipi- allocation plans, etc. as specified in
ent's accounting controls are adequate to §84.53(g). Termination and.Enforcement
minimize excessive Federal advances; or (c) Copies of original records may be
(C) When the electronic payment substituted for the original records if §84.60 Purpose of termination and
mechanisms provide adequate data. authorized by HUD. enforcement.
(b)When HUD needs additional infor- (d) HUD shall request transfer of cer-
mation or more frequent reports, the tain records to its custody from recipients Sections 84.61 and 84.62 set forth
following shall be observed. when it determines that the records poss- uniform suspension, termination and en-
(I) When additional information is ess long term retention value. However, forcement procedures.
needed to comply with legislative require- in order to avoid duplicate recordkeep-
ments, HUD shall issue instructions to ing, HUD may make arrangements for §84.61 Termination.
require recipients to submit such infor- an recipients to retain records that are
illation under the "Remarks" section of P any
continuously needed for joint use. (a)Awards may be terminated in whole
the reports. y
(2)When HUD determine that a recipi- (e) HUD, the inspector General, or in part only if paragraphs(ax1),(aX2)
ent's When system does not meet the Comptroller . General of the United or (a)(3) of this section apply.
ent's
standards in§accounting system additional pertinent the States, or any of their duly authorized (1) By HUD, if a recipient materially
information to further monitor awards representatives, have the right of timely fails to comply with the terms and condi-
and unrestricted access to any books, tions of an award.
may be obtained upon written notice to
the recipient until such time as the system documents, papers, or other records of (2) By HUD with the consent of the
is brought up to standard. HUD, in recipients that are pertinent to the recipient, in which case the two parties
obtaining this information, shall comply awards , in order to make audits, exami- shall agree upon the termination condi-
with report clearance requirements of 5 nations, excerpts, transcripts and copies tions,including the effective date and,in
CFR part 1320. of such documents. This right,also in- the case of partial termination, the por-
(3) HUD will shade out any line item eludes timely and reasonable access 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 to such HUD written notification setting forth
information from the recipients in ma- documents. The rights of access in this the reasons for such termination, the
chine readable format or computer print- paragraph (e) are not limited to the effective date, and, in the case of partial
outs or electronic outputs in lieu of required retention period,but shall last as termination, the portion to be terminal-
prescribed formats. long as records are retained. ed. However, if HUD determines in the
(5) HUD may provide computer or (i) Unless required by statute, HUD case of partial termination that the re-
electronic outputs to recipients when such shall not place restrictions on recipients duced or modified portion of the grant
expedites or contributes to the accuracy that limit public access to the records of will not accomplish the purposes for
of reporting. recipients that are pertinent to an award, which the grant was made,it may termi-
except when HUD can demonstrate that nate the grant in its entirety under either
§84.53 Retention and access such records shall be kept confidential paragraphs(ax l)or(a)(2)of this section.
requirements for records. and would have been exempted from (b)If costs are allowed under an award,
disclosure pursuant to the Freedom of the responsibilities of the recipient re-
Information Act (5 U.S.C. 552) if 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)(1) award, and provision shall be made for
impose any other record retention or and (g)(2) of this section apply to the continuing responsibilities of the recipi-
access requirements upon recipients. following types of documents, and their ent after termination, as appropriate.
Pubtshed by West Group
09:1664 HOUSING AND DEVELOPMENT REPORTER
§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• modified created under an award may be
modified or ended in whole or in part
the terms and conditions of an award, with the consent of HUD and the reci i-
whether stated in a Federal statute, regu- Sections 84.71 through 84.73 contain P
closeout procedures and other procedures ent, provided the responsibilities of the
lation,assurance,application,or notice of recipient referred to in§84.73(a),indud-
award, HUD may, in.addition to impos• for subsequent disallowances and adjust- ing those for property management as
ments.
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. (a) Recipients shall submit, within 90 §84.73 Collection of amounts due.
(1) Temporarily withhold cash pay- calendar days after the date of completion
meats 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 costa 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 (aXI), (aX2) 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.
Take other remedies that may be (c) against other requests for reimburse-
(5)le 11 available. O HUD shall make prompt payments menu.
legally 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 paid.and that is (b) Except as otherwise provided by
ing to which the :recipient is entitled not authorized to be retained by the law, HUD shall charge interest on an
under any statute the .regulation applicable recipient.for use in other projects. OMB overdue debt in accordance with 4 CFR
the action involved. Circular A-129 governs unreturned Chapter II, "Federal Claims Collection
to
(th Effects ct action
of suspension-and terming- amounts that become delinquent debts. Standards."
(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. . §84.80 Conditions for use of Lump
expressly authorizes them in the notice of (f)The recipient shall account for any Sum (fixed price or fixed amount)
suspension or termination or subsequent- real and personal property acquired with grants.
ly. Other recipient costs_during suspen- Federal funds or received from the Feder-
al or after termination which are neces- Government in accordance with
sary and not reasonably avoidable are §§84.31 through 84.37: (a) Heads of awarding activities
ry y (HAAS) shall determine and publish the
allowable if paragraphs.(cx1)and(cX2)of. (g) In the event a final audit has not funding arrangement for award programs
rf
been performed prior to the closeout of
this section apply. having a published program regulation or
an award, HUD shall retain the right fully Notice of Funding Availability.For other
(1) The costs result'from obligations recover an appropriate amount after fully g y'
which were properly incurred by the considering the recommendations on di- awards, discretion may be provided to
recipient before the effective date of sailowed costs resulting from the final Grant Officers to determine the funding
suspension or termination, are not in audit. arrangement on a transaction basis. In
such cases,Grant Officers shall document
anticipation of it, and in the case of a 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 suspended 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- (I)The right of HUD to disallow costs (I)The HUD funding amount is deli-
pension.The enforcement remedies idea- 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.
lion and termination, do not preclude a (2) The obligation of the recipient to (2)The HUD funding amount does not
recipient from being subject to debar- return any funds due as a result of later exceed $100,000 or the small purchase
recut and suspension n under subject to 12549 debar- refunds, corrections, or other transac- threshold fixed at 41 U.S.C. 403 (I I),
lions, 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.t3). 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 lion should be related to performance 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 borrowed by the depending upon HUD requirements. It
recipient, HUD, at its discretion, may shall be related to performance for pro-
§84.81 Definition. require adequate bonding and insurance gram evaluation purposes whenever ap-
if the bonding and insurance require- propriate.
ments of the recipient are not deemed (2) Recipients are required to report
(a)A lump sum award is an award for a adequate to protect the interest 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 recipient 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 coin- (6) Where bonds are required 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 holding (i)Change in the scope or the objective
fined milestone. Some of the ways in certificates of authority as acceptable of the project or program(even if there is
which the grant amount may be paid are, sureties, as prescribed in 31 CFR part no associated budget revision requiring
but are not limited to: 223, "Surety Companies Doing Business 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 govern- funding.
and the "milestone" or event triggering ing the use of banks and other institutions (iii)Unless described in the application
the payment also agreed upon in advance, as depositories of funds advanced under and funded in the approved awards, the
and set forth in the grant; awards is,HUD shall not require separate subaward, transfer or contracting out of
(2)On a unit price basis,for a defined depository accounts for funds provided to any work under an award.This provision
unit or units(such as a housing counsel- a recipient or establish any eligibility does not apply to the purchase of sup-
ing unit), at a defined price or prices, requirements for depositories for 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 for the (4) No other prior approval require-
(3) In one payment at grant comple- receipt, obligation and expenditure 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 women- (5) Except for requirements listed in
the lack of a direct relationship between owned and minority-owned business en- paragraphs (dX3Xi) and (dX3Xii) of this
the costs incurred by the recipient and the terprises, recipients shall be encouraged section,HUD is authorized,at its option,
amount paid by HUD in the lump sum to use women-owned and minority- to waive cost-related and administrative
arrangement. owned banks (a bank which is owned at prior written approvals required by Cir-
least 50 percent by women or minority cular A-110 and OMB Circulars A-21 and
§84.82 Provisions applicable only to group members)_ A-I22. 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 shall be the following.
In addition to the provisions of this authorized for the recipients in requesting (i) Initiate a one-time extension of the
subpart E, subparts A and B of this part Payments. HUD shall not require more expiration date of the award of up to 12
apply to lump sum grants. than an original and two copies of 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 Advance or sions, the recipient must notify HUD in
section prescribe standards for financial Reimbursement. HUD has adopted the writing with the supporting reasons and
management systems, methods for mak- SF-270 as a standard form for all noncon- revised expiration date at least 10 days .
ing payments,budget revision approvals, struction programs when electronic funds before the expiration date specified in the
and making audits. transfer or predetermined advance meth-- award. This action may be taken unless:
(b)Standards for financial management ods are not used.The SF-270 shall also be (A)The terms and conditions of award
systems. used for lump sum payment requests. prohibit the extension.
(I) Records that identify adequately HUD, however, has the option of using (B) The extension requires additional
the source and application of funds for - this form for construction programs in Federal funds. -
federally-sponsored activities are re- lieu of the SF-271, "Outlay Report and (C)The extension involves any change
quired.These records shall contain infor- Request for Reimbursement for Con- in the approved objectives or scope of the
mation pertaining to Federal awards, au- struction Programs." project.
thorizations,obligations,unobligated bat- (ii)SF-271,Outlay Report and Request (6)For construction awards, recipients
antes, assets, outlays, income and inter- for Reimbursement for Construction Pro- shall request prior written approval
est. grams. HUD has adopted the SF-27I as promptly from HUD for budget revisions
(2) Effective control over and account- the standard form to be used for request- whenever paragraphs(d)(6Xi)or(d)(6Xii)
ability for all funds, property and other ing reimbursement for construction pro- of this section apply.
assets are required. Recipients shall ade- grams. However, HUD may substitute (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 to meet program.
purposes. HUD's needs. (ii)The need arises for additional Fed-
(3) Comparison of outlays with budget (d) Revision of budget and program eral funds to complete the project.
amounts for each award is required. plans. (I)The budget plan is the financial (7) No other prior approval require-
Whenever appropriate,financial informa- expression of the project or program as ments for specific items may be imposed
Published by West Group
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-I 33, "Au- of HUD. (3) During the time that equipment is
dits of States, Local Governments, and o
(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-133, "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
lions." 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]. men[.Recipients shall submit annually an Government shall be permissible if au- (
(2)State and local governments shall be inventory listing of federally-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-I 33,"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 tamed 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 requirements of the Federal award- ry au-
(A) A description of the equipment.
ing agencies. thorny to dispose of the property by (B) Manufacturer's serial number,
(4) Commercial organizations shall be alternative methods (e.g., the authority model number, Federal stock number,
su(4) Commercial
the audit organizations shall
hHUD provided by the Federal Technology national stock number, or other identift-
su the prime recipient requirements
incorporated Transfer Act (15 U.S.C. 3710 (I)) to cation number.
or into the award document. donate research equipment to educational (C)Source of the equipment,including
and non-profit organizations in actor- 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 equipment was furnished by the
graphs(b)through (g) of this section set issued to the recipient by HUD. Federal Government) and cost.
forth uniform standards governing man- (2) Exempt property. 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
niched 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. (I) 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
IDR RF-628
2-2-98
rent utilization. and continued need for (g) Property trust relationship. Real vol.'s,or anything of monetary value from
the equipment. property, equipment, intangible property contractors,or parties to subagreements.
(iv)A control system shall be in effect and debt instruments that are acquired or However, recipients may set standards
to insure adequate safeguards to prevent improved with Federal funds shall be for situations in which the financial inter-
loss. damage. or theft of the equipment. held in trust by the recipient as trustee for est is not substantial or the gift is an
Any loss, damage. or theft of equipment the beneficiaries of the project or pro- unsolicited item of nominal value. The
shall be investigated and fully document- gram under which the property was ac- standards of conduct shall provide for
ed-.'if the equipment was owned by the quired or improved. HUD may require 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 indicate that employees, or agents of the recipient.
(v) Adequate maintenance procedures personal or real property has been ac- (d) Competition. All procurement
shall be implemented to keep the equip- quired or improved with Federal funds transactions shall be conducted in a man-
ment in good condition. and that use and disposition conditions 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 practices among contractors that
party is otherwise eligible under existing (a) Purpose of procurement standards. may restrict or eliminate competition or
statutes.Such transfer shall be subject to Paragraphs (b)through (i)of this section otherwise restrain trade. In order to en-
die following standards. set forth standards for use by recipients in sure objective contractor performance
(i)The equipment shall be appropriate- establishing procedures for the procure- and eliminate unfair competitive advan-
ly identified in the award or otherwise ment of supplies and other expendable tage, contractors that develop or draft
made known to the recipient in writing. property, equipment, real property and specifications, requirements, statements
(ii) HUD shall issue disposition in other services with Federal funds. These of work, invitations for bids and/or re-
structions within 120 calendar days after standards are furnished to ensure that quests for proposals shall be excluded
receipt of a final inventory. The final such materials and services are obtained from competing for such procurements.
inventory shall list all equipment ac- in an effective manner and in compliance Awards shall be made to the bidder or
quired with grant funds and federally- with the provisions of applicable Federal offeror whose bid or offer is responsive to
owned equipment. If HUD fails to issue statutes and executive orders. No addi- the solicitation and is most advantageous
disposition instructions within the 120 tional procurement standards or require- to the recipient, price, quality and other
calendar day period. the recipient shall ments shall be imposed by HUD upon factors considered_The other factors shall
apply the standards of this section, as recipients, unless specifically required by include the bidder's or offeror's compli-
appropriate. Federal statute or executive order or ance with Section 3 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. The Stan- U.S.C. 1701u), hereafter referred to as
to the provisions for federally-owned dards contained in this section do not "Section 3." Section 3 provides that, to
equipment. relieve the recipient of the contractual the greatest extent feasible,and consistent
(0 Intangible property. (I) The recipi- responsibilities arising under its con- with existing Federal, State, and local
ent may copyright any work that is sub- tract(s). The recipient is the. responsible laws,and regulations,economic opportu-
ject to copyright and was developed, or authority, without recourse to HUD, re- nities generated by certain HUD financial
for which ownership was purchased, un- garding the settlement and satisfaction of
der an award. HUD reserves a royalty- all contractual and administrative issues assistance shall be directed to low- and
free, nonexclusive and irrevocable right arising out of procurements entered into yea low-income persons. Solicitations
to reproduce, publish, or otherwise use in support of an award or other agree- shall clearly set forth ail requirements
the work for Federal purposes, and to ment.This includes disputes,claims,pro-
that the bidder or offeror shall vale l in
authorize others to do so. tests of award,source evaluation or other order for the bid or offer to be evaluated
(2)Recipients are subject to applicable matters of a contractual nature. Matters 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
lions,including government-wide regula- referred to such Federal, State or local en(s interest to do so.
tions issued by the Department of Corn- authority as may have proper jurisdic- (e) Procurement procedures (I)All re-
merce at 37 CFR part 401, "Rights to Lion. cipients shall establish written procure-
Inventions Made by Nonprofit Organiza- (c)Codes ofconduct.The recipient shall ment procedures. These procedures shall
tions and Small Business Firms Under maintain written standards of conduct provide for, at a minimum, that para-
Government Grants. Contracts and Co- governing the performance of its employ- graphs(eXIXi), (e)(I)(ii)and(eXIXiii)of
operative Agreements." ees engaged in the award and administra- this section apply.
(3)Unless waived by HUD,the Federal tion of contracts.No employee,officer,or (1) Recipients avoid purchasing unnec-
Government has the right to paragraphs agent shall participate in the selection, essary items.
(f)(3X1) and (f)(3)(ii) of this section_ award, or administration of a contract (ii) Where appropriate, an analysis is
(i)Obtain, reproduce,publish or other- supported by Federal funds if a real or made of lease and purchase alternatives
wise use the data first produced under an apparent conflict of interest would 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 family, (iii)Solicitations for goods and services
for Federal purposes. his or her partner, or an organization provide for all of the following_
(4) Title to intangible property and which employs or is about to employ any (A)A clear and accurate description of
debt instruments acquired under an of the parties indicated herein, has a the technical requirements for the materi-
award or subaward vests upon acquisition financial or other interest in the firm at, product or service to be procured. In
in the recipient. The recipient shall use selected for an award. The officers, 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 gratuities, fa- unduly restrict competition.
Published by West Group
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-
b a used in evaluating bids or proposals_ shall be given to such matters as contras- for performance and document,as appro.
(C) A description, whenever practica- tor integrity;compliance with public poll- 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 economically 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 tor 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 effected and 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 subcontracting) for construe-
frames for purchases and contracts to old, specifies a "brand name" product. tion or facility improvements 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$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
hums 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 -Agency in the discounts.Cost analysis is the review and certified check,or other negotiable instill-
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 merits 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- (1) 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 tamed 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 Lions of the contract and to ensure ade- persons supplying labor and material in
Published by West Group
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 objectives estab- ing, HUD may make arrangements for
(iv) Where bonds are required in the lished for the period, the findings of the recipients to retain any records that are
situations described herein, the bonds investigator,or both.Whenever appropri- continuously needed for joint,use.
shall be obtained from companies holding ate and the output of programs or (5) HUD, the Inspector General,
certificates of authority as acceptable projects can be readily quantified, such Comptroller General of the United
sureties pursuant to 31 CFR part 223, quantitative data should be related 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 goals 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 required to recipients that are pertinent to the
threshold) awarded by recipients shall submit more than the original and 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 immediately notify of such documents. This right also in-
of the United States,or any of their duly HUD of developments that have a 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 be given interview and discussion related to such
records of the contractor which are direct- in the case of problems,delays,or adverse documents. The rights of access in this
ly pertinent to a specific program for the conditions which materially impair the paragraph (cX5) 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 shall include a long as records are retained.
