95-8175. Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations  

  • [Federal Register Volume 60, Number 65 (Wednesday, April 5, 1995)]
    [Rules and Regulations]
    [Pages 17237-17253]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-8175]
    
    
    
    =======================================================================
    -----------------------------------------------------------------------
    
    DEPARTMENT OF THE INTERIOR
    
    Office of the Secretary
    
    43 CFR Part 12
    
    RIN 1090-AA42
    
    
    Uniform Administrative Requirements for Grants and Agreements 
    With Institutions of Higher Education, Hospitals, and Other Non-Profit 
    Organizations
    
    AGENCY: Office of the Secretary, Interior.
    
    ACTION: Final rule.
    
    -----------------------------------------------------------------------
    
    SUMMARY: This action finalizes an interim final rule the Department 
    published in response to the publication by the Office of Management 
    and Budget (OMB) of revised OMB Circular A-110, ``Uniform 
    Administrative Requirements for Grants and Agreements With Institutions 
    of Higher Education, Hospitals, and Other Non-Profit Organizations.''
        Agencies were required to adopt those standards which would be 
    imposed on grantees in codified regulations within six months after 
    publication in the Federal Register.
        Over 200 comments were received by OMB from Federal agencies, non-
    profit organizations, professional organizations, and others in 
    response to the notice published on August 27, 1992, (57 FR 39018) 
    requesting comments on proposed revisions. The comments were considered 
    in developing the final version. Consequently, the Department published 
    an interim final rule because of the previous request for comment 
    process used in the development of the Circular, the large number of 
    comments already received and considered by OMB and the Federal 
    agencies, and due to the limited flexibility to revise the rule 
    provided by OMB.
    
    EFFECTIVE DATE: May 5, 1995.
    
    FOR FURTHER INFORMATION CONTACT:
    Dean A. Titcomb, (Chief, Acquisition and Assistance Division), (202) 
    208-6432.
    
    SUPPLEMENTARY INFORMATION: OMB Circular A-110 (58 FR 62991) covers both 
    grants made by Federal agencies and subgrants made by States to 
    nongovernmental organizations.
        Following the August 26, 1994, publication in the Federal Register 
    (59 FR 44040), no public comments were received by the Department.
        This final rule essentially adopts all the language in the Circular 
    with two exceptions. At Section 12.904, language has been added to 
    describe the procedure for handling requests for [[Page 17238]] class 
    deviations and case-by-case exceptions. At Section 12.915, the 
    Department is revising the provision concerning use of the metric 
    system of measurement. This revision indicates that the system should 
    be used to the maximum extent possible and that both metric and inch-
    pound units (dual units) may be used if necessary during any 
    transaction period(s).
        The reference to the small purchase threshold currently being 
    $25,000 in section 12.944(e)(2) has been changed to $100,000. This 
    change is based on a provision of the Federal Acquisition Streamlining 
    Act of 1994.
        The Circular inadvertently misstates the applicability of the 
    statute commonly known as the Byrd Anti-Lobbying Amendment, 31 U.S.C. 
    1352. The statute applies to organizations which apply or bid for an 
    award exceeding $100,000, not $100,000 or more. We have made this 
    correction in Appendix A.
        Two other changes have been made to Appendix A because of recent 
    changes brought about by the Federal Acquisition Streamlining Act of 
    1994. The threshold for the requirement to include a provision for 
    compliance with the Copeland ``Anti-Kickback Act'' (18 U.S.C. 874) was 
    raised from $2,000 to $100,000.
        The threshold for the requirement to include the provision for 
    compliance with sections 102 and 107 of the Contract Work Hours and 
    Safety Standards Act (40 U.S.C. 327-333) was raised to $100,000.
        Other minor editorial changes are being made to conform with 
    language in the Circular.
        The Department is amending 43 CFR part 12, by revising subpart F to 
    implement these requirements.
    
    Executive Order 12866, Paperwork Reduction Act, and Regulatory 
    Flexibility Act
    
        This final rule was not subject to Office of Management and Budget 
    review under Executive Order 12866.
        The Department has determined that this rule will not have a 
    significant economic impact on a substantial number of small entities 
    because it does not affect the amount of funds provided in the covered 
    programs, but rather modifies and updates administrative and procedural 
    requirements. This final rule does not contain a collection of 
    information subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 
    3501 et seq.).
    
    Environmental Effects
    
        The Department has determined that this rule does not constitute a 
    major Federal action having a significant impact on the human 
    environment under the National Environmental Policy Act of 1969.
    
    Executive Order No. 12778
    
        The Department has certified to the Office of Management and Budget 
    that this proposed rule meets the applicable standards provided in 
    Sections 2(a) and 2(b)(2) of Executive Order 12778.
    
    List of Subjects in 43 CFR Part 12
    
        Cooperative agreements, Grants administration, Grant program.
    
        Dated: March 15, 1995.
    Bonnie R. Cohen,
    Assistant Secretary-Policy, Management and Budget.
    
        For the reasons set forth in the preamble, Title 43, part 12 of the 
    Code of Federal Regulations is amended as set forth below:
    
    PART 12--ADMINISTRATIVE AND AUDIT REQUIREMENTS AND COST PRINCIPLES 
    FOR ASSISTANCE PROGRAMS
    
        1. The authority citation for part 12 is revised to read as 
    follows:
    
        Authority: 5 U.S.C. 301; 31 U.S.C. 6101 note, 7501; 41 U.S.C. 
    252a, 701 et seq.; sec. 307, Pub. L. 103-332, 108 Stat. 2499; sec. 
    501, Pub. L. 103-316, 108 Stat. 1723; E.O. 12549, 3 CFR, 1986 Comp., 
    p. 189; E.O. 12674, 3 CFR, 1989 Comp., p. 215; E.O. 12731, 3 CFR, 
    1990 Comp., p. 306; OMB Circular A-102; OMB Circular A-110; OMB 
    Circular A-128; and OMB Circular A-133.
    
        2. Part 12 is amended by revising subpart F to read as follows:
    
    Subpart F--Uniform Administrative Requirements for Grants and 
    Agreements With Institutions of Higher Education, Hospitals, and 
    Other Non-Profit Organizations
    
    General
    
    Sec.
    12.901  Purpose.
    12.902  Definitions.
    12.903  Effect on other issuances.
    12.904  Deviations.
    12.905  Subawards.
    
    Pre-Award Requirements
    
    12.910  Purpose.
    12.911  Pre-award policies.
    12.912  Forms for applying for Federal assistance.
    12.913 Debarment and suspension.
    12.914 Special award conditions.
    12.915 Metric system of measurement.
    12.916 Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-580 
    codified at 42 U.S.C. 6962).
    12.917 Certifications and representations.
    
    Post-Award Requirements
    
    Financial and Program Management
    
    12.920 Purpose of financial and program management.
    12.921 Standards for financial management systems.
    12.922 Payment.
    12.923 Cost sharing or matching.
    12.924 Program income.
    12.925 Revision of budget and program plans.
    12.926 Non-Federal audits.
    12.927 Allowable costs.
    12.928 Period of availability of funds.
    
    Property Standards
    
    12.930 Purpose of property standards.
    12.931 Insurance coverage.
    12.932 Real property.
    12.933 Federally-owned and exempt property.
    12.934 Equipment.
    12.935 Supplies and other expendable property.
    12.936 Intangible property.
    12.937 Property trust relationship.
    
    Procurement Standards
    
    12.940 Purpose of procurement standards.
    12.941 Recipient responsibilities.
    12.942 Codes of conduct.
    12.943 Competition.
    12.944 Procurement procedures.
    12.945 Cost and price analysis.
    12.946 Procurement records.
    12.947 Contract administration.
    12.948 Contract provisions.
    
    Reports and Records
    
    12.950 Purpose of reports and records.
    12.951 Monitoring and reporting program performance.
    12.952 Financial reporting.
    12.953 Retention and access requirements for records.
    
    Termination and Enforcement
    
    12.960 Purpose of termination and enforcement.
    12.961 Termination.
    12.962 Enforcement.
    
    After-the-Award Requirements
    
    12.970 Purpose.
    12.971 Closeout procedures.
    12.972 Subsequent adjustments and continuing responsibilities.
    12.973 Collection of amounts due.
    
    Appendix A to Subpart F--Contract Provisions
    
    General
    
    
    Sec. 12.901  Purpose.
    
        This subpart establishes uniform administrative requirements for 
    Federal grants and agreements awarded to institutions of higher 
    education, hospitals, and other non-profit organizations.
    
    
    Sec. 12.902  Definitions.
    
