[Federal Register Volume 60, Number 125 (Thursday, June 29, 1995)]
[Rules and Regulations]
[Pages 33694-33710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15898]
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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
14 CFR Part 1273
Grants and Cooperative Agreements to State and Local Governments
AGENCY: Office of Procurement, Contract Management Division, National
Aeronautics and Space Administration (NASA).
ACTION: Interim rule.
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SUMMARY: This interim rule is NASA's adoption of the Common Rule, under
Office of Management and Budget Circular No. A-102, on grants and
cooperative agreements to state and local governments.
DATES: This rule is effective July 31, 1995. Comments must be received
on or before August 28, 1995.
ADDRESSEES: Submit comments to Rich Kall, Contract Management Division
(Code HK), Office of Procurement, NASA Headquarters, Washington, DC
20546. Comments on the paperwork burden should also be addressed to the
Office of Information and Regulatory Affairs, Attention: Desk Officer
for NASA, Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Rich Kall, (202) 358-0459.
SUPPLEMENTARY INFORMATION:
Background
The NASA Research Grant Handbook (14 CFR part 1260) is the current
governing rule for NASA research grants and cooperative agreements. It
does not address all types of NASA grants and cooperative agreements.
NASA intends to issue regulations on all its grant programs thru new
CFR parts. These regulations will cover grants and cooperative
agreements with state and local governments, grants and cooperative
agreements with educational institutions and other nonprofit
organizations, and cooperative agreements with commercial firms.
At this time it is our intention to adopt the Common Rule as it
applies under OMB Circular No. A-102. This rule is adopted as an
interim rule so that it may be used immediately. The Common Rule has
already undergone public comment and NASA is not making significant
changes. NASA's interim rule is the same as the common rule adopted by
other agencies, for example, the National Science Foundation at 45 CFR
part 602, except that the following corrections have been made: (1) In
Sec. 1273.3, the definition of ``share'' has been corrected by removing
the phrase ``to which the acquisition costs under the grant''; (2) in
Sec. 1273.21(e), the phrase ``provide cash or a working capital advance
basis'' in the first sentence has been changed to ``provide cash on a
working capital advance basis''; (3) in Sec. 1273.30(f), ``budget
formal'' has been changed to ``budget format''; (4) in Sec. 1273.32(g),
``third part'' has been changed to ``third party''; (5) in
Sec. 1273.36(d)(2)(i)(B), ``compete effectively and for the business''
has been changed to ``compete effectively for the business''; and (6)
in Sec. 1273.42(f), ``records Unless required'' has been changed to
``records unless required''.
Regulatory Flexibility Act
NASA certifies that this regulation will not have a significant
economic impact on a substantial number of small entities under
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Paperwork Reduction Act
The information collection requirements in this interim rule have
been submitted to the Office of Management and Budget for review under
44 U.S.C. 3504(h). The Common Rule as adopted by NASA requires certain
reporting and recordkeeping of states and local governments in order to
determine eligibility for selection and compliance with the rule. The
estimated total annual reporting and recordkeeping burden is 1180
hours. The estimated average burden hours per response is 7 hours. The
rule proposes quarterly financial reporting and annual reporting for
property and technical results. Other reports are required at the
conclusion of the agreement or the occurrence of other events. The
estimated number of likely respondents is 30 organizations submitting
proposals per year resulting in the award of 10 grants per year.
List of Subjects in 14 CFR Part 1273.
Grant programs, Intergovernmental relations.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
Accordingly, 14 CFR part 1273 is added to read as follows:
PART 1273--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND
COOPERATIVE AGREEMENTS TO STATE AND LOCAL GOVERNMENTS
Subpart A--General
Sec.
1273.1 Purpose and scope of this part.
1273.2 Scope of subpart.
1273.3 Definitions.
1273.4 Applicability.
1273.5 Effect on other issuances.
1273.6 Additions and exceptions.
Subpart B--Pre-Award Requirements
1273.10 Forms for applying for grants.
1273.11 State plans.
1273.12 Special grant or subgrant conditions for ``high-risk''
grantees.
[[Page 33695]]
Subpart C--Post-Award Requirements
Financial Administration
1273.20 Standards for financial management systems.
1273.21 Payment.
1273.22 Allowable costs.
1273.23 Period of availability of funds.
1273.24 Matching or cost sharing.
1273.25 Program income.
1273.26 Non-Federal audit.
Changes, Property, and Subawards
1273.30 Changes.
1273.31 Real property.
1273.32 Equipment.
1273.33 Supplies.
1273.34 Copyrights.
1273.35 Subawards to debarred and suspended parties.
1273.36 Procurement.
1273.37 Subgrants.
Reports, Records, Retention, and Enforcement
1273.40 Monitoring and reporting program performance.
1273.41 Financial reporting.
1273.42 Retention and access requirements for records.
1273.43 Enforcement.
1273.44 Termination for convenience.
Subpart D--After-the-Grant Requirements
1273.50 Closeout.
1273.51 Later disallowances and adjustments.
1273.52 Collection of amounts due.
Subpart E--Entitlements (Reserved)
Authority: 31 U.S.C. 6301 to 6308; 42 U.S.C. 2451, et seq.
Subpart A--General
Sec. 1273.1 Purpose and scope of this part.
This subpart establishes uniform administrative rules for Federal
grants and cooperative agreements and subawards to State, local and
Indian tribal governments.
Sec. 1273.2 Scope of subpart.
This subpart contains general rules pertaining to this part and
procedures for control of exceptions from this part.
Sec. 1273.3 Definitions.
As used in this part:
Accrued expenditures mean the charges incurred by the grantee
during a given period requiring the provision of funds for:
(1) Goods and other tangible property received;
(2) Services performed by employees, contractors, subgrantees,
subcontractors, and other payees; and
(3) Other amounts becoming owed under programs for which no current
services or performance is required, such as annuities, insurance
claims, and other benefit payments.
Accrued income means the sum of:
(1) Earnings during a given period from services performed by the
grantee and goods and other tangible property delivered to purchasers,
and
(2) Amounts becoming owed to the grantee for which no current
services or performance is required by the grantee.
Acquisition cost of an item of purchased equipment means the net
invoice unit price of the property 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 grantee's regular
accounting practices.
Administrative requirements mean those matters common to grants in
general, such as financial management, kinds and frequency of reports,
and retention of records. These are distinguished from ``programmatic''
requirements, which concern matters that can be treated only on a
program-by-program or grant-by-grant basis, such as kinds of activities
that can be supported by grants under a particular program.
Awarding agency means:
(1) With respect to a grant, the Federal agency, and
(2) With respect to a subgrant, the party that awarded the
subgrant.
Cash contributions means the grantee's cash outlay, including the
outlay of money contributed to the grantee or subgrantee by other
public agencies and institutions, and private organizations and
individuals. When authorized by Federal legislation, Federal funds
received from other assistance agreements may be considered as grantee
or subgrantee cash contributions.
Contract means (except as used in the definitions for ``grant'' and
``subgrant'' in this section and except where qualified by ``Federal'')
a procurement contract under a grant or subgrant, and means a
procurement subcontract under a contract.
Cost sharing or matching means the value of the third party in-kind
contributions and the portion of the costs of a federally assisted
project or program not borne by the Federal Government.
Cost-type contract means a contract or subcontract under a grant in
which the contractor or subcontractor is paid on the basis of the costs
it incurs, with or without a fee.
Equipment means tangible, nonexpendable, personal property having a
useful life of more than one year and an acquisition cost of $5,000 or
more per unit. A grantee may use its own definition of equipment
provided that such definition would at least include all equipment
defined above.
Expenditure report means:
(1) For nonconstruction grants, the SF-269 ``Financial Status
Report'' (or other equivalent report);
(2) For construction grants, the SF-271 ``Outlay Report and Request
for Reimbursement'' (or other equivalent report).
Federally recognized Indian tribal government means the governing
body or a governmental agency of any Indian tribe, band, nation, or
other organized group or community (including any Native village as
defined in section 3 of the Alaska Native Claims Settlement Act, 85
Stat. 688) certified by the Secretary of the Interior as eligible for
the special programs and services provided by him through the Bureau of
Indian Affairs.