(5)All contracts, including small pur- statement of the action taken or contemp (6) Unless required by statute, HUD
chases, awarded by recipients and their lated, and any assistance needed 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 visits, as recipients that are pertinent to an award,
applicable. needed. except when HUD can denionstrate that
(8) HUD shall comply with clearance such records shall be kept confidential
requirements of 5 CFR part 1320 when and would have been exempted from
§84.85 Reports and records. requesting performance data from recipi- disclosure pursuant to the Freedom of
ents. Information Act (5 U.S.C. 552) if the
(a)Purpose of reports and records.Pam- (c) Retention and access requirements 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 forth 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 recipients. (a) Termination. (1) Awards may be
dard reporting forms.They also set forth Federal awarding-agencies shall not im- terminated in whole or in part only if
record retention requirements. pose any other record retention or access paragraphs(aXIXi),(aXIXii),or(aXIXiii)
(b) Monitoring and reporting program requirements upon recipients. of this section apply.
performance. (2)Financial records,supporting docu- (i) By HUD, if a recipient materially
(I)Recipients are responsible for man- ments, statistical records, and all other fails to comply with the terms and condi-
aging and monitoring each project, pro- records pertinent to an award shall be tions of an award.
gram,subaward,function or activity sup- retained for a period of three years from (ii) By HUD with the consent of the
ported by the award. Recipients shall the date of submission of the final expen- recipient, in which case the two parties
monitor subawards to ensure subreci- diture report or, for awards that are shall agree upon the termination condi-
pients have met the audit requirements as renewed quarterly or annually, from the tions,including the effective date and,in
delineated in §84.82(e). date of the submission of the quarterly or the case of partial termination, the por-
(2)The Federal awarding agency shall annual financial report, as authorized by lion to be terminated.
prescribe-the frequency with which the HUD.The only exceptions are the follow- (iii) By the recipient upon sending to
performance reports shall be submitted. ing. HUD written notification setting forth
Except as provided in paragraph(bX6)of (i) If any litigation, claim, or audit is the reasons for such termination, the
this section, performance reports shall started before the expiration of the 3-year effective date, and, in the case of partial
not be required more frequently than period,the records shall be retained until termination, the portion to beterminat-
quarterly or less frequently than annually. all litigation, claims or audit findings ed. However, if HUD determines in the
Annual reports shall be due 90 calendar involving the records have been resolved 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 property and will not accomplish the purposes for
after the reporting period. The Federal equipment acquired with Federal funds which the grant was made, it may termi-
awarding agency may require annual re- shall be retained for 3 years after final nate the grant in its entirety under either
ports before the anniversary dates of disposition. paragraphs (a)(lXi) or (axl)(ii) of this
multiple year awards in lieu of these (iii)When records are transferred to or section.
requirements. The final performance re- maintained by the Federal awarding (2)If costs are allowed under an award,
ports are due 90 calendar days after the agency, the 3-year retention requirement the responsibilities of the recipient re-
expiration or termination of the award. is not applicable to the recipient. ferred to in §84.87(a)(1), including those
(3)If inappropriate,a final technical or (3) Copies of original records may 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 shalt request transfer of cer- for continuing responsibilities of the re-
ports shall generally contain, for each tain records to its custody from recipients cipient after termination, as appropriate.
award, brief information on each of the - when it determines that the records poss- (3)If costs are allowed, the cost princi-
following: ess long term retention value. However, pies in §84.27 apply, even though the
Published by West Group
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 ofcomple- -- U.S.0 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 --U) 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 52000 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
of an award, whether stated in a Federal the recipient. Standards Provisions Applicable to_Con- -
of an award,
rrd, whether
assurance, Federal (2)The recipient shall account for any tracts Governing Federally Financed and
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
addition to imposing any of the special al Government in accordance with laborers and mechanics at a rate not less
conditions outlined in §84.14. take one §84.83(b) through (g). than the minimum wages 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 fermi- (iii Records retention as required in be conditioned upon the current award. ) q pun the acceptance of the
(iii) Withhold further awards for the §84.53. wage determination. The recipient shall
( i) (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.0 327 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 52000 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 the 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 standard workweek is permissi-
sion or after termination which are neces- E.O. 11375. "Amending Executive Order ble provided that the worker is compensated
sary and not reasonably avoidable are 11246 Relating to Equal Employment Op- at a rate of not less than 1 1/2 times the
allowable if paragraphs void ) and portunity,"and as supplemented by regula- basic rate of pay for all hours worked in
Lions at 41 CFR part 60,"Office of Federal excess of 40 hours in the workweek.Section
(bX3Xii) 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 shall be required to work in sur-
recipient before the effective date of 2. Copeland -Anti-Kickback" Act (18 roundings or under working conditions
suspension or termination, are not in U.S.C. 874 and 40 U.S.C. 276c)— All, which are unsanitary,hazardous or danger-
anticipation of it, and in the case of a contracts and subgrants in excess of 52000 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 ems 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. Rights to Inventions Made Under a
including suspen-section, in -(4) Relationship to debarment and sus- ulations (29 CFR part 3. "Contractors and Contract or Agreement—Contracts or agree-
pension. The enforcement remedies lean- Subcontractors on Public Building or Public ments for the performance of experimental,
pro-
titled in this s Work Financed in Whole or in Part by developmental, or research work shall pro-
title and this ction, in do not preclude Loans or Grants from the United States"). vide for the rights of the Federal Govern-
sion 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
rent 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 Small 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 influenc- wise excluded by agencies, and contrac-
HUD. ing or attempting to influence an officer or tors declared ineligible under statutory or
6. Clean.-tirAct(42 US.C. 7401 et seq.) employee of any agency, a member of regulatory authority other than E.O.
and the Federal Water Pollution Control Congress, officer or employee of Congress, 12549. Contractors with awards that ex-
Act(33 U.S.C. 1251 cat seq.). as amended— or an employee of a member of Congress in teed the small purchase threshold shall
Contracts and subgrants of amounts in connection with obtaining any Federal con- provide the required certification regard-
excess of 5100.000 shall contain a provision tract, grant or any other award covered by ing its exclusion status and that of its
that requires the recipient to agree to corn- 31 U.S.C. 1352.Each tier shall also disclose principal employees.
ply with all applicable standards. orders or any lobbying with non-Federal funds that 9. Drug-Free Workplace Require-
regulations issued pursuant to the Clean Air takes place in connection with obtaining any meats—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 gs
Water Pollution Control Act as amended warded from tier to tier up to the recipient. (including individuals) of federal grantees te
(33 U.S.C. 1251 et seq.).Violations shall be 8. Debarment and Suspension (E.O.s
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 General ed a grant, to certify that they will pro-
(EPA). Services Administration's List of Parties vide drug-free workplaces.Each potential
7. Brrd .Anti-Lobbying Amendment (31 Excluded. from Federal Procurement or recipient must certify that it will comply
U.S.C. 1352)— Contractors who apply or Nonprocurement Programs in accordance 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 forth 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 the names Dated: September 1, 1994. Henry G.
has not used Federal appropriated funds to of parties debarred, suspended, or other- Cisneros, Secretary.
Published by West Group
Exhibit D:
OMB Circular A-122
Cost Principles for Non-Profit Organizations
)MB CircutarA-122 LapJ/www.wRrtchousGgov:UMWcircuhus/aFatlLF�unt
OFFICE OF MANAGEMENT AND BUDGET
Cost Principles for Non-Profit Organizations
- AGENCY: Office of Management and Budget
ACTION:Final revision of OMB Circular A-122,"Cost Principles for 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 into two categories(facilities and
administration)for certain non-profit organizations;modifying the multiple allocation basis;and,clarifying
the treatment of certain cost items.
DATES:The revision is effective on June 1, 1998_
• FOR F>U'RTRER INFORMATION CONTACT:Federal agencies should contact Gilbert Tran,Office of
Federal Financial Management,Office of Management and Budget, (202)395-3993.Non-Federal
organizations should contact the organization's Federal cognizant agency.
SUPPLEMENTARY INFORMATION:
A.Background
On October 6, 1995, the Office of Management and Budget(OMB)issued a final revision to OMB -
Circular A-122, "Cost Principles for Non-Profit Organizations,"in the Federal Register(60 FR 52516)
regarding interest allowability.The revision was made in a continuing effort to increase consistency across
OMB's cost principles circulars A-122,A-21,"Cost Principles for Educational 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 definition of equipment,to clarify the
treatment bf certain types of costs,to modify the multiple allocation base method for computing indirect
cost rate(s),and to place an upper-limit on payments of administrative expenses for certain non-profit
organizations.
With this final revision,Circular A-122 consists of the Circular as issued in 1980(45 FR 46022;July 8,
1980),as amended in 1984(49 FR 18260;April 27, 1984),in 1987(52 FR 19788;May 27, 1987),in 1995
(60 FR 52516;October 6, 1995),in 1997(62 FR 45934;August 29, 1997), and in this notice.A
recompilation of the entire Circular A-I22,with all its amendments, accompanies the noticeand is
available in electronic form on the OMB Homc Page at http://www.whitebonse.gov/OM13.
B.Current Revisions
Circular A-122 is revised in this notice to:
1.Amend the definition of equipment by increasing the capitalization 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 than$10 million in direct Federal funding)
to report indirect cost rates by two major component categories: facilities and administratior_(see
paragraph D,Attachment A).
3.Modify the multiple allocation base method(MA13)to be consistent with OMB Circular A-21 (sec
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OMB Circular A-122 nttp:tnvww.wrutcnouscgovrvuucunv atuIaitt.naw
paragraph D3).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_CIarify 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 fines_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 allowances 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 13.13 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
2o161
05109/2000 11:15 AM
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UM13 CircularA-1Z2 nttpxi www-wn8cnonsegur.vmnu cut umrsrn,cunieu►uiu
proposed revision.
Response: OMB agrees.The Circular is revised to require prior Federal 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 Circulars A-21, "Cost Principles for
Educational Institutions,"and A-87, "Cost Principles for State,Local and 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 cost regulations was a more significant
issue than most of the commenters'concerns. Comments related to specific cost items are presented below,
followed by OMB's responses.
Advertising and Public Relations Costs
Comment:Current paragraph 37,Public information service costs, should be combined with the
"Advertising"paragraph to be consistent with other OMB cost principles in Circulars A-21 and A-87.
Response: The commenter is correct.The treatment of public information service costs is now addressed in
revised paragraph 1,Advertising and public relations costs. Current paragraph 37 is deleted.
Comment: Clarify the types of activities that are allowable as public relations costs.Public relations costs
to carry out certain functions, such as legitimate program outreach,that are required under sponsored
programs and contracts should be allowable. -
Response:The Circular is revised to clarify that certain public relations costs for the purpose of
communicating specific activities related to the sponsored programs to 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 relations 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 required by the sponsored programs or are
related to the promotion of sponsored programs, any reasonable advertising media,including magazines,
newspapers,radio,television,direct mail, exhibits,and the like,can be 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 1.b as"those activities dedicated to maintain
the image of the organization or promoting understanding and favorable relations with the community or
public at large or any segment of the public." Costs related to community relations are allowable when the
costs are required or necessary to the performance of the sponsored programs.
Organization-furnished automobiles for personal use
Comment:For security and economic reasons,non-profit organizations often furnish automobiles and
housing for its personnel working on Federal projects(e.g.,overseas projects sponsored by the US.
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)MB Circular A-122 .--..._-
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 are allowable or unallowable(e.g.,
cars,vans,trucks and buses).
Response:The types of automobiles are irrelevant for the purpose of determining the al.lowithility of
automobile costs.Rather,the determinant factors should be whether the automobile costs are reasonable
and necessary for the performance of the 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 new 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 are
discussed in new paragraph 10.Professional service costs incurred for organization and reorganize.Lion 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 case 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 against claims made
by the Federal Government or prosecuting claims against the Government. As such once a:final
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 readied 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 on reimbursement 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 orsi 05/09/200011:15 AM
OMB Circular A-122 nap:iiwww.wmtenouse.govrvmnrcttcurarualcuniic.nu u
expenses to defend against lawsuits brought by a foreign government for violation of its law when such
costs were necessary or were direct results of the performance of Federal sponsored programs.The same
authorizations apply for legal costs for defense against lawsuits brought by state or local governments.
Comment:Legal fees to defend against lawsuits filed by former employees for termination or by
subrecipients should be allowable. -
Response:Legal fees incurred in defense of lawsuits not brought by a Federal,State,local or foreign
government,except when the suits are brought by former employees 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 organizations 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),the Circular is revised to allow these
costs when they are necessary to perform the Federal projects and when they are approved by the Federal
awarding agency. These costs are allowable only as direct costs to the Federal projects,and not as fringe
benefit or indirect costs.
Insurance
Comment:General and casualty liability insurance costs for organization'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 against Federally sponsored awards for
product(or services)liability insurance costs.
Comment:Medical liability insurance costs for participants in Federal training programs should be
allowable.
•
Response:.Medical liability insurance costs associated with participants in Federal training programs are
allowable to Federal programs as direct costs.
Comment:Malpractice insurance costs for physicians should be direct charged to Federal programs while
malpractice insurance costs for nurses or laboratory assistants,which are immaterial in most cases,should
be charged as indirect costs.
Response:Subparagraph B.2 of Attachment A provides that when a direct cost is of minor amounts,it may
be treated as an indirect cost for reasons of practicality and efficiency,provided that the accounting
treatment for such cost is consistently applied to all final cost objectives.Therefore,when malpractice
insurance costs for nurses or lab technicians are immaterial in relation 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 organizations should be allowable.
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� (, W14iD/l'1J CUM Yn1 Ltln JL.L_rlW»
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 lobbying
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 31.20538(cxl). _ •
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 generally 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 sponsored programs 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 shoald 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 benefits 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).
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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.As a result,the Federal awarding
agency may allow these costs when they are necessary for the performance of the Federal sponsored
programs.
Trustees'Travel
Comment: Several commenters opposed the proposal to disallow trustees'travel costs citing the difficulty
of retaining or obtaining members to serve voluntarily on the Board of 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 organization's Board is often not as
prestigious and desirable as serving on a University's Board(where trustees'travel costs are-unallowable
under Circular A-21),non-reimbursement of the travel costs would inhibit the recruitment of Board
members.
Response:OMB concurs that disallowing the reimbursement of trustees'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 recognizes that trustees'travel costs arc
reasonable and necessary business costs.As a result,trustees'travel costs remain allowable.
Comment:Trustees'travel costs should be allowable if they are reasonable.Some suggested tests for
reasonableness of trustees'travel costs are:limit number of allowed trips per year,restriction of trips to
organization's principal place of business or reasonable surroundings, distinction between scheduled Board
meetings and emergency Board meetings,and disallowance of first-class airfare travels.
Response:All costs charged to Federal projects must satisfy a reasonableness test.Although some of the
suggested reasonableness tests appear to be good,OMB does not believe it is necessary at this time to
impose specific restrictions on trustees'travel expenses.The reasonableness of a particular travel expense
remains at the judgement of Federal negotiators.
Comment:At Head Start organizations,some Trustee members are first sent for training in the operations
of a Head Start program.These travel costs related to training should be allowable.
Response: Travel costs related to training and education are allowable, subject to limitations,and are
addressed in paragraph 53 of the Circular,Training and education costs.
Comment:At Head Start organizations,there often are several advisory boards in addition to the Board of
Trustees(or Directors).These advisory boards are involved in day-to-day operations of the:organizations
and often incur travel costs.Are these costs subject to the same restrictions as trustees'travel?
Response:Travel costs for members of advisory groups are allowable,subject to the limitations in
paragraph 55,Travel costs.
Multiple Allocation Basis(MAB)
Comment: The multiple allocation method for calculating indirect costs rates is much more complicated
and burdensome than the simplified method and it will cost non-profit organizations much more to prepare
the indirect cost proposal. Several commenters recommended the flexibility of using one of the three
different allocatioh methods as they are currently described in the Circular. The multiple allocation basis
(MAB)should remain an optional allocation methodology rather than a required methodology for certain
organizations.
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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 revised to 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 administration,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 Cost 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 from 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 5300,000 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 commenters 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.
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Other
Comment: Attachment C ofthe Circular should be updated since a few listed organizations no longer exist.
Response:OMB agrees.Attachment C is updated to delete those organizations 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
I.Add subparagraph 3 to paragraph C("Indirect Costs").
3.Indirect costs shall be classified within two broad categories: "Facilities"and"Administration."
"Facilities"is defined as depreciation 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).Sec indirect cost rate 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 Federal funding of direct costs in a fiscal
year,a breakout of the indirect cost component into two broad categories,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 Administration)is of the distribution base
identified with that category.
•
3.Replace subparagraph D3 with the following:
3.Multiple allocation base method.
a.General.Where an organization's indirect costs benefit its major functions in varying degrees,indirect
costs shall be accumulated into separate cost groupings,as described in subparagraph b.Each grouping
shall then be allocated individually to benefitting functions by means of a base which best measures the
relative benefits.The default allocation bases by cost pool are described 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 benefit 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 described in subparagraph C3. The indirect
cost pools are defined as follows:
(1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the
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organization's buildings, capital improvements to land and buildings, and equipment which arc computed
in accordance with paragraph II of Attachment B ("Depreciation and use allowance?).
(2)Interest.Interest on debt associated with certain buildings,equipment and capital improvements are
computed in accordance with 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 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:
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(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
improvements and equipment used in such buildings, shall be allocated to the individual functions
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 improvements and equipment related space(e.g.,
individual rooms,and laboratories)used jointly by more than one function(as determined by the users of
the space)shall be treated as follows.The cost of each jointly used unit 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 wages of those
individual functions bcnefitting from the use of that space; or
(ii)organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the
organization.
(d)Depreciation or use allowances on certain capital improvements to 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 m ajor functions in proportion to the salaries and wages of all employees
applicable to the functions.
(2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on
the buildings,equipment and capital equipments to which the interest relates.
(3)Operation and maintenance expenses_ Operation and maintenance expenses shall be allocated in the
same manner as the depreciation and use allowances.
(4)General administration and general expenses. General administration and general expenses shall be
allocated to benefitting functions based on modified total direct costs(MTDC), as described in
subparagraph D.3.f.The expenses included in this category could be grouped first according to major
functions of the organization to which they render services or provide benefits.The aggregate expenses of
each group shall then be allocated to benefitting functions based on MTDC.
d.Order of distribution.
(1)Indirect cost categories consisting of depreciation and use allowances,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 appropriate by the organization.When
cross allocation of costs is made as provided in subparagraph(2),this order of allocation does not apply. .••
(2)Normally, an indirect cost category will be considered closed once it has been allocated to other cost
objectives, and costs shall not be subsequently allocated to it.However,a cross allocation of costs between
two or more indirect costs categories could be used if such allocation will result in a more equitable
allocation of costs.If a cross allocation is used, an appropriate modification to the composition of the
indirect cost categories is required.
•
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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 included in that function by use of a single indirect cost rate.
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,
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 pardon in excess of$25,000
shall be excluded from MTDC.Participant support costs shall generally be excluded from MwC.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.
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
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
•
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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 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
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 and corollary administrative costs_
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");
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(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:
(I)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 13("Direct Costs")and C("Indirect Costs")of Attachment A are observed.
f.Unallowable advertising and public relations costs include the following:
(I)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 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:
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g.Organization-furnished automobiles.That portion of the cost of organization-furnished automobiles
that relates to personal use by employees(including transportation to and from work)is 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.
6.Renumber current paragraphs 9 through 15 as paragraphs 11 through 17,respectively.
7.Add new paragraph 10:
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.
(2)Costs include,but are not limited to,administrative and clerical expenses;the cost of legal services,
whether performed by in-house or private counsel; and the costs of the services of accountants,consultants,
or others retained by the organization to assist it; costs of employees, 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 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.0 sections 3729-3731,or the
Anti-Kickback Act,41 U.S.C_,sections 51 and 54.
(4)Penalty does not include restitution,reimbursement,or compensatory damages.
(5)Proceeding includes an investigation.
b.(1)Except as otherwise described herein, costs incurred in connection with any criminal,civil or •
administrative proceeding(including filing of a false certification)commenced by the Federal Government,
or a State,local or foreign government,are not allowable if the proceeding:(1)relates to a violation of,or
failure to comply with,a Federal,State,local or foreign statute or regulation by the organization(including
its agents and employees), and(2)results in any of the following dispositions:
(a)In a criminal proceeding,a conviction.
(b)In a civil or administrative proceeding involving an allegation of fraud or similar misconduct,a
determination of organizational liability.
(c)In the case of any civil or administrative proceeding,the imposition of a monetary penalty.
(d)A final decision by an appropriate Federal official to debar or suspend the organization,to rescind or
void an award,or to terminate an award for default by reason of a violation or failure to comply with a law
or regulation.
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(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.(l).
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 the costs were incurred as a result of(1)a specific teen or condition of a
federally-sponsored award,or(2)specific written direction of an authorized official 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 a 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.
£ 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
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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.
8.In paragraph 15("Equipment and other capital expenditure?),as renumbered in item 6 above,replace
subparagraphs 15.a.(1)and 15.b.(2)to read:
15.3.(1)"Equipment"means an article of nonexpendable,tangible personal property having a useful life of
more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization Ievel
established by the organization for the financial statement purposes,or(b)$5000.The unamortized portion
of any equipment written off as a result of a change in capitalization levels may be recovered by continuing
to claim the otherwise allowable use allowances 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.
15.b.(2)Capital expenditures for special purpose equipment are allowable as direct costs,provided that.
items with a unit cost of$5000 or more have the prior approval of awarding agency.
9.Renumber current paragraphs 16 through 36 as paragraphs 20 through 40,respectively.