        Accrued expenditures means the charges incurred by the recipient 
    during a given period requiring the provision of funds 
    for: [[Page 17239]] 
        (1) goods and other tangible property received;
        (2) services performed by employees, contractors, subrecipients, 
    and other payees; and,
        (3) other amounts becoming owed under programs for which no current 
    services or performance is required.
        Accrued income means the sum of:
        (1) earnings during a given period from:
        (i) services performed by the recipient, and
        (ii) goods and other tangible property delivered to purchasers, and
        (2) amounts becoming owed to the recipient for which no current 
    services or performance is required by the recipient.
        Acquisition cost of equipment means the net invoice price of the 
    equipment, including the cost of modifications, attachments, 
    accessories, or auxiliary apparatus necessary to make the property 
    usable for the purpose for which it was acquired. Other charges, such 
    as the cost of installation, transportation, taxes, duty or protective 
    in-transit insurance, shall be included or excluded from the unit 
    acquisition cost in accordance with the recipient's regular accounting 
    practices.
        Advance means a payment made by Treasury check or other appropriate 
    payment mechanism to a recipient upon its request either before outlays 
    are made by the recipient or through the use of predetermined payment 
    schedules.
        Award means financial assistance that provides support or 
    stimulation to accomplish a public purpose. Awards include grants and 
    other agreements in the form of money or property in lieu of money, by 
    the Federal Government to an eligible recipient. The term does not 
    include: technical assistance, which provides services instead of 
    money; other assistance in the form of loans, loan guarantees, interest 
    subsidies, or insurance; direct payments of any kind to individuals; 
    and, contracts which are required to be entered into and administered 
    under procurement laws and regulations.
        Cash contributions means the recipient's cash outlay, including the 
    outlay of money contributed to the recipient by third parties.
        Closeout means the process by which a Federal agency determines 
    that all applicable administrative actions and all required work of the 
    award have been completed by the recipient and Federal awarding agency.
        Contract means a procurement contract under an award or subaward, 
    and a procurement subcontract under a recipient's or subrecipient's 
    contract.
        Cost sharing or matching means that portion of project or program 
    costs not borne by the Federal Government.
        Date of completion means the date on which all work under an award 
    is completed or the date on the award document, or any supplement or 
    amendment thereto, on which Federal sponsorship ends.
        Disallowed costs means those charges to an award that the Federal 
    awarding agency determines to be unallowable, in accordance with the 
    applicable Federal cost principles or other terms and conditions 
    contained in the award.
        Equipment means tangible nonexpendable personal property including 
    exempt property charged directly to the award having a useful life of 
    more than one year and an acquisition cost of $5,000 or more per unit. 
    However, consistent with recipient policy, lower limits may be 
    established.
        Excess property means property under the control of any Federal 
    awarding agency that, as determined by the Secretary, is no longer 
    required for its needs or the discharge of its responsibilities.
        Exempt property means tangible personal property acquired in whole 
    or in part with Federal funds, where the Federal awarding agency has 
    statutory authority to vest title in the recipient without further 
    obligation to the Federal Government. An example of exempt property 
    authority is contained in the Federal Grant and Cooperative Agreement 
    Act (31 U.S.C. 6306), for property acquired under an award to conduct 
    basic or applied research by a non-profit institution of higher 
    education or non-profit organization whose principal purpose is 
    conducting scientific research.
        Federal funds authorized means the total amount of Federal funds 
    obligated by the Federal Government for use by the recipient. This 
    amount may include any authorized carryover of unobligated funds from 
    prior funding periods when permitted by agency regulations or agency 
    implementing instructions.
        Federal share of real property, equipment, or supplies means that 
    percentage of the property's acquisition costs and any improvement 
    expenditures paid with Federal funds.
        Funding period means the period of time when Federal funding is 
    available for obligation by the recipient.
        Intangible property and debt instruments means, but is not limited 
    to, trademarks, copyrights, patents and patent applications and such 
    property as loans, notes and other debt instruments, lease agreements, 
    stock and other instruments of property ownership, whether considered 
    tangible or intangible.
        Obligations means the amounts of orders placed, contracts and 
    grants awarded, services received and similar transactions during a 
    given period that require payment by the recipient during the same or a 
    future period.
        Outlays or expenditures means charges made to the project or 
    program. They may be reported on a cash or accrual basis. For reports 
    prepared on a cash basis, outlays are the sum of cash disbursements for 
    direct charges for goods and services, the amount of indirect expense 
    charged, the value of third party in-kind contributions applied and the 
    amount of cash advances and payments made to subrecipients. For reports 
    prepared on an accrual basis, outlays are the sum of: cash 
    disbursements for direct charges for goods and services; the amount of 
    indirect expense incurred; the value of in-kind contributions applied; 
    and the net increase (or decrease) in the amounts owed by the recipient 
    for goods and other property received, for services performed by 
    employees, contractors, subrecipients and other payees and other 
    amounts becoming owed under programs for which no current services or 
    performance are required.
        Personal property means property of any kind except real property. 
    It may be tangible, having physical existence, or intangible, having no 
    physical existence, such as copyrights, patents, or securities.
        Prior approval means written approval by an authorized official 
    evidencing prior consent.
        Program income means gross income earned by the recipient that is 
    directly generated by a supported activity or earned as a result of the 
    award (see exclusions in Sec. 12.924 (e) and (h)). Program income 
    includes, but is not limited to, income from fees for services 
    performed, the use or rental of real or personal property acquired 
    under federally-funded projects, the sale of commodities or items 
    fabricated under an award, license fees and royalties on patients and 
    copyrights, and interest on loans made with award funds. Interest 
    earned on advances of Federal funds is not program income. Except as 
    otherwise provided in Federal awarding agency regulations or the terms 
    and conditions of the award, program income does not include the 
    receipt of principal on loans, rebates, credits, discounts, etc., or 
    interest earned on any of them.
        Project costs means all allowable costs, as set forth in the 
    applicable Federal cost principles, incurred by a 
    [[Page 17240]] recipient and the value of the contributions made by 
    third parties in accomplishing the objectives of the award during the 
    project period.
        Project period means the period established in the award document 
    during which Federal sponsorship begins and ends.
        Property means, unless otherwise stated, real property, equipment, 
    supplies, intangible property and debt instruments.
        Real property means land, including land improvements, structures 
    and appurtenances thereto, but excludes movable machinery and 
    equipment.
        Recipient means an organization receiving financial assistance 
    directly from Federal awarding agencies to carry out a project or 
    program. The term includes public and private institutions of higher 
    education, public and private hospitals, and other quasi-public and 
    private non-profit organizations such as, but not limited to, community 
    action agencies, research institutes, educational associations, and 
    health centers. The term may include, at the discretion of the Federal 
    awarding agency, foreign or international organizations (such as 
    agencies of the United Nations) which are recipients, subrecipients, or 
    contractors or subcontractors of recipients or subrecipients. The term 
    does not include government-owned contractor-operated facilities or 
    research centers providing continued support for mission-oriented, 
    large-scale programs that are government-owned or controlled, or are 
    designated as federally-funded research and development centers.
        Research and development means all research activities, both basic 
    and applied, and all development activities that are supported at 
    universities, colleges, and other non-profit institutions.
        (1) Research is defined as a systematic study directed toward 
    fuller scientific knowledge or understanding of the subject studied.
        (2) Development is the systematic use of knowledge and 
    understanding gained from research directed toward the production of 
    useful materials, devices, systems, or methods, including design and 
    development of prototypes and processes. The term research also 
    includes activities involving the training of individuals in research 
    techniques where such activities utilize the same facilities as other 
    research and development activities and where such activities are not 
    included in the instruction function.
        Small awards means a grant or cooperative agreement not exceeding 
    the small purchase threshold fixed at 41 U.S.C. 403(11) (currently 
    $100,000).
        Subaward means an award of financial assistance in the form of 
    money, or property in lieu of money, made under an award by a recipient 
    to an eligible subrecipient or by a subrecipient to a lower tier 
    subrecipient. The term includes financial assistance when provided by 
    any legal agreement, even if the agreement is called a contract, but 
    does not include procurement of goods and services nor does it include 
    any form of assistance which is excluded from the definition of 
    ``award'' in this section.
        Subrecipient means the legal entity to which a subaward is made and 
    which is accountable to the recipient for the use of the funds 
    provided. The term may include foreign or international organizations 
    (such as agencies of the United Nations) at the discretion of the 
    Federal awarding agency.
        Supplies means all personal property excluding equipment, 
    intangible property, and debt instruments as defined in this section, 
    and inventions of a contractor conceived or first actually reduced to 
    practice in the performance of work under a funding agreement 
    (``subject inventions''), as defined in 37 CFR part 401, ``Rights to 
    Inventions Made by Nonprofit Organizations and Small Business Firms 
    Under Government Grants, Contracts, and Cooperative Agreements.''
        Suspension means an action by a Federal awarding agency that 
    temporarily withdraws Federal sponsorship under an award, pending 
    corrective action by the recipient or pending a decision to terminate 
    the award by the Federal awarding agency. Suspension of an award is a 
    separate action from suspension under the Department of the Interior 
    Regulations implementing E.O.'s 12549 and 12689, ``Debarment and 
    Suspension.'' See subpart D of 43 CFR part 12.
        Termination means the cancellation of Federal sponsorship, in whole 
    or in part, under an agreement at any time prior to the date of 
    completion.
        Third party in-kind contributions means the value of noncash 
    contributions provided by non-Federal third parties. Third party in-
    kind contributions may be in the form of real property, equipment, 
    supplies and other expendable property, and the value of goods and 
    services directly benefiting and specifically identifiable to the 
    project or program.
        Unliquidated obligations, for financial reports prepared on a cash 
    basis, means the amount of obligations incurred by the recipient that 
    have not been paid. For reports prepared on an accrued expenditure 
    basis, they represent the amount of obligations incurred by the 
    recipient for which an outlay has not been recorded.
        Unobligated balance means the portion of the funds authorized by 
    Federal awarding agency that has not been obligated by the recipient 
    and is determined by deducting the cumulative obligations from the 
    cumulative funds authorized.
        Unrecovered indirect cost means the difference between the amount 
    awarded and the amount which could have been awarded under the 
    recipient's approved negotiated indirect cost rate.
        Working capital advance means a procedure whereby funds are 
    advanced to the recipient to cover its estimated disbursement needs for 
    a given initial period.
    
    
    Sec. 12.903  Effect on other issuances.
    
        For awards subject to this subpart, all administrative requirements 
    of codified program regulations, program manuals, handbooks and other 
    nonregulatory materials which are inconsistent with the requirements of 
    this subpart shall be superseded, except to the extent they are 
    required by statute, or authorized in accordance with the deviations 
    provision in Section 12.904.
    
    
    Sec. 12.904  Deviations.
    
        The Office of Management and Budget (OMB) may grant exceptions for 
    classes of grants or recipients subject to the requirements of this 
    subpart when exceptions are not prohibited by statute. However, in the 
    interest of maximum uniformity, exceptions from the requirements of 
    this subpart shall be permitted only in unusual circumstances. Federal 
    awarding agencies may apply more restrictive requirements to a class of 
    recipients when approved by OMB. All requests for class deviations 
    shall be processed through the Assistant Secretary-Policy, Management, 
    and Budget. Federal awarding agencies may apply less restrictive 
    requirements when awarding small awards, except for those requirements 
    which are statutory. Exceptions on a case-by-case basis may also be 
    made by Federal awarding agencies. Bureau/office application of less 
    restrictive requirements when awarding small awards, except for those 
    requirements which are statutory, as well as exceptions on a case-by-
    case basis, will be handled by designated officials identified in 
    bureau/office procedures.
    
    
    Sec. 12.905  Subawards.
    
        Unless sections of this subpart specifically exclude subrecipients 
    from [[Page 17241]] coverage, the provisions of this subpart shall be 
    applied to subrecipients performing work under awards if such 
    subrecipients are institutions of higher education, hospitals, or other 
    non-profit organizations. State and local government subrecipients are 
    subject to the provisions of regulations implementing the grants 
    management common rule, ``Uniform Administrative Requirements for 
    Grants and Cooperative Agreements to State and Local Governments,'' 43 
    CFR part 12.
    
    Pre-Award Requirements
    
    
    Sec. 12.910  Purpose.
    
        Sections 12.011 through 12.917 prescribe forms and instructions and 
    other pre-award matters to be used in applying for Federal awards.
    
    
    Sec. 12.911  Pre-award policies.
    
        (a) Use of Grants and Cooperative Agreements, and Contracts. In 
    each instance, the Federal awarding agency shall decide on the 
    appropriate award instrument (i.e., grant, cooperative agreement, or 
    contract). The Federal Grant and Cooperative Agreement Act (31 U.S.C. 
    6301-6308) governs the use of grants, cooperative agreements and 
    contracts. A grant or cooperative agreement shall be used only when the 
    principal purpose of a transaction is to accomplish a public purpose of 
    support or stimulation authorized by Federal statute. The statutory 
    criterion for choosing between grants and cooperative agreements is 
    that for the latter, ``substantial involvement is expected between the 
    executive agency and the State, local government, or other recipient 
    when carrying out the activity contemplated in the agreement.'' 
    Contracts shall be used when the principal purpose is acquisition of 
    property or services for the direct benefit or use of the Federal 
    Government.
        (b) Public Notice and Priority Setting. Federal awarding agencies 
    shall notify the public of their funding priorities for discretionary 
    grant programs, unless funding priorities are established by Federal 
    statute.
    
    
    Sec. 12.912  Forms for applying for Federal assistance.
    
        (a) Federal awarding agencies shall comply with the applicable 
    report clearance requirements of 5 CFR part 1320, ``Controlling 
    Paperwork Burdens on the Public,'' with regard to all forms used by the 
    Federal awarding agency in place of or as a supplement to the Standard 
    Form 424 (SF-424) series.
        (b) Applicants shall use the SF-424 series or those forms and 
    instructions prescribed by the Federal awarding agency.
        (c) For Federal programs covered by E.O. 12372, ``Intergovernmental 
    Review of Federal Programs,'' the applicant shall complete the 
    appropriate sections of the SF-424 (Application for Federal Assistance) 
    indicating whether the application was subject to review by the State 
    Single Point of Contact (SPOC). The name and address of the SPOC for a 
    particular State can be obtained from the Federal awarding agency or 
    the Catalog of Federal Domestic Assistance. The SPOC shall advise the 
    applicant whether the program for which application is made has been 
    selected by that State for review. (See also 43 CFR part 9).
        (d) Federal awarding agencies that do not use the SF-424 form will 
    indicate whether the application is subject to review by the State 
    under E.O. 12372.
    
    
    Sec. 12.913  Debarment and suspension.
    
        Federal awarding agencies and recipients shall comply with the 
    nonprocurement debarment and suspension common rule implementing E.O.s 
    12549 and 12689, ``Debarment and Suspension,'' subpart D of 43 CFR part 
    12. This common rule restricts subawards and contracts with certain 
    parties that are debarred, suspended or otherwise excluded from or 
    ineligible for participation in Federal assistance programs or 
    activities.
    
    
    Sec. 12.914  Special award conditions.
    
        (a) Federal awarding agencies may impose additional requirements as 
    needed, if an applicant or recipient:
        (1) Has a history of poor performance;
        (2) Is not financially stable;
        (3) Has a management system that does not meet the standards 
    prescribed in this part;
        (4) Has not conformed to the terms and conditions of a previous 
    award; or
        (5) Is not otherwise responsible.
        (b) Additional requirements may only be imposed provided that the 
    applicant or recipient is notified in writing as to:
        (1) The nature of the additional requirements;
        (2) The reason why the additional requirements are being imposed;
        (3) The nature of the corrective action needed;
        (4) The time allowed for completing the corrective actions; and
        (5) The method for requesting reconsideration of the additional 
    requirements imposed.
        (c) Any special conditions shall be promptly removed once the 
    conditions that prompted them have been corrected.
    
    
    Sec. 12.915  Metric system of measurement.
    