Government means a State or local government or a federally
recognized Indian tribal government.
Grant means an award of financial assistance, including cooperative
agreements, in the form of money, or property in lieu of money, by the
Federal Government to an eligible grantee. The term does not include
technical assistance which provides services instead of money, or other
assistance in the form of revenue sharing, loans, loan guarantees,
interest subsidies, insurance, or direct appropriations. Also, the term
does not include assistance, such as a fellowship or other lump sum
award, which the grantee is not required to account for.
Grantee means the government to which a grant is awarded and which
is accountable for the use of the funds provided. The grantee is the
entire legal entity even if only a particular component of the entity
is designated in the grant award document.
Local government means a county, municipality, city, town,
township, local public authority (including any public and Indian
housing agency under the United States Housing Act of 1937) school
district, special district, intrastate district, council of governments
(whether or not incorporated as a nonprofit corporation under state
law), any other regional or interstate government entity, or any agency
or instrumentality of a local government.
Obligations means the amounts of orders placed, contracts and
subgrants awarded, goods and services received, and similar
transactions during a given period that will require payment by the
[[Page 33696]]
grantee during the same or a future period.
OMB means the United States Office of Management and Budget.
Outlays (expenditures) mean 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 actual cash disbursement for
direct charges for goods and services, the amount of indirect expense
incurred, the value of in-kind contributions applied, and the amount of
cash advances and payments made to contractors and subgrantees. For
reports prepared on an accrued expenditure basis, outlays are the sum
of actual cash disbursements, the amount of indirect expense incurred,
the value of inkind contributions applied, and the new increase (or
decrease) in the amounts owed by the grantee for goods and other
property received, for services performed by employees, contractors,
subgrantees, subcontractors, and other payees, and other amounts
becoming owed under programs for which no current services or
performance are required, such as annuities, insurance claims, and
other benefit payments.
Percentage of completion method refers to a system under which
payments are made for construction work according to the percentage of
completion of the work, rather than to the grantee's cost incurred.
Prior approval means documentation evidencing consent prior to
incurring specific cost.
Real property means land, including land improvements, structures
and appurtenances thereto, excluding movable machinery and equipment.
Share, when referring to the awarding agency's portion of real
property, equipment or supplies, means the same percentage as the
awarding agency's portion of the acquiring party's total costs under
the grant to which the acquisition cost of the property was charged.
Only costs are to be counted--not the value of third-party in-kind
contributions.
State means any of the several States of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, any territory or
possession of the United States, or any agency or instrumentality of a
State exclusive of local governments. The term does not include any
public and Indian housing agency under United States Housing Act of
1937.
Subgrant means an award of financial assistance in the form of
money, or property in lieu of money, made under a grant by a grantee to
an eligible subgrantee. The term includes financial assistance when
provided by contractual legal agreement, but does not include
procurement purchases, nor does it include any form of assistance which
is excluded from the definition of ``grant'' in this subpart.
Subgrantee means the government or other legal entity to which a
subgrant is awarded and which is accountable to the grantee for the use
of the funds provided.
Supplies means all tangible personal property other than
``equipment'' as defined in this part.
Suspension means depending on the context, either
(1) Temporary withdrawal of the authority to obligate grant funds
pending corrective action by the grantee or subgrantee or a decision to
terminate the grant; or
(2) An action taken by a suspending official in accordance with
agency regulations implementing E.O. 12549 to immediately exclude a
person from participating in grant transactions for a period, pending
completion of an investigation and such legal or debarment proceedings
as may ensue.
Termination means permanent withdrawal of the authority to obligate
previously-awarded grant funds before that authority would otherwise
expire. It also means the voluntary relinquishment of that authority by
the grantee or subgrantee. ``Termination'' does not include:
(1) Withdrawal of funds awarded on the basis of the grantee's
underestimate of the unobligated balance in a prior period;
(2) Withdrawal of the unobligated balance as of the expiration of a
grant;
(3) Refusal to extend a grant or award additional funds, to make a
competing or noncompeting continuation, renewal, extension, or
supplemental award; or
(4) Voiding of a grant upon determination that the award was
obtained fraudulently, or was otherwise illegal or invalid from
inception.
Terms of a grant or subgrant mean all requirements of the grant or
subgrant, whether in statute, regulations, or the award document.
Third party in-kind contributions mean property or services which
benefit a federally assisted project or program and which are
contributed by non-Federal third parties without charge to the grantee,
or a cost-type contractor under the grant agreement.
Unliquidated obligations for reports prepared on a cash basis mean
the amount of obligations incurred by the grantee that has not been
paid. For reports prepared on an accrued expenditure basis, they
represent the amount of obligations incurred by the grantee for which
an outlay has not been recorded.
Unobligated balance means the portion of the funds authorized by
the Federal agency that has not been obligated by the grantee and is
determined by deducting the cumulative obligations from the cumulative
funds authorized.
Sec. 1273.4 Applicability.
(a) General. Subparts A through D of this part apply to all grants
and subgrants to governments, except where inconsistent with Federal
statutes or with regulations authorized in accordance with the
exception provision of Sec. 1273.6 or:
(1) Grants and subgrants to State and local institutions of higher
education or State and local hospitals.
(2) The block grants authorized by the Omnibus Budget
Reconciliation Act of 1981 (Community Services; Preventive Health and
Health Services; Alcohol, Drug Abuse, and Mental Health Services;
Maternal and Child Health Services; Social Services; Low-Income Home
Energy Assistance; States' Program of Community Development Block
Grants for Small Cities; and Elementary and Secondary Education other
than programs administered by the Secretary of Education under Title V,
Subtitle D, Chapter 2, Section 583--the Secretary's discretionary grant
program) and titles I-III of the Job Training Partnership Act of 1982
and under the Public Health Services Act (Section 1921), Alcohol and
Drug Abuse Treatment and Rehabilitation Block Grant and Part C of title
V, Mental Health Service for the Homeless Block Grant).
(3) Entitlement grants to carry out the following programs of the
Social Security Act:
(i) Aid to Needy Families with Dependent Children (Title IV-A of
the Act, not including the Work Incentive Program (WIN) authorized by
section 402(a)19(G); HHS grants for WIN are subject to this part);
(ii) Child Support Enforcement and Establishment of Paternity
(Title IV-D of the Act);
(iii) Foster Care and Adoption Assistance (Title IV-E of the Act);
(iv) Aid to the Aged, Blind, and Disabled (Titles I, X, XIV, and
XVI-AABD of the Act); and
(v) Medical Assistance (Medicaid) (Title XIX of the Act) not
including the State Medicaid Fraud Control program authorized by
section 1903(a)(6)(B).
(4) Entitlement grants under the following programs of The National
School Lunch Act:
[[Page 33697]]
(i) School Lunch (section 4 of the Act),
(ii) Commodity Assistance (section 6 of the Act),
(iii) Special Meal Assistance (section 11 of the Act),
(iv) Summer Food Service for Children (section 13 of the Act), and
(v) Child Care Food Program (section 17 of the Act).
(5) Entitlement grants under the following programs of The Child
Nutrition Act of 1966:
(i) Special Milk (section 3 of the Act), and
(ii) School Breakfast (section 4 of the Act).
(6) Entitlement grants for State Administrative expenses under The
Food Stamp Act of 1977 (section 16 of the Act).
(7) A grant for an experimental, pilot, or demonstration project
that is also supported by a grant listed in paragraph (a)(3) of this
section;
(8) Grant funds awarded under subsection 412(e) of the Immigration
and Nationality Act (8 U.S.C. 1522(e)) and subsection 501(a) of the
Refugee Education Assistance Act of 1980 (Pub. L. 96-422, 94 Stat.
1809), for cash assistance, medical assistance, and supplemental
security income benefits to refugees and entrants and the
administrative costs of providing the assistance and benefits;
(9) Grants to local education agencies under 20 U.S.C. 236 through
241-1(a), and 242 through 244 (portions of the Impact Aid program),
except for 20 U.S.C. 238(d)(2)(c) and 240(f) (Entitlement Increase for
Handicapped Children); and
(10) Payments under the Veterans Administration's State Home Per
Diem Program (38 U.S.C. 641(a)).