10.Add new paragraph 18:
18.Goods or services for personal use.Costs of goods or services for personal use of the organization's
employees are unallowable regardless of whether the cost is reported 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, 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 awards when necessary for the performance of the sponsored award
and approved by awarding agencies.
b.The term"officers"includes current and past officers and employees.
12.Add to paragraph 22.a._(2)( Insurance and indemnification"),as renumbered in item 9,subparagraphs
(1)and(g):
(1)Insurance against defects_ Costs of insurance with respect to any costs incurred to correct defects in the
organization's materials or workmanship are unallowable.
(g)Medical liability(malpractice)insurance.Medical liability insurance is an allowable cost of Federal
research programs only to the extent that the Federal research programs involve human subjects or training
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.
13.Revise paragraph 30, as renumbered in item 9,to read:
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)MB Circular A-122 _
3Q:Memberships,subscriptions and professional activity costs.
a. Costs 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 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 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.
1 8.Renumber current paragraphs 45 through 51 as paragraphs 49 through 55,respectively.
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19.Add new paragraph 48:
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.
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 known as "a golden parachute"payment)
which are in an amount in excess of the normal severance pay paid by the organization to an employee
upon termination of employment and are paid to the employee contingent upon a change in management
control over,or ownership ofi the organization's assets are unallowable.
d. Severance payments to foreign nationals employed by the organization 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 performance of Federal programs and approved by
awarding agencies_
e. Severance payments to foreign nationals employed by the organization outside the United States due to
the termination of the foreign national as a result of the closing of,or curtailment of activities by,the
organization in that country,are unallowable,unless they are necessary 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)are allowable.The costs are subject to
restrictions regarding lodging, subsistence and air travel costs provided 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,Tucson,Arizona
• Center for Energy and Environmental Research(CEER),(University of Puerto Rico),
Commonwealth of Puerto Rico
• Comparative Animal Research Laboratory(CARL),(University of Tennessee),Oak Ridge,
Tennessee
• Institute of Gas Technology,Chicago,Illinois
• Montana Energy Research and Development Institute,Inc.,(MERDI),Butte,Montana
• Project Management Corporation,Oak Ridge,Tennessee
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B Circular A-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 ENTS
SUBJECT:Cost Principles for Non-Profit Organisations
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,"Cost Principles for Educational
Institutions";State,local, and federally-recognized Indian tribal 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 agreements.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 performed 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 organza tion 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.
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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 operations.For this purpose,the term
"non-profit organization" excludes(i)colleges and universities;(ii)hospitals; (iii)State,local,and
federally-recognized Indian tribal governments;and(iv)those non-profit organizations which are excluded
from coverage of this Circular in accordance with paragraph 5.
b. Prior approval means securing the awarding agency's permission 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 in the budget of an award,approval of
the budget constitutes approval of that cost.
5_Exclusion of some non-profit organizations. Some non-profit organizations,because of their size and
nature of operations,can be considered to be similar to commercial concerns for purpose of applicability of
cost principles.Such non-profit organizations shall operate under Federal cost principles applicable to
commercial concerns.A listing of these organizations is contained in Attachment C. Other organizations
may be added from time to time.
6.Responsibilities.Agencies responsible for administering programs that involve awards to non-profit
organizations shall implement the provisions of this Circular.Upon request,implementing instruction shall
be furnished to OMB.Agencies shall designate a liaison official to serve as the agency representative on
matters relating to the implementation of this Circular_The name and title of such representative shall be
furnished to OMB within 30 days of the date of this Circular.
7.Attachments.The principles and related policy guides are set forth 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 requirements of this Circular when
permissible under existing law.However,in the interest of achieving maximum uniformity,exceptions will
be permitted only in highly unusual circumstances.
9.Effective Date_The provisions of this Circular are effective immediately.Implementation shall be
phased in by incorporating the provisions into new awards made after the start of the organization's next
fiscal year. For existing awards,the new principles may be applied if art organization and the cognizant
Federal agency agree.Earlier implementation,or a delay in implementation of individual provisions,is
also permitted by mutual agreement between an organization and the cognizant Federal agency.
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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 credits
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
I. 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_
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2.Factors affecting allowability of costs.To be allowable under an award,costs must meet the following
general criteria:
a.Be reasonable for the performance of the award and be allocable thereto under these principles.
b.Conform to any limitations or exclusions set forth in these principles or in the award as to types or
amount of cost items.
c.Be consistent with policies and procedures that apply uniformly to both federally-financed and other
activities of the organization.
d.Be accorded consistent treatment.
e.Be determined in accordance with generally accepted accounting principles(GAAP).
f.Not be included as a cost or used to meet cost sharing or matching requirements of any other
federally-financed program in either the current or a prior period.
g.Be adequately documented.
3.Reasonable costs.A cost is reasonable it in its nature or amount,it does not exceed that which would be
incurred by a piudent person under the circumstances prevailing at the time the decision was made to incur
the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in
connection with organizations or separate divisions thereof which receive the preponderance of their
support from awards made by Federal agencies.In determining the reasonableness of a given cost,
consideration shall be given to: -
a.Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the
organization or the performance of the award.
b.The restraints or requirements imposed by such factors as generally 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 circumstances,considering their
responsibilities to the organization,its members,employees, and clients,the public at large,and the
Federal Government.
d.Significant deviations from the established practices of the organization which may unjustifiably
increase the award costs.
4.Allocable costs.
a.A cost is allocable to a particular cost objective,such as a grant,contract,project,service,or other
activity, in accordance with the relative benefits received.A cost is allocable to a Federal award if it is
treated consistently with other costs incurred for the same purpose in Iike circumstances and if it:
(1)Is incurred specifically for the award_
(2)Benefits both the award and other work and can be distributed in reasonable proportion to the benefits
received,or
23(AM 05/091200011:15 AM
DM B 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 are 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
refimds,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.hi 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)sea
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 nonallocability,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 OMB 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
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)M$Circular A-1TL y......._ ....,. .. a .. ..,-- ---_..
Educational Institutions,"and A-122(Attachment A,subsection A.4),"Cost Principles for Non-Profit
Organizations,"and from all of the administrative requirements provisions of OMB Circular A-110,
"Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education,
Hospitals,and Other Non-Profit Organizations,"and the agencies'grants management common rule.
• c.When a Federal agency provides this flexibility,as a prerequisite to a State's exercising this option,a
State must adopt its own written fiscal and administrative requirements for expending and accounting for
all fimds,which are consistent with the provisions of OMB Circular A-87,and extend such policies to all
subrecipients.These fiscal and administrative requirements must be sufficiently specific to ensure that:
funds are used in compliance with all applicable Federal statutory and regulatory provisions,costs are
reasonable and necessary for operating these programs, and funds are not be used for general expenses
required to carry out other responsibilities of a State or its subrecipients.
B.Direct Costs
.1.Direct costs are those that can be identified specifically with a particular final cost objective,i.e.,a
particular award,project,service,or other direct activity of an organization.However,a cost may not be
assigned to an award as a direct cost if any other cost incurred for the same purpose,in lice circumstance,
has been allocated to an award as an indirect cost. Costs identified specifically with awards are direct costs
of the awards and are to be assigned directly thereto.Costs identified specifically with other final cost
objectives of the organization are direct costs of those cost objectives 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 cost for reasons of practicality where the
accounting treatment for-such cost is consistently applied to all final cost objectives.
3.The cost of certain activities are not allowable as charges to Federal awards(see,for example,
fundraising costs in paragraph 23 of Attachment B).However,even though these costs are unallowable
for purposes of computing charges to Federal awards,they nonetheless must be treated as direct costs for
purposes of determining indirect cost rates and be allocated their share of the organization's 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 members, clients,or the general public when
significant and necessary to the organization's mission must be treated as direct costs whether or not
allowable and be allocated an equitable share of indirect costs.Some examples of these types of activities
include:
a.Maintenance of membership rolls,subscriptions,publications,and related functions.
b.Providing services and information to members,legislative or administrative bodies,or the public.
c.Promotion,lobbying,and other forms of public relations.
d.Meetings and conferences except those held to conduct the general administration of the organization.
e.Maintenance,protection, and investment of special funds not used in operation of the organization.
f Administration of group benefits on behalf of members or clients,including life and hospital insurance,
annuity or retirement plans, financial aid, etc.
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/{.ASSSiasS.a.....0-1_
2.Simplified allocation method_
a.Where an organization's major functions benefit from.its indirect costs to approximately the same
- degree,the allocation of indirect costs may be accomplished by(i)separating the organization's total costs
for the base period as either direct or indirect,and(i)dividing the total allowable indirect costs(net of
applicable credits)by an equitable distribution base_The result of this process is an indirect cost rate which
is used to distribute indirect costs to individual awards.The rate should be expressed as the percentage
which the total amount of allowable indirect costs bears to the base selected.This method ishould also be
used where an organization has only one major function encompassing a number of individual projects or
activities,and may be used where the level of Federal awards to an organization is relatively small.
b.Both the direct costs and the indirect costs shall exclude capital expenditures and unallowable costs.
However,unallowable costs which represent activities must be included in the direct costs under the
conditions described in subparagraph B3.
c.The distribution base may be total direct costs(excluding capital expenditures and other distorting items,
such as major subcontracts or subgrants),direct salaries and wages,or other base which results in an
equitable distribution.The distribution base shall generally exclude participant support costs as defined in
paragraph 34 of Attachment B.
d.Except where a special rate(s)is required in accordance with subparagraph 5,the indirect cost rate
developed under the above principles is applicable to all awards at the organization.If a special rate(s)is
required,appropriate modifications shall be made in order to develop the special rate(s).
e.For an organization that receives more than S10 million in Federal funding of direct costs in a fiscal
year,a breakout of the indirect cost component into two broad categories,Facilities and Administration as
defined in subparagraph C3,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 Administration)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 functions in varying degrees,indirect
costs shall be accumulated into separate cost groupings,as described in subparagraph b.Each grouping
shall then be allocated individually to benefitting functions by means of a base which best measures the
relative benefits.The default allocation bases by cost pool are described 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 lice character in terms of functions they benefit 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 described in subparagraph C.3.The indirect
cost pools are defined as follows:
(1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the
organization's buildings,capital improvements to land and buildings, and equipment which are computed
in accordance with paragraph 11 of Attachment B("Depreciation and use allowances").
(2)Interest. Interest on debt associated with certain buildings,equipment and capital improvements arc
computed in accordance with paragraph 23 of Attachment B ("Interest,fundraising, and investment
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OM11 Circular A-122 ,
•
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 offringe benefit
costs,depreciation and use allowances,and interest costs.
(4)General administration and general expenses.The expenses under this heading arc 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 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
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improvements and equipment used in such buildings,shall be allocated to the individual fractions
perfonned 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 improvements and equipment related space(e.g.,
individual rooms,and laboratories)used jointly by more-than one function(as determined by the users of
the space)shall be treated as follows.The cost of each jointly used unit 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 wages of those
individual functions benefitting from the use of that space; or
(ii)organization-wide employee FTEs or salaries and wages applicable to the benefiting functions of the
organization.
(d)Depreciation or use allowances on certain capital improvements to 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 salaries and wages of all employees
applicable to the functions.
(2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on
the buildings,equipment and capital equipments to-which the interest relates.
(3)Operation and maintenance expenses.Operation and maintenance expenses shall be allocated in the
same meaner as the depreciation and use allowances.
(4)General administration and general expenses. General administration and general expenses shall be
allocated to benefitting functions based on modified total direct costs(MTDC), as described in
subparagraph D_3.f.The expenses included in this category could be grouped first according to major
functions of the organization to which they render services or provide benefits.The aggregate expenses of
each group shall then be allocated to benefitting functions based on MTDC.
d. Order of distribution.
(1)Indirect cost categories consisting of depreciation and use allowances,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 appropriate by the organization.When
cross allocation of costs is made as provided in subparagraph (2),this order of allocation does not apply.
(2)Normally,an indirect cost category will be considered closed once it has been allocated to other cost
objectives, and costs shall not be subsequently allocated to it.However,a cross allocation of costs between
two or more indirect costs categories could be used if such allocation will result in a more equitable
allocation of costs.If a cross allocation is used,an appropriate modification 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 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 included in that function by use of a single indirect cost rate.
•
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•
f.Distribution basis.Indirect costs shall be distributed to applicable sponsored awards and other benefitting
activities within each major function on the basis of MTAC.MTDC consists of all salaries and wages,
fringe benefits,materials and supplies,services,travel,and subgrants and subcontracts up tb 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 S25,000
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 C3.
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
Organizations,and the United Way of America.
c.Under this method,indirect costs consist exclusively of general administration and general expenses.In
all other respects,the organization's indirect cost rates shall be computed in the same manner 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 awards 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
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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 all situations_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 depreciation 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
I.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 same degree,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 are 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.
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E.Negotiation and Approval of Indirect Cost Rates
•
1.Definitions.As used in this section,the following terms have the meanings set forth below:
a. Cognizant agency means the Federal agency responsible for negotiating 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 specified current or future period,
usually the organization's fiscal year.The rate is based on an estimate 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 characteristics as a predetermined rate,except
that the difference between the estimated costs and the actual costs of the period covered by the rate is
carried forward as an adjustment to the rate computation of a subsequent period. •
d.Final rate means an indirect cost rate applicable to a specified past 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 rate applicable to a specified period
which is used for funding,interim reimbursement, and reporting indirect costs on awards p_nding the
establishment of a final rate for the period.
f.Indirect cost proposal means the documentation prepared by an organization to substantiate its claim
for the reimbursement of indirect costs.This proposal provides the basis for the review and negotiation
leading to the establishment of an organization's indirect cost rate.
g.Cost objective means a function,organizational subdivision,contract,grant,or other work unit for
which cost data are desired and for which provision is made to accumulate 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 concerned,the Federal agency with the
largest dollar value of awards with an organization will be designated as the cognizant agency for the
negotiation and approval of the indirect cost rates and, where necessary,other rates such as fringe benefit
and computer charge-out rates. Once an agency is assigned cognizance for a particular non-profit
organization,the assignment will not be changed unless there is a major long-term shift in the dollar
volume of the Federal awards to the organization. All concerned Federal agencies shall be given the
opportunity to participate in the negotiation process but, after a rate has been agreed upon,it will be
accepted by all Federal agencies.When a Federal agency has reason to believe that special operating
factors affecting its awards necessitate special indirect cost rates in accordance with subparagraph DS,it
will,prior to the time the rates are negotiated,notify the cognizant agency.
b. A non-profit organization which has not previously established an indirect cost rate with a Federal
agency shah submit its initial indirect cost proposal immediately after the organization is advised that an
award will be made and,in no event,later than three months after the effective date of the award.
c_ Organizations that have previously established indirect cost rates must submit a new indirect cost
proposal to the cognizant agency within six months after the close of each fiscal year.
d.A predetermined rate may be negotiated for use on awards where there is reasonable assurance,based on
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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(1)all or a substantial portion of the organization's awards are expected
to expire before the carry-forward adjustment can be made;(n)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 cognizant agency
and the non-profit organization.The cognizant agency shall distribute copies of the agreement 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,OMB will lend assistance as required to resolve such problems in a
timely manner.
ATTACHMENT B
Circular No.A-I22
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
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at 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 COST
Paragraphs 1 through 56 provide principles to be applied in establishing the allowability of certain items
of cost.These principles apply whether a cost is treated as direct or indirect.Failure to mention a particular
item of cost is not intended to imply that it is unallowable;rather, determination as to allowability in each
case should be based on the treatment or principles provided for similar or related items of cost.
1.Advertising and public relations costs.
a.The term advertising costs means the costs of advertising media and corollary administrative costs.
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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 perfonnancc 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.
1.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 fluid raising or other organizational 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;
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(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.
2.Alcoholic beverages. Costs of alcoholic beverages are unallowable.
3.Bad debts.Bad debts,including losses(whether actual or estimated)arising from uncollcctible accounts
and other claims,related collection costs,and related legal costs, are unallowable.
4.Bid and proposal costs.(reserved)
5.Bonding costs.
a Bonding costs arise when the Federal Government requires assurance against financial loss to itself or
. others by reason of the act or default of the organization.They arise also in instances where the
organization requires similar assurance-Included arc such bonds as bid,performance,payment,advance
• payment,infringement, and fidelity bonds.
b. Costs of bonding required pursuant to the terms of the award are allowable.
c.Costs of bonding required by the organization in the general conduct of its operations are allowable to
the extent that such bonding is in accordance with sound business practice and the rates and premiums are
reasonable under the circumstances.
6. Communication costs.Costs incurred for telephone services,local and long distance telephone calls,
telegrams,radiograms,postage and the like are allowable.
7. Compensation for personal services.
a. Definition.Compensation for personal services includes all compensation paid currently or accrued by
• the organization for services of employees rendered during the period of the award(except as otherwise
provided in subparagraph h).It includes,but is not limited to,salaries,wages,director's and executive
committee member's fees,incentive awards, fringe benefits,pension plan costs,allowances for off-site pay,
incentive pay,location allowances,hardship pay, and cost of living differentials.
b.Allowabdity. Except as otherwise specifically provided in this paragraph,the costs of such
compensation arc allowable to the extent that
(1)Total compensation to individual employees is reasonable for the 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 other than those sponsored by the Federal
Government,compensation for employees on federally-sponsored work will be considered reasonable to
the extent that it is consistent with that paid for similar work in the organization's other activities. -
(2)When the organization is predominantly engaged in federally-sponsored activities and in cases where
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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 distribution 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 than not be
allowable under this paragraph solely on the basis that they constitute personal compensation.
f.Fringe benefits.
(I)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 organization 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.
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4B C■rcular A422
g. Organization-furnished automobiles.That portion of the cost of organization-furnished automobiles
that relates to personal use by employees(including transportation to and from work)is 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.
h.Pension plan costs.
(1)Costs of the organization's pension plan which are incurred in accordance 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 Opinion 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 participants within six months after the
end of that year.However,increases to normal and past service pension costs caused by a delay in funding
the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are
unallowable.
(2)Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income
Security Act(ERISA)of 1974(Pub_L. 93-406)are allowable.Late payment charges on such premiums are
unallowable.
(3)Excise taxes on accumulated funding deficiencies and other penalties imposed under ERISA arc
unallowable.
i.Incentive compensation.Incentive compensation to employees based on cost reduction,or efficient
performance, suggestion awards, safety awards,etc.,are allowable to the extent that the overall
compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement
entered into in good faith between the organization and the employees before the services were rendered,
or pursuant to an established plan followed by the organization so consistently 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.
m. Support of salaries and wages.
(1)Charges to awards for salaries and wages,whether treated as direct costs or indirect costs,will be based
on documented payrolls approved by a responsible officials)of the organisation.The distribution of
salaries and wages to awards must be supported by personnel activity reports, as prescribed in
subparagraph (2),except when a substitute system has been approved in writing by the zogni7ant agency.
(See subparagraph E.2 of Attachment A.)
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dB Circular A-122
(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 organisations 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 are 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 unallowable.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.
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05/09/2000 I I:15 AM
MB CitcultvA-122 •
(2)Costs include,but are not limited to,administrative and clerical expenses;the cost of legal services,
whether performed by in-house or private counsel;and the costs of the services of accountants,consultants,
or others retained by the organization to assist it; costs of employees,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 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 compensatory damages.
(5)Proceeding includes an investigation.
b.(1)Except as otherwise described herein,costs incurred in connection with any criminal,civil or
administrative proceeding(including filing of a false certification)commenced by the Federal Government,
or a State,local or foreign government,are not allowable if the proceeding: (1)relates to a violation of,or
failure to comply with,a Federal,State,local or foreign statute or regulation by the organization(mcluding
its agents and employees),and(2)results in any of the following dispositions:
(a)In a criminal proceeding,a conviction.