        The Metric Conversion Act, as amended by the Omnibus Trade and 
    Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
    the preferred measurement system for U.S. trade and commerce. The Act 
    requires each Federal agency to establish a date or dates in 
    consultation with the Secretary of Commerce when the metric system of 
    measurement will be used in the agency's procurements, grants, and 
    other business-related activities. Metric implementation may take 
    longer where the use of the system is initially impractical or likely 
    to cause significant inefficiencies in the accomplishment of federally-
    funded activities. Federal awarding agencies will follow the provisions 
    of E.O. 12770, ``Metric usage in Federal Government Programs.'' When 
    applicable, the awarding agency shall request that measurement-
    sensitive information to be included as part of the application, be 
    expressed in metric units. When required by the awarding agency, for 
    grants to recipients, the following term and condition will be 
    incorporated into the grant:
    
    Provision
    
        All progress and final reports, other reports, or
        All progress and final reports, other reports, or publications 
    produced under this award shall employ the metric system of 
    measurements to the maximum extent practicable. Both metric and 
    inch-pound units (dual units) may be used if necessary during any 
    transition period(s). However, the recipient may use non-metric 
    measurements to the extent that the recipient has supporting 
    documentation that the use of metric measurements is impracticable 
    or is likely to cause significant inefficiencies or loss of markets 
    to the recipient, such as when foreign competitors are producing 
    competing products in non-metric units.
    
    End of Provision
    
    
    Sec. 12.916  Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-
    580 codified at 42 U.S.C. 6962).
    
        Under the Act, any State agency or agency of a political 
    subdivision of a State that is using appropriated Federal funds must 
    comply with section 6002 of RCRA. Section 6002 of RCRA requires that 
    preference be given in procurement programs to the purchase of specific 
    products containing recycled materials identified in guidelines 
    developed by the Environmental Protection Agency (EPA) (40 CFR parts 
    247-254). Accordingly, State and local institutions of higher education 
    and hospitals that receive direct Federal awards or other Federal funds 
    shall give preference in their procurement programs funded with Federal 
    funds to the purchase of [[Page 17242]] recycled products pursuant to 
    the EPA guidelines.
    
    
    Sec. 12.917  Certifications and representations.
    
        Unless prohibited by statute or codified regulation, each Federal 
    awarding agency is authorized and encouraged to allow recipients to 
    submit certifications and representations required by statute, 
    executive order, or regulation on an annual basis, if the recipients 
    have ongoing and continuing relationships with the agency. Annual 
    certifications and representations shall be signed by responsible 
    officials with the authority to ensure recipients' compliance with the 
    pertinent requirements.
    
    Post-Award Requirements
    
    Financial and Program Management
    
    
    Sec. 12.920  Purpose of financial and program management.
    
        Sections 12.921 through 12.928 prescribe standards for financial 
    management systems, methods for making payments and rules for: 
    satisfying cost sharing and matching requirements, accounting for 
    program income, budget revision approvals, making audits, determining 
    allowability of cost, and establishing fund availability.
    
    
    Sec. 12.921  Standards for financial management systems.
    
        (a) Federal awarding agencies shall require recipients to relate 
    financial data to performance data and develop unit cost information 
    whenever practical.
        (b) Recipients' financial management systems shall provide for the 
    following:
        (1) Accurate, current and complete disclosure of the financial 
    results of each federally-sponsored project or program in accordance 
    with the reporting requirements set forth in Sec. 12.952. If a Federal 
    awarding agency requires reporting on an accrual basis from a recipient 
    that maintains its records on other than an accrual basis, the 
    recipient shall not be required to establish an accrual accounting 
    system. These recipients may develop such accrual data for their 
    reports on the basis of an analysis of the documentation on hand.
        (2) Records that identify adequately the source and application of 
    funds for federally-sponsored activities. These records shall contain 
    information pertaining to Federal awards, authorizations, obligations, 
    unobligated balances, assets, outlays, income and interest.
        (3) Effective control over and accountability for all funds, 
    property and other assets. Recipients shall adequately safeguard all 
    such assets and assure they are used solely for authorized purposes.
        (4) Comparison of outlays with budget amounts for each award. 
    Whenever appropriate, financial information should be related to 
    performance and unit cost data.
        (5) Written procedures to minimize the time elapsing between the 
    transfer of funds to the recipient from the U.S. Treasury and the 
    issuance or redemption of checks, warrants or payments by other means 
    for program purposes by the recipient. To the extent that the 
    provisions of the Cash Management Improvement Act (CMIA) (31 U.S.C. 
    6501 note) govern, payment methods of State agencies, 
    instrumentalities, and fiscal agents shall be consistent with CMIA 
    Treasury-State Agreements or the CMIA default procedures codified at 31 
    CFR part 205, ``Withdrawal of Cash from the Treasury for Advances under 
    Federal Grant and Other Programs.''
        (6) Written procedures for determining the reasonableness, 
    allocability and allowability of costs in accordance with the 
    provisions of the applicable Federal cost principles and the terms and 
    conditions of the award.
        (7) Accounting records, including cost accounting records, that are 
    supported by source documentation.
        (c) Where the Federal Government guarantees or insures the 
    repayment of money borrowed by the recipient, the Federal awarding 
    agency, at its discretion, may require adequate bonding and insurance 
    if the bonding and insurance requirements of the recipient are not 
    deemed adequate to protect the interest of the Federal Government.
        (d) The Federal awarding agency may require adequate fidelity bond 
    coverage where the recipient lacks sufficient coverage to protect the 
    Federal Government's interest.
        (e) Where bonds are required in the situations described above in 
    Sec. 12.921 (c) and (d), the bonds shall be obtained from companies 
    holding certificates of authority as acceptable sureties, as prescribed 
    in 31 CFR part 223, ``Surety Companies Doing Business with the United 
    States.''
    
    
    Sec. 12.922  Payment.
    
        (a) Payment methods shall minimize the time elapsing between the 
    transfer of funds from the United States Treasury and the issuance or 
    redemption of checks, warrants, or payment by other means by the 
    recipients. Payment methods of State agencies or instrumentalities 
    shall be consistent with Treasury-State CMIA agreements or default 
    procedures codified at 31 CFR part 205.
        (b) Recipients are to be paid in advance, provided they maintain or 
    demonstrate the willingness to maintain or demonstrate written 
    procedures that minimize the time elapsing between the transfer of 
    funds and disbursement by the recipient, and financial management 
    systems that meet the standards for fund control and accountability as 
    established in Sec. 12.921. Cash advances to a recipient organization 
    shall be limited to the minimum amounts needed and be timed to be in 
    accordance with the actual, immediate cash requirements of the 
    recipient organization in carrying out the purposes of the approved 
    program or project. The timing and amount of cash advances shall be as 
    close as is administratively feasible to the actual disbursements by 
    the recipient organization for direct program or project costs and the 
    proportionate share of any allowable indirect costs.
        (c) Whenever possible, advances will be consolidated to cover 
    anticipated cash needs for all awards made by the Federal awarding 
    agency to the recipient.
        (1) Advance payment mechanisms include, but are not limited to, 
    Treasury check and electronic funds transfer.
        (2) Advance payment mechanisms are subject to 31 CFR part 205.
        (3) Recipients shall be authorized to submit requests for advances 
    and reimbursements at least monthly when electronic fund transfers are 
    not used.
        (d) Requests for Treasury check advance payment shall be submitted 
    on SF-270, ``Request for Advance or Reimbursement,'' or other forms as 
    may be authorized by OMB. This form is not to be used when Treasury 
    check advance payments are made to the recipient automatically through 
    the use of a predetermined payment schedule or if precluded by special 
    Federal awarding agency instructions for electronic funds transfer.
        (e) Reimbursement is the preferred method when the requirements in 
    paragraph (b) of this section cannot be met. Federal awarding agencies 
    may also use this method on any construction agreement, or if the major 
    portion of the construction project is accomplished through private 
    market financing or Federal loans, and the Federal assistance 
    constitutes a minor portion of the project.
        (1) When the reimbursement method is used, the Federal awarding 
    agency shall make payment within 30 days after receipt of the billing, 
    unless the billing is improper. [[Page 17243]] 
        (2) Recipients shall be authorized to submit a request for 
    reimbursement at least monthly when electronic funds transfers are not 
    used.
        (f) If a recipient cannot meet the criteria for advance payments 
    and the Federal awarding agency has determined that reimbursement is 
    not feasible because the recipient lacks sufficient working capital, 
    the Federal awarding agency may provide cash on a working capital 
    advance basis. Under this procedure, the Federal awarding agency shall 
    advance cash to the recipient to cover its estimated disbursement needs 
    for an initial period generally geared to the awardee's disbursing 
    cycle. Thereafter, the Federal awarding agency shall reimburse the 
    recipient for its actual cash disbursements. The working capital 
    advance method of payment shall not be used for recipients unwilling or 
    unable to provide timely advances to their subrecipient to meet the 
    subrecipient's actual cash disbursements.
        (g) To the extent available, recipients shall disburse funds 
    available from repayments to and interest earned on a revolving fund, 
    program income, rebates, refunds, contract settlements, audit 
    recoveries and interest earned on such funds before requesting 
    additional cash payments.
        (h) Unless otherwise required by statute, Federal awarding agencies 
    shall not withhold payments for proper charges made by recipients at 
    any time during the project period unless paragraph (h)(1) or (h)(2) of 
    this section apply:
        (1) A recipient has failed to comply with the project objectives, 
    the terms and conditions of the award, or Federal reporting 
    requirements; or
        (2) The recipient or subrecipient is delinquent in a debt to the 
    United States as defined in OMB Circular A-129, ``Managing Federal 
    Credit Programs.'' Under such conditions, the Federal awarding agency 
    may, upon reasonable notice, inform the recipient that payments shall 
    not be made for obligations incurred after a specified date until the 
    conditions are corrected or the indebtedness to the Federal Government 
    is liquidated.
        (i) Standards governing the use of banks and other institutions as 
    depositories of funds advanced under awards are as follows.
        (1) Except for situations described in paragraph (i)(2) of this 
    section, Federal awarding agencies shall not require separate 
    depository accounts for funds provided to a recipient or establish any 
    eligibility requirements for depositories for funds provided to a 
    recipient. However, recipients must be able to account for the receipt, 
    obligation and expenditure of funds.
        (2) Advances of Federal funds shall be deposited and maintained in 
    insured accounts whenever possible.
        (j) Consistent with the national goal of expanding opportunities 
    for women-owned and minority-owned business enterprises, recipients are 
    encouraged to use women-owned and minority-owned banks (a bank which is 
    owned at least 50 percent by women or minority group members).
        (k) Recipients shall maintain advances of Federal funds in interest 
    bearing accounts, unless paragraph (k)(1), (2) or (3) apply:
        (1) The recipient receives less than $120,000 in Federal awards per 
    year.
        (2) The best reasonably available interest bearing account would 
    not be expected to earn interest in excess of $250 per year on Federal 
    cash balances.
        (3) The depository would require an average or minimum balance so 
    high that it would not be feasible within the expected Federal and non-
    Federal cash resources.
        (l) For those entities where CMIA and its implementing regulations 
    do not apply, interest earned on Federal advances deposited in interest 
    bearing accounts shall be remitted annually to Department of Health and 
    Human Services, Payment Management System, P.O. Box 6021, Rockville, MD 
    20852. Interest amounts up to $250 per year may be retained by the 
    recipient for administrative expense. In keeping with Electronic Funds 
    Transfer rules, (31 CFR part 206), interest should be remitted to the 
    HHS Payment Management System through an electronic medium such as the 
    FEDWIRE Deposit system. Recipients which do not have this capability 
    should use a check. State universities and hospitals shall comply with 
    CMIA, as it pertains to interest. If an entity subject to CMIA uses its 
    own funds to pay pre-award costs for discretionary awards without prior 
    written approval from the Federal awarding agency, it waives its right 
    to recover the interest under CMIA.
        (m) Except as noted elsewhere in this subpart, only the following 
    forms shall be authorized for the recipients in requesting advances and 
    reimbursements. Federal agencies shall not require more than an 
    original and two copies of these forms.
        (1) SF-270, Request for Advance or Reimbursement. Each Federal 
    awarding agency shall adopt the SF-270 as a standard form for all 
    nonconstruction programs where electronic funds transfer or 
    predetermined advance methods are not used. Federal awarding agencies, 
    however, have the option of using this form for construction programs 
    in lieu of the SF-271, ``Outlay Report and Request for Reimbursement 
    for Construction Programs.''
        (2) SF-271, Outlay Report and Request for Reimbursement for 
    Construction Programs. Each Federal awarding agency shall adopt the SF-
    271 as the standard form to be used for requesting reimbursement for 
    construction programs. However, a Federal awarding agency may 
    substitute the SF-270 when the Federal awarding agency determines that 
    it provides adequate information to meet Federal needs.
    