(b) Entitlement programs. Entitlement programs enumerated above in
Sec. 1273.4(a)(3) through (8) are subject to subpart E.
Sec. 1273.5 Effect on other issuances.
All other grants administration provisions of codified program
regulations, program manuals, handbooks and other nonregulatory
materials which are inconsistent with this part are superseded, except
to the extent they are required by statute, or authorized in accordance
with the exception provision in Sec. 1273.6.
Sec. 1273.6 Additions and exceptions.
(a) For classes of grants and grantees subject to this part,
Federal agencies may not impose additional administrative requirements
except in codified regulations published in the Federal Register.
(b) Exceptions for classes of grants or grantees may be authorized
only by OMB.
(c) Exceptions on a case-by-case basis and for subgrantees may be
authorized by the affected Federal agencies.
Subpart B--Pre-Award Requirements
Sec. 1273.10 Forms for applying for grants.
(a) Scope. (1) This section prescribes forms and instructions to be
used by governmental organizations (except hospitals and institutions
of higher education operated by a government) in applying for grants.
This section is not applicable, however, to formula grant programs
which do not require applicants to apply for funds on a project basis.
(2) This section applies only to applications to Federal agencies
for grants, and is not required to be applied by grantees in dealing
with applicants for subgrants. However, grantees are encouraged to
avoid more detailed or burdensome application requirements for
subgrants.
(b) Authorized forms and instructions for governmental
organizations. (1) In applying for grants, applicants shall only use
standard application forms or those prescribed by the granting agency
with the approval of OMB under the Paperwork Reduction Act of 1980.
(2) Applicants are not required to submit more than the original
and two copies of preapplications or applications.
(3) Applicants must follow all applicable instructions that bear
OMB clearance numbers. Federal agencies may specify and describe the
programs, functions, or activities that will be used to plan, budget,
and evaluate the work under a grant. Other supplementary instructions
may be issued only with the approval of OMB to the extent required
under the Paperwork Reduction Act of 1980. For any standard form,
except the SF-424 factsheet, Federal agencies may shade out or instruct
the applicant to disregard any line item that is not needed.
(4) When a grantee applies for additional funding (such as a
continuation or supplemental award) or amends a previously submitted
application, only the affected pages need be submitted. Previously
submitted pages with information that is still current need not be
resubmitted.
Sec. 1273.11 State plans.
(a) Scope. The statutes for some programs require States to submit
plans before receiving grants. Under regulations implementing Executive
Order 12372, ``Intergovernmental Review of Federal Programs,'' States
are allowed to simplify, consolidate and substitute plans. This section
contains additional provisions for plans that are subject to
regulations implementing the Executive Order.
(b) Requirements. A State need meet only Federal administrative or
programmatic requirements for a plan that are in statutes or codified
regulations.
(c) Assurances. In each plan the State will include an assurance
that the State shall comply with all applicable Federal statutes and
regulations in effect with respect to the periods for which it receives
grant funding. For this assurance and other assurances required in the
plan, the State may:
(1) Cite by number the statutory or regulatory provisions requiring
the assurances and affirm that it gives the assurances required by
those provisions,
(2) Repeat the assurance language in the statutes or regulations,
or
(3) Develop its own language to the extent permitted by law.
(d) Amendments. A State will amend a plan whenever necessary to
reflect:
(1) New or revised Federal statutes or regulations; or
(2) A material change in any State law, organization, policy, or
State agency operation. The State will obtain approval for the
amendment and its effective date but need submit for approval only the
amended portions of the plan.
Sec. 1273.12 Special grant or subgrant conditions for ``high-risk''
grantees.
(a) A grantee or subgrantee may be considered ``high risk'' if an
awarding agency determines that a grantee or subgrantee:
(1) Has a history of unsatisfactory performance, or
(2) Is not financially stable, or
(3) Has a management system which does not meet the management
standards set forth in this part, or
(4) Has not conformed to terms and conditions of previous awards,
or
(5) Is otherwise not responsible; and if the awarding agency
determines that an award will be made, special conditions and/or
restrictions shall correspond to the high risk condition and shall be
included in the award.
(b) Special conditions or restrictions may include:
(1) Payment on a reimbursement basis;
(2) Withholding authority to proceed to the next phase until
receipt of evidence of acceptable performance within a given funding
period;
(3) Requiring additional, more detailed financial reports;
[[Page 33698]]
(4) Additional project monitoring;
(5) Requiring the grantee or subgrantee to obtain technical or
management assistance; or
(6) Establishing additional prior approvals.
(c) If an awarding agency decides to impose such conditions, the
awarding official will notify the grantee or subgrantee as early as
possible, in writing, of:
(1) The nature of the special conditions/restrictions;
(2) The reason(s) for imposing them;
(3) The corrective actions which must be taken before they will be
removed and the time allowed for completing the corrective actions; and
(4) The method of requesting reconsideration of the conditions/
restrictions imposed.
Subpart C--Post-Award Requirements
Financial Administration
Sec. 1273.20 Standards for financial management systems.
(a) A State must expand and account for grant funds in accordance
with State laws and procedures for expending and accounting for its own
funds. Fiscal control and accounting procedures of the State, as well
as its subgrantees and cost-type contractors, must be sufficient to--
(1) Permit preparation of reports required by this part and the
statutes authorizing the grant, and
(2) Permit the tracing of funds to a level of expenditures adequate
to establish that such funds have not been used in violation of the
restrictions and prohibitions of applicable statutes.
(b) The financial management systems of other grantees and
subgrantees must meet the following standards:
(1) Financial reporting. Accurate, current, and complete disclosure
of the financial results of financially assisted activities must be
made in accordance with the financial reporting requirements of the
grant or subgrant.
(2) Accounting records. Grantees and subgrantees must maintain
records which adequately identify the source and application of funds
provided for financially-assisted activities. These records must
contain information pertaining to grant or subgrant awards and
authorizations, obligations, unobligated balances, assets, liabilities,
outlays or expenditures, and income.
(3) Internal control. Effective control and accountability must be
maintained for all grant and subgrant cash, real and personal property,
and other assets. Grantees and subgrantees must adequately safeguard
all such property and must assure that it is used solely for authorized
purposes.
(4) Budget control. Actual expenditures or outlays must be compared
with budgeted amounts for each grant or subgrant. Financial information
must be related to performance or productivity data, including the
development of unit cost information whenever appropriate or
specifically required in the grant or subgrant agreement. If unit cost
data are required, estimates based on available documentation will be
accepted whenever possible.
(5) Allowable cost. Applicable OMB cost principles, agency program
regulations, and the terms of grant and subgrant agreements will be
followed in determining the reasonableness, allowability, and
allocability of costs.
(6) Source documentation. Accounting records must be supported by
such source documentation as cancelled checks, paid bills, payrolls,
time and attendance records, contract and subgrant award documents,
etc.
(7) Cash management. Procedures for minimizing the time elapsing
between the transfer of funds from the U.S. Treasury and disbursement
by grantees and subgrantees must be followed whenever advance payment
procedures are used. Grantees must establish reasonable procedures to
ensure the receipt of reports on subgrantees' cash balances and cash
disbursements in sufficient time to enable them to prepare complete and
accurate cash transactions reports to the awarding agency. When
advances are made by letter-of-credit or electronic transfer of funds
methods, the grantee must make drawdowns as close as possible to the
time of making disbursements. Grantees must monitor cash drawdowns by
their subgrantees to assure that they conform substantially to the same
standards of timing and amount as apply to advances to the grantees.
(c) An awarding agency may review the adequacy of the financial
management system of any applicant for financial assistance as part of
a preaward review or at any time subsequent to award.
Sec. 1273.21 Payment.
(a) Scope. This section prescribes the basic standard and the
methods under which a Federal agency will make payments to grantees,
and grantees will make payments to subgrantees and contractors.
(b) Basic standard. Methods and procedures for payment shall
minimize the time elapsing between the transfer of funds and
disbursement by the grantee or subgrantee, in accordance with Treasury
regulations at 31 CFR part 205.