(b)In a civil or administrative proceeding involving an allegation of fraud or similar misconduct,a
determination of organizational liability.
(c)In the case of any civil or administrative proceeding,the imposition of a monetary penalty.
(d)A final decision by an appropriate Federal official to debar or suspend the organization, to rescind or
void an award,or to terminate an award for default by reason of a violation or failure to comply with a law
or regulation.
(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 the costs were incurred as a result of(l)a specific term or
condition of a federally-sponsored award, or(2)specific written direction of an authorized official of the
sponsoring agency.
e. Costs incurred in connection with proceedings described in subparagraph b,but which are not made
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unallowable by that subparagraph,may 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
ptovision(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
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:
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(1)The cost of land;
(2)Any portion of the cost ofbuildings and equipment borne by or donated by the Federal Government
irrespective of where title was originally vested or where it presently resides;and
(3)Any portion of the cost of buildings and equipment contributed by or for the organization in satisfaction
of a statutory matching requirement
d.Where the use allowance method is followed,the use allowance for buildings and improvement
(including land improvements,such as paved parking areas,fences,and 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 of acquisition cost.When the use
allowance method is used for buildings,the entire building must be treated 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 applied to equipment which is merely
attached or fastened to the building but not permanently fixed to it and which is used as furnishings or
decorations or for specialized purposes(e.g.,dentist chairs and dental treatment units,counters,laboratory .
benches bolted to the floor,dishwashers,carpeting,etc.). Such equipment will be considered as not being
permanently fixed to the building if it can be removed without the need for costly or extensive alterations
or repairs to the building or the equipment.Equipment that meets these 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 service(useful life)established in each case
for usable capital assets must take into consideration such factors as type of construction,nature of the
equipment used,technological developments in the particular program area,and the renewal and
replacement policies followed for the individual items or classes of assets involved.The method of
depreciation used to assign the cost of an asset(or group of assets)to accounting periods shall reflect the
pattern of consumption of the asset during its useful life.In the absence of clear evidence indicating that
the expected consumption of the asset will be significantly greater or 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 unless approved in advance by the
cognizant Federal agency.When the depreciation method is introduced for application to assets previously
subject to a use allowance,the combination of use allowances and depreciation applicable to such assets
must not exceed the total acquisition cost of the assets.When the depreciation 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 depreciated over its estimated useful life;or the
entire building(i.e.,the shell and all components)may be treated as a single asset and depreciated over a
single useful life.
f When the depreciation method is used for a particular class of assets,no depreciation may be allowed on
any such assets that,under subparagraph e,would be viewed as fully depreciated.However,a reasonable
use allowance may be negotiated for such assets if warranted alter taking into consideration the amount of
depreciation previously charged to the Federal Government,the estimated useful life remaining at time of
negotiation,the effect of any increased maintenance charges or decreased efficiency due to age,and any
other factors pertinent to the utilization of the asset for the purpose contemplated
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 method is followed, adequate
depreciation records indicating the amount of depreciation taken each period must also be maintained.
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12.Donations.
- a Services received
- (I)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 maybe
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 than 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.lithe 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
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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 costs of house publications,health or
first-aid clinics,and/or infirmaries,recreational activities,employees'counseling services,and other
expenses incurred in accordance with the organization's established practice or custom for the improvement
of working conditions,employer-employee relations,employee morale, and employee performance are
allowable.Such costs will be equitably apportioned to all activities of the organization.Income generated
from any of these activities will be credited to the cost thereof unless such income has been irrevocably set
over to employee welfare organizations.
14.Entertainment costs. Costs of amusement,diversion, social activities,ceremonials,and costs relating
thereto,such as meals,lodging,rentals,transportation,and gratuities are unallowable(but see paragraphs
13 and 30).
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 personal property having a useful life of
more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization level
established by the organization for the financial statement purposes,or(b)S5000.The unamortized portion
of any equipment written off as a result of a change in capitalization levels may be recovered by continuing
to claim the otherwise allowable use allowances 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.
(2)Acquisition cost means the net invoice unit price of an item of equipment,including the cost of any
modifications,attachments, accessories,or auxiliary apparatus necessary to make it usable for the purpose
for which it is acquired.Ancillary charges,such as taxes,duty,protective in-transit insurance,freight, and
installation shall be included in or excluded from acquisition cost in accordance with the organization's
regular written accounting practices.
(3)Special purpose equipment means equipment which is usable only for research,medical,scientific,or
technical activities.Examples of special purpose equipment include microscopes,x-ray machines,surgical
instruments,and spectrometers.
(4)General purpose equipment means equipment which is usable for other than research,medical,
scientific,or technical activities,whether or not special modifications are needed to make them suitable for
a particular purpose.Examples of general purpose equipment include office equipment and furnishings,air
conditioning equipment,reproduction and printing equipment,motor 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 allowable as direct costs,provided that items
with a unit cost of 55000 or more have the prior approval of awarding agency_
c. Capital expenditures for land or buildings are unallowable as a direct cost except with the prior approval
of the awarding agency.
d.Capital expenditures for improyements to land,buildings, or equipment which materially increase their
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value or useful life are unallowable as a direct cost except with the prior approval of the awarding 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,sec 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 7.1.
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,fiarnishings,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 officers 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,
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reorganization,termination,or other causes which could not have been reasonably foreseen.:Under the
exception stated in this subparagraph,costs of idle facilities are allowable 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 allowable,provided the capacity is
reasonably anticipated to be necessary or was originally reasonable and is not subject to reduction or
elimination by subletting,renting,or sale,in accordance with sound business,economics,or security
practices.Widespread idle capacity throughout an entire facility or among a group of assetshaving
substantially the same function may be idle facilities_
21.Independent research and development. [Reserved]
22.Insurance and indemnification.
. a.Insurance includes insurance which the organization is required to carry,or which is approved,under the
terms of the award and any other insurance which the organization maintains in connection with the
general conduct of its operations.This paragraph does not apply to insurance which represents fringe -
benefits for employees(see subparagraphs 7..f and 7.h(2)).
(1)Costs of insurance required or approved,and maintained,pursuant to the award are allowable.
(2)Costs of other insurance maintained by the organization in connection 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 allowable 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 estimated 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.
(e)Costs of insurance on the lives of trustees,officers,or other employees holding positions of similar
responsibilities arc allowable only to the extent that the insurance represents additional compensation(see
subparagraph 7.f(4)).The cost of such insurance when the organization is identified as the beneficiary is
unallowable.
(1)Insurance against defects. Costs of insurance with respect to any costs incurred to cornet defects in the
organization's materials or workmanship arc unallowable_ -
(g)Medical liability(malpractice)insurance.Medical liability insurance is an allowable cost of Federal
research programs only to the extent that the Federal research programs involve human subjects or training
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ofparticipants 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 fee 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 n 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 acquisition 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 minimum,the
following:
A statement of purpose and justification for facility acquisition or replacement
A statement as to why current facilities are not adequate
A statement 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 S500,000,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.
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III Circular A-122
through 37 of Circular A-110,which shows that a financed purchase or capital lease is le;s costly to the
organization than other leasing alternatives,on a net present value basis.Discount rates used should be
equal to the non-profit organization's anticipated interest rates and should be no higher than the fair market
rate available to the non-profit organization from an unrelated("arm's length")third-party.The
lease/purchase analysis shall include a comparison of the net present value of the projected total cost
comparisons of both alternatives over the period the asset is expected to be used by the non-profit
organization.The cost comparisons associated with purchasing the facility shall include the estimated
purchase price,anticipated operating and maintenance costs(mcluding property taxes,if applicable)not
included in the debt financing,less any estimated asset salvage value at the end of the period defined
above.The cost-comparison for a capital least shall include the estimated total lease payments,any
estimated bargain purchase option,operating and maintenance costs,and taxes not included in the capital
leasing arrangement,less any estimated credits due under the lease at the end of the period defined above.
Projected operating lease costs shall be based on the anticipated cost of leasing comparable facilities at fair
market rates under rental agreements that would be renewed or reestablished over the period defined above,
and any expected maintenance costs and allowable property taxes to be 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 that are no higher than the fair market
rate available to the non-profit organization from an unrelated("arm's length")third party_
(d)Investment earnings,including interest income,on bond or loan principal,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 allowable interest costs.
(e)Reimbursements are limited to the least costly alternative based.on the total cost analysis required under
subparagraph(b).For example,if an operating lease is determined to be less costly than purchasing
through debt financing,then reimbursement is limited to the amount determined if leasing bad been used.
In all cases where a lease/purchase analysis is performed,Federal reimbursement 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 before or reacquired after the effective
date of this Circular is not allowable.
(ii)For debt arrangements over$1 million,unless the non-profit organization makes an initial equity
contribution to the asset purchase of 25 percent or more,non-profit organizations shall reduce claims for
interest expense by an amount equal to imputed interest earnings on excess cash flow,which is to be
calculated as follows.Annually,non-profit organizations shall prepare a cumulative(from the inception of
the project)report of monthly cash flows that includes inflows and outflows,regardless of the funding
source.Inflows consist of depreciation expense,amortization of capitalized construction interest,and
annual interest expense_For cash flow calculations,the annual inflow figures shall be divided by the
number of months in the year(usually 12)that the building is in service for monthly amounts.Outflows
consist of initial equity contributions,debt principal payments(less the pro rata share attributable to the
unallowable costs of land)and interest payments_Where cumulative inflows exceed cumulative outflows,
interest shall be calculated on the excess inflows for that period and be treated as a reduction to allowable
interest expense. The rate of interest to be used to compute earnings on excess cash flows shall be the three
month Treasury Bill closing rate as of the last business day of that month_
(iii)Substantial relocation of federally-sponsored activities from a facility financed by indebtedness,the
cost of which was funded in whole or part through Federal reimbursements,to another facility prior to the
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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 arc limited to a fair market valve 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 CtIt 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 construction.
(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 arc 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 organization
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 associated with the following activities are
unallowable:
(1)Attempts to influence the outcomes of any Federal,State,or Iocal 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;
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(3)Any attempt to influence:(i)The introduction of Federal or State legislation;or(ii)the enactment or
modification of any pending Federal or State legislation through communication with any member or
employee of the Congress or State legislature(ncluding efforts to influence State or local officials.to
engage in similar lobbying activity),or with any Government official or employee in connection with a
- decision to sign or veto enrolled legislation;
(4)Any attempt to influence:(i)The introduction of Federal or State legislation;or(ii)the enactment or
modification of any pending Federal or State legislation by preparing,distributing or using publicity or
propaganda,or by urging members of the general public or any segment thereof to contribute to or
participate in any mass demonstration,march,rally,fundraising drive,lobbying campaign or letter writing
or telephone campaign;or
(5)Legislative liaison activities,including attendance at legislative sessions or committee bearings,
gathering information regarding legislation,and analyzing the effect of legislation,when such activities are
- carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying.
b.The following activities are excepted from the coverage of subparagraph a:
(1)Providing a technical and factual presentation of information on a topic directly related to the
performance of a grant,contract or other agreement through hearing testimony, statements or letters to the
Congress or a State legislature,or subdivision,member,or cognizant staffmember thereof;in response to a
documented request(iincluding a Congressional Record notice requesting testimony or statements for the
record at a regularly scheduled hearing)made by the recipient member,legislative body or subdivision,or
a cognizant staff member thereof;provided such information is readily obtainable and can be readily put in
deliverable form;and further provided that costs under this section for travel,lodging or meals arc
unallowable unless incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a
written request for such presentation made by the Chairman or Ranking Minority Member of the
Committee or Subcommittee conducting such hearing.
(2)Any lobbying made unallowable by subparagraph a(3)to influence State legislation in order to
directly reduce the cost,or to avoid material impairment of the organization'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,total lobbying costs shall be separately
identified in the indirect cost rate proposal,and thereafter treated as other unallowable activity costs in
accordance with the procedures of subparagraph B3 of Attachment A-
(2)Organizations shall submit,as part of the annual indirect cost rate proposal, a certification that the
requirements and standards of this paragraph have been complied with.
(3)Organizations shall maintain adequate records to demonstrate that the determination of costs as being
allowable or unallowable pursuant to paragraph 25 complies with the requirements of this Circular.
(4)Time logs,calendars,or similar records shall not be required to be created for purposes of complying
with this paragraph during any particular calendar month when: (1)the employee engages in lobbying(as
defined in subparagraphs (a)and (b))25 percent or less of the employee's compensated hours of
employment during that calendar month, and(2)within the preceding five-year period,the organization
has not materially misstated allowable or unallowable costs of any nature,including legislative lobbying
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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 abscnce 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.
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eMB cam,►err w-2n
b.Costs of the organization's subscriptions to business,professional,and technical periodicals arc
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.
c.Costs of membership in any country club or social or dining club or organization are r nallowable.
31. Organization costs.Expenditures,such as incorporation fees,brokers'fees,fees to promoters,
organizers or management consultants,attorneys,accountants,or investment counselors,whether or not
employees of the organization,in connection with establishment or reorganization of an organization,are
unallowable except with prior approval of the awarding agency.
32.Overtime,extra-pay shift,and multi-shift premiums.Premiums for overtime, extra-pay shifts,and
multi-shift work are allowable only with the prior approval of the awarding 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 a sporadic nature.
b.When employees are performing indirect functions,such as administration,maintenance,or accounting.
c.In the performance of tests,laboratory procedures,or other similar 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 Government; and
b.The charges are levied impartially on all research papers published by the journal,whether or not by
federally-sponsored authors.
34.Participant support costs.Participant support costs are direct costs for items such as stipends or
subsistence allowances,travel allowances,and registration fees paid to or on behalf of participants or
trainees(but not employees)in connection with meetings,conferences,symposia,or training projects.
These costs are allowable with the prior approval of the awarding agency.
35.Patent costs.
a. Costs of(i)preparing disclosures,reports,and other documents required by the award and of searching
the art to the extent necessary to make such disclosures,(ii)preparing documents and any other patent
costs in connection with the filing and prosecution of a United States patent application where title or
royalty-free license is required by the Federal Government to be conveyed to the Federal Government, and
(iii)general counseling services relating to patent and copyright matters,such as advice on patent and
copyright laws,regulations,clauses,and employee agreements are allowable(but see paragraph 39).
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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 written approval
of the awarding agency.
39.Professional service costs.
a. Costs of professional and consultant services rendered by persons who are members of a particular
profession or possess a special skill,and who are not officers or employees of the 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
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evidence of bona fide services available or rendered _
40.Profits and losses on disposition of depreciable property or other capital assets.
a. (1)Gains and losses on sale,retirement or other disposition of depreciable property shall be included in
the year in which they occur as credits or charges to cost grouping(s)in which the depreciation applicable
to such property was included.The amount of the gain or loss to be included as a credit or charge to the
appropriate cost grouping(s)shall be the difference between the amount realized on the property and the
=depreciated basis of the property.
(2)Gains and losses on the disposition of depreciable property shall not be recognized as a separate credit
or charge under the following conditions:
(a)The gain or loss is processed through a depreciation reserve account and is reflected in the depreciation
allowable under paragraph 11.
(b)The property is given in exchange as part of the purchase price of a similar item and the gain or loss is
taken into account in determining the depreciation cost basis of the new item.
(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 arising from mass or extraordinary sales,retirements, or other dispositions shall be
considered on a case-by-case basis.
b. Gains or losses of any nature arising from the sale or exchange of property other than the property
covered in subparagraph a shall be excluded in computing award costs.
41.Publication and printing costs_
a.Publication costs include the costs of printing(including the processes of composition,plate-making,
press work,binding,and the end products produced by such processes),distribution,pronsotion,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 organization.
c.Publication and printing costs are unallowable as direct costs except with the prior approval of the
awarding agency.
d.The cost ofpage charges in journals is addressed paragraph 33.
42. Rearrangement and alteration costs. Costs incurred for ordinary or normal rearrangement and
alteration of facilities are allowable. Special arrangement and alteration costs incurred specifically for the
project are allowable with the prior approval of the awarding agency.
43.Reconversion costs. Costs incurred in the restoration or rehabilitation of the organization's facilities to
approximately the same condition existing irrunediately prior to commencement of Federal awards,fair
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wear and tear excepted,are allowable.
44.Recruiting costs.
a.Subject to subparagraphs b,S and d,and provided that the size of the staffrecruited 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 recru itment 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_
45.Relocation 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 a new
employee.Relocation costs are allowable, subject to the Iimitation 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 30 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
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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 and 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 appliances, and purchasing insurance against
loss of or damages to personal property.The cost of canceling an unexpired lease is limited to three times -
the monthly rental.
c_Allowable relocation costs for new employees are limited to those described in(1)and(2)of
subparagraph b.When relocation costs incurred incident to the recruitment of new employees have been
allowed either as a direct or indirect cost and the employee resigns for reasons within his control within 12
months after hire,the organization shall refimd or credit the Federal Government for its share of the cost.
However,the costs of travel to an overseas location shall be considered travel costs in accordance with
paragraph 55 and not relocation costs for the purpose of this paragraph if dependents are not permitted at
the location for any reason and the costs do not include costs of transporting 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 being 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 costs of comparable property,if any;
market conditions in the area;alternatives available; and the type,life 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 only up to the amount that would be
allowed had title to the property vested in the organization.For this purpose, a less-than-arms-length lease
is one under which one party to the lease agreement is able to control or substantially influence the actions
of the other. Such leases include,but are not limited to those between(i)divisions of an organization;(ii)
organizations under common control through common officers, directors,or members; and(iii)an
organization and a director,trustee,officer,or key employee of the organization or his immediate family
either directly or through corporations,trusts,or similar arrangements in which they hold a controlling
interest.
d. Rental costs under leases which are required to be treated as capital leases under GAAP,are allowable
only up to the amount that would be allowed had the organization purchased the property on the date the
lease agreement was executed, i.e.,to the amount that minimally would pay for depreciation or use
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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 the 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 performance of the award arc allowable unless:
(1)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.
J
(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_
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•
(2)Abnormal or mass severance pay is of such a conjectural nature that measurement of costs by means of
an accrual will not achieve equity to both parties.Thus,accruals for this purpose are not allowable.
However,the Federal Government recognizes its obligation to participate,to the extent of its fair share,in
any specific payment.Thus, allowability will be considered on a case-by-case basis in the event or
occurrence.
c.Costs incurred in certain severance pay packages(commonly known as"a golden parachute"payment)
which are in an amount in excess of the normal severance pay paid by the organization to an employee
upon termination of employment and are paid to the employee contingent upon a change in management
control over,or ownership of,the organization's assets are unallowable.
d.Severance payments to foreign nationals employed by the organization 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 performance of Federal programs and approved by
awarding agencies.
e.Severance payments to foreign nationals employed by the organization outside the United States due to
the termination of the foreign national as a result of the closing of,or curtailment of activities by,the
organization in that country,are unallowable,unless they are necessary 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 facilities operated by the organization,
such as electronic computers and wind tunnels, are allowable,provided the charges for the services meet
the conditions of either subparagraph b or c and,in addition,take into account any items of income or
Federal financing that qualify as applicable credits under subparagraph AS of Attachment A.
b.The costs of such services,when material,must be charged directly to applicable awards based on actual
usage of the services on the basis of a schedule of rates or established methodology that(i)does not
discriminate against federally-supported activities of the organization,including usage by the organization
for internal purposes, and(ii)is designed to recover only the aggregate costs of the services.The costs of
each service shall consist normally of both its direct costs and its allocable share of all indirect costs.