    
    Sec. 12.923  Cost sharing or matching.
    
        (a) All contributions, including cash and third party in-kind, 
    shall be accepted as part of the recipient's cost sharing or matching 
    when such contributions meet all of the following criteria:
        (1) Are verifiable from the recipient's records.
        (2) Are not included as contributions for any other federally-
    assisted project or program.
        (3) Are necessary and reasonable for proper and efficient 
    accomplishment of project or program objectives.
        (4) Are allowable under the applicable cost principles.
        (5) Are not paid by the Federal Government under another award, 
    except where authorized by Federal statute to be used for cost sharing 
    or matching.
        (6) Are provided for in the approved budget when required by the 
    Federal awarding agency.
        (7) Conform to other provisions of this subpart, as applicable.
        (b) Unrecovered indirect costs may be included as part of cost 
    sharing or matching only with the prior approval of the Federal 
    awarding agency.
        (c) Values for recipient contributions of services and property 
    shall be established in accordance with the applicable cost principles. 
    If a Federal awarding agency authorizes recipients to donate buildings 
    or land for construction/facilities acquisition projects or long-term 
    use, the value of the donated property for cost sharing or matching 
    shall be the lesser of paragraph (c) (1) or (2) of this section:
        (1) The certified value of the remaining life of the property 
    recorded in the recipient's accounting records at the time of donation.
        (2) the current fair market value. However, when there is 
    sufficient justification, the Federal awarding agency may approve the 
    use of the current fair market value of the donated 
    [[Page 17244]] property, even if it exceeds the certified value at the 
    time of donation to the project.
        (d) Volunteer services furnished by professional and technical 
    personnel, consultants, and other skilled and unskilled labor may be 
    counted as cost sharing or matching if the service is an integral and 
    necessary part of an approved project or program. Rates for volunteer 
    services shall be consistent with those paid for similar work in the 
    recipient's organization. In those instances in which the required 
    skills are not found in the recipient organization, rates shall be 
    consistent with those paid for similar work in the labor market in 
    which the recipient competes for the kind of services involved. In 
    either case, paid fringe benefits that are reasonable, allowable, and 
    allocable may be included in the valuation.
        (e) When an employer other than the recipient furnishes the 
    services of an employee, these services shall be valued at the 
    employee's regular rate of pay (plus an amount of fringe benefits that 
    are reasonable, allowable, and allocable, but exclusive of overhead 
    costs), provided these services are in the same skill for which the 
    employee is normally paid.
        (f) Donated supplies may include such items as expendable 
    equipment, office supplies, laboratory supplies or workshop and 
    classroom supplies. Value assessed to donated supplies included in the 
    cost sharing or matching share shall be reasonable and shall not exceed 
    the fair market value of the property at the time of the donation.
        (g) The method used for determining cost sharing or matching for 
    donated equipment, buildings and land for which title passes to the 
    recipient may differ according to the purpose of the award, if 
    paragraph (g) (1) or (2) of this section apply:
        (1) If the purpose of the award is to assist the recipient to 
    acquire equipment, buildings, or land, the total value of the donated 
    property may be claimed as cost sharing or matching.
        (2) If the purpose of the award is to support activities that 
    require the use of equipment, buildings or land, normally only 
    depreciation or use charges for equipment and buildings may be made. 
    However, the full value of equipment or other capital assets and fair 
    rental charges for land may be allowed, provided that the Federal 
    awarding agency has approved the charges.
        (h) The value of donated property shall be determined in accordance 
    with the usual accounting policies of the recipient, with the following 
    qualifications.
        (1) The value of donated land and buildings shall not exceed their 
    fair market value at the time of donation to the recipient as 
    established by an independent appraiser (e.g., certified real property 
    appraiser or General Services Administration representative) and 
    certified by a responsible official of the recipient.
        (2) The value of donated equipment shall not exceed the fair market 
    value of equipment of the same age and condition at the time of 
    donation.
        (3) The value of donated space shall not exceed the fair rental 
    value of comparable space as established by an independent appraisal of 
    comparable space and facilities in a privately-owned building in the 
    same locality.
        (4) The value of loaned equipment shall not exceed its fair rental 
    value.
        (i) The following requirements pertain to the recipient's 
    supporting records for in-kind contributions from third parties.
        (1) Volunteer services shall be documented and, to the extent 
    feasible, supported by the same methods used by the recipient for its 
    own employees.
        (2) The basis for determining the valuation for personal service, 
    material, equipment, buildings and land shall be documented.
    
    
    Sec. 12.924  Program income.
    
        (a) Federal awarding agencies shall apply the standards set forth 
    in this section in requiring recipient organizations to account for 
    program income related to projects financed in whole or in part with 
    Federal funds.
        (b) Except as provided in paragraph (h) of this section, program 
    income earned during the project period shall be retained by the 
    recipient and, in accordance with Federal awarding agency regulations 
    or the terms and conditions of the award, shall be used in one or more 
    of the following ways:
        (1) added to funds committed to the project or program by the 
    Federal awarding agency and recipient and used to further eligible 
    project or program objectives;
        (2) used to finance the non-Federal share of the project or 
    program; or
        (3) deducted from the total project or program allowable cost in 
    determining the net allowable costs upon which the Federal share of 
    costs is based.
        (c) When an agency authorizes the disposition of program income as 
    described in paragraph (b)(1) or (b)(2) of this section, program income 
    in excess of any limits stipulated shall be used in accordance with 
    paragraph (b)(3) of this section.
        (d) If the Federal awarding agency does not specify in its 
    regulations or the terms and conditions of the award how program income 
    is to be used, paragraph (b)(3) of this section shall apply 
    automatically to all projects or programs except research. For awards 
    that support research, paragraph (b)(1) of this section shall apply 
    automatically unless the awarding agency indicates in the terms and 
    conditions another alternative on the award or the recipient is subject 
    to special award conditions, as indicated in Sec. 12.914.
        (e) Unless Federal awarding agency regulations or the terms and 
    conditions of the award provide otherwise, recipients shall have no 
    obligation to the Federal Government regarding program income earned 
    after the end of the project period.
        (f) If authorized by Federal awarding agency regulations or the 
    terms and conditions of the award, costs incident to the generation of 
    program income may be deducted from gross income to determine program 
    income, provided these costs have not been charged to the award.
        (g) Proceeds from the sale of property shall be handled in 
    accordance with the requirements of the Property Standards (See 
    Secs. 12.930 through 12.937).
        (h) Unless Federal awarding agency regulations or the terms and 
    conditions of the award provide otherwise, recipients shall have no 
    obligation to the Federal Government with respect to program income 
    earned from license fees and royalties for copyrighted material, 
    patents, patent applications, trademarks, and inventions produced under 
    an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply 
    to inventions made under an experimental, developmental, or research 
    award.
    
    
    Sec. 12.925  Revision of budget and program plans.
    
        (a) The budget plan is the financial expression of the project or 
    program as approved during the award process. It may include either the 
    Federal and non-Federal share, or only the Federal share, depending 
    upon Federal awarding agency requirements. It shall be related to 
    performance for program evaluation purposes whenever appropriate.
        (b) Recipients are required to report deviations from budget and 
    program plans, and request prior approvals for budget and program plan 
    revisions, in accordance with this section.
        (c) For nonconstruction awards, recipients shall request prior 
    approvals from Federal awarding agencies for one or more of the 
    following program or budget related reasons:
        (1) Change in the scope or the objective of the project or program 
    (even [[Page 17245]] if there is no associated budget revision 
    requiring prior written approval).
        (2) Change in a key person specified in the application or award 
    document.
        (3) The absence for more than three months, or a 25 percent 
    reduction in time devoted to the project, by the approved project 
    director or principal investigator.
        (4) The need for additional Federal funding.
        (5) The transfer of amounts budgeted for indirect costs to absorb 
    increases in direct costs, or vice versa, if approval is required by 
    the Federal awarding agency.
        (6) The inclusion, unless waived by the Federal awarding agency, of 
    costs that require prior approval in accordance with OMB Circular A-21, 
    ``Cost Principles for Institutions of Higher Education,'' OMB Circular 
    A-122, ``Cost Principles for Non-Profit Organizations,'' or 45 CFR part 
    74, appendix E, ``Principles for Determining Costs Applicable to 
    Research and Development under Grants and Contracts with Hospitals,'' 
    or 48 CFR part 31, ``Contract Cost Principles and Procedures,'' as 
    applicable.
        (7) The transfer of funds allotted for training allowances (direct 
    payment to trainees) to other categories of expense.
        (8) Unless described in the application and funded in the approved 
    award, the subaward, transfer or contracting out of any work under an 
    award. This provision does not apply to the purchase of supplies, 
    material, equipment or general support services.
        (d) No other prior approval requirements for specific items may be 
    imposed unless a deviation has been approved by OMB.
        (e) Except for requirements listed in paragraph (c)(1) and (c)(4) 
    of this section, Federal awarding agencies are authorized, at their 
    option, to waive cost-related and administrative prior written 
    approvals required by this subpart and OMB Circulars A-21 and A-122. 
    Such waivers may include authorizating recipients to do any one or more 
    of the following:
        (1) Incur pre-award costs 90 calendar days prior to award or more 
    than 90 calendar days with the prior approval of the Federal awarding 
    agency. All pre-award costs are incurred at the recipient's risk (i.e., 
    the Federal awarding agency is under no obligation to reimburse such 
    costs if for any reason the recipient does not receive an award or if 
    the award is less than anticipated and inadequate to cover such costs).
        (2) Initiate a one-time extension of the expiration date of the 
    award of up to 12 months unless one or more of the following conditions 
    apply. For one-time extensions, the recipient must notify the Federal 
    awarding agency in writing, with the supporting reasons and revised 
    expiration date, at least 10 days before the expiration date specified 
    in the award. This one-time extension may not be exercised merely for 
    the purpose of using unobligated balances. The conditions that prevent 
    issuance of a one-time extension are:
        (i) the terms and conditions of award prohibit the extension;
        (ii) the extension requires additional Federal funds; or
        (iii) the extension involves any change in the approved objectives 
    or scope of the project.
        (3) Carry forward unobligated balances to subsequent funding 
    periods.
        (4) For awards that support research, unless the Federal awarding 
    agency provides otherwise in the award or in the agency's regulations, 
    the prior approval requirements described in paragraph (e)(1) through 
    (3) of this section are automatically waived (i.e., recipients need not 
    obtain such prior approvals) unless one of the conditions included in 
    paragraph (e)(2) applies.
        (f) The Federal awarding agency may, at its option, restrict the 
    transfer of funds among direct cost categories or programs, functions 
    and activities for awards in which the Federal share of the project 
    exceeds $100,000 and the cumulative amount of the transfer exceeds or 
    is expected to exceed 10 percent of the total budget as last approved 
    by the Federal awarding agency. No Federal awarding agency shall permit 
    a transfer that would cause any Federal appropriation or part thereof 
    to be used for purposes other than those consistent with the original 
    intent of the appropriation.
        (g) No other changes to nonconstruction budgets, except for the 
    changes described in paragraph (j) of this section, require prior 
    approval.
        (h) For construction awards, recipients shall request prior written 
    approval promptly from Federal awarding agencies for budget revisions 
    whenever paragraph (h) (1), (2) or (3) of this section apply:
        (1) the revision results from changes in the scope or the objective 
    of the project or program;
        (2) additional Federal funds are needed to complete the project; or
        (3) the recipient requests a revision that involves specific costs 
    for which prior written approval requirements may be imposed under 
    Sec. 12.927.
        (i) No other prior approval requirements for specific items will be 
    imposed unless OMB approves a deviation.
        (j) When a Federal awarding agency makes an award that provides 
    support for both construction and nonconstruction work, the Federal 
    awarding agency may require the recipient to request prior approval 
    before making any fund or budget transfers between the two types of 
    work supported.
        (k) For both construction and nonconstruction awards, Federal 
    awarding agencies shall require recipients to notify the Federal 
    awarding agency in writing promptly whenever the amount of Federal 
    authorized funds is expected to exceed the needs of the recipient for 
    the project period by more than $5,000 or five percent of the Federal 
    award, whichever is greater. This notification shall not be required if 
    an application for additional funding is submitted for a continuation 
    award.
        (l) When requesting approval for budget revisions, recipients shall 
    use the budget forms that were used in the application unless the 
    Federal awarding agency indicates that a letter of request suffices.
        (m) Within 30 calendar days from the date of receipt of the request 
    for budget revisions, the Federal awarding agencies shall review the 
    request and notify the recipient whether the budget revisions have been 
    approved. If the revision is still under consideration at the end of 30 
    calendar days, the Federal awarding agency shall inform the recipient 
    in writing of the date when the recipient may expect the decision.
    