(c) Advances. Grantees and subgrantees shall be paid in advance,
provided they maintain or demonstrate the willingness and ability to
maintain procedures to minimize the time elapsing between the transfer
of the funds and their disbursement by the grantee or subgrantee.
(d) Reimbursement. Reimbursement shall be the preferred method when
the requirements in paragraph (c) of this section are not met. Grantees
and subgrantees may also be paid by reimbursement for any construction
grant. Except as otherwise specified in regulation, Federal agencies
shall not use the percentage of completion method to pay construction
grants. The grantee or subgrantee may use that method to pay its
construction contractor, and if it does, the awarding agency's payments
to the grantee or subgrantee will be based on the grantee's or
subgrantee's actual rate of disbursement.
(e) Working capital advances. If a grantee cannot meet the criteria
for advance payments described in paragraph (c) of this section, and
the Federal agency has determined that reimbursement is not feasible
because the grantee lacks sufficient working capital, the awarding
agency may provide cash on a working capital advance basis. Under this
procedure the awarding agency shall advance cash to the grantee to
cover its estimated disbursement needs for an initial period generally
geared to the grantee's disbursing cycle. Thereafter, the awarding
agency shall reimburse the grantee for its actual cash disbursements.
The working capital advance method of payment shall not be used by
grantees or subgrantees if the reason for using such method is the
unwillingness or inability of the grantee to provide timely advances to
the subgrantee to meet the subgrantee's actual cash disbursements.
(f) Effect of program income, refunds, and audit recoveries on
payment. (1) Grantees and subgrantees shall disburse repayments to and
interest earned on a revolving fund before requesting additional cash
payments for the same activity.
(2) Except as provided in paragraph (f)(1) of this section,
grantees and subgrantees shall disburse program income, rebates,
refunds, contract settlements, audit recoveries and interest earned on
such funds before requesting additional cash payments.
(g) Withholding payments. (1) Unless otherwise required by Federal
statute, awarding agencies shall not withhold
[[Page 33699]]
payments for proper charges incurred by grantees or subgrantees unless-
(i) The grantee or subgrantee has failed to comply with grant award
conditions or
(ii) The grantee or subgrantee is indebted to the United States.
(2) Cash withheld for failure to comply with grant award condition,
but without suspension of the grant, shall be released to the grantee
upon subsequent compliance. When a grant is suspended, payment
adjustments will be made in accordance with Sec. 1273.43(c).
(3) A Federal agency shall not make payment to grantees for amounts
that are withheld by grantees or subgrantees from payment to
contractors to assure satisfactory completion of work. Payments shall
be made by the Federal agency when the grantees or subgrantees actually
disburse the withheld funds to the contractors or to escrow accounts
established to assure satisfactory completion of work.
(h) Cash depositories. (1) Consistent with the national goal of
expanding the opportunities for minority business enterprises, grantees
and subgrantees are encouraged to use minority banks (a bank which is
owned at least 50 percent by minority group members). A list of
minority owned banks can be obtained from the Minority Business
Development Agency, Department of Commerce, Washington, DC 20230.
(2) A grantee or subgrantee shall maintain a separate bank account
only when required by Federal-State agreement.
(i) Interest earned on advances. Except for interest earned on
advances of funds exempt under the Intergovernmental Cooperation Act
(31 U.S.C. 6501 et seq.) and the Indian Self-Determination Act (23
U.S.C. 450), grantees and subgrantees shall promptly, but at least
quarterly, remit interest earned on advances to the Federal agency. The
grantee or subgrantee may keep interest amounts up to $100 per year for
administrative expenses.
Sec. 1273.22 Allowable costs.
(a) Limitation on use of funds. Grant funds may be used only for:
(1) The allowable costs of the grantees, subgrantees and cost-type
contractors, including allowable costs in the form of payments to
fixed-price contractors; and
(2) Reasonable fees or profit to cost-type contractors but not any
fee or profit (or other increment above allowable costs) to the grantee
or subgrantee.
(b) Applicable cost principles. For each kind of organization,
there is a set of Federal principles for determining allowable costs.
Allowable costs will be determined in accordance with the cost
principles applicable to the organization incurring the costs. The
following chart lists the kinds of organizations and the applicable
cost principles.
For the costs of a Use the principles in:
State, local or Indian tribal OMB Circular A-87.
government.
Private nonprofit organization OMB Circular A-122.
other than an (1) institution of
higher education, (2) hospital, or
(3) organization named in OMB
Circular A-122 as not subject to
that circular.
Educational institutions........... OMB Circular A-21.
For-profit organization other than 48 CFR part 31, Contract Cost
a hospital and an organization Principles and Procedures, or
named in OMB Circular A-122 as not uniform cost accounting standards
subject to that circular. that comply with cost principles
acceptable to the Federal agency.
Sec. 1273.23 Period of availability of funds.
(a) General. Where a funding period is specified, a grantee may
charge to the award only costs resulting from obligations of the
funding period unless carryover of unobligated balances is permitted,
in which case the carryover balances may be charged for costs resulting
from obligations of the subsequent funding period.
(b) Liquidation of obligations. A grantee must liquidate all
obligations incurred under the award not later than 90 days after the
end of the funding period (or as specified in a program regulation) to
coincide with the submission of the annual Financial Status Report (SF-
269). The Federal agency may extend this deadline at the request of the
grantee.
Sec. 1273.24 Matching or cost sharing.
(a) Basic rule: Costs and contributions acceptable. With the
qualifications and exceptions listed in paragraph (b) of this section,
a matching or cost sharing requirement may be satisfied by either or
both of the following:
(1) Allowable costs incurred by the grantee, subgrantee or a cost-
type contractor under the assistance agreement. This includes allowable
costs borne by non-Federal grants or by others cash donations from non-
Federal third parties.
(2) The value of third party in-kind contributions applicable to
the period to which the cost sharing or matching requirements applies.
(b) Qualifications and exceptions--(1) Costs borne by other Federal
grant agreements. Except as provided by Federal statute, a cost sharing
or matching requirement may not be met by costs borne by another
Federal grant. This prohibition does not apply to income earned by a
grantee or subgrantee from a contract awarded under another Federal
grant.
(2) General revenue sharing. For the purpose of this section,
general revenue sharing funds distributed under 31 U.S.C. 6702 are not
considered Federal grant funds.
(3) Cost or contributions counted towards other Federal costs-
sharing requirements. Neither costs nor the values of third party in-
kind contributions may count towards satisfying a cost sharing or
matching requirement of a grant agreement if they have been or will be
counted towards satisfying a cost sharing or matching requirement of
another Federal grant agreement, a Federal procurement contract, or any
other award of Federal funds.
(4) Costs financed by program income. Costs financed by program
income, as defined in Sec. 1273.25, shall not count towards satisfying
a cost sharing or matching requirement unless they are expressly
permitted in the terms of the assistance agreement. (This use of
general program income is described in Sec. 1273.25(g).)
(5) Services or property financed by income earned by contractors.
Contractors under a grant may earn income from the activities carried
out under the contract in addition to the amounts earned from the party
awarding the contract. No costs of services or property supported by
this income may count toward satisfying a cost sharing or matching
requirement unless other provisions of the grant agreement expressly
permit this kind of income to be used to meet the requirement.
(6) Records. Costs and third party in-kind contributions counting
towards satisfying a cost sharing or matching requirement must be
verifiable from the records of grantees and subgrantee or cost-type
contractors. These records must show how the value placed on third
party in-kind contributions was derived. To the extent feasible,
volunteer services will be supported by the same methods that the
organization
[[Page 33700]]
uses to support the allocability of regular personnel costs.
(7) Special standards for third party in-kind contributions. (i)
Third party in-kind contributions count towards satisfying a cost
sharing or matching requirement only where, if the party receiving the
contributions were to pay for them, the payments would be allowable
costs.
(ii) Some third party in-kind contributions are goods and services
that, if the grantee, subgrantee, or contractor receiving the
contribution had to pay for them, the payments would have been an
indirect costs. Costs sharing or matching credit for such contributions
shall be given only if the grantee, subgrantee, or contractor has
established, along with its regular indirect cost rate, a special rate
for allocating to individual projects or programs the value of the
contributions.