Advance agreements pursuant to subparagraph A.6 of Attachment 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 which are paid or accrued in accordance
with GAAP,and payments made to local governments in lieu of taxes which are commensurate with the
local government services received are allowable,except for(i)taxes from which exemptions are available
to the organization directly or which are available to the organization based on an exemption afforded the
Federal Government and in the latter case when the awarding agency makes available the necessary
exemption certificates, (ii) special assessments on land which represent capital improvements, and(iii)
Federal income taxes.
b.Any refund of taxes, and any payment to the organization of interest thereon,which were allowed as
award costs,will be credited either as a cost reduction or cash refund, as appropriate,to the Federal
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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 efforts 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 organization to discontinue such
WAS 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 if
(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 may be reasonable,and(it)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:
(I)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.
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(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 when grantees or contractors are
reimbursed for disposals at a predetermined amount in accordance with 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.
f.Claims under subawards.Claims under subawards,including the allocable portion of claims which are
common to the award, and to other work of the organization are generally allowable.An appropriate share
of the organization's indirect expense may be allocated to The amount of settlements with subcontractors
and/or subgrantees,provided that the amount allocated is otherwise consistent with the basic guidelines
contained in Attachment A.The indirect expense so allocated shall exclude the same and similar costs
claimed directly or indirectly as settlement expenses.
53.Training and education costs.
a. Costs of preparation and maintenance of a program of instruction including but not limited to on-the-job,
classroom, and apprenticeship training,designed to increase the vocational 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 training and staff when the training program
is conducted by the organization; or(ii)tuition and fees when the training 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 course or degree pursued is relative to the
field in which the employee is now working or may reasonably be expected to work, and are 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 tuition,instructors'salaries and the related
share of indirect costs of the educational institution to the extent that the sum thereof is not in excess of the
tuition which would have been paid to the participating educational institution.
•
(5)Salaries and related costs of instructors who are employees of the organization_
(6)Straight-time compensation of each employee for time spent attending classes during working hours not
in excess of 156 hours per year and only to the extent that circumstances do not permit the operation of
classes or attendance at classes after regular working hours;otherwise,such compensation is unallowable.
c. Costs of tuition, fees,training materials,and textbooks(but not subsistence,salary,or any other
emoluments)in connection with full-time education,including that provided at the organization's own
• facilities, at a post-graduate(but not undergraduate)college level, are allowable only when the course or
degree pursued is related to the field in which the employee is now working or may reasonably be expected
to work, and only where the costs receive the prior approval of the awarding agency_Such costs are limited
to the costs attributable to a total period not to exceed one school year for each employee so trained_In
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unusual cases the period may be extended.
d.Costs of attendance of up to 16 weeks per employee per year at specialized programs specifically V
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 11,27, 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(see 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 are directly attributable to specific work under an
award or are incurred in the normal course of administration of the organization.
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 not 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 traveler.
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
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the awarding agency.Each separate foreign trip must be approved.For purposes of this provision,foreign
travel is defined as any travel outside of Canada and the United States and its territories and possessions.
However, for an organization located in foreign countries,the term"foreign travel"means travel outside
that country.
56.Trustees.Travel and subsistence costs of trustees(or directors)are allowable.The costs 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
ITT 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 BIue Shield Organizations
Other non-profit organizations as negotiated with awarding agencies
BILLING CODE 3110-01
I OMB Home Page Budget Information}Legislative Information}Management ReformJGPRA}
I Grants Management}Financial Management I Procurement Policy I
}Information&Regulatory Policy I Special Topics I
Read our Privacy Policy
61 of 61
05/09!2000 11:15 AM .
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 ORGANIZATIONS
OFFICE OF MANAGEMENT AND eral entities shall apply to audits of fiscal can be easily scanned into a computer
BUDGET years beginning after June 30, 1996,with format.
the exception that § 305(b) applies FOR FURTHER INFORMATION
Audits of States, Local to audits of fiscal years beginning after CONTACT: Recipients should contact
Governments, and Non-Profit June 30, 1998. The requirements of Cu-- their cognizant or oversight agency for
Organizations cular A-128, although the Circular is audit,or Federal or oversight
agency,
rescinded,and the 1990 version of Circu- awarding g cy,as may
AGENCY: Office of Management and tar A-133 continue to apply for audits of be appropriate in the circumstances. Su-
fiscal years beginning on or before June brecipients should contact their pass-
Budget.
30, 1996. through entity. Federal agencies should
ACTION: Final revision of OMB Circu- All comments on the provisional "Cir- contact Sheila O.Conley,Office of Mari-
lar No. A-133. final rescission of OMB cular A-133 Compliance Supplement" agement and Budget, Office of Federal
Circular No. A-128. and notice of docu- Financial Management, Financial Stan-
ment availability of the Provisional Cir- should be in writing, and must be re dards and Reporting Branch, telephone
ceived by November 30, 1997.Late corn-
cular A-I 33 Compliance Supplement. ments will be considered to the extent (202) 395-3993.
practicable.
* s a
SUMMARY: This revision of Office of ADDRESSES: A copy of the Circular
Management and Budget(OMB)Circular may be obtained from the OMB fax
No. A-I33. 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 page on 30, 1997-
ganizations," establishes uniform audit the Internet which is currently located at 2. OMB revises Circular A-133 to read
requirements for non-Federal entities http /www.whitehouse.gov/WH/EOP/ as follows:
that administer Federal awards and im- omb, under the captions "OMB Docu- [Circular No. A-133 Revised]
plements the Single Audit Act Amend- ments,"and then"Grants Management;"
ments of 1996, which were signed into or by writing or calling the Office of
law on July 5. 1996 (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, telephone
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 Compliance ments, and Non-Profit Organiza-
der Circular A-133. Supplement"may be obtained from EOP tions.
One of the more significant revisions is. Publications, Office of Administration, 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 provision- P.L. 98-502, and the Single Audit Act
$25,000 to $300,000. This will signify- al "Circular A-133 Compliance Supple- Amendments of 1996, P.L. 104-156. It
cantly reduce audit costs for many small ment" is also available from the 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 tar A-133 Compliance Supplement" governments, and non-profit organiza-
report submission process that includes a should be mailed to the Office of Manage- Lions expending Federal awards.
data collection form and streamlined fit- ment and Budget, Office of Federal Fi- 2. Authority. Circular A-133 is issued
ing requirements(§ .320);a new risk- nancial Management, Financial Stan- under the authority of sections 503, 1111,
based approach for major program deter- dards and Reporting Branch,Room 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 applicable 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 facsimile(fax), of State and Local Governments,"issued
tics an opportunity to comment on the they should be faxed to (202) 395-4915. April 12, 1985,and supersedes the prior
provisional "Circular A-133 Compliance Electronic mail comments may be sub- Circular A-I33,"Audits of Institutions of
Supplement,"provided as Appendix B to mitted via the Internet to RAMSEY— Higher Education and Other Non-Profit
Circular A-133. However, due to its T @AI.EOP.GOV. Please include the full Institutions," issued April 22, 1996. For
length. the provisional "Circular A-133 body of electronic mail comments 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 name, 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 message. 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 for analy- the standards provided herein,the provi-
revised Circular in codified regulations sis, it would be helpful if respondents sions of the subsequent statute shall go-
not later than August 29. 1997. would send a copy of comments on either vein_
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 Si- or 6.0, WordPerfect 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
ning after June 30. 1996,except as other- ette cannot be provided, it would be recipients expending Federal awards re-
wise specified in § .400(a).The stan- helpful if the comments were printed in ceived directly from Federal awarding
dards set forth in this Circular which pica or an equivalent 10 characters per agencies, or are subrecipients expending
Federal agencies shall apply to non-Fed- inch type on white paper so the document Federal awards received from a pass-
Published by West Group
09:1602 HOUSING AND DEVELOPMENT REPORTER
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- ubpart A-General. :, lied in generally accepted government
ent or indirectly as a subrecipient. _ • auditing standards (GAGAS). The term
5. Definitions. The definitions of key *_ --- -• auditor does not include intern_ al auditors
terms used in this Circular are contained .100 Purpose.. of non-profit organizations.
in § 105 in the Attachment to this .195 Definitions.. Audit finding means deficiencies which
the auditor is required by § -51
Circular. = Q(a)
Subpart B--Audits.. to report in the schedule of findings'and
6. Required Action. The specific re- - questioned costs.
quirements and responsibilities of Feder- CFDA number means the number as-
al agencies and non-Federal entities s are 200 Audit requirements.
.205_ Basis for determining Federal
set forth in the Attachment to this entities signed to a Federal program in the Cata-
awards expended. log of Federal Domestic Assistance
Jar. Federal agencies making awards to .210 Subrecipient and vendor deter- (CFDA)-
non-Federal entities, either directly or minations. Cluster 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- mints. - -. 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 or
7. OMB Responsibilities. OMB will Management and Budget. (OMB)_in the
review Federal agency regulations and Subpart C—Auditees compliance supplement or as designated
by a State for Federal awards the State
implementation of this Circular,and will provides to its subrecipients that meet the
provide interpretations of policy require- .300 Auditee responsibilities. definition of a cluster of programs.When
menu and assistance to ensure uniform. .305 Auditor selection- P 8r
.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
illation concerning Circular A-133 may of compliance requirements applicable
be obtained by contacting the Financial Subpart D—Fideral Agencies and- to the cluster, consistent with
Standards and Reporting Branch, Office Pass-Through Entities § .400(dx1)and§ . .400(dX2),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
R&D as described in .200(c),
a policy review three years from the date Subpart E—Auditors - whether a program-specific audit ma be
of issuance. may .
elected.
10. Effective Dates. The standards set :500'Scope of audit. _ ' -
forth in § .400 of the Attachment to .505 Audit reporting. " Cognizant agency for audit means-•the
this Circular. which apply directly to 510 Audit findings. Federal agency designated to carry,_out
Federal agencies,shall be effective July 1, .515'Audit working papers. the 4esponsibilities described:- in
1996. and shall apply to audits of fiscal .520 Major.program determination. § .pla(a)_
years beginning after June 30.- 1996, .525 Criteria for Federal program Compliance A-A-133 supple ianc refers to the
y g g Circular A-133 Compliance Supplement,
except as otherwise specified in risk• included as Appendix Criteria for a low-risk auditee. PPendix B to Circular A-
§ -400(a). . . . 133, or such documents as OMB or its
The standards set forth,in 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
Collection Form (Form SF-SAC) Government Printing entities shall be adopted by Fed- g Office,Superinten-
eral agencies in codified regulations not dent of Documents, Washington, DC
A
later than 60 days after publication of this -j33 Compliance Supplement 20402-9325.
final revision in the Federal Register. so Corrective action means action taken
that they will apply to audits of fiscal by the auditee that:
Subpart A—General (I) Corrects identified deficiencies;
years beginning after June 30, 1996,with (2) Produces recommended improve-
the exception that § .305(b) of the § .100 Purpose. merits; or
Attachment applies to audits of fiscal _ (3) Demonstrates that audit findings
years beginning after June 30, 1998.The 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
§_.105 Definitions. assistance and Federal cost-reimburse-
Franklin D. Raines. ment 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 09:1603
HDR RF-628
2-2-98
contracts.under grants orcontracts,used (3) Compliance with applicable laws OMB means the Executive Office of
- 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-aim- Budget.
covered by the terms and conditions of pliance requirements for Federal programs Oversight agency for audit means the
the contract.Contracts to operate Federal (internal control over Federal'programs) Federal awarding agency that provides
Government owned,contractor operated means a process—effected by an entity's the predominant amount of direct fund-
facilities(GOCOs)are excluded from the management and other personnel—de- ing to a recipient not assigned a cognizant
requirements of this part. signed to provide reasonable assurance agency for audit.When there is no direct
Federal awarding agency means the regarding the achievement of the follow- funding, the Federal agency with the
Federal agency that provides an award ing objectives for Federal programs: predominant indirect funding shall as-
directly to the recipient. (1)Transactions are properly recorded sume the oversight responsibilities. The
Federal financial assistance means as- and accounted for to: duties of the oversight agency for audit
sistancc that non-Federal entities receive (i) Permit the preparation of reliable are described in §.._____•400(b). -
or administer in the form of grants.loans, financial statements and Federal reports; Pass-through entity means a non-Feder-
loan guarantees, property (including do- (ii)Maintain accountability over assets; 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 compliance Program-specific audit means an audit
and other assistance,but does not include requirements of one Federal program as provided for in
amounts received as reimbursement for §____.200(c) and § .235.
(2) Transactions are executed in corn-
services rendered to individuals as de- Questioned cost means a cost that is
pliance with:
scribed in § .205(h) and (I) Laws, regulations, and.the provi- questioned by the auditor because of an
§ .205(i). audit finding:
Federal program means: sions of contracts or grant agreements
that could have a direct and material (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 regulation, contract, grant, cooperative
(ii)Any other laws and regulations that
CFDA. are identified in the compliance supple- agreement, or other agreement or docu-
(2) When no CFDA number is as- men[; and ment governing the use of Federal funds,
signed.all Federal awards from the same (3) Funds, property, and other assets including funds used to match Federal
agcncy made for the same purpose should
be combined and considered one pro- are safeguarded.against loss from unau- (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 or loan
(3)Notwithstanding paragraphs(I)and documentation; or
(2) of this definition, a cluster of pro- guarantee received or administered by a (3) Where the costs incurred appear
grams. The types programs non-Federal entity.
g ypes of clusters of unreasonable and do not reflect the ac-
are: Local government means any unit of Lions a prudent person would take in the
local government within a State, includ-
(i) Research and development (R&D); circumstances.
(ii) Student financial aid (SFA); and ing a county,borough,municipality,city, Recipient means a non-Federal entity
town, township, parish, local public au-
(iii) "Other clusters," as described in p that expends Federal awards received
- the definition of cluster of programs in thority, special district, school district, directly from a Federal awarding agency
this section. intrastate district, council of govern- to carry out a Federal program.
G4G.4S means generally accepted gov-
ments, and any other instrumentality 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 Federal pro- and applied, and all development activi-
States, which are applicable to financial gram determined by the auditor to be a ties that are performed by a non-Federal
audits. major program in accordance with entity.Research is defined as a systematic
Generally accepted accounting princi- §______.520 or a program identified as a study directed toward fuller scientific
pies has the meaning specified in general- major program by a Federal agency or knowledge or understanding of the sub-
ly accepted auditing standards issued by pass-through entity in accordance with ject studied. The term research also in-
the American Institute of Certified Public §_______.215(c). eludes activities involving the training of
Accountants (AiCPA). Management decision means the evalu- individuals in research techniques where
Indian tribe means any Indian tribe, ation by the Federal awarding agency or such activities utilize the same facilities
band,nation,or other organized group or pass-through entity of the audit findings as other research and development activi-
community, including any Alaskan Na- and corrective action plan and the is- ties and where such activities are not
five village or regional or village corpora- nuance of a written decision as to what included in the instruction function_ De-
lion (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: men[ of prototypes and processes.
Indians. (i) Is operated primarily for scientific, Single audit means an audit which
Internal control means a process,effect- educational,service,charitable,or similar 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 for 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 maintain, States, the District of Columbia, the
(1)Effectiveness and efficiency of oper- improve, or expand its operations; and Commonwealth of Puerto Rico, the Vir-
ations: (2) The term non-profit organization gin Islands,Guam,American Samoa,the
(2) Reliability of financial reporting; includes non-profit institutions of higher Commonwealth of the Northern Mariana
and education and hospitals. Islands, and the Trust Territory of the
Published by West Group
09:1604 HOUSING AND DEVELOPMENT REPORTER
r,
,,
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 institu:ions 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 not be 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 and expended in prior-
provide fellowships or similar Federal Federal entities that expend less than years, are not considered Federal awards
awards to students on a competitive ba- $300,000 a year in Federal awards are expended under 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 compy=
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.
pient and a vendor is provided in a FFRDC may elect to treat the FFRDC (f)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
ments listed in the compliance supple- § .205 Basis for determining out a Federal program shall be included
ment. Examples include: activities al- Federal awards expended. in determining Federal awards expended lc.
lowed or unallowed: allowable costs/cost and subject to audit under this part.
principles: cash management; 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 toa
lion'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
to subrecipients;the use of loan proceeds
Subpart B—Audits under loan and loan guarantee programs services to Medicaid eligible individuals
are not considered Federal awards ex-
the receipt of property; the receipt of
§_200 Audit requirements. surplus property; the receipt or use of pended under this part unless a State
requires the funds to be treated as Federal
program income; the distribution or con- awards expended because reimbursement
(a)Audit required.Non-Federal entities sumption of food commodities; the dis- is on a cost-reimbursement basis.
that expend$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 pair, 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- (i) 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
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would not be considered Federal awards. compliance requirements normally do §,.220 Frequency of audits.
- The guidance in paragraphs(b)and(c)of not pass through to vendors. However, .
this section should be considered in deter- the auditee is responsible for ensuring Except for the provisions for biennial.
mining whether payments constitute a compliance for vendor transactions-which 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 compliance or part shall be performed annually. Any
(b) Federal award. Characteristics in- the vendor's records must be reviewed to biennial audit shall cover both years
dicative of a Federal award received by a determine program compliance. Also, within the biennial period.
subrecipient are when the organization: when these vendor transactions relate to a (a)A State or local government that is
(I) Determines who is eligible to re- major program, the scope of the audit required by constitution or statute, in
ceive what Federal financial assistance; shall include determining whether these effect on January I, 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 of other January 1, 1995, is permitted to undergo
audits.An audit made in accordance with
a program of the organization as corn- its audits pursuant to this part biennially.
pared to providing goods or services for a this part shall be in lieu of any financial -
program of the pass through entity. audit required under individual Federal §,225 Sanctions.
(c) Payment for goods and services. awards. To the extent this audit meets a
Characteristics indicative of a payment
Federal agency's needs, it shall rely upon
p y and use such audits. The provisions of No audit costs may be charged to
for goods and services received by a this part neither limit the authority of Federal awards when audits required by
vendor are when the organization: Federal agencies, including their Inspec- this part have not been made or have
(i) Provides the goods and services tors General, or GAO to conduct or been made but not in accordance with
within normal business operations: arrange for additional audits(e.g., finan- this part. In cases of continued inability
(2) Provides similar goods or services cial audits, performance audits, evalu- or unwillingness to'have an audit con-
to many different purchasers: ations,inspections,or reviews)nor autho ducted in accordance with this part,Fed--
(3)Operates in a competitive environ- rite any auditee to constrain Federal era) agencies and pass-through entities
ment: agencies from carrying out additional shall take appropriate action using sane-
(4)Provides goods or services that are audits. Any additional audits shall be tions such as: -
ancillary to the operation of the Federal planned and performed in such a way 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 to pay for additional (b) Withholding or disallowing over=
(d)Use of judgment in making determi- audits.A Federal agency that conducts 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 laws and audit is conducted; or.
teristics. In making the determination of regulations, arrange for funding the 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 audited §;230 Audit costs. -
tionship is more important than the form as a major program. A Federal agency
of the agreement. It is not expected that may request an auditee to have a particu- (a) Allowable costs. Unless prohibited
all of the characteristics will be present tar Federal program audited as a major by law, the cost of audits made in actor
and judgment should be used in deter- program in lieu of the Federal agency 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
(c) For-profit subrecipient. Since this requests should be made at least 180 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
picots, the pass-through entity is respon- audited. The auditee, after consultation applicable OMB cost principles circulars,-
sible for establishing requirements. as with its auditor,should promptly respond 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 estimated Federal award:
compliance responsibility. Methods to incremental cost. The Federal agency (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 audited (31 U.S.C.. 7501 el seq.)not conducted in
elude pre-award audits, monitoring dur- as a major program. If the program is to accordance with this part.
ing the contract, and post-award audits. be audited as a major program based (2) The cost of auditing a non-Federal
(1) Compliance responsibility for Yen- upon this Federal agency request,and the entity which has Federal awards expend-
dors. In most cases.the auditee's compli- Federal agency agrees to pay the full ed of less than S300,000 per year and is
ance responsibility for vendors is only to incremental costs, then the auditee shall thereby exempted under § .200(d)
ensure that the procurement, receipt, and have the program audited as a major from having an audit conducted under
payment for goods and services comply program. A pass-through entity may 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
Published by West Group
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(dX3).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 summary 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- prioraudit 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 attes- - (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 (bX2) of this section, and the auditor's
ties allowed or unallowed; allowable that the audit was conducted in accor- report(s)described in paragraph(bX4)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 audit formity with the stated accounting poli- OMB to be retained as an archival copy.
guide avail- 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
specific 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 prose- (iii) A report on compliance which copy of the reporting package to the
dures. and audit reporting requirements. Federal clearinghouse on behalf of' the
The auditor should contact the Office.of
includes an opinion (or disclaimer of BII
Inspector General of the Federal agency opinion)as to whether the auditee corn- Federal awarding agency, or directly to
to determine whether such a guide is plied with laws, regulations,and the pro- the pass-through entity in the case of a
available, When a current program-spe- visions of contracts or grant agreements subrecipient. Instead of submitting the
cific audit guide is available, the auditor which could have a direct and material reporting package to the pass-through
re-
shall follow GAGAS and the guide when effect on the Federal program; and entity, when a subrecipient is not re-
performing a program-specific audit. (iv) A schedule of findings and ques- quired to submit a reporting package to
(b) Program-specific audit guide not boned costs for the Federal program that the pass-through entity, the subrecipient (
mailable (1) When a program-specific includes a summary of the auditor's re- shall provide written notification to the
audit guide is not available, the auditee suits relative to the Federal program in a pass-through entity, consistent with the
and auditor shall have basically the same format consistent with § .505(dxl) 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 entity to comply with this notification
major program in a single audit. § .505(d x3) requirement.