    
    Sec. 12.926  Non-Federal audits.
    
        Certain recipients and subrecipients shall be subject to non-
    Federal audits in accordance with the applicable directive from the 
    table in this section.
    
    ------------------------------------------------------------------------
        Type of recipient                   Applicable directive            
    ------------------------------------------------------------------------
    Institution of higher      OMB Circular A-133.                          
     education or other non-                                                
     profit organization.                                                   
    State or local government  Single Audit Act 31 U.S.C. 7501-7507 and 43  
                                CFR part 12, subpart B.                     
    Hospital.................  OMB Circular A-133 or audit requirements of  
                                the Federal awarding agency.                
    ------------------------------------------------------------------------
    
    
    [[Page 17246]]
    
    Sec. 12.927  Allowable costs.
    
        Federal awarding agencies shall determine allowable costs in 
    accordance with the type of entity incurring the costs, using the 
    appropriate directive from the table below.
    
    ------------------------------------------------------------------------
      Entity incurring costs                Applicable directive            
    ------------------------------------------------------------------------
    State, local, or           OMB Circular A-87, Cost Principles for State 
     Federally recognized       and Local Governments.                      
     Indian Tribe.                                                          
    Non-profit organization..  OMB Circular A-122, Cost Principles for Non- 
                                profit Organizations and 43 CFR 12.927(b).  
    Institution of Higher      OMB Circular A-21, Cost Principles for       
     Education.                 Educational Institutions.                   
    Hospital.................  45 CFR part 74, appendix E, Principles for   
                                Determining Costs Applicable to Research and
                                Development Under Grants and Contracts with 
                                Hospitals.                                  
    Commercial organization    48 CFR part 31, Contract Principles and      
     or non-profit              Procedures or uniform cost accounting       
     organization listed in     standards that comply with cost principles  
     Attachment C of OMB        acceptable to the Federal agency.           
     Circular A-122.                                                        
    ------------------------------------------------------------------------
    
    Sec. 12.928  Period of availability of funds.
    
        Where a funding period is specified, a recipient may charge to the 
    grant only allowable costs resulting from obligations incurred during 
    the funding period and any pre-award costs authorized by the Federal 
    awarding agency.
    
    Property Standards
    
    
    Sec. 12.930  Purpose of property standards.
    
        Sections 12.931 through 12.937 set forth uniform standards 
    governing management and disposition of property furnished by the 
    Federal Government whose cost was charged to a project supported by a 
    Federal award. Federal awarding agencies shall require recipients to 
    observe these standards under awards and shall not impose additional 
    requirements, unless specifically required by Federal statute. The 
    recipient may use its own property management standards and procedures 
    provided it observes the provisions of Secs. 12.931 through 12.937.
    
    
    Sec. 12.931  Insurance coverage.
    
        Recipients shall, at a minimum, provide the equivalent insurance 
    coverage for real property and equipment acquired with Federal funds as 
    provided to property owned by the recipient. Federally-owned property 
    need not be insured unless required by the terms and conditions of the 
    award.
    
    
    Sec. 12.932  Real property.
    
        Each Federal awarding agency shall prescribe requirements for 
    recipients concerning the use and disposition of real property acquired 
    in whole or in part under awards. Unless otherwise provided by statute, 
    such requirements, at a minimum, shall contain the following.
        (a) Title to real property shall vest in the recipient subject to 
    the condition that the recipient shall use the real property for the 
    authorized purpose of the project as long as it is needed and shall not 
    encumber the property without approval of the awarding agency.
        (b) The recipient shall obtain written approval by the Federal 
    awarding agency for the use of real property in other federally-
    sponsored projects when the recipient determines that the property is 
    no longer needed for the purpose of the original project. Use in other 
    projects shall be limited to those under federally-sponsored projects 
    (i.e., awards) or programs that have purposes consistent with those 
    authorized for support by the Department of the Interior.
        (c) When the real property is no longer needed as provided in 
    paragraphs (a) and (b) of this section, the recipient shall request 
    disposition instructions from the Federal awarding agency or its 
    successor. The Federal awarding agency will give one or more of the 
    following disposition instructions:
        (1) The recipient may be permitted to retain title without further 
    obligation to the Federal Government after it compensates the Federal 
    Government for that percentage of the current fair market value of the 
    property attributable to the Federal participation in the project.
        (2) The recipient may be directed to sell the property under 
    guidelines provided by the Federal awarding agency and pay the Federal 
    Government for that percentage of the current fair market value of the 
    property attributable to the Federal participation in the project 
    (after deducting actual and reasonable selling and fix-up expenses, if 
    any, from the sales proceeds). When the recipient is authorized or 
    required to sell the property, proper sales procedures shall be 
    established that provide for competition to the extent practicable and 
    result in the highest possible return.
        (3) The recipient may be directed to transfer title to the property 
    to the Federal Government or to an eligible third party provided that, 
    in such cases, the recipient shall be entitled to compensation for its 
    attributable percentage of the current fair market value of the 
    property.
    
    
    Sec. 12.933  Federally-owned and exempt property.
    
        (a) Federally-owned property. (1) Title to federally-owned property 
    remains vested in the Federal Government. Recipients shall submit 
    annually to the Federal awarding agency an inventory listing of 
    federally-owned property in their custody. Upon completion of the award 
    or when the property is no longer needed, the recipient shall report 
    the property to the Federal awarding agency for further utilization.
        (2) If the Federal awarding agency has no further need for the 
    property, it shall be declared excess and reported to the General 
    Services Administration, unless the Federal awarding agency has 
    statutory authority to dispose of the property by alternative methods 
    (e.g., the authority provided by the Federal Technology Transfer Act 
    (15 U.S.C. 3710(I)) to donate research equipment to educational and 
    non-profit organizations in accordance with E.O. 12821, ``Improving 
    Mathematics and Science Education in Support of the National Education 
    Goals.'') Appropriate instructions shall be issued to the recipient by 
    the Federal awarding agency.
        (b) Exempt property. Exempt property. When statutory authority 
    exists, the Federal awarding agency has the option to vest title to 
    property acquired with Federal funds in the recipient without further 
    obligation to the Federal Government and under conditions the Federal 
    awarding agency considers appropriate. Such property is ``exempt 
    property.'' Should a Federal awarding agency not establish conditions, 
    title to exempt property upon acquisition shall vest in the recipient 
    without further obligation to the Federal Government.
    
    
    Sec. 12.934  Equipment.
    
        (a) Title to equipment acquired by a recipient with Federal funds 
    shall vest [[Page 17247]] in the recipient, subject to conditions of 
    this section.
        (b) The recipient shall not use equipment acquired with Federal 
    funds to provide services to non-Federal outside organizations for a 
    fee that is less than private companies charge for equivalent services, 
    unless specifically authorized by Federal statute, for as long as the 
    Federal Government retains an interest in the equipment.
        (c) The recipient shall use the equipment in the project or program 
    for which it was acquired as long as needed, whether or not the project 
    or program continues to be supported by Federal funds, and shall not 
    encumber the property without approval of the Federal awarding agency. 
    When no longer needed for the original project or program, the 
    recipient shall use the equipment in connection with its other 
    federally-sponsored activities, in the following order of priority:
        (1) Activities sponsored by the Federal awarding agency, then (2) 
    Activities sponsored by other Federal agencies.
        (d) During the time that equipment is used on the project or 
    program for which it was acquired, the recipient shall make it 
    available for use on other projects or programs if such other use will 
    not interfere with the work on the project or program for which the 
    equipment was originally acquired. First preference for such other use 
    shall be given to other projects or programs sponsored by the Federal 
    awarding agency that financed the equipment; second preference shall be 
    given to projects or programs sponsored by other Federal agencies. If 
    the equipment is owned by the Federal Government, use on other 
    activities not sponsored by the Federal Government shall be permissible 
    if authorized by the Federal awarding agency. User charges shall be 
    treated as program income.
        (e) When acquiring replacement equipment, the recipient may use the 
    equipment to be replaced as trade-in or sell the equipment and use the 
    proceeds to offset the costs of the replacement equipment subject to 
    the approval of the Federal awarding agency.
        (f) The recipient's property management standards for equipment 
    acquired with Federal funds and federally-owned equipment shall include 
    all of the following.
        (1) Equipment records shall be maintained accurately and shall 
    include the following information.
        (i) A description of the equipment.
        (ii) Manufacturer's serial number, model number, Federal stock 
    number, national stock number, or other identification number.
        (iii) Source of the equipment, including the award number.
        (iv) Whether title vests in the recipient or the Federal 
    Government.
        (v) Acquisition date (or date received, if the equipment was 
    furnished by the Federal Government) and cost.
        (vi) Information from which one can calculate the percentage of 
    Federal participation in the cost of the equipment (not applicable to 
    equipment furnished by the Federal Government).
        (vii) Location and condition of the equipment and the date the 
    information was reported.
        (viii) Unit acquisition cost.
        (ix) Ultimate disposition data, including date of disposal and 
    sales price or the method used to determine current fair market value 
    where a recipient compensates the Federal awarding agency for its 
    share.
        (2) Equipment owned by the Federal Government shall be identified 
    to indicate Federal ownership.
        (3) A physical inventory of equipment shall be taken and the 
    results reconciled with the equipment records at least once every two 
    years. Any differences between quantities determined by the physical 
    inspection and those shown in the accounting records shall be 
    investigated to determine the causes of the difference. The recipient 
    shall, in connection with the inventory, verify the existence, current 
    utilization, and continued need for the equipment.
        (4) A control system shall be in effect to insure adequate 
    safeguards to prevent loss, damage, or theft of the equipment. Any 
    loss, damage, or theft of equipment shall be investigated and fully 
    documented; if the equipment was owned by the Federal Government, the 
    recipient shall promptly notify the Federal awarding agency.
        (5) Adequate maintenance procedures shall be implemented to keep 
    the equipment in good condition.
        (6) Where the recipient is authorized or required to sell the 
    equipment, proper sales procedures shall be established which provide 
    for competition to the extent practicable and result in the highest 
    possible return.
        (g) When the recipient no longer needs the equipment, the equipment 
    may be used for other activities in accordance with the following 
    standards. For equipment with a current per unit fair market value of 
    $5,000 or more, the recipient may retain the equipment for other uses 
    provided that compensation is made to the original Federal awarding 
    agency or its successor. The amount of compensation shall be computed 
    by applying the percentage of Federal participation in the cost of the 
    original project or program to the current fair market value of the 
    equipment. If the recipient has no need for the equipment, the 
    recipient shall request disposition instructions from the Federal 
    awarding agency. The Federal awarding agency shall determine whether 
    the equipment can be used to meet the agency's requirements. If no 
    requirement exists within that agency, the availability of the 
    equipment shall be reported to the General Services Administration by 
    the Federal awarding agency to determine whether a requirement for the 
    equipment exists in other Federal agencies. The Federal awarding agency 
    shall issue instructions to the recipient no later than 120 calendar 
    days after the recipient's request and the following procedures shall 
    govern:
        (1) If so instructed or if disposition instructions are not issued 
    within 120 calendar days after the recipient's request, the recipient 
    shall sell the equipment and reimburse the Federal awarding agency an 
    amount computed by applying to the sales proceeds the percentage of 
    Federal participation in the cost of the original project or program. 
    However, the recipient shall be permitted to deduct and retain from the 
    Federal share $500 or ten percent of the proceeds, whichever is less, 
    for the recipient's selling and handling expenses.
        (2) If the recipient is instructed to ship the equipment elsewhere, 
    the recipient shall be reimbursed by the Federal Government by an 
    amount which is computed by applying the percentage of the recipient's 
    participation in the cost of the original project or program to the 
    current fair market value of the equipment, plus any reasonable 
    shipping or interim storage costs incurred.
        (3) If the recipient is instructed to otherwise dispose of the 
    equipment, the recipient will be reimbursed by the Federal awarding 
    agency for such costs incurred in its disposition.
        (h) The Federal awarding agency may reserve the right to transfer 
    the title to the Federal Government or to a third party named by the 
    Federal Government when the third party is otherwise eligible under 
    existing statutes. The transfer shall be subject to the following 
    standards.
        (1) The equipment shall be appropriately identified in the award or 
    otherwise made known to the recipient in writing.
        (2) The Federal awarding agency shall issue disposition 
    instructions within 120 calendar days after receipt of a final 
    inventory. The final inventory shall list all equipment acquired with 
    Federal funds and federally-owned equipment. [[Page 17248]] If the 
    Federal awarding agency fails to issue disposition instructions within 
    the 120-calendar-day period, the recipient shall apply the standards of 
    this section, as appropriate.
        (3) When the Federal awarding agency exercises its right to take 
    title, the equipment shall be subject to the provisions for federally-
    owned equipment.
    