(iii) A third party in-kind contribution to a fixed-price contract
may count towards satisfying a cost sharing or matching requirement
only if it results in:
(A) An increase in the services or property provided under the
contract (without additional cost to the grantee or subgrantee) or
(B) A cost savings to the grantee or subgrantee.
(iv) The values placed on third party in-kind contributions for
cost sharing or matching purposes will conform to the rules in the
succeeding sections of this part. If a third party in-kind contribution
is a type not treated in those sections, the value placed upon it shall
be fair and reasonable.
(c) Valuation of donated services--(1) Volunteer services. Unpaid
services provided to a grantee or subgrantee by individuals will be
valued at rates consistent with those ordinarily paid for similar work
in the grantee's or subgrantee's organization. If the grantee or
subgrantee does not have employees performing similar work, the rates
will be consistent with those ordinarily paid by other employers for
similar work in the same labor market. In either case, a reasonable
amount for fringe benefits may be included in the valuation.
(2) Employees of other organizations. When an employer other than a
grantee, subgrantee, or cost-type contractor furnishes free of charge
the services of an employee in the employee's normal line of work, the
services will be valued at the employee's regular rate of pay exclusive
of the employee's fringe benefits and overhead costs. If the services
are in a different line of work, paragraph (c)(1) of this section
applies.
(d) Valuation of third party donated supplies and loaned equipment
or space. (1) If a third party donates supplies, the contribution will
be valued at the market value of the supplies at the time of donation.
(2) If a third party donates the use of equipment or space in a
building but retains title, the contribution will be valued at the fair
rental rate of the equipment or space.
(e) Valuation of third party donated equipment, buildings, and
land. If a third party donates equipment, buildings, or land, and title
passes to a grantee or subgrantee, the treatment of the donated
property will depend upon the purpose of the grant or subgrant, as
follows:
(1) Awards for capital expenditures. If the purpose of the grant or
subgrant is to assist the grantee or subgrantee in the acquisition of
property, the market value of that property at the time of donation may
be counted as cost sharing or matching,
(2) Other awards. If assisting in the acquisition of property is
not the purpose of the grant or subgrant, paragraphs (e)(2)(i) and (ii)
of this section apply:
(i) If approval is obtained from the awarding agency, the market
value at the time of donation of the donated equipment or buildings and
the fair rental rate of the donated land may be counted as cost sharing
or matching. In the case of a subgrant, the terms of the grant
agreement may require that the approval be obtained from the Federal
agency as well as the grantee. In all cases, the approval may be given
only if a purchase of the equipment or rental of the land would be
approved as an allowable direct cost. If any part of the donated
property was acquired with Federal funds, only the non-federal share of
the property may be counted as cost-sharing or matching.
(ii) If approval is not obtained under paragraph (e)(2)(i) of this
section, no amount may be counted for donated land, and only
depreciation or use allowances may be counted for donated equipment and
buildings. The depreciation or use allowances for this property are not
treated as third party in-kind contributions. Instead, they are treated
as costs incurred by the grantee or subgrantee. They are computed and
allocated (usually as indirect costs) in accordance with the cost
principles specified in Sec. 1273.22, in the same way as depreciation
or use allowances for purchased equipment and buildings. The amount of
depreciation or use allowances for donated equipment and buildings is
based on the property's market value at the time it was donated.
(f) Valuation of grantee or subgrantee donated real property for
construction/acquisition. If a grantee or subgrantee donates real
property for a construction or facilities acquisition project, the
current market value of that property may be counted as cost sharing or
matching. If any part of the donated property was acquired with Federal
funds, only the non-federal share of the property may be counted as
cost sharing or matching.
(g) Appraisal of real property. In some cases under paragraphs (d),
(e) and (f) of this section, it will be necessary to establish the
market value of land or a building or the fair rental rate of land or
of space in a building. In these cases, the Federal agency may require
the market value or fair rental value be set by an independent
appraiser, and that the value or rate be certified by the grantee. This
requirement will also be imposed by the grantee on subgrantees.
Sec. 1273.25 Program income.
(a) General. Grantees are encouraged to earn income to defray
program costs. Program income includes income from fees for services
performed, from the use or rental of real or personal property acquired
with grant funds, from the sale of commodities or items fabricated
under a grant agreement, and from payments of principal and interest on
loans made with grant funds. Except as otherwise provided in
regulations of the Federal agency, program income does not include
interest on grant funds, rebates, credits, discounts, refunds, etc. and
interest earned on any of them.
(b) Definition of program income. Program income means gross income
received by the grantee or subgrantee directly generated by a grant
supported activity, or earned only as a result of the grant agreement
during the grant period. ``During the grant period'' is the time
between the effective date of the award and the ending date of the
award reflected in the final financial report.
(c) Cost of generating program income. If authorized by Federal
regulations or the grant agreement, costs incident to the generation of
program income may be deducted from gross income to determine program
income.
(d) Governmental revenues. Taxes, special assessments, levies,
fines, and other such revenues raised by a grantee or subgrantee are
not program income unless the revenues are specifically identified in
the grant agreement or Federal agency regulations as program income.
(e) Royalties. Income from royalties and license fees for
copyrighted material, patents, and inventions developed by a grantee or
subgrantee is program income only if the revenues are specifically
identified in the grant
[[Page 33701]]
agreement or Federal agency regulations as program income. (See
Sec. 1273.34).
(f) Property. Proceeds from the sale of real property or equipment
will be handled in accordance with the requirements of Secs. 1273.31
and 1273.32.
(g) Use of program income. Program income shall be deducted from
outlays which may be both Federal and non-Federal as described below,
unless the Federal agency regulations or the grant agreement specify
another alternative (or a combination of the alternatives). In
specifying alternatives, the Federal agency may distinguish between
income earned by the grantee and income earned by subgrantees and
between the sources, kinds, or amounts of income. When Federal agencies
authorize the alternatives in paragraphs (g) (2) and (3) of this
section, program income in excess of any limits stipulated shall also
be deducted from outlays.
(1) Deduction. Ordinarily program income shall be deducted from
total allowable costs to determine the net allowable costs. Program
income shall be used for current costs unless the Federal agency
authorizes otherwise. Program income which the grantee did not
anticipate at the time of the award shall be used to reduce the Federal
agency and grantee contributions rather than to increase the funds
committed to the project.
(2) Addition. When authorized, program income may be added to the
funds committed to the grant agreement by the Federal agency and the
grantee. The program income shall be used for the purposes and under
the conditions of the grant agreement.
(3) Cost sharing or matching. When authorized, program income may
be used to meet the cost sharing or matching requirement of the grant
agreement. The amount of the Federal grant award remains the same.
(h) Income after the award period. There are no Federal
requirements governing the disposition of program income earned after
the end of the award period (i.e., until the ending date of the final
financial report, see paragraph (a) of this section), unless the terms
of the agreement or the Federal agency regulations provide otherwise.
Sec. 1273.26 Non-Federal audit.
(a) Basic rule. Grantees and subgrantees are responsible for
obtaining audits in accordance with the Single Audit Act of 1984 (31
U.S.C. 7501-7507) and Federal agency implementing regulations. The
audits shall be made by an independent auditor in accordance with
generally accepted government auditing standards covering financial and
compliance audits.
(b) Subgrantees. State or local governments, as those terms are
defined for purposes of the Single Audit Act, that receive Federal
financial assistance and provide $25,000 or more of it in a fiscal year
to a subgrantee shall:
(1) Determine whether State or local subgrantees have met the audit
requirements of the Act and whether subgrantees covered by OMB Circular
A-110, ``Uniform Requirements for Grants and Other Agreements with
Institutions of Higher Education, Hospitals and Other Nonprofit
Organizations'' have met the audit requirement. Commercial contractors
(private forprofit and private and governmental organizations)
providing goods and services to State and local governments are not
required to have a single audit performed. State and local governments
should use their own procedures to ensure that the contractor has
complied with laws and regulations affecting the expenditure of Federal
funds;
(2) Determine whether the subgrantee spent Federal assistance funds
provided in accordance with applicable laws and regulations. This may
be accomplished by reviewing an audit of the subgrantee made in
accordance with the Act, Circular A-110, or through other means (e.g.,
program reviews) if the subgrantee has not had such an audit;
(3) Ensure that appropriate corrective action is taken within six
months after receipt of the audit report in instance of noncompliance
with Federal laws and regulations;
(4) Consider whether subgrantee audits necessitate adjustment of
the grantee's own records; and
(5) Require each subgrantee to permit independent auditors to have
access to the records and financial statements.