(2)The auditee shall prepare the finan- (c)Report submission for program-spe-
cific (d) Other sections of this part may
cial statement(s)for the Federal program audits. (1) The audit shall be corn- apply.Program-specific audits are subject
that includes, at a minimum, a schedule pleted and the reporting required by
of expenditures of Federal awards for the paragraph (cX2) or (cX3) of this section to § 100 through § 215(b),
program and notes that describe the sig- submitted within the earlier of 30 days § 220 through § .230,
after receipt of the auditor's report(s), or § 300 through §_305,
nificant accounting policies used in pre- P § 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 .405,
requirements of§ .315(b),and a cor- in advance by the Federal agency that § § 5fe through
provi-
rective action plan consistent with the provided the funding or a different period 515, and other referenced prove•
is specified in a program-specific lions of this part unless contrary to the
requirements of§ .315(c). P p ogr pecific audit
(3) The auditor shall: guide. (However, for fiscal years begin- provisions of this section,aprogram-spe-
(i) Perform an audit of the financial ning on or before June 30, 1998,the audit ru audit guide, or program laws and
statement(s) for the Federal program in shall be completed and the required re- reeggulations.
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 after the ,
control over the Federal program consis- end of the audit period, unless a different §_.300 Auditee responsibilities.
tent with the requirements of period is specified in a program-specific
§_.500(c) for a major program; audit guide.) Unless restricted by law or The auditee shall:
(iii) Perform procedures to determine regulation, the auditee shall make report (a)Identify,in its accounts, all 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 they 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
2-2-98
Federal awards in compliance with laws, auditee during the prior year exceeded S I (4) Include notes that describe the
regulations. and the provisions of con- million. This restriction applies to 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 allocation (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 agreement or schedule the total amount provided to
the provisions of contracts or grant agree- cost allocation plan is used to recover subrecipients from each Federal program.
ments related to each of its Federal costs. To minimize any disruption in (6) Include, in either the schedule or a
programs. existing contracts for audit services, this note to the schedule, the value of the
(d)Prepare appropriate financial state- paragraph applies to audits of fiscal 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. Federal ante in effect during the year, and loans
with § .310. auditors may perform all or part of the or loan guarantees outstanding at year
(e) Ensure that the audits required by work required under this part if they end. While not required, it.is preferable
this part are properly performed and comply fully with the requirements of this to present this information in the sched-
submitted when due.When extensions to part. We.
the report submission due date required -
by§ .320(a)are granted by the cogni- § 315 Audit findings follow-up.
zant or oversight agency for audit, 310 Financial statements. §— gs P
promptly notify the Federal clearinghouse -
designated by OMB and each pass- (a) Financial statements.-The auditee (a) General The auditee is responsible
through entity providing Federal awards shall prepare financial statements that for follow-up and corrective action on all
of the extension. reflect its financial position, results of audit findings.As part of this responsibil-
(f)Follow up and take corrective action operations or changes in net assets,and, ity, the auditee shall prepare a summary
on audit findings. including preparation where appropriate, cash flows for 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 organization- action plan for current year audit find-
accordance with § .315(b) and al unit and fiscal year that is chosen to ings. The summary schedule of prior
§ .315(c). respectively. meet the requirements of this part.How- audit findings and the corrective action
ever, organization-wide financial state- plan shall include the reference numbers
menu may also include departments, the auditor assigns to audit findings un-
§_305 Auditor selection. y 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 accordance multiple years, it shall include the fiscal
audit services, auditees shall follow the with §500(a) and prepare separate year in which the finding initially oc-
procurement standards prescribed by the financial statements. cursed_
Grants Management Common Rule (b)Schedule of expenditures of Federal (b) Summary schedule of prior audit
(hereinafter referred to as the "A-102 awards. The auditee shall also prepare a findings_ The summary schedule of prior
Common Rule") published March 11, schedule of expenditures of Federal audit findings shall report the status of all
1988 and amended April 19, 1995,Circu- awards for the period covered by the audit findings included in the prior au-
tar A-I 10, "Uniform Administrative Re- auditee's financial statements. While not dit's schedule of findings and questioned
quirements for Grants and Agreements required, the auditee may choose to pro- costs relative to Federal awards. The
with Institutions of Higher Education, vide information requested by Federal summary schedule shall also include au-
Hospitals and Other Non-Profit Organi- awarding agencies and pass-through enti- dit findings reported in the prior audit's
zations,"or the FAR(48 CFR part 42),as ties to make the schedule easier to use. summary schedule of prior audit findings
applicable (OMB Circulars are available For example,when a Federal program has except audit findings listed as corrected
from the Office of Administration,Publi- multiple award years,the auditee may list in accordance with paragraph (bxl) of
cations Office, room 2200, New Execu- the amount of Federal awards expended this section, or no longer valid or not
five 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 (bX4) of this section.
. make positive efforts to utilize small (1)List individual Federal programs by (1) When audit findings were fully
businesses, minority-owned firms, and Federal agency. For Federal programs corrected, the summary schedule need
women's business enterprises, in procur- included in a cluster of programs, list only list the audit findings and state that
ing audit services as stated in the A-102 individual Federal programs within a corrective action was taken.
Common Rule, OMB Circular A-I 10, or cluster of programs. For R&D,total Fed- (2) When audit findings were not cor-
the FAR(48 CFR part 42),as applicable. eral awards expended shall be shown rected or were only partially corrected,
In requesting proposals for audit services, either by individual award or by Federal the summary schedule shall describe the
the objectives and scope of the audit agency and major subdivision within the planned corrective action as well as any
should be made clear. Factors to be Federal agency. For example,the Nation- partial corrective action taken.
considered in evaluating each proposal al Institutes of Health is a major subdivi- (3) When corrective action taken is
for audit services include the responsive- sion in the Department of Health and significantly different from corrective ac-
ness to the request for proposal, relevant Human Services_ lion 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 number 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 Federal 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 CFDA in- summary schedule. A valid reason for
when the indirect costs recovered by the formation is not available. considering an audit finding as not war-
Published by West Group
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 Federalragency 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 final).- tor Telephone Number, Signature, and
issued. vial statements and whether any such Date.
(c) Corrective action plan. At the com- 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
live 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 this 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) Genera! The audit shall be corn- package pursuant to scribed in paragraph (c) of this section,
pleted and the data collection form de- § -32((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 pars= 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: (
led 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 § .3I5(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_ (I) 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 schedule 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 off- agement. (e) Additional submission by subreci-
cer,or chief financial officer)shall sign a (G) Matching, level of effort, earmark- pients.(1)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
Hying 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 propertacquisition 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 electronic 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 Agencies 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 §_400 Responsibilities, dard performance by auditors shall be
subrecipient is not required to submit a referred to appropriate State licensing
reporting package to a pass-through entity agencies and professional bodies for disci-
pursuant to paragraph (eX I) of this sec- (a)Cognizant agency audit responsi- plrnary action.
lion,the subrecipient shall provide writ- bihties. Recipients expending more than
ten notification to the pass-through entity $25 million a year in Federal awards shall (6)Coordinate,to the extent practical,
that: an audit of the subrecipient was have a cognizant agency for audit. The audits or reviews made by or for Federal
conducted in accordance with this part designated cognizant agency for audit agencies that are in addition to the audits
(including the period covered by the audit shall be the Federal awarding agency that made pursuant to this part, so that the
and the name,amount,and CFDA num- provides the predominant amount of di- additional audits or reviews build upon
ber of the Federal award(s) provided by rest funding to a recipient unless OMB audits performed in accordance with this
the pass-through entity); the schedule of makes a specific cognizant agency for part.
findings and questioned costs disclosed audit assignment.To provide for continu- (7)Coordinate a management decision
no audit findings relating to the Federal
Ay of cognizance, the determination of for audit findings that affect the Federal
award(s)that the pass through entity pro-
the predominant amount of direct 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 audit findings did not report on the awards expended in the recipient's fiscal reporting responsibilities among auditors
status of any audit findings relating to the years ending in 1995, 2000, 2005, and to achieve the most cost-effective audit.
Federal award(s) that the pass-through audit thereafter. For
ending in (9)For biennial audits permitted under
entity provided.A subrecipient may sub- § .220, consider auditee requests to
mil a copy of the reporting package 1997 through 2000 will be determined qualify as a low-risk auditee under
described in paragraph (c)of this section based on Federal awards expended in § 530(a)
to a pass-through entit to tom 1 with 1995. (However, for States and local •
entity comply governments that expend more than S25 (b)Oversight agency for audit responsi-
this notification requirement. bitities.An auditee which does not have a
million a year in Federal awards and have
(f) Requests for report copies. In re- previously assigned cognizant agencies designated cognizant agency for audit will
sponse to requests by a Federal agency or be under the general oversight of the
for audit, the requirements of this Para-
pass-through entity,auditees shall submit graph are not effective until fiscal years Federal agency determined in accordance
the appropriate copies of the reporting beginning after June 30, 2000.)Notwith- with§. .105.The oversight agency for
package described in paragraph(c)of this standing the manner in which audit cog- audit:
section and, if requested, a copy of any nizance is determined, a Federal award- (I) 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 another Fed- (2) May assume all or some of the
ditecs shall keep one copy of the data eral awarding agency which provides 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. Within 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 for audit shall perform the following 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 reassignment. 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 (I)Provide technical audit advice and title and number,award name and num-
- from date of receipt. liaison to auditees and auditors. ber, award year, and if the award is for
(h) Clearinghouse responsibilities. The (2)Consider auditee requests for exten- R&D. When some of this information is
Federal clearinghouse designated by sions to the report submission due date not available, the Federal agency shall
OMB shall distribute the reporting pack- required by§ .320(a).The cognizant provide information necessary to oclearly
ages received in accordance with para- agency for audit may grant extensions for describe the Federal award.
graph (d)(2) of this section and good cause.
§ .235(c)(3) to applicable Federal (3) Obtain or conduct quality control (2) Advise recipients of requirements
awarding agencies, maintain a data base reviews of selected audits made by non- imposed on them by Federal laws,regula-
of completed audits,provide appropriate Federal auditors,and provide the results, lions, and the provisions of contracts or
information to Federal agencies, and fol- when appropriate, to other interested grant agreements.
low up with known auditees which have organizations. (3) Ensure that audits are completed
not submitted the required data collet- (4) Promptly inform other affected and reports are received in a timely
lion forms and reporting packages_ Federal agencies and appropriate Federal manner and in accordance with the re-
(i) Clearinghouse address. The address law enforcement officials of any direct quirements of this part_
of the Federal clearinghouse currently reporting by the auditee or its auditor of (4)Provide technical advice and coun-
designated by OMB is Federal Audit irregularities or illegal acts,as required by set to auditees and auditors as requested.
Clearinghouse, Bureau of the Census, GAGAS or laws and regulations. (5) Issue a management decision on -
1201 E 10th Street, Jeffersonville, IN (5) Advise the auditor and, where ap- audit findings within six months after
47132. propriate, the auditee of any deficiencies receipt of the audit report and ensure that
(j) Electronic filing_ Nothing in this found in the audits when the deficiencies 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 auditee (6) Assign a person responsible for
ner as may be approved by OMB. With shall work with the auditor to take correc- providing annual updates of the compli-
OMB approval,the Federal clearinghouse Live action. If corrective action is not ante supplement to OMB.
Published by West Group
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 (cX2Xi) of this
following for the Federal awards it makes: to Federal awards it makes to recipients. section.
(I) 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(dx5), 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 (cX2) 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- Lion (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."(l)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 hers 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 merits 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-
met the audit requirements of this part (a)General.The audit shall be conduct- grams and the compliance requirements
for that fiscal year. of the largest Federal programs are in-
ed in accordance with GAGAS.The audit
45) Issue a management decision on eluded in the compliance supplement.
audit findings within six months after shall cover the entire operations of the
auditee; or, at the option of the auditee, (3) For the compliance requirements
receipt of the subrecipient's audit report 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
that cover departments, agencies, and
appropriate and timely corrective action. these compliance requirements will meet
other organizational units which expend-
(6) Consider whether subrecipient au- the requirements of this part.Where there
ed or otherwise administered Federal
dits necessitate adjustment of the pass- have been changes to the compliance
awards during such fiscal year, provided
through entity's own records. that each such audit shall encompass the requirements and the changes are not
(7)Require each subrecipient to permit financial statements and schedule of ex- reflected in the compliance supplement,
the pass-through entity and auditors to penditures of Federal awards for each the auditor shall determine the current
have access to the records and financial compliance requirements and modify the
statements as necessary for the pass- such department,agency,and other orga- audit procedures.according) ,>ror those
through entity to comply with this art. nizational"unit,which shall be considered
y p y part. be a non-Federal entity. The financial Federal programs not covered in the
statements and schedule of expenditures compliance supplement, the auditor
§_.405 Management decision. of Federal awards shall be for the same should use the types of compliance re-
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 expendi- 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 elude 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 (I) 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(0(5), 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
whether a prior audit finding relates to a over major programs were disclosed 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(bx3), the auditor shall (v) The type of report the auditor supplement.
complete and sign specified sections of issued on compliance for major programs . (3) Known questioned costs which are
the data collection form. (i.e.,unqualified opinion, qualified opin- greater than$10,000 for a type of compli-
ion, adverse opinion, or disclaimer of ance requirement for a major program.
opinion); Known questioned costs are those specifi-
(vi)_SOS Audit reporting. (vi)A statement as to whether the audit cally identified by the auditor.In evaluat-
disclosed any audit findings which the ing the effect of questioned costs on the
The auditor's report(s) may be in the auditor is required to report under opinion on compliance, the auditor con-
form of either combined or separate § . 510(a); siders the best estimate of total costs
reports and may be organized differently (vii) An identification of major 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 used to tilled (known questioned costs). The au-
that the audit was conducted in accor- distinguish between Type A and Type 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$10,000 for a type of compli-
(a)An opinion (or disclaimer of opin- (ix) A statement as to whether 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 financial proper perspective for judging the preva-
cepted accounting principles and an opin- statements which are required to be re- lence and consequences of the questioned
ion (or disclaimer of opinion) as to ported in accordance with GAGAS. 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 include audit greater than $10,000 for a Federal pro-
material respects in relation to the finan- findings as defined in § _510(a). gram which is not audited as a major
cial statements taken as a whole. (i)Audit findings(e.g., internal control program. Except for audit follow-up, the
(b)A report on internal control related findings,compliance findings,questioned auditor is not required under this part to
to the financial statements and major costs, or fraud) which relate to the same perform audit procedures for such a Fed-
programs. This report shall describe the issue should be presented as a single audit eral program; therefore, the auditor will
scope of testing of internal control and finding. Where practical, audit findings normally not find questioned costs for a
the results of the tests, and,where appli- should be organized by Federal agency 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 (ii)Audit findings which relate to both become aware of questioned costs for a
in paragraph (d) of this section. the financial statements and Federal
(c) A report on compliance with laws, Federal program which is not audited as a
regulations, and the provisions of con- awards, as reported under paragraphs major program (e.g., as part of audit
g P (dX2) and (dx3) of this section, respec- follow-up or other audit procedures)and
tracts or grant agreements, noncompli- Lively,should be reported in both sections the known questioned costs are greater
ance with which could have a material of the schedule.However,the reporting in
effect on the financial statements. This one section of the schedule m y be in than this as an then the ading. shall re-
report shall also include an opinion (or summary form with a reference .t - a port this as an audit finding
disclaimer tif'-o inion as to whether the ry P o (5)The circumstances concerning why
p ) detailed reporting in the other section of the auditor's report on compliance for
auditee complied with laws, regulations, the schedule.
and the provisions of contracts or grant major programs is other than an unquali-
agreements which could have a direct and lied 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 audit find- (6) Known fraud affecting a Federal-
section. ings in a schedule of findings and ques- award, unless such fraud is otherwise
(d) A schedule of findings and ques- tioned costs: reported as an audit finding in the scbed-
tioned costs which shall include the fol- (I) Reportable conditions in internal ule of findings and questioned costs for
lowing three components: control over major programs. The audi- Federal awards.This paragraph does not
(I)A summary of the auditor's results tor's determination of whether a deficien- 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 reporting 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 identified 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 conditions which summary schedule of prior audit findings
reportable conditions in internal control are individually or cumulatively material 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 with the sents the status of any prior audit finding_
conditions were material weaknesses; provisions of laws, regulations,contracts, (b).Audit finding detail. Audit findings
(iii)A statement as to whether the audit or grant agreements related to a major shall be presented in sufficient detail for
disclosed any noncompliance which is program. The auditor's determination of the auditee to prepare a corrective action
material to the financial statements of the whether a noncompliance with the provi- plan and take corrective action and for
auditee: lions of laws, regulations, contracts, or Federal agencies and pass-through enti-
(iv)Where applicable, a statement that grant agreements is material for the pur- ties to arrive at a management decision.
reportable conditions in internal control pose of reporting an audit finding is in The following specific information shall
Published by West Group
09:1614 HOUSING AND DEVELOPMENT REPORTER
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- fied as Type A programs: ment and Budget by calling 202-395-3080.
agement of Federal awards and provide a (1) Internal control deficiencies which In addition, a reproduction of Form SF-
waiver. were identified as material weaknesses; SAC may be received by contacting: Refer-
(2)Noncompliance with the provisions
(c)There were no deficiencies in inter- of laws, regulations, contracts, or grant ence Editor, Housing and Development
nal control which were identified as mate- agreements which have a material effect Reporter, 1255 23rd Street, N.W., Suite
rial weaknesses under the requirements of on the Type A program; or 655,Washington, D.C. 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. A pendix A to Part -Data Note: Provisional OMB Circular A-133
(d)None of the Federal programs had pCoilection Form (Form SF-SAC) Compliance Supplement is available from
audit findings from any of the following the Office of 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.
•
C.
Published by West Group
09:0642 HOUSING AND DEVELOPMENT REPORTER .