    
    Sec. 12.935  Supplies and other expendable property.
    
        (a) Title to supplies and other expendable property shall vest in 
    the recipient upon acquisition. If there is a residual inventory of 
    unused supplies exceeding $5,000 in total aggregate value upon 
    termination or completion of the project or program and the supplies 
    are not needed for any other federally-sponsored project or program, 
    the recipient shall retain the supplies for use on non-Federal 
    sponsored activities or sell them, but shall, in either case, 
    compensate the Federal Government for its share. The amount of 
    compensation shall be computed in the same manner as for equipment.
        (b) The recipient shall not use supplies acquired with Federal 
    funds to provide services to non-Federal outside organizations for a 
    fee that is less than private companies charge for equivalent services, 
    unless specifically authorized by Federal statute as long as the 
    Federal Government retains an interest in the supplies.
    
    
    Sec. 12.936  Intangible property.
    
        (a) The recipient may copyright any work that is subject to 
    copyright and was developed, or for which ownership was purchased, 
    under an award. The Federal awarding agency(ies) reserves a royalty-
    free, nonexclusive and irrevocable right to reproduce, publish, or 
    otherwise use the work for Federal purposes, and to authorize others to 
    do so.
        (b) Recipients are subject to applicable regulations governing 
    patents and inventions, including government-wide regulations issued by 
    the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
    Made by Nonprofit Organizations and Small Business Firms Under 
    Government Grants, Contracts and Cooperative Agreements.''
        (c) Unless waived by the Federal awarding agency, the Federal 
    Government has the right to:
        (1) Obtain, reproduce, publish or otherwise use the data first 
    produced under an award; and
        (2) Authorize others to receive, reproduce, publish, or otherwise 
    use the data for Federal purposes.
        (d) Title to intangible property and debt instruments acquired 
    under an award or subaward vests upon acquisition in the recipient. The 
    recipient shall use that property for the originally-authorized 
    purpose, and the recipient shall not encumber the property without 
    approval of the Federal awarding agency. When no longer needed for the 
    originally authorized purpose, disposition of the intangible property 
    shall occur in accordance with the provisions of Sec. 12.934(g).
    
    
    Sec. 12.937  Property trust relationship.
    
        Real property, equipment, intangible property and debt instruments 
    that are acquired or improved with Federal funds shall be held in trust 
    by the recipient as trustee for the beneficiaries of the project or 
    program under which the property was acquired or improved. Agencies may 
    require recipients to record liens or other appropriate notices of 
    record to indicate that personal or real property has been acquired or 
    improved with Federal funds and that use and disposition conditions 
    apply to the property.
    
    Procurement Standard
    
    
    Sec. 12.940  Purpose of procurement standards.
    
    
        Sections 12.941 through 12.948 set forth standards for use by 
    recipients in establishing procedures for the procurement of supplies 
    and other expendable property, equipment, real property and other 
    services with Federal funds. These standards are furnished to ensure 
    that such materials and services are obtained in an effective manner 
    and in compliance with the provisions of applicable Federal statutes 
    and executive orders. No additional procurement standards or 
    requirements shall be imposed by the Federal awarding agencies upon 
    recipients, unless specifically required by Federal statute or 
    executive order or approved by OMB.
    
    
    Sec. 12.941  Recipient responsibilities.
    
        The standards contained in this section do not relieve the 
    recipient of the contractual responsibilities arising under its 
    contract(s). The recipient is the responsible authority, without 
    recourse to the Federal awarding agency, regarding the settlement and 
    satisfaction of all contractual and administrative issues arising out 
    of procurements entered into in support of an award or other agreement. 
    This includes disputes, claims, protests of award, source evaluation or 
    other matters of a contractual nature. Matters concerning violation of 
    statute are to be referred to such Federal, State or local authority as 
    may have proper jurisdiction.
    
    
    Sec. 12.942  Codes of conduct.
    
        The recipient shall maintain written standards of conduct governing 
    the performance of its employees engaged in the award and 
    administration of contracts. No employee, officer, or agent shall 
    participate in the selection, award, or administration of a contract 
    supported by Federal funds if a real or apparent conflict of interest 
    would be involved. Such a conflict would arise when the employee, 
    officer, or agent, any member of his or her immediate family, his or 
    her partner, or an organization which employs or is about to employ any 
    of the parties indicated herein, has a financial or other interest in 
    the firm selected for an award. The officers, employees, and agents of 
    the recipient shall neither solicit nor accept gratuities, favors, or 
    anything of monetary value from contractors, or parties to 
    subagreements. However, recipients may set standards for situations in 
    which the financial interest is not substantial or the gift is an 
    unsolicited item of nominal value. The standards of conduct shall 
    provide for disciplinary actions to be applied for violations of such 
    standards by officers, employees, or agents of the recipient.
    
    
    Sec. 12.943  Competition.
    
        All procurement transactions shall be conducted in a manner to 
    provide, to the maximum extent practical, open and free competition. 
    The recipient shall be alert to organizational conflicts of interest as 
    well as noncompetitive practices among contractors that may restrict or 
    eliminate competition or otherwise restrain trade. In order to ensure 
    objective contractor performance and eliminate unfair competitive 
    advantage, contractors that develop or draft specifications, 
    requirements, statements of work, invitations for bids and/or requests 
    for proposals shall be excluded from competing for such procurements. 
    Awards shall be made to the bidder or offeror whose bids or offer is 
    responsive to the solicitation and is most advantageous to the 
    recipient, price, quality and other factors considered. Solicitations 
    shall clearly set forth all requirements that the bidder or offeror 
    shall fulfill in order for the bid or offer to be evaluated by the 
    recipient. Any and all bids or offers may be rejected when it is in the 
    recipient's interest to do so. [[Page 17249]] 
    
    
    Sec. 12.944  Procurement procedures.
    
        (a) All recipients shall establish written procurement procedures. 
    These procedures shall provide, at a minimum, that:
        (1) Recipients avoid purchasing unnecessary items.
        (2) Where appropriate, an analysis is made of lease and purchase 
    alternatives to determine which would be the most economical and 
    practical procurement for the Federal Government; and
        (3) Solicitations for goods and services provide for all of the 
    following:
        (i) A clear and accurate description of the technical requirements 
    for the material, product or service to be procured. In competitive 
    procurements, such a description shall not contain features which 
    unduly restrict competition.
        (ii) Requirements which the bidder/offeror must fulfill and all 
    other factors to be used in evaluating bids or proposals.
        (iii) A description, whenever practicable, of technical 
    requirements in terms of functions to be performed or performance 
    required, including the range of acceptable characteristics or minimum 
    acceptable standards.
        (iv) The specific features of ``brand name or equal'' descriptions 
    that bidders are required to meet when such items are included in the 
    solicitation.
        (v) The acceptance, to the extent practicable and economically 
    feasible, of products and services dimensioned in the metric system of 
    measurement.
        (vi) Preference, to the extent practicable and economically 
    feasible, for products and services that conserve natural resources and 
    protect the environment and are energy efficient.
        (b) Positive efforts shall be made by recipients to use small 
    businesses, minority-owned firms, and women's business enterprises, 
    whenever possible. Recipients of Federal awards shall take all of the 
    following steps to further this goal.
        (1) Ensure that small businesses, minority-owned firms, and women's 
    business enterprises are used to the fullest extent practicable.
        (2) Make information on forthcoming opportunities available and 
    arrange time frames for purchases and contracts to encourage and 
    facilitate participation by small businesses, minority-owned firms, and 
    women's business enterprises.
        (3) Consider in the contract process whether firms competing for 
    larger contracts intend to subcontract with small businesses, minority-
    owned firms, and women's business enterprises.
        (4) Encourage contracting with consortiums of small businesses, 
    minority-owned firms and women's business enterprises when a contract 
    is too large for one of these firms to handle individually.
        (5) Use the services and assistance, as appropriate, of such 
    organizations as the Small Business Administration and the Department 
    of Commerce's Minority Business Development Agency in the solicitation 
    and utilization of small businesses, minority-owned firms and women's 
    business enterprises.
        (c) The type of procuring instruments used (e.g., fixed price 
    contracts, cost reimbursable contracts, purchase orders, and incentive 
    contracts) shall be determined by the recipient but shall be 
    appropriate for the particular procurement and for promoting the best 
    interest of the program or project involved. The ``cost-plus-a-
    percentage-of-cost'' or ``percentage of construction cost'' methods of 
    contracting shall not be used.
        (d) Contracts shall be made only with responsible contractors who 
    possess the potential ability to perform successfully under the terms 
    and conditions of the proposed procurement. Consideration shall be 
    given to such matters as contractor integrity, record of past 
    performance, financial and technical resources or accessibility to 
    other necessary resources. In certain circumstances, contracts with 
    certain parties are restricted by agencies' implementation of E.O.s 
    12549 and 12689, ``Debarment and Suspension.'' See 43 CFR part 12.
        (e) Recipients shall, on request, make available for the Federal 
    awarding agency, pre-award review of procurement documents, such as 
    requests for proposals or invitations for bids, independent cost 
    estimates, etc., when any of the following conditions apply:
        (1) A recipient's procurement procedures or operation fails to 
    comply with the procurement standards in this part.
        (2) The procurement is expected to exceed the small purchase 
    threshold fixed at 41 U.S.C. 403 (11) (currently $100,000) and is to be 
    awarded without competition or only one bid or offer is received in 
    response to a solicitation.
        (3) The procurement, which is expected to exceed the small purchase 
    threshold, specifies a ``brand name'' product.
        (4) The proposed award over the small purchase threshold is to be 
    awarded to other than the apparent low bidder under a sealed bid 
    procurement.
        (5) A proposed contract modification changes the scope of a 
    contract or increases the contract amount by more than the amount of 
    the small purchase threshold.
    
    
    Sec. 12.945  Cost and price analysis.
    
        Some form of cost or price analysis shall be made and documented in 
    the procurement files in connection with every procurement action. 
    Price analysis may be accomplished in various ways, including the 
    comparison of price quotations submitted, market prices and similar 
    indicia, together with discounts. Cost analysis is the review and 
    evaluation of each element of cost to determine reasonableness, 
    allocability and allowability.
    
    
    Sec. 12.946  Procurement records.
    
        Procurement records and files for purchases in excess of the small 
    purchase threshold shall include the following at a minimum:
        (a) Basis for contractor selection;
        (b) Justification for lack of competition when competitive bids or 
    offers are not obtained; and
        (c) Basis for award cost or price.
    
    
    Sec. 12.947  Contract administration.
    
        A system for contract administration shall be maintained to ensure 
    contractor conformance with the terms, conditions and specifications of 
    the contract and to ensure adequate and timely follow up of all 
    purchases. Recipients shall evaluate contractor performance and 
    documents, as appropriate, whether contractors have met the terms, 
    conditions and specifications of the contract.
    
    
    Sec. 12.948  Contract provisions.
    