(c) Auditor selection. In arranging for audit services,
Sec. 1273.36 shall be followed.
Changes, Property, and Subawards
Sec. 1273.30 Changes.
(a) General. Grantees and subgrantees are permitted to rebudget
within the approved direct cost budget to meet unanticipated
requirements and may make limited program changes to the approved
project. However, unless waived by the awarding agency, certain types
of post-award changes in budgets and projects shall require the prior
written approval of the awarding agency.
(b) Relation to cost principles. The applicable cost principles
(see Sec. 1273.22) contain requirements for prior approval of certain
types of costs. Except where waived, those requirements apply to all
grants and subgrants even if paragraphs (c) through (f) of this section
do not.
(c) Budget changes--(1) Nonconstruction projects. Except as stated
in other regulations or an award document, grantees or subgrantees
shall obtain the prior approval of the awarding agency whenever any of
the following changes is anticipated under a nonconstruction award:
(i) Any revision which would result in the need for additional
funding.
(ii) Unless waived by the awarding agency, cumulative
transfers among direct cost categories, or, if applicable, among
separately budgeted programs, projects, functions, or activities which
exceed or are expected to exceed ten percent of the current total
approved budget, whenever the awarding agency's share exceeds $100,000.
(iii) Transfer of funds allotted for training allowances (i.e.,
from direct payments to trainees to other expense categories).
(2) Construction projects. Grantees and subgrantees shall obtain
prior written approval for any budget revision which would result in
the need for additional funds.
(3) Combined construction and nonconstruction projects. When a
grant or subgrant provides funding for both construction and
nonconstruction activities, the grantee or subgrantee must obtain prior
written approval from the awarding agency before making any fund or
budget transfer from nonconstruction to construction or vice versa.
(d) Programmatic changes. Grantees or subgrantees must obtain the
prior approval of the awarding agency whenever any of the following
actions is anticipated:
(1) Any revision of the scope or objectives of the project
(regardless of whether there is an associated budget revision requiring
prior approval).
(2) Need to extend the period of availability of funds.
(3) Changes in key persons in cases where specified in an
application or a grant award. In research projects, a change in the
project director or principal investigator shall always require
approval unless waived by the awarding agency.
(4) Under nonconstruction projects, contracting out, subgranting
(if authorized by law) or otherwise obtaining the services of a third
party to perform activities which are central to the purposes of the
award. This approval requirement is in addition to the approval
requirements of Sec. 1273.36
[[Page 33702]]
but does not apply to the procurement of equipment, supplies, and
general support services.
(e) Additional prior approval requirements. The awarding agency may
not require prior approval for any budget revision which is not
described in paragraph (c) of this section.
(f) Requesting prior approval. (1) A request for prior approval of
any budget revision will be in the same budget format the grantee used
in its application and shall be accompanied by a narrative
justification for the proposed revision.
(2) A request for a prior approval under the applicable Federal
cost principles (see Sec. 1273.22) may be made by letter.
(3) A request by a subgrantee for prior approval will be addressed
in writing to the grantee. The grantee will promptly review such
request and shall approve or disapprove the request in writing. A
grantee will not approve any budget or project revision which is
inconsistent with the purpose or terms and conditions of the Federal
grant to the grantee. If the revision, requested by the subgrantee
would result in a change to the grantee's approved project which
requires Federal prior approval, the grantee will obtain the Federal
agency's approval before approving the subgrantee's request.
Sec. 1273.31 Real property.
(a) Title. Subject to the obligations and conditions set forth in
this section, title to real property acquired under a grant or subgrant
will vest upon acquisition in the grantee or subgrantee respectively.
(b) Use. Except as otherwise provided by Federal statutes, real
property will be used for the originally authorized purposes as long as
needed for that purpose, and the grantee or subgrantee shall not
dispose of or encumber its title or other interests.
(c) Disposition. When real property is no longer needed for the
originally authorized purpose, the grantee or subgrantee will request
disposition instructions from the awarding agency. The instructions
will provide for one of the following alternatives:
(1) Retention of title. Retain after compensating the awarding
agency. The amount paid to the awarding agency will be computed by
applying the awarding agency's percentage of participation in the cost
of the original purchase to the fair market value of the property.
However, in those situations where a grantee or subgrantee is disposing
of real property acquired with grant funds and acquiring replacement
real property under the same program, the net proceeds from the
disposition may be used as an offset to the cost of the replacement
property.
(2) Sale of property. Sell the property and compensate the awarding
agency. The amount due to the awarding agency will be calculated by
applying the awarding agency's percentage of participation in the cost
of the original purchase to the proceeds of the sale after deduction of
any actual and reasonable selling and fixing-up expenses. If the grant
is still active, the net proceeds from sale may be offset against the
original cost of the property. When a grantee or subgrantee is directed
to sell property, sales procedures shall be followed that provide for
competition to the extent practicable and result in the highest
possible return.
(3) Transfer of title. Transfer title to the awarding agency or to
a third-party designated/approved by the awarding agency. The grantee
or subgrantee shall be paid an amount calculated by applying the
grantee or subgrantee's percentage of participation in the purchase of
the real property to the current fair market value of the property.
Sec. 1273.32 Equipment.
(a) Title. Subject to the obligations and conditions set forth in
this section, title to equipment acquired under a grant or subgrant
will vest upon acquisition in the grantee or subgrantee respectively.
(b) States. A State will use, manage, and dispose of equipment
acquired under a grant by the State in accordance with State laws and
procedures. Other grantees and subgrantees will follow paragraphs (c)
through (e) of this section.
(c) Use. (1) Equipment shall be used by the grantee or subgrantee
in the program or project for which it was acquired as long as needed,
whether or not the project or program continues to be supported by
Federal funds. When no longer needed for the original program or
project, the equipment may be used in other activities currently or
previously supported by a Federal agency.
(2) The grantee or subgrantee shall also make equipment available
for use on other projects or programs currently or previously supported
by the Federal Government, providing such use will not interfere with
the work on the projects or program for which it was originally
acquired. First preference for other use shall be given to other
programs or projects supported by the awarding agency. User fees should
be considered if appropriate.
(3) Notwithstanding the encouragement in Sec. 1273.25(a) to earn
program income, the grantee or subgrantee must not use equipment
acquired with grant funds to provide services for a fee to compete
unfairly with private companies that provide equivalent services,
unless specifically permitted or contemplated by Federal statute.
(4) When acquiring replacement equipment, the grantee or subgrantee
may use the equipment to be replaced as a trade-in or sell the property
and use the proceeds to offset the cost of the replacement property,
subject to the approval of the awarding agency.
(d) Management requirements. Procedures for managing equipment
(including replacement equipment), whether acquired in whole or in part
with grant funds, until disposition takes place will, as a minimum,
meet the following requirements:
(1) Property records must be maintained that include a description
of the property, a serial number or other identification number, the
source of property, who holds title, the acquisition date, and cost of
the property, percentage of Federal participation in the cost of the
property, the location, use and condition of the property, and any
ultimate disposition data including the date of disposal and sale price
of the property.
(2) A physical inventory of the property must be taken and the
results reconciled with the property records at least once every two
years.
(3) A control system must be developed to ensure adequate
safeguards to prevent loss, damage, or theft of the property. Any loss,
damage or theft shall be investigated.
(4) Adequate maintenance procedures must be developed to keep the
property in good condition.
(5) If the grantee or subgrantee is authorized or required to sell
the property, proper sales procedures must be established to ensure the
highest possible return.