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
(5) Program-activity. Recipients shall interest rate that would fluctuate periodi- pursuant to section 106(d)of the Act,for
review the level of program activity on a catty during the term of the agreement, 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(exl)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 of ` 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- cial 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 commits of any other statute for which the Secre-
tor the action, withdraw all unobligated private funds for loans in the rehabilita- tary does not have direct enforcement
deposited funds from the private finan- Lion program in an amount substantially responsibility is-not intended to be taken
vial institution, and return the funds to as an-indication that, in the Secretary's
the recipient's letter of credit. in excess of the amount of the lump sum opinion, such statute or Executive Order
deposit;
(7) Return of unused deposits. At the is not applicable to activities assisted
end of the period specified in the agree-
i.Commitment of private funds by under the Act.For laws that the Secretary
ment for undertaking activities, all uno- the financial institution for rehabilitation will treat as applicable to grants made to
bligated deposited funds shall be returned loans at below market interest rates, at States under section 106(d)of the Act for
to the recipient's letter of credit unless the higher than normal risk, or with longer purposes p rposes 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(ex2) of the Act, see
section. In addition, the recipient shalt vices in support of the rehabilitation §570.487. -
reserve the right to withdraw any unobli- program by the participating financial (b)This subpart also sets forth certain
gated deposited funds required by HUD institution at no cost or at lower than 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 on cable to grants provided under the Act as
570.911, 570.912 or 570.913. lump sum deposits and a matter of administrative discretion.
p po payments on
(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 or to section 106(b)and 106(dX2XB)of the
gram income and, during the period of
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 Cation activities under the provisions of 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 new
CDBG-assisted- activities subject to the agreement during any period of time in §570.601 Public Law 88-352 and -
requirements applicable to such activi- which an audit or monitoring finding on a Public Law 90-284; affirmatively -
ties,except that repaymeht of non-CDBG previous lump sum drawdown agreement furthering far housing.Executive Order
funds shall not be treated as program remains unresolved. - - 11063.
income. (e) Prior notification. The recipient -
(9)Provision of consideration. In con- shall provide the HUD field office with (a) The following requirements apply
sideration for the lump sum deposit by written notification.of the amount of 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:
lion,the deposit must result in appropri- cial institution before distribution under (1)Public Law 88-352,which is title VI
ate benefits in support of the recipient's the provisions of this section. of the Civil Rights Act of 1964(42 U.S.C.
local rehabilitation program: Minimum 2000d et seq.),and implementing regula-
(f) Recordkeeping requirements. The
requirements for such benefits are: lions in 24 CFR pail I.
(i) Grantees shall require the financial recipient shall maintain in its files a copy (2) Public Law 90-284, which is the
institution to pay interest on the lump of the written agreement and related Fair Housing Act (42 U.S.C. 3601-3620).
sum deposit. documents establishing conformance In accordance with the Fair Housing Act,
(A)The interest rate paid by the finan- with this section and concerning perfor- the Secretary requires that grantees
cial institution shall be no more than mance by a financial institution in actor- 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
COMMUNITY DEVELOPMENT 09:0643
I-IDR 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 104(bx2) 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.
analysis'to identify impediments to fair ronmental' review, decisionmaking, and (B)After notice.by the property owner
action responsibilities by execution of to move permanently from the property,
housing choice within its jurisdiction, grant 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 p m, . . 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(bX2XiXA)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 of the 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. Disaster 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 discrimina- ble)shall assure that they have taken all tions or 30 percent of the household's
lion 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 shall apply to and farms)as a result of activities assisted is not offered payment for all reasonable
con-
programs or activities 504 Federal under this part. out-of-pocket expenses incurred in con-
prog amal assistance under Title I pro- (b) Relocation assistance for displaced nection with the temporary relocation,
grams.The ssiitan and der Title I pro- persons at URA levels. (1) A displaced including the cost of moving to and from
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 Act contains and Real Property Acquisition Policies another unit in the building/complex,but
labor standards that ato nonvol ins Act of 1970 (URA) (42 U.S.C. 4601- is not offered reimbursement for all rea-
labor standards stun arils that in apply ly to n in part 4655). sonable out-of-pocket expenses incurred
with assistance or fis received under then part rt (2)Displaced person.(i)For purposes of in connection with the move.
with with eceive under h the Act, paragraph (b) of this section, the term (ii) Notwithstanding the provisions of
the Contract Work Hours and Safety displaced person" means any person paragraph (bX2Xi) of this section, the
the
Act(40 U.S.C.Hours and de .Safety (family, individual, business, nonprofit term "displaced person-" does not in-
Standards 4) organization, or farm) that moves from elude:
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(bX2XiXA)or(B) request HUD to determine whether a property
of this section,but who received a written person is a displaced person under this (c) Residential antidisplacement and
notice of the expected displacement be- section. relocation assistance plan. The grantee
fore occupancy. (3)Initiation of negotiations. For pur- shall comply with the requirements of 24
(C) A person who is not displaced as poses of determining the type of replace-
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 D.09:1001 for text of 24 CFR 42.
as a direct result of the acquisition, vately undertaken rehabilitation, demoli-
[Text continues on p. 09:06471
•
•
Published by West Group .
COMMUNITY DEVELOPMENT Uy:Uti4't
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(aX11) 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 haz-
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:
(a)Executive Order 11246,as amended to which children under seven years of
tance to persons receiving assistance un- by Executive Orders 11375 11478 age may be exposed in existing housing
der paragraphs(b)or(c)of this section at which is rehabilitated with assistance
levels in excess of those required by these I208b, and 12107 (3 CFR, 1964-1965
y 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 Comp.,p.803; has promulgated requirements regarding
vided under State or local law,the grantee 1978 Comp., the elimination of lead-based paint haz-
(or state recipient, as applicable) shat! p-.p•264)(Equal Employment
P
provide such assistance only upon the Opportunity)and the implementing regu- ards in HUD-associated housing at 24
?' p° lations at 41 CFR chapter 60; and CFR Part 35, Subpart C. This paragraph
basis of a written determination that the (b)Section 3 of the Housing and Urban is promulgated pursuant to the authoriza-
assistance 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 recipi- §570.608 Lead-based paint.
8r ( p 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 assis- Cl-K part 35,subpart B apply to residen- (i) Emergency repairs (not including
ted activity is subject to 49 CFR part 24, tial structures constructed or rehabilitat- lead-based paint-related emergency re-
subpart B. ed with assistance provided under this
(f)Appeals. If a person disagrees with part 570. pairs);
the determination of the grantee (or the (b)Notification of hazards of lead-based (ii) Weat r or sewer( (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- NUD associated housing constructed pri- issuances which provide funds for reha-
tion,the person may file a written appeal bilitation;
of that determination with the grantee(or or to 1978 of the hazards of lead-based
( paint poisoning at 24 CFR Part 35, (vi) Other similar types of single-put-
procedureseto�be followed ear The appeal Subpart A.This paragraph is promulgat- Gals res programs or remodeling include
applicable
ed pursuant to the authorization granted
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 to which it applies,
p g y the notification requirements prescribed (vii)Any non-single purpose rehabilita-
written request for review of the grantee's by Subpart A of 24 CFR Part 35. tion that does not involve applicable
decision to the HUD Field Office. For (2)For properties constructed prior to surfaces (as defined in 24 CFR 35.22)
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 ants or purchasers of properties owned by "Applicable surface." All intact and
state recipient's decision with the State. the grantee or its subrecipient and ac- nonintact interior and exterior painted
(g) Responsibility of grantee or State quired or rehabilitated with assistance surfaces of a residential structure.
(I)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 lead- truding painted surfaces up to five feet
the requirements of this section,notwith- based paint; from the floor or ground, which are
standing any third party'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 par- 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 µ/d1(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 KEFOK1 EK
t
t
"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). Lead-based paint and defective paint de-
fied as having a lead content greater than (6)Funding for inspection, testing and bris shall be disposed of in accordance
or equal to 1 mg/cm2. abatement. Program requirements and with applicable Federal, State or local
(3) Inspection and Testing—(i) Defec- local program design will determine requirements.(See e.g.,40 CFR Parts 260
rive paint surfaces. The grantee shall in- whether the cost of inspection,testing or through 271.)
sped 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- or ineligible contractors or
seven years of age and which are pro- veloper shall take appropriate action to subrecipients.
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 tem-
bilitation. Defective paint conditions porary relocation of tenants during the p 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. requirements 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. mentalities, and subrecipients shall com-
receiving rehabilitation assistance, in- (9)Monitoring and enforcement. HUD ply with the
eludes a child under seven years of age field office monitoring of rehabilitation requirements q policies, guidelines,ar85 and
Y g g r of 24 CFR part 85 and
with an identified EBL condition. Lead programs includes reviews for compli- OMB Circulars A-87,A-110(implement-
content shall be tested by using an X-ray ance with applicable program require- ed 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- 1282(implemented at 24 CFR part 44),as
of Img/cm2 or higher using an XRF shall really includes instructions for monitor- applicable, as they relate to the accep-
be considered positive for presence of ing lead-based paint requirements will be Lance and use of Federal funds under this
lead-based paint. amended as appropriate.In cases of non- part. The applicable sections of 24 CFR
(iii)Abatement without testing. In lieu compliance, HUD may impose condi- parts 84 and 85 are set forth at§570.502.
of the procedures set forth in paragraph tions or sanctions on grantees to encour-
(cx3Xii) of this section, in the case of a age prompt compliance. §570.611 Conflict of interest.
residential structure constructed prior to (10) Compliance with other program
1978, the grantee may forgo testing and requirements, Federal, State and local
abate all applicable surfaces in accor- laws. (a)Applicability.(1)In the procurement
dance with the methods set out in 24 (i)Other program requirements. To the of supplies,equipment,construction,and
CFR 35.24(bX2Xii). extent that assistance from any of the services by recipients and by subreci-
(4)Abatement Actions. (I) For inspec- programs covered by this section is used pients, the conflict of interest provisions
Lions performed under §570.608(cx3Xi) 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 ap- 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(cx3Xii) 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 meats 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. 2 Sec footnote I at Sec. 570.200(aX5).
Published by Warren Gorham Lamont
COMMUNITY DEVELOPMENT 09:0649
HDR RF-613
9-15-97
with regard to such activities,may obtain to receive generally the same interests or (I) 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 applicants 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.(I)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(dX I)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 (dX2) of this section. program and the UDAG program. The local government's grant by the State.
(I) Threshold requirements. HUD will Executive Order applies 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
cation: 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 Lion 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 met the requirements of §570.613 Eligibility restrictions for building or facility designed,constructed,
paragraph (dx1) 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
09:0654 HOUSING AND DEVELOPMENT REPORTER
--,..
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 Lions by States that administer the CDBG and
that are structural in nature in existing Such assistance r shall consist, at this a mini- projects elfin ble under 570.204opment
facilities, where such removal is readily mum,of the certifications required under p §
achievable-that is, easily accomplishable n (j)Construction of housing by nonprof-
and able to be carried out without much §570.704(bX9) (and actions pursuant it organizations for homeownership un-
and or expense. thereto). der section 17(d) of the United States
Y pe (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 Development Act of 1987 (Nehemiah
§570.703 Eligible activities.
§570.700 Purpose. . " Housing 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 §570.705(b)(I).
CDBG program account or line of credit (1) Acquisition, construction, recon-
for costs incurred by the public entity or struction,rehabilitation,or installation of
§570.701 Definitions. public facilities (except for buildings for
designated public agency and paid with the general conduct of government),pub-
Borrower means the public entit or its CDBG grant funds or program income. lic streets, sidewalks, and other site im-
p Y (a) Acquisition of improved or unim-
designated public agency that issues debt proved 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 (a)Presubmission and citizen participa-
lic public agency.means a pub- §570.606(b) or (c); or lion requirements.
lic agency designated by"a public entity to (2)Determined by the public entity to (1)Before submission of an application
issue debt obligations as borrower under be appropriate under the provisions'of
ga
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- including movement of structures to oth- (i)Develop a proposed application that
ropolitan 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 (1)Site preparation,including construe- (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 I08(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 G:
24 CFR 52
Intergovernmental Review of HUD Programs and Activities
•
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 com-
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 Wbat 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, I983 and titled"Intergovern- 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 lion 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
cafe 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 financial assis- can Samoa,the U.S.Virgin Islands,or the interagency coordination?
lance and direct federal develop- Trust Territory of the Pacific Islands.
meat?
52.9 How does the Secretary receive and §523 What programs and activities of The Secretary, to the extent practica-
ble,to comments? the Department are subject to these all consults with and seeks advice from
52.10 How does the Secretary make ef- regulations? all other substantially affected federal
forts to accommodate intergovern- departments and agencies in an effort to
Mental concerns? The Secretary publishes in the Federal assure full coordination between such
52.11 What are the Secretary's obliges- Register a list of the Department's pro- agencies and the Department regarding
lions in interstate situations? grams and activities that are subject to programs and activities covered under
52.12 [Reserved) these regulations and identifies which of these regulations.
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.0 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. meat'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
09:1722 HOUSING AND DEVELOPMENT 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 prose- 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- (aX3) of this section, the Secretary in-
covered by a state process under §52.6 ed to act as a single point of contact forms the single point of contact that—
the Secretary,to the extent permitted by between a state process and all federal (I) 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 a after the single point of contact receives
views of state and local elected officials; state process recommendation for a pro- the explanation; or
and, gram selected under §52.6. (2) The Secretary has reviewed the
(2)Communicates with state and Iocaf (bX1)The single point of contact is not decision and determined that,because of
elected officials, through the state pro- obligated to transmit comments from unusual circumstances, the waiting perm.
state,areawide,regional or local officials of at least ten days is not feasible_
cess,as early in a program planning cycle and entities where there is no state pro-
(c) For purposes of computing the
as is reasonably feasible to explain specif- seas recommendation. waiting period under paragraph (bxl)of
The Secretary (2) If a state process recommendation this section, a single point of contact is
(b) ary provides notice to is transmitted by a single point of contact, presumed to have received written notify
directly affected state,areawide,regional, all comments from state, areawide, re- cation 5 days after the date of mailing of
and local entities in a state of proposed gional,and local officials and entities that such notification.
federal financial assistance or direct fed- differ from it must also be transmitted.
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 state obligations in interstate situations?
under the Order, or process recommendation,state,areawide,
(2)The assistance or development in- regional and local officials and entities (a).The Secretary is responsible for-
volves a program or activity not selected may submit comments either to the appli- (I)Identifying proposed federal finan-
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 not ment that have an impact on interstate
tion in the Federal Register or other selected for a state process, state, area- areas;
appropriate means, which the Depart- wide, regional and local officials and (2) Notifying appropriate officials and
ment in its discretion deems appropriate. entities may submit comments either to entities in states which have adopted a
the applicant or to the Department. In process and which select the Depart
§52.S How does the Secretary provide addition, if a state process recommenda- meat's program or activity. (;
states an opportunity to comment on
tion for a nonselected program or activity (3)Making efforts to identify and null-
proposed federal financial assistance is transmitted to the Department by the fy the affected state, areawide, regional,
and direct federal development? single point of contact, the Secretary and local officials and entities in those
follows the procedures of§52.10 of this 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 comments Department's program or activity,
the Secretary gives state processes or which do not constitute a state process (4) Responding pursuant to§52.10 of
directly affected state,areawide,regional recommendation submitted under these this Part if the Secretary receives a recom-
and local officials and entities— regulations and for which the Secretary 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 comments contact,in cases in which review,coordi-
on proposed Federal financial assistance are provided by a single point of contact, nation, and communication with the De-
under: (i)A covered mortgage insurance by the applicant, or directly to the De- partment have been delegated.
programs, (ii) the Urban Development partment by a commenting party. (b) The Department uses the prom-
Action Grant Program,or(iii)the lions- dures in§52.10 if a state process provides
ing Development Grant Program. §52.10 How does the Secretary make 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 state §52.12 [Reserved]
paragraph faX I). process recommendation to the Depart-
(b) This section also applies to coin- meat through its single point of contact, §52.13 May the Secretary waive any
meats 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 solo- Upon determination of good cause,the
(c)Applicants for programs and activi- Lion 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 contact these regulations.Every waiver is in writ-
stration Cities and Metropolitan Act shall with such written explanation of its deci- ing and sets forth the facts and reasons
allow areawide agencies a 60-day oppor- sion,as the Secretary in his or her discre- upon which the Secretary relies in waiv--
tunity for review and comment. tion deems appropriate. The Secretary ing the provisions.
Published by Warren Gorham Lamont
journeymen hourly rate specified in the applicable wage determi- 7. Contract termination; debarment. A breach of the contract
nation: Apprentices shall be paid fringe benefits in accordance clauses in 29 CFR 5.5 may be grounds for termination of the con-
with the provisions of the apprenticeship program. If the appren- tract and for debarment as a contractor and a subcontractor as
ticeship program does not specify fringe benefits,apprentices must provided in 29 CFR 5.12.
be paid the full amount of fringe benefits listed on the wage deter- 8. Compliance with Davis-Bacon and Related Act Requirements.
mination for the applicable classification. If the Administrator de- All rulings and interpretations of the Davis-Bacon and Related
termines that a different practice prevails for the applicable ap- Acts contained in 29 CFR Parts 1, 3, and 5 are herein incorpo-
prentice classification, fringes shall be paid in accordance with rated by reference in this contract
that determination. In the event the Office of Apprenticeship Train 9. Disputes concerning labor standards. Disputes arising out
ing, Employer and Labor Services, or a State Apprenticeship of the labor standards provisions of this contract shall not be sub-
Agency recognized by the Office, withdraws approval of an ap ject to the general disputes clause of this contract. Such disputes
prenticeship program, the contractor will no longer be permitted shall be resolved in accordance with the procedures of the De-
to utilize apprentices at less than the applicable predetermined partment of Labor set forth in 29 CFR Parts 5,6,and 7.Disputes
rate for the work performed until an acceptable program is ap within the meaning of this clause include disputes between the
proved. contractor(or any of its subcontractors)and HUD or its designee,
(ii) Trainees. Except as provided in 29 CFR 5.16, trainees will the U.S. Department of Labor, or the employees or their repre-
not be permitted to work at less than the predetermined rate for sentatives.
the work performed unless they are employed pursuant to and 10. (i) Certification of Eligibility. By entering into this contract
individually registered in a program which has received prior ap the contractor certifies that neither it(nor he or she) nor any per
-
prove!, evidenced by formal certification by the U.S. Department son or firm who has an interest in the contractor's firm is a person
of Labor, Employment and Training Administration. The ratio of or firm ineligible to be awarded Government contracts by virtue of
trainees to journeymen on the job site shall not be greater than Section 3(a)of the Davis-Bacon Act or 29 CFR 5.12(a)(1)or to be
permitted under the plan approved by the Employment and Train awarded HUD contracts or participate in HUD programs pursuant
ing Administration. Every trainee must be paid at not less than to 24 CFR Part 24.
the rate specified in the approved program for the trainee's level
of progress,expressed as a percentage of the journeyman hourly (ii) No part of this contract shall be subcontracted to any person
rate specified in the applicable wage determination. Trainees shall or firm ineligible for award of a Government contract by virtue of
be paid fringe benefits in accordance with the provisions of the Section 3(a)of the Davis-Bacon Act or 29 CFR 5.12(a)(1)or to be
trainee program. If the trainee program does not mention fringe awarded HUD contracts or participate in HUD programs pursuant
benefits, trainees shall be paid the full amount of fringe benefits to 24 CFR Part 24.
listed on the wage determination unless the Administrator of the (iii) The penalty for making false statements is prescribed in the
Wage and Hour Division determines that there is an apprentice- U.S. Criminal Code, 18 U.S.C. 1001. Additionally, U.S. Criminal
ship program associated with the corresponding journeyman wage Code, Section 1 01 0,Title 18, U.S.C.,"Federal Housing Adminis-
rate on the wage determination which provides for less than full tration transactions", provides in part:"Whoever, for the purpose
fringe benefits for apprentices. Any employee listed on the pay- of.. .influencing in any way the action of such Administration
roll at a trainee rate who is not registered and participating in a makes,utters or publishes any statement knowing the same to be
training plan approved by the Employment and Training Adminis- false shall be fined not more than $5,000 or imprisoned not
tration shall be paid not less than the applicable wage rate on the more than two years, or both"
wage determination for the work actually performed. In addition, 11. Complaints, Proceedings, or Testimony by Employees.
any trainee performing work on the job site in excess of the ratio No laborer or mechanic to whom the wage, salary,or other labor
permitted under the registered program shall be paid not less than standards provisions of this Contract are applicable shall be dis-
the applicable wage rate on the wage determination for the work charged or in any other manner discriminated against by the Con-
actually performed. In the event the Employment and Training tractor or any subcontractor because such employee has filed any
Administration withdraws approval of a training program,the con- complaint or instituted or caused to be instituted any proceeding
tractor will no longer be permitted to utilize trainees at less than or has testified or is about to testify in any proceeding under or
the applicable predetermined rate for the work performed until an relating to the labor standards applicable under this Contract to
acceptable program is approved. his employer.