        The recipient shall include, in addition to provisions to define a 
    sound and complete agreement, the provisions below in all contracts and 
    subcontracts.
        (a) Contracts in excess of the small purchase threshold shall 
    contain contractual provisions or conditions that allow for 
    administrative, contractual, or legal remedies in instances in which a 
    contractor violates or breaches the contract terms, and provide for 
    such remedial actions as may be appropriate.
        (b) All contracts in excess of the small purchase threshold shall 
    contain suitable provisions for termination by the recipient, including 
    the manner by which termination shall be effected and the basis for 
    settlement. In addition, such contracts shall describe conditions under 
    which the contract may be terminated for default as well as conditions 
    where the contract may be terminated because of circumstances beyond 
    the control of the contractor.
        (c) Except as otherwise required by statute, an award that requires 
    the contracting (or subcontracting) for construction or facility 
    improvements shall provide for the recipient to follow its own 
    requirements relating to bid [[Page 17250]] guarantees, performance 
    bonds, and payment bonds unless the construction contract or 
    subcontract exceeds $100,000. For those contracts or subcontracts 
    exceeding $100,000, the Federal awarding agency may accept the bonding 
    policy and requirements of the recipient, provided the Federal awarding 
    agency has made a determination that the Federal Government's interest 
    is adequately protected. If such a determination has not been made, the 
    minimum requirements shall be as follows:
        (1) A bid guarantee from each bidder equivalent to five percent of 
    the bid price. The ``bid guarantee'' shall consist of a firm commitment 
    such as a bid bond, certified check, or other negotiable instrument 
    accompanying a bid as assurance that the bidder shall, upon acceptance 
    of his bid, execute such contractual documents as may be required 
    within the time specified.
        (2) A performance bond on the part of the contractor for 100 
    percent of the contract price. A ``performance bond'' is one executed 
    in connection with a contract to secure fulfillment of all the 
    contractor's obligations under such contract.
        (3) A payment bond on the part of the contractor for 100 percent of 
    the contract price. A ``payment bond'' is one executed in connection 
    with a contract to assure payment as required by statute of all persons 
    supplying labor and material in the execution of the work provided for 
    in the contract.
        (4) Where bonds are required in the situations described herein, 
    the bonds shall be obtained from companies holding certificates of 
    authority as acceptable sureties pursuant to 31 CFR part 223, ``Surety 
    Companies Doing Business with the United States.''
        (d) All negotiated contracts (except those for less than the small 
    purchase threshold) awarded by recipients shall include a provision to 
    the effect that the recipient, the Federal awarding agency, the 
    Comptroller General of the United States, or any of their duly 
    authorized representatives, shall have access to any books, documents, 
    papers and records of the contractor which are directly pertinent to a 
    specific program for the purpose of making audits, examinations, 
    excerpts and transcriptions.
        (e) All contracts, including small purchases, awarded by recipients 
    and their contractors shall contain the procurement provisions of 
    appendix A to this subpart, as applicable.
    
    Reports and Records
    
    
    Sec. 12.950  Purpose of reports and records.
    
        Sections 12.951 through 12.953 set forth the procedures for 
    monitoring and reporting on the recipient's financial and program 
    performance and the necessary standard reporting forms. They also set 
    forth record retention requirements.
    
    
    Sec. 12.951  Monitoring and reporting program performance.
    
        (a) Recipients are responsible for managing and monitoring each 
    project, program, subaward, function or activity supported by the 
    award. Recipients shall monitor subawards to ensure subrecipients have 
    met the audit requirements as delineated in Sec. 12.926.
        (b) The Federal awarding agency shall prescribe the frequency of 
    submission for performance reports. Except as provided in 
    Sec. 12.951(f), performance reports will not be required more 
    frequently than quarterly or less frequently than annually. Annual 
    reports shall be due 90 calendar days after the grant year; quarterly 
    or semi-annual reports shall be due 30 days after the reporting period. 
    The Federal awarding agency may require annual reports before the 
    anniversary dates of multiple year awards in lieu of these 
    requirements. The final performance reports are due 90 calendar days 
    after the expiration or termination of the award.
        (c) A final technical or performance report shall be required after 
    completion of the project only if the awarding agency determines this 
    to be appropriate.
        (d) When required, performance reports shall generally contain, for 
    each award, brief information on each of the following:
        (1) A comparison of actual accomplishments with the goals and 
    objectives established for the period, the findings of the 
    investigator, or both. Whenever appropriate and the output of programs 
    or projects can be readily quantified, such quantitative data should be 
    related to cost data for computation of unit costs.
        (2) Reasons why established goals were not met, if appropriate.
        (3) Other pertinent information including, when appropriate, 
    analysis and explanation of cost overruns or high unit costs.
        (e) Recipients shall not be required to submit more than the 
    original and two copies of performance reports.
        (f) Recipients shall immediately notify the Federal awarding agency 
    of developments that have a significant impact on the award-supported 
    activities. Also, notification shall be given in the case of problems, 
    delays, or adverse conditions which materially impair the ability to 
    meet the objectives of the award. This notification shall include a 
    statement of the action taken or contemplated, and any assistance 
    needed to resolve the situation.
        (g) Federal awarding agencies may make site visits, as needed.
        (h) Federal awarding agencies shall comply with clearance 
    requirements of 5 CFR part 1320 when requesting performance data from 
    recipients.
    
    
    Sec. 12.952  Financial reporting.
    
        (a) The following forms or such other forms as may be approved by 
    OMB are authorized for obtaining financial information from recipients.
        (1) SF-269 or SF-269A, Financial Status Report.
        (i) Each Federal awarding agency will require recipients to use 
    either the SF-269 or SF-269A to report the status of funds for all 
    nonconstruction projects or programs. A Federal awarding agency may, 
    however, have the option of not requiring the SF-269 or SF-269A when 
    the SF-270, Request for Advance or Reimbursement, or SF-272, Report of 
    Federal Cash Transactions, is determined to provide adequate 
    information to meet its needs, except that a final SF-269 or SF-269A 
    shall be required at the completion of the project when the SF-270 is 
    used only for advances.
        (ii) The Federal awarding agency shall prescribe whether the report 
    shall be on a cash or accrual basis. If the Federal awarding agency 
    requires accrual information and the recipient's accounting records are 
    not normally kept on the accrual basis, the recipient shall not be 
    required to convert its accounting system, but shall develop accrual 
    information through best estimates based upon an analysis of the 
    documentation on hand.
        (iii) The Federal awarding agency shall determine the frequency of 
    the Financial Status Report for each project or program, considering 
    the size and complexity of the particular project or program. However, 
    the report shall not be required more frequently than quarterly or less 
    frequently than annually. A final report shall be required at the 
    completion of the agreement.
        (iv) The Federal awarding agency shall require recipients to submit 
    the SF-269 or SF-269A (an original and no more than two copies) no 
    later than 30 days after the end of each specified reporting period for 
    quarterly and semi-annual reports, and 90 calendar days for annual and 
    final reports. Extensions of reporting due dates may be approved by the 
    Federal awarding agency upon request by the recipient.
        (2) SF-272, Report of Federal Cash Transactions. [[Page 17251]] 
        (i) When funds are advanced to recipients, the Federal awarding 
    agency shall require each recipient to submit the SF-272 and, when 
    necessary, its continuation sheet, SF-272a. The Federal awarding agency 
    shall use this report to monitor cash advanced to recipients and to 
    obtain disbursement information for each agreement with the recipients.
        (ii) Federal awarding agencies may require forecasts of Federal 
    cash requirements in the ``Remarks'' section of the report.
        (iii) When practical and deemed necessary, Federal awarding 
    agencies may require recipients to report in the ``Remarks'' section 
    the amount of cash advances received in excess of three days. 
    Recipients shall provide short narrative explanations of actions taken 
    to reduce the excess balances.
        (iv) Recipients shall be required to submit not more than the 
    original and two copies of the SF-272 15 calendar days following the 
    end of each quarter. The Federal awarding agencies may require a 
    monthly report from those recipients receiving advances totaling $1 
    million or more per year.
        (v) Federal awarding agencies may waive the requirement for 
    submission of the SF-272 for any one of the following reasons:
        (A) When monthly advances do not exceed $25,000 per recipient, 
    provided that such advances are monitored through other forms contained 
    in this section;
        (B) If, in the Federal awarding agency's opinion, the recipient's 
    accounting controls are adequate to minimize excessive Federal 
    advances; or
        (C) When the electronic payment mechanisms provide adequate data.
        (b) When the Federal awarding agency needs additional information 
    or more frequent reports, the following shall be observed:
        (1) When additional information is needed to comply with 
    legislative requirements, Federal awarding agencies shall issue 
    instructions to require recipients to submit such information under the 
    ``Remarks'' section of the reports.
        (2) When a Federal awarding agency determines that a recipient's 
    accounting system does not meet the standards in Sec. 12.921, 
    additional pertinent information to further monitor awards may be 
    obtained upon written notice to the recipient until such time as the 
    system is brought up to standard. The Federal awarding agency, in 
    obtaining this information, shall comply with report clearance 
    requirements of 5 CFR part 1320.
        (3) Federal awarding agencies are encouraged to shade out any line 
    item on any report if not necessary.
        (4) Federal awarding agencies may accept the identical information 
    from the recipients in machine readable format or computer printouts or 
    electronic outputs in lieu of prescribed formats.
        (5) Federal awarding agencies may provide computer or electronic 
    outputs to recipients when such action expedites or contributes to the 
    accuracy or reporting.
    
    
    Sec. 12.953  Retention and access requirements for records.
    
        (a) This section sets forth requirements for record retention and 
    access to records for awards to recipients. Federal awarding agencies 
    shall not impose any other record retention or access requirements upon 
    recipients.
        (b) Financial records, supporting documents, statistical records, 
    and all other records pertinent to an award shall be retained for a 
    period of three years from the date of submission of the final 
    expenditure report or, for awards that are renewed quarterly or 
    annually, from the date of the submission of the quarterly or annual 
    financial report. The only exceptions are the following:
        (1) If any litigation, claim, or audit is started before the 
    expiration of the 3-year period, the records shall be retained until 
    all litigation, claims or audit findings involving the records have 
    been resolved and final action taken.
        (2) Records for real property and equipment acquired with Federal 
    funds shall be retained for 3 years after final disposition.
        (3) When records are transferred to or maintained by the Federal 
    awarding agency, the 3-year retention requirement is not applicable to 
    the recipient.
        (4) Indirect cost rate proposals, cost allocation plans, etc., as 
    specified in Sec. 12.953(g).
        (c) Copies of original records may be substituted for the original 
    records if authorized by the Federal awarding agency.
        (d) The Federal awarding agency will request transfer of certain 
    records to its custody from recipients when it determines that the 
    records possess long term retention value. However, in order to avoid 
    duplicate recordkeeping, a Federal awarding agency may make 
    arrangements for recipients to retain any records that are continuously 
    needed for joint use.
        (e) The Federal awarding agency, the Inspector General, Comptroller 
    General of the United States, or any of their duly authorized 
    representatives, have the right of timely and unrestricted access to 
    any books, documents, papers, or other records of recipients that are 
    pertinent to the awards, in order to make audits, examinations, 
    excerpts, transcripts and copies of such documents. This right also 
    includes timely and reasonable access to a recipient's personnel for 
    the purpose of interview and discussion related to such documents. The 
    rights of access in this paragraph are not limited to the required 
    retention period, but shall last as long as records are retained.
        (f) Unless required by statute, no Federal awarding agency shall 
    place restrictions on recipients that limit public access to the 
    records of recipients that are pertinent to an award, except when the 
    Federal awarding agency can demonstrate that such records shall be kept 
    confidential and would have been exempted from disclosure pursuant to 
    the Freedom of Information Act (5 U.S.C. 552) if the records had 
    belonged to the Federal awarding agency.
        (g) Indirect cost rate proposals, cost allocation plans, etc. 
    Paragraphs (g)(1) and (g)(2) of this section apply to the following 
    types of documents, and their supporting records: indirect cost rate 
    computations or proposals, cost allocation plans, and any similar 
    accounting computations of the rate at which a particular group of 
    costs is chargeable (such as computer usage chargeback rates or 
    composite fringe benefit rates).
        (1) If submitted for negotiation. If the recipient submits to the 
    Federal awarding agency or the subrecipient submits to the recipient 
    the proposal, plan, or other computation to form the basis for 
    negotiation of the rate, then the 3-year retention period for its 
    supporting records starts on the date of the submission.
        (2) If not submitted for negotiation. If the recipient is not 
    required to submit to the Federal awarding agency or the subrecipient 
    is not required to submit to the recipient the proposal, plan, or other 
    computation for negotiation purposes, then the 3-year retention period 
    for the proposal, plan, or other computation and its supporting records 
    starts at the end of the fiscal year (or other accounting period) 
    covered by the proposal, plan, or other computation.
    
    Termination and Enforcement
    
    
    Sec. 12.960  Purpose of termination and enforcement.
    
        Sections 12.961 and 12.962 set forth uniform suspension, 
    termination and enforcement procedures. [[Page 17252]] 
    
    
    Sec. 12.961  Termination.
    