(e) Disposition. When original or replacement equipment acquired
under a grant or subgrant is no longer needed for the original project
or program or for other activities currently or previously supported by
a Federal agency, disposition of the equipment will be made as follows:
(1) Items of equipment with a current per-unit fair market value of
less than $5,000 may be retained, or sold or otherwise disposed of with
no further obligation to the awarding agency.
(2) Items of equipment with a current per unit fair market value in
excess of $5,000 may be retained or sold and the
[[Page 33703]]
awarding agency shall have a right to an amount calculated by
multiplying the current market value or proceeds from sale by the
awarding agency's share of the equipment.
(3) In cases where a grantee or subgrantee fails to take
appropriate disposition actions, the awarding agency may direct the
grantee or subgrantee to take excess and disposition actions.
(f) Federal equipment. In the event a grantee or subgrantee is
provided federally-owned equipment:
(1) Title will remain vested in the Federal Government.
(2) Grantees or subgrantees will manage the equipment in accordance
with Federal agency rules and procedures, and submit an annual
inventory listing.
(3) When the equipment is no longer needed, the grantee or
subgrantee will request disposition instructions from the Federal
agency.
(g) Right to transfer title. The Federal awarding agency may
reserve the right to transfer title to the Federal Government or a
third party named by the awarding agency when such a third party is
otherwise eligible under existing statutes. Such transfers shall be
subject to the following standards:
(1) The property shall be identified in the grant or otherwise made
known to the grantee in writing.
(2) The Federal awarding agency shall issue disposition instruction
within 120 calendar days after the end of the Federal support of the
project for which it was acquired. If the Federal awarding agency fails
to issue disposition instructions within the 120 calendar-day period
the grantee shall follow Sec. 1273.32(e).
(3) When title to equipment is transferred, the grantee shall be
paid an amount calculated by applying the percentage of participation
in the purchase to the current fair market value of the property.
Sec. 1273.33 Supplies.
(a) Title. Title to supplies acquired under a grant or subgrant
will vest, upon acquisition, in the grantee or subgrantee respectively.
(b) Disposition. If there is a residual inventory of unused
supplies exceeding $5,000 in total aggregate fair market value upon
termination or completion of the award, and if the supplies are not
needed for any other federally sponsored programs or projects, the
grantee or subgrantee shall compensate the awarding agency for its
share.
Sec. 1273.34 Copyrights.
The Federal awarding agency reserves a royalty-free, nonexclusive,
and irrevocable license to reproduce, publish or otherwise use, and to
authorize others to use, for Federal Government purposes:
(a) The copyright in any work developed under a grant, subgrant, or
contract under a grant or subgrant; and
(b) Any rights of copyright to which a grantee, subgrantee or a
contractor purchases ownership with grant support.
Sec. 1273.35 Subawards to debarred and suspended parties.
Grantees and subgrantees must not make any award or permit any
award (subgrant or contract) at any tier to any party which is debarred
or suspended or is otherwise excluded from or ineligible for
participation in Federal assistance programs under Executive Order
12549, ``Debarment and Suspension.''
Sec. 1273.36 Procurement.
(a) States. When procuring property and services under a grant, a
State will allow the same policies and procedures it uses for
procurements from its non-Federal funds. The State will ensure that
every purchase order or other contract includes any clauses required by
Federal statutes and executive orders and their implementing
regulations. Other grantees and subgrantees will follow paragraphs (b)
through (i) in this section.
(b) Procurement standards. (1) Grantees and subgrantees will use
their own procurement procedures which reflect applicable State and
local laws and regulations, provided that the procurements conform to
applicable Federal law and the standards identified in this section.
(2) Grantees and subgrantees will maintain a contract
administration system which ensures that contractors perform in
accordance with the terms, conditions, and specifications of their
contracts or purchase orders.
(3) Grantees an subgrantees will maintain a written code of
standards of conduct governing the performance of their employees
engaged in the award and administration of contracts. No employee,
officer or agent of the grantee or subgrantee shall participate in
selection, or in the award or administration of a contract supported by
Federal funds if a conflict of interest, real or apparent, would be
involved. Such a conflict would arise when:
(i) The employee, officer or agent,
(ii) Any member of his immediate family,
(iii) His or her partner, or
(iv) An organization which employs, or is about to employ, any of
the above, has a financial or other interest in the firm selected for
award. The grantee's or subgrantee's officers, employees or agents will
neither solicit nor accept gratuities, favors or anything of monetary
value from contractors, potential contractors, or parties to
subagreements. Grantee and subgrantees may set minimum rules where the
financial interest is not substantial or the gift is an unsolicited
item or nominal intrinsic value. To the extent permitted by State or
local law or regulations, such standards or conduct will provide for
penalties, sanctions, or other disciplinary actions for violations of
such standards by the grantee's and subgrantee's officers, employees,
or agents, or by contractors or their agents. The awarding agency may
in regulation provide additional prohibitions relative to real,
apparent, or potential conflicts of interest.
(4) Grantee and subgrantee procedures will provide for a review of
proposed procurements to avoid purchase of unnecessary or duplicative
items. Consideration should be given to consolidating or breaking out
procurements to obtain a more economical purchase. Where appropriate,
an analysis will be made of lease versus purchase alternatives, and any
other appropriate analysis to determine the most economical approach.
(5) To foster greater economy and efficiency, grantees and
subgrantees are encouraged to enter into State and local
intergovernmental agreements for procurement or use of common goods and
services.
(6) Grantees and subgrantees are encouraged to use Federal excess
and surplus property in lieu of purchasing new equipment and property
whenever such use is feasible and reduces project costs.
(7) Grantees and subgrantees are encouraged to use value
engineering clauses in contracts for construction projects of
sufficient size to offer reasonable opportunities for cost reductions.
Value engineering is a systematic and creative analysis of each
contract item or task to ensure that its essential function is provided
at the overall lower cost.
(8) Grantees and subgrantees will make awards only to responsible
contractors possessing the ability to perform successfully under the
terms and conditions of a proposed procurement. Consideration will be
given to such matters as contractor integrity, compliance with public
policy, record of past performance, and financial and technical
resources.
(9) Grantees and subgrantees will maintain records sufficient to
detail the
[[Page 33704]]
significant history of a procurement. These records will include, but
are not necessarily limited to the following: rationale for the method
of procurement, selection of contract type, contractor selection or
rejection, and the basis for the contract price.
(10) Grantees and subgrantees will use time and material type
contracts only--
(i) After a determination that no other contract is suitable, and
(ii) If the contract includes a ceiling price that the contractor
exceeds at its own risk.
(11) Grantees and subgrantees alone will be responsible, in
accordance with good administrative practice and sound business
judgment, for the settlement of all contractual and administrative
issues arising out of procurements. These issues include, but are not
limited to source evaluation, protests, disputes, and claims. These
standards do not relieve the grantee or subgrantee of any contractual
responsibilities under its contracts. Federal agencies will not
substitute their judgment for that of the grantee or subgrantee unless
the matter is primarily a Federal concern. Violations of law will be
referred to the local, State, or Federal authority having proper
jurisdiction.
(12) Grantees and subgrantees will have protest procedures to
handle and resolve disputes relating to their procurements and shall in
all instances disclose information regarding the protest to the
awarding agency. A protestor must exhaust all administrative remedies
with the grantee and subgrantee before pursuing a protest with the
Federal agency. Reviews of protests by the Federal agency will be
limited to:
(i) Violations of Federal law or regulations and the standards of
this section (violations of State or local law will be under the
jurisdiction of State or local authorities) and
(ii) Violations of the grantee's or subgrantee's protest procedures
for failure to review a complaint or protest. Protests received by the
Federal agency other than those specified above will be referred to the
grantee or subgrantee.
(c) Competition. (1) All procurement transactions will be conducted
in a manner providing full and open competition consistent with the
standards of Sec. 1273.36. Some of the situations considered to be
restrictive of competition include but are not limited to:
(i) Placing unreasonable requirements on firms in order for them to
qualify to do business,
(ii) Requiring unnecessary experience and excessive bonding,
(iii) Noncompetitive pricing practices between firms or between
affiliated companies,
(iv) Noncompetitive awards to consultants that are on retainer
contracts,
(v) Organizational conflicts of interest,
(vi) Specifying only a ``brand name'' product instead of allowing
``an equal'' product to be offered and describing the performance of
other relevant requirements of the procurement, and
(vii) Any arbitrary action in the procurement process.