(iii) Equal employment opportunity. The utilization of appren-
tices, trainees and journeymen under 29 CFR Part 5 shall be in B. Contract Work Hours and Safety Standards Act. The provi-
conformity with the equal employment opportunity requirements
of Executive Order 11246, as amended, and 29 CFR Part 30. sions of this paragraph B are applicable only where the amount of
the prime contract exceeds$100,000. As used in this paragraph,the
5. Compliance with Copeland Act requirements. The contrac- terms"laborers"and"mechanics"include watchmen and guards.
tor shall comply with the requirements of 29 CFR Part 3 which are
incorporated by reference in this contract (1) Overtime requirements. No contractor or subcontractor con-
tracting for any part of the contract work which may require or involve
6. Subcontracts. The contractor or subcontractor will insert in the employment of laborers or mechanics shall require or permit any
any subcontracts the clauses contained in subparagraphs 1 such laborer or mechanic in any workweek in which he or she is
through 11 of this paragraph A and such other clauses as HUD or employed on such work to work in excess of 40 hours in such work-
its designee may by appropriate instructions require, and a copy week unless such laborer or mechanic receives compensation at a
of the applicable prevailing wage decision, and also a clause re- rate not less than one and one-half times the basic rate of pay for all
quiring the subcontractors to include these clauses in any lower hours worked in excess of 40 hours in such workweek.
tier subcontracts. The prime contractor shall be responsible for (2) Violation;liability for unpaid wages;liquidated damages.
the compliance by any subcontractor or lower tier subcontractor In the event of any violation of the clause set forth in subpara-
with all the contract clauses in this paragraph.
form HUD-4010(07/2003)
Page 3 of 4 ref.Handbook 1344.1
a
Previous edition is obsolete 9
graph(1)of this paragraph,the contractor and any subcontractor (4) Subcontracts. The contractor or subcontractor shall in;ert
responsible therefor shall be liable for the unpaid wages. In addi- in any subcontracts the clauses set forth in subparagraph (t)
tion,such contractor and subcontractor shall be liable to the United through(4)of this paragraph and also a clause requiring the sub-
States(in the case of work done under contract for the District of contractors to include these clauses in any lower tier subcontracts.
Columbia or a territory, to such District or to such territory), for The prime contractor shall be responsible for compliance by any
liquidated damages. Such liquidated damages shall be computed subcontractor or lower tier subcontractor with the clauses set forth
with respect to each individual laborer or mechanic, including in subparagraphs (1)through (4) of this paragraph.
watchmen and guards, employed in violation of the clause set C. Health and Safety. The provisions of this paragraph C are ap-
forth in subparagraph (1) of this paragraph, in the sum of$10 for plicable only where the amount of the prime contract exceeds
each calendar day on which such individual was required or permit- $100,000.
ted to work in excess of the standard workweek of 40 hours without (1) No laborer or mechanic shall be required to work in surround-
payment of the overtime wages required by the clause set forth in ings or under working conditions which are unsanitary, hazard-
sub paragraph (1) of this paragraph. ous, or dangerous to his health and safety as determined under
(3) Withholding for unpaid wages and liquidated damages. construction safety and health standards promulgated by the Sec-
HUD or its designee shall upon its own action or upon written retary of Labor by regulation.
request of an authorized representative of the Department of La- (2) The Contractor shall comply with all regulations issued by the
bor withhold or cause to be withheld, from any moneys payable Secretary of Labor pursuant to Title 29 Part 1926 and failure to
on account of work performed by the contractor or subcontractor comply may result in imposition of sanctions pursuant to the Con-
under any such contract or any other Federal contract with the tract Work Hours and Safety Standards Act,40 USC 3701 et seq.
same prime contract, or any other Federally-assisted contract
subject to the Contract Work Hours and Safety Standards Act (3) The Contractor shall include the provisions of this para
which is held by the same prime contractor such sums as may be graph in every subcontract so that such provisions will be
determined to be necessary to satisfy any liabilities of such con- binding on each subcontractor. The Contractor shall take such
tractor or subcontractor for unpaid wages and liquidated damages action with respect to any subcontract as the Secretary of
as provided in the clause set forth in subparagraph (2) of this Housing and Urban Development or the Secretary of Labor
shall direct as a means of enforcing such provisions.
paragraph.
form HUD-4010(07/2003)
ref.Handbook 1344.1
Page 4 of 4
Previous edition is obsolete
Federa',Labor Standards Provisions U.S.Department of Housing
and Urban Development
Office of Labor Relations
Applicability
The Project or Program to which the construction work covered appropriate),a report of the action taken shalt be sent by HUD or
by this contract pertains is being assisted by the United States of its designee to the Administrator of the Wage and Hour Division,
America and the following Federal Labor Standards Provisions Employment Standards Administration, U.S. Department of La-
are included in this Contract pursuant to the provisions applicable bor,Washington,D.C.20210. The Administrator,or an authorized
to such Federal assistance. representative,will approve,modify,or disapprove every additional
A. 1. (i) Minimum Wages. All laborers and mechanics em- classification action within 30 days of receipt and so advise HUD
ployed or working upon the site of the work will be paid uncondi- or its designee or will notify HUD or its designee within the 30-day
tionally and not less often than once a week, and without subse- period that additional time is necessary.(Approved by the Office
quent deduction or rebate on any account (except such payroll of Management and Budget under OMB control number 1215-
deductions as are permitted by regulations issued by the Secre- 0140.)
tary of Labor under the Copeland Act (29 CFR Part 3), the full (c) In the event the contractor, the laborers or mechanics to be
amount of wages and bona fide fringe benefits (or cash equiva- employed in the classification or their representatives, and HUD
lents thereof)due at time of payment computed at rates not less or its designee do not agree on the proposed classification and
than those contained in the wage determination of the Secretary wage rate (including the amount designated for fringe benefits,
of Labor which is attached hereto and made a part hereof, re- where appropriate),HUD or its designee shall refer the questions,
gardless of any contractual relationship which may be alleged to including the views of all interested parties and the recommenda-
exist between the contractor and such laborers and mechanics. tion of HUD or its designee, to the Administrator for determina-
Contributions made or costs reasonably anticipated for bona fide tion. The Administrator, or an authorized representative, will is-
fringe benefits under Section I(b)(2) of the Davis-Bacon Act on sue a determination within 30 days of receipt and so advise HUD
behalf of laborers or mechanics are considered wages paid to or its designee or will notify HUD or its designee within the 30-day
such laborers or mechanics, subject to the provisions of 29 CFR period that additional time is necessary. (Approved by the Office
5.5(a)(1)(iv); also, regular contributions made or costs incurred of Management and Budget under OMB Control Number 1215-
for more than a weekly period (but not less often than quarterly) 0140.)
under plans,funds,or programs,which cover the particular weekly (d) The wage rate (including fringe benefits where appropriate)
period, are deemed to be constructively made or incurred during determined pursuant to subparagraphs(1)(ii)(b)or(c)of this para-
such weekly period. graph,shall be paid to all workers performing work in the classifi-
Such laborers and mechanics shall be paid the appropriate wage cation under this contract from the first day on which work is per-
rate and fringe benefits on the wage determination for the classi- formed in the classification.
fication of work actually performed,without regard to skill, except (iii) Whenever the minimum wage rate prescribed in the contract
as provided in 29 CFR 5.5(a)(4). Laborers or mechanics per- for a class of laborers or mechanics includes a fringe benefit which
forming work in more than one classification may be compensated is not expressed as an hourly rate,the contractor shall either pay
at the rate specified for each classification for the time actually the benefit as stated in the wage determination or shall pay an-
worked therein: Provided, That the employer's payroll records other bona fide fringe benefit or an hourly cash equivalent thereof.
accurately set forth the time spent in each classification in which
work is performed. The wage determination (including any addi (iv) If the contractor does not make payments to a trustee or
tional classification and wage rates conformed under 29 CFR other third person, the contractor may consider as part of the
5.5(a)(1)(ii)and the Davis-Bacon poster(WH-1321)shall be posted wages of any laborer or mechanic the amount of any costs rea
at all times by the contractor and its subcontractors at the site of sonably anticipated in providing bona fide fringe benefits under a
the work in a prominent and accessible, place where it can be plan or program,Provided,That the Secretary of Labor has found,
easily seen by the workers. upon the written request of the contractor,that the applicable stan-
dards of the Davis-Bacon Act have been met. The Secretary of
(ii) (a)Any class of laborers or mechanics which is not listed in Labor may require the contractor to set aside in a separate ac-
the wage determination and which is to be employed under the count assets for the meeting of obligations under the plan or pro-
contract shall be classified in conformance with the wage deter- gram.(Approved by the Office of Management and Budget under
mination. HUD shall approve an additional classification and wage OMB Control Number 1215-0140.)
rate and fringe benefits therefor only when the following criteria
have been met: 2. Withholding. HUD or its designee shall upon its own action or
(i) The work to be performed by the classification requested is upon written request of an authorized representative of the De-
partment of Labor withhold or cause to be withheld from the con-
not performed by a classification in the wage determination;and tractor under this contract or any other Federal contract with the
(2) The classification is utilized in the area by the construction same prime contractor, or any other Federally-assisted contract
industry;and subject to Davis-Bacon prevailing wage requirements, which is
(3) The proposed wage rate, including any bona fide fringe ben- held by the same prime contractor so much of the accrued pay-
efits,bears a reasonable relationship to the wage rates contained ments or advances as may be considered necessary to pay la-
in the wage determination. borers and mechanics, including apprentices, trainees and help-
(b) If the contractor and the laborers and mechanics to be em ers, employed by the contractor or any subcontractor the full
ployed in the classification (if known), or their representatives, amount of wages required by the contract. In the event of failure
and HUD or its designee agree on the classification and wage to pay any laborer or mechanic, including any apprentice,trainee
rate (including the amount designated for fringe benefits where or helper, employed or working on the site of the work, all or part
form HUD-4010(07/2003)
Page 1 of 4 ref.Handbook 1344.1
Previous edition is obsolete 9
of the wages required by the contract, HUD or its designee may, period has been paid the full weekly wages earned, without re-
after written notice to the contractor,sponsor,applicant,or owner, bate,either directly or indirectly,and that no deductions have been
take such action as may be necessary to cause the suspension made either directly or indirectly from the full wages earned,other
of any further payment,advance,or guarantee of funds until such than permissible deductions as set forth in 29 CFR Part 3;
violations have ceased. HUD or its designee may, after written (3) That each laborer or mechanic has been paid not less than
notice to the contractor, disburse such amounts withheld for and the applicable wage rates and fringe benefits or cash equivalents
on account of the contractor or subcontractor to the respective for the classification of work performed,as specified in the appli-
employees to whom they are due. The Comptroller General shall cable wage determination incorporated into the contract.
make such disbursements in the case of direct Davis-Bacon Act
contracts. (c) The weekly submission of a properly executed certification
set forth on the reverse side of Optional Form WH-347 shall sat-
3. (i) Payrolls and basic records. Payrolls and basic records isfy the requirement for submission of the"Statement of Compli-
relating thereto shall be maintained by the contractor during the ance" required by subparagraph A.3.(ii)(b).
course of the work preserved for a period of three years thereaf (d) The falsification of any of the above certifications may subject
ter for all laborers and mechanics working at the site of the work. the contractor or subcontractor to civil or criminal prosecution
Such records shall contain the name, address, and social secu-
under Section 1001 of Title 18 and Section 231 of Title 31 of the
rity number of each such worker, his or her correct classification, United States Code.
hourly rates of wages paid(including rates of contributions or costs
anticipated for bona fide fringe benefits or cash equivalents thereof (iii) The contractor or subcontractor shall make the records re-
of the types described in Section l(b)(2)(B) of the Davis-bacon quired under subparagraph A.3.(i)available for inspection, copy-
Act),daily and weekly number of hours worked,deductions made ing, or transcription by authorized representatives of HUD or its
and actual wages paid. Whenever the Secretary of Labor has designee or the Department of Labor, and shall permit such rep-
found under 29 CFR 5.5(a)(1)(iv)that the wages of any laborer or resentatives to interview employees during working hours on the
mechanic include the amount of any costs reasonably anticipated job. It the contractor or subcontractor fails to submit the required
in providing benefits under a plan or program described in Sec- records or to make them available,HUD or its designee may,after
tion I(b)(2)(B) of the Davis-Bacon Act, the contractor shall main- written notice to the contractor,sponsor, applicant or owner,take
tain records which show that the commitment to provide such such action as may be necessary to cause the suspension of any
benefits is enforceable,that the plan or program is financially re- further payment, advance, or guarantee of funds. Furthermore,
sponsible, and that the plan or program has been communicated failure to submit the required records upon request or to make
in writing to the laborers or mechanics affected,and records which such records available may be grounds for debarment action pur-
show the costs anticipated or the actual cost incurred in providing suant to 29 CFR 5.12.
such benefits. Contractors employing apprentices or trainees 4. Apprentices and Trainees.
under approved programs shall maintain written evidence of the (i) Apprentices. Apprentices will be permitted to work at less
registration of apprenticeship programs and certification of trainee than the predetermined rate for the work they performed when
programs, the registration of the apprentices and trainees, and they are employed pursuant to and individually registered in a
the ratios and wage rates prescribed in the applicable programs. bona fide apprenticeship program registered with the U.S. De-
(Approved by the Office of Management and Budget under OMB partment of Labor, Employment and Training Administration, Of-
Control Numbers 1215-0140 and 1215-0017.) fice of Apprenticeship Training, Employer and Labor Services, or
(ii) (a) The contractor shall submit weekly for each week in which with a State Apprenticeship Agency recognized by the Office,or if
any contract work is performed a copy of all payrolls to HUD or its a person is employed in his or her first 90 days of probationary
designee if the agency is a party to the contract,but if the agency employment as an apprentice in such an apprenticeship program,
is not such a party, the contractor will submit the payrolls to the who is not individually registered in the program, but who has
applicant sponsor,or owner,as the case may be,for transmission been certified by the Office of Apprenticeship Training, Employer
to HUD or its designee. The payrolls submitted shall set out ac- and Labor Services or a State Apprenticeship Agency (where
curately and completely all of the information required to be main- appropriate) to be eligible for probationary employment as an
tained under 29 CFR 5.5(a)(3)(i).This information may be submit- apprentice. The allowable ratio of apprentices to journeymen on
ted in any form desired. Optional Form WH-347 is available for the job site in any craft classification shall not be greater than the
this purpose and may be purchased from the Superintendent of ratio permitted to the contractor as to the entire work force under
Documents(Federal Stock Number 029-005-00014-1), U.S.Gov- the registered program. Any worker listed on a payroll at an ap-
ernment Printing Office,Washington, DC 20402. The prime con- prentice wage rate, who is not registered or otherwise employed
tractor is responsible for the submission of copies of payrolls by as stated above, shall be paid not less than the applicable wage
all subcontractors. (Approved by the Office of Management and rate on the wage determination for the classification of work actu-
Budget under OMB Control Number 1215-0149.) ally performed. In addition, any apprentice performing work on
(b) Each payroll submitted shall be accompanied by a "State- the job site in excess of the ratio permitted under the registered
ment of Compliance,"signed by the contractor or subcontractor or program shall be paid not less than the applicable wage rate on
his or her agent who pays or supervises the payment of the per- the wage determination for the work actually performed. Where a
sons employed under the contract and shall certify the following: contractor is performing construction on a project in a locality other
(1) That the payroll for the payroll period contains the information than that in which its program is registered, the ratios and wage
required to be maintained under 29 CFR 5.5 (a)(3)(i) and that rates (expressed in percentages of the journeyman's hourly rate)
such information is correct and complete; specified in the contractor's or subcontractor's registered program
shall be observed. Every apprentice must be paid at not less
(2) That each laborer or mechanic (including each helper, ap- than the rate specified in the registered program for the
prentice,and trainee)employed on the contract during the payroll apprentice's level of progress, expressed as a percentage of the
form HUD-4010(07/2003)
Pa e 2 of 4 ref.Handbook 1344.1
Previous edition is obsolete 9
E -
L
Gr
July 3 , 2003
N d .
QUALITY HOUSING
TO: Mayor and Members of the City Council
FROM: David M. Dorgan, City Manager
Amy Coyne, CDBG Program Coordinator
SUBJECT: YWCA of Elgin Community Development Block Grant Sub-
recipient Agreement
PURPOSE
The purpose of this memorandum is to provide the Mayor and
members of the City Council with information regarding the Sub-
Recipient Agreement between the City of Elgin and YWCA of Elgin.
BACKGROUND
On May 28, 2003 the City Council approved amendments to the 1999
and 2002 Annual Updated Action Plans . The Amendments have
allowed the YWCA of Elgin to reallocate remaining 1999 funds
from the YWCA' s Fire Alarm project totaling $39, 147 . 93 . The
$39, 147 . 93 will be reallocated to the YWCA' s 2002 CDBG
Renovation project . The 2002 CDBG project was originally
allocated at $70, 000, and combined with the reallocated
$39, 147 . 93 , increases the funding level to $109, 147 . 93 .
The $39, 147 . 93 increase will allow the YWCA to accomplish more
of the rehabilitation work included in their Building Needs
Inventory Assessment Report . The purposed work consists of
installing a handicap lift , renovating bathrooms to make them
ADA compliant , replacing and installing needed hardware for
facility doors, HVAC duct work, replacing an ejector pump, floor
replacement, painting, and boiler replacement . At a minimum,
51% of the clients served will be at or below 80% of the median
family income limits established by HUD.
Pending approval of the agreement , the YWCA of Elgin and the
Planning and Neighborhood Services staff will be working on
developing the Bid Specification Manual for this project . The
CDBG - YWCA of Elgin
July 3 , 2003
Page 2
goal is to have the project ready to bid by September of 2003 .
It is anticipated the project should be completed within one
year from the start of the renovation work.
COMMUNITY GROUPS/INTERESTED PERSONS CONTACTED
None .
FINANCIAL IMPACT
Sufficient funds are budgeted and available ($109, 147 . 93) to
enter into this agreement in the CDBG Program Year 2002 , Major
Repairs/Building-Structures, account number 230-0000-791 . 93-36,
project number 154054 .
LEGAL IMPACT
None.
ALTERNATIVES
1 . Approve the attached Sub-Recipient Agreement .
2 . Do not proceed with the Sub-Recipient Agreement at this
time .
RECOMMENDATION
It is recommended that the City Council approve the Sub-
Recipient Agreement between the City of Elgin and the YWCA of
Elgin in the amount of $109, 147 . 93 .
Respectfully submitted for Council consideration.
AC/sr
Attachment