        (a) Awards may be terminated in whole or in part only if paragraph 
    (a)(1), (a)(2) or (a)(3) of this section applies.
        (1) By the Federal awarding agency, if a recipient materially fails 
    to comply with the terms and conditions of an award.
        (2) By the Federal awarding agency with the consent of the 
    recipient, in which case the two parties shall agree upon the 
    termination conditions, including the effective date and, in the case 
    of partial termination, the portion to be terminated.
        (3) By the recipient upon sending to the Federal awarding agency 
    written notification setting forth the reasons for such termination, 
    the effective date, and, in the case of partial termination, the 
    portion to be terminated. However, if the Federal awarding agency 
    determines in the case of partial termination that the reduced or 
    modified portion of the grant will not accomplish the purposes for 
    which the grant was made, it may terminate the grant in its entirety 
    under either paragraph (a) (1) or (2) of this section.
        (b) If costs are allowed under an award, the responsibilities of 
    the recipient referred to in Sec. 12.971(a), including those for 
    property management as applicable, shall be considered in the 
    termination of the award, and provision shall be made for continuing 
    responsibilities of the recipient after termination, as appropriate.
    
    
    Sec. 12.962  Enforcement.
    
        (a) Remedies for noncompliance. If a recipient materially fails to 
    comply with the terms and conditions of an award, whether stated in a 
    Federal statute, regulation, assurance, application, or notice of 
    award, the Federal awarding agency may, in addition to imposing any of 
    the special conditions outlined in Sec. 12.914, take one or more of the 
    following actions, as appropriate in the circumstances.
        (1) Temporarily withhold cash payments pending correction of the 
    deficiency by the recipient or more severe enforcement action by the 
    Federal awarding agency.
        (2) Disallow (that is, deny both use of funds and any applicable 
    matching credit for) all or part of the cost of the activity or action 
    not in compliance.
        (3) Wholly or partly suspend or terminate the current award.
        (4) Withhold further awards for the project or program.
        (5) Take other remedies that may be legally available.
        (b) Hearings and appeals. In taking an enforcement action, the 
    awarding agency shall provide the recipient an opportunity for hearing, 
    appeal, or other administrative proceeding to which the recipient is 
    entitled under any statute or regulation applicable to the action 
    involved.
        (c) Effects of suspension and termination. Costs of a recipient 
    resulting from obligations incurred by the recipient during a 
    suspension or after termination of an award are not allowable unless 
    the Federal awarding agency expressly authorizes them in the notice of 
    suspension or termination or subsequently. Other recipient costs during 
    suspension or after termination which are necessary and not reasonably 
    avoidable are allowable if paragraphs (c) (1) and (2) of this section 
    apply:
        (1) The costs result from obligations which are properly incurred 
    by the recipient before the effective date of suspension or 
    termination, are not in anticipation of it, and in the case of a 
    termination, are noncancellable.
        (2) The costs would be allowable if the award were not suspended or 
    expired normally at the end of the funding period in which the 
    termination takes effect.
        (d) Relationship to debarment and suspension. The enforcement 
    remedies identified in this section, including suspension and 
    termination, do not preclude a recipient from being subject to 
    debarment and suspension under E.O.s 12549 and 12689 and the Federal 
    awarding agency implementing regulations (see 43 CFR part 12).
    
    After-the-Award Requirements
    
    
    Sec. 12.970  Purpose.
    
        Sections 12.971 through 12.973 contain closeout procedures and 
    other procedures for subsequent disallowances and adjustments.
    
    
    Sec. 12.971  Closeout procedures.
    
        (a) Recipients shall submit, within 90 calendar days after the date 
    of completion of the award, all financial, performance, and other 
    reports as required by the terms and conditions of the award. The 
    Federal awarding agency may approve extensions when requested by the 
    recipient.
        (b) Unless the Federal awarding agency authorizes an extension, a 
    recipient shall liquidate all obligations incurred under the award not 
    later than 90 calendar days after the funding period or the date of 
    completion as specified in the terms and conditions of the award or in 
    agency implementing instructions.
        (c) The Federal awarding agency shall make prompt payments to a 
    recipient for allowable reimbursable costs under the award being closed 
    out.
        (d) The recipient shall promptly refund any balances of unobligated 
    cash that the Federal awarding agency has advanced or paid and that is 
    not authorized to be retained by the recipient for use in other 
    projects. OMB Circular A-129 governs unreturned amounts that become 
    delinquent debts.
        (e) When authorized by the terms and conditions of the award, the 
    Federal awarding agency shall make a settlement for any upward or 
    downward adjustments to the Federal share of costs after closeout 
    reports are received.
        (f) The recipient shall account for any real and personal property 
    acquired with Federal funds or received from the Federal Government in 
    accordance with Secs. 12.931 through 12.937.
        (g) If a final audit has not been performed prior to the closeout 
    of an award, the Federal awarding agency shall retain the right to 
    recover an appropriate amount after fully considering the 
    recommendations on disallowed costs resulting from the final audit.
    
    
    Sec. 12.972  Subsequent adjustments and continuing responsibilities.
    
        (a) The closeout of an award does not affect any of the following.
        (1) The right of the Federal awarding agency to disallow costs and 
    recover funds on the basis of a later audit or other review.
        (2) The obligation of the recipient to return any funds due as a 
    result of later refunds, corrections, or other transactions.
        (3) Audit requirements in Sec. 12.926.
        (4) Property management requirements in Secs. 12.931 through 
    12.937.
        (5) Records retention as required in Sec. 12.953.
        (b) After closeout of an award, a relationship created under an 
    award may be modified or ended in whole or in part with the consent of 
    the Federal awarding agency and the recipient, provided the 
    responsibilities of the recipient referred to in Sec. 12.973(a), 
    including those for property management as applicable, are considered 
    and provisions made for continuing responsibilities of the recipient, 
    as appropriate.
    
    
    Sec. 12.973  Collection of amounts due.
    
        (a) Any funds paid to a recipient in excess of the amount to which 
    the recipient is finally determined to be entitled under the terms and 
    conditions of the award constitute a debt to the Federal Government. If 
    not paid within a reasonable period after the demand for payment, the 
    Federal awarding agency may reduce the debt by paragraph (a) (1), (2) 
    or (3) of this section: [[Page 17253]] 
        (1) Making an administrative offset against other requests for 
    reimbursements.
        (2) Withholding advance payments otherwise due to the recipient.
        (3) Taking other action permitted by statute.
        (b) Except as otherwise provided by law, the Federal awarding 
    agency shall charge interest on an overdue debt in accordance with 4 
    CFR chapter II, ``Federal Claims Collection Standards.''
    
    Appendix A to Subpart F--Contract Provisions
    
        All contracts awarded by a recipient, including small purchases, 
    shall contain the following provisions as applicable:
        1. Equal Employment Opportunity--All contracts shall contain a 
    provision requiring compliance with E.O. 11246, ``Equal Employment 
    Opportunity,'' as amended by E.O. 11375, ``Amending Executive Order 
    11246 Relating to Equal Employment Opportunity,'' and as 
    supplemented by regulations at 41 CFR part 60, ``Office of Federal 
    Contract Compliance Programs, Equal Employment Opportunity, 
    Department of Labor.''
        2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
    276c)--All contracts and subgrants in excess of $100,000 for 
    construction or repair awarded by recipients and subrecipients shall 
    include a provision for compliance with the Copeland ``Anti-
    Kickback'' Act (18 U.S.C. 874), as supplemented by Department of 
    Labor regulations (29 CFR part 3, ``Contractors and Subcontractors 
    on Public Building or Public Work Financed in Whole or in Part by 
    Loans or Grants from the United States''). The Act provides that 
    each contractor or subrecipient shall be prohibited from inducing, 
    by any means, any person employed in the construction, completion, 
    or repair of public work, to give up any part of the compensation to 
    which he is otherwise entitled. The recipient shall report all 
    suspected or reported violations to the Federal awarding agency.
        3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
    required by Federal program legislation, all construction contracts 
    awarded by the recipients and subrecipients of more than $2,000 
    shall include a provision for compliance with the Davis-Bacon Act 
    (40 U.S.C. 276a to a-7) and as supplemented by Department of Labor 
    regulations (29 CFR part 5, ``Labor Standards Provisions Applicable 
    to Contracts Governing Federally Financed and Assisted 
    Construction''). Under this Act, contractors shall be required to 
    pay wages to laborers and mechanics at a rate not less than the 
    minimum wages specified in a wage determination made by the 
    Secretary of Labor. In addition, contractors shall be required to 
    pay wages not less than once a week. The recipient shall place a 
    copy of the current prevailing wage determination issued by the 
    Department of Labor in each solicitation and the award of a contract 
    shall be conditioned upon the acceptance of the wage determination. 
    The recipient shall report all suspected or reported violations to 
    the Federal awarding agency.
        4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
    333)--Where applicable, all contracts awarded by recipients in 
    excess of $100,000 for construction contracts and for other 
    contracts that involve the employment of mechanics or laborers shall 
    include a provision for compliance with sections 102 and 107 of the 
    Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
    supplemented by Department of Labor regulations (29 CFR part 5). 
    Under section 102 of the Act, each contractor shall be required to 
    compute the wages of every mechanic and laborer on the basis of a 
    standard work week of 40 hours. Work in excess of the standard work 
    week is permissible provided that the worker is compensated at a 
    rate of not less than 1\1/2\ times the basic rate of pay for all 
    hours worked in excess of 40 hours in the work week. Section 107 of 
    the Act is applicable to construction work and provides that no 
    laborer or mechanic shall be required to work in surroundings or 
    under working conditions which are unsanitary, hazardous or 
    dangerous. These requirements do not apply to the purchases of 
    supplies or materials or articles ordinarily available on the open 
    market, or contracts for transportation or transmission of 
    intelligence.
        5. Rights to Inventions Made Under a Contract or Agreement--
    Contracts or agreements for the performance of experimental, 
    developmental, or research work shall provide for the rights of the 
    Federal Government and the recipient in any resulting invention in 
    accordance with 37 CFR part 401, ``Rights to Inventions Made by 
    Nonprofit Organizations and Small Business Firms Under Government 
    Grants, Contracts and Cooperative Agreements,'' and any implementing 
    regulations issued by the awarding agency.
        6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
    Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--
    Contracts and subgrants of amounts in excess of $100,000 shall 
    contain a provision that requires the recipient to agree to comply 
    with all applicable standards, orders or regulations issued pursuant 
    to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
    Pollution Control Act as amended (33 U.S.C. 1251 et seq.). 
    Violations shall be reported to the Federal awarding agency and the 
    Regional Office of the Environmental Protection Agency (EPA).
        7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors 
    who apply or bid for an award of more than $100,000 shall file the 
    required certification. Each tier certifies to the tier above that 
    it will not and has not used Federal appropriated funds to pay any 
    person or organization for influencing or attempting to influence an 
    officer or employee of any agency, a member of Congress, officer or 
    employee of Congress, or an employee of a member of Congress in 
    connection with obtaining any Federal contract, grant or any other 
    award covered by 31 U.S.C. 1352. Each tier shall also disclose any 
    lobbying with non-Federal funds that takes place in connection with 
    obtaining any Federal award. Such disclosures are forwarded from 
    tier to tier up to the recipient.
        8. Debarment and Suspension (E.O.s 12549 and 12689)--No 
    contracts shall be made to parties listed on the General Services 
    Administration's ``Lists of Parties Excluded from Federal 
    Procurement or Nonprocurement Programs'' in accordance with E.O.s 
    12549 and 12689, ``Debarment and Suspension.'' This list contains 
    the names of parties debarred, suspended, or otherwise excluded by 
    agencies, and contractors declared ineligible under statutory or 
    regulatory authority other than E.O. 12549. Contractors with awards 
    that exceed the small purchase threshold shall provide the required 
    certification regarding their exclusion status and that of their 
    principals.
    
    [FR Doc. 95-8175 Filed 4-4-95; 8:45 am]
    BILLING CODE 4310-RF-M
    
    

Document Information

Effective Date:
5/5/1995
Published:
04/05/1995
Department:
Interior Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-8175
Dates:
May 5, 1995.
Pages:
17237-17253 (17 pages)
RINs:
1090-AA42
PDF File:
95-8175.pdf
CFR: (51)
43 CFR 12.951(f)
43 CFR 12.901
43 CFR 12.902
43 CFR 12.903
43 CFR 12.904
More ...