(2) Grantees and subgrantees will conduct procurements in a manner
that prohibits the use of statutorily or administratively imposed in-
State or local geographical preferences in the evaluation of bids or
proposals, except in those cases where applicable Federal statutes
expressly mandate or encourage geographic preference. Nothing in this
section preempts State licensing laws. When contracting for
architectural and engineering (A/E) services, geographic location may
be a selection criteria provided its application leaves an appropriate
number of qualified firms, given the nature and size of the project, to
compete for the contract.
(3) Grantees will have written selection procedures for procurement
transactions. These procedures will ensure that all solicitations:
(i) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. Such
description shall not, in competitive procurements, contain features
which unduly restrict competition. The description may include a
statement of the qualitative nature of the material, product or service
to be procured, and when necessary, shall set forth those minimum
essential characteristics and standards to which it must conform if it
is to satisfy its intended use. Detailed product specifications should
be avoided if at all possible. When it is impractical or uneconomical
to make a clear and accurate description of the technical requirements,
a ``brand name or equal'' description may be used as a means to define
the performance or other salient requirements of a procurement. The
specific features of the named brand which must be met by offerors
shall be clearly stated; and
(ii) Identify all requirements which the offerors must fulfill and
all other factors to be used in evaluating bids or proposals.
(4) Grantees and subgrantees will ensure that all prequalified
lists of persons, firms, or products which are used in acquiring goods
and services are current and include enough qualified sources to ensure
maximum open and free competition. Also, grantees and subgrantees will
not preclude potential bidders from qualifying during the solicitation
period.
(d) Methods of procurement to be followed--(1) Procurement by small
purchase procedures. Small purchase procedures are those relatively
simple and informal procurement methods for securing services,
supplies, or other property that do not cost more than the simplified
acquisition threshold fixed at 41 U.S.C. 403(11) (currently set at
$100,000). If small purchase procurements are used, price or rate
quotations shall be obtained from an adequate number of qualified
sources.
(2) Procurement by sealed bids (formal advertising). Bids are
publicly solicited and a firm-fixed-price contract (lump sum or unit
price) is awarded to the responsible bidder whose bid, conforming with
all the material terms and conditions of the invitation for bids, is
the lowest in price. The sealed bid method is the preferred method for
procuring construction, if the conditions in Sec. 1273.36(d)(2)(i)
apply.
(i) In order for sealed bidding to be feasible, the following
conditions should be present:
(A) A complete, adequate, and realistic specification or purchase
description is available;
(B) Two or more responsible bidders are willing and able to compete
effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and
the selection of the successful bidder can be made principally on the
basis of price.
(ii) If sealed bids are used, the following requirements apply:
(A) The invitation for bids will be publicly advertised and bids
shall be solicited from an adequate number of known suppliers,
providing them sufficient time prior to the date set for opening the
bids;
(B) The invitation for bids, which will include any specifications
and pertinent attachments, shall define the items or services in order
for the bidder to properly respond;
(C) All bids will be publicly opened at the time and place
prescribed in the invitation for bids;
(D) A firm fixed-price contract award will be made in writing to
the lowest responsive and responsible bidder. Where specified in
bidding documents, factors such as discounts, transportation cost, and
life cycle costs shall be considered in determining which bid is
lowest. Payment discounts will only be used to determine the low bid
when prior experience indicates that such
[[Page 33705]]
discounts are usually taken advantage of: and
(E) Any or all bids may be rejected if there is a sound documented
reason.
(3) Procurement by competitive proposals. The technique of
competitive proposals is normally conducted with more than one source
submitting an offer, and either a fixed-price or cost-reimbursement
type contract is awarded. It is generally used when conditions are not
appropriate for the use of sealed bids. If this method is used, the
following requirements apply:
(i) Requests for proposals will be publicized and identify all
evaluation factors and their relative importance. Any response to
publicized requests for proposals shall be honored to the maximum
extent practical;
(ii) Proposals will be solicited from an adequate number of
qualified sources;
(iii) Grantees and subgrantees will have a method for conducting
technical evaluations of the proposals received and for selecting
awardees;
(iv) Awards will be made to the responsible firm whose proposal is
most advantageous to the program, with price and other factors
considered; and
(v) Grantees and subgrantees may use competitive proposal
procedures for qualifications-based procurement of architectural/
engineering (A/E) professional services whereby competitors'
qualifications are evaluated and the most qualified competitor is
selected, subject to negotiation of fair and reasonable compensation.
The method, where price is not used as a selection factor, can only be
used in procurement of A/E professional services. It cannot be used to
purchase other types of services though A/E firms are a potential
source to perform the proposed effort.
(4) Procurement by noncompetitive proposals is procurement through
solicitation of a proposal from only one source, or after solicitation
of a number of sources, competition is determined inadequate.
(i) Procurement by noncompetitive proposals may be used only when
the award of a contract is infeasible under small purchase procedures,
sealed bids or competitive proposals and one of the following
circumstances applies:
(A) The item is available only from a single source;
(B) The public exigency or emergency for the requirement will not
permit a delay resulting from competitive solicitation;
(C) The awarding agency authorizes noncompetitive proposals; or
(D) After solicitation of a number of sources, competition is
determined inadequate.
(ii) Cost analysis, i.e., verifying the proposed cost data, the
projections of the data, and the evaluation of the specific elements of
costs and profit, is required.
(iii) Grantees and subgrantees may be required to submit the
proposed procurement to the awarding agency for pre-award review in
accordance with paragraph (g) of this section.
(e) Contracting with small and minority firms, women's business
enterprise and labor surplus area firms. (1) The grantee and subgrantee
will take all necessary affirmative steps to assure that minority
firms, women's business enterprises, and labor surplus area firms are
used when possible.
(2) Affirmative steps shall include:
(i) Placing qualified small and minority businesses and women's
business enterprises on solicitation lists;
(ii) Assuring that small and minority businesses, and women's
business enterprises are solicited whenever they are potential sources;
(iii) Dividing total requirements, when economically feasible, into
smaller tasks or quantities to permit maximum participation by small
and minority business, and women's business enterprises;
(iv) Establishing delivery schedules, where the requirement
permits, which encourage participation by small and minority business,
and women's business enterprises;
(v) Using the services and assistance of the Small Business
Administration, and the Minority Business Development Agency of the
Department of Commerce; and
(vi) Requiring the prime contractor, if subcontracts are to be let,
to take the affirmative steps listed in paragraphs (e)(2) (i) through
(v) of this section.
(f) Contract cost and price. (1) Grantees and subgrantees must
perform a cost or price analysis in connection with every procurement
action including contract modifications. The method and degree of
analysis is dependent on the facts surrounding the particular
procurement situation, but as a starting point, grantees must make
independent estimates before receiving bids or proposals. A cost
analysis must be performed when the offeror is required to submit the
elements of his estimated cost, e.g., under professional, consulting,
and architectural engineering services contracts. A cost analysis will
be necessary when adequate price competition is lacking, and for sole
source procurements, including contract modifications or change orders,
unless price reasonableness can be established on the basis of a
catalog or market price of a commercial product sold in substantial
quantities to the general public or based on prices set by law or
regulation. A price analysis will be used in all other instances to
determine the reasonableness of the proposed contract price.
(2) Grantees and subgrantees will negotiate profit as a separate
element of the price for each contract in which there is no price
competition and in all cases where cost analysis is performed. To
establish a fair and reasonable profit, consideration will be given to
the complexity of the work to be performed, the risk borne by the
contractor, the contractor's investment, the amount of subcontracting,
the quality of its record of past performance, and industry profit
rates in the surrounding geographical area for similar work.
(3) Costs or prices based on estimated costs for contracts under
grants will be allowable only to the extent that costs incurred or cost
estimates included in negotiated prices are consistent with Federal
cost principles (see Sec. 1273.22). Grantees may reference their own
cost principles that comply with the applicable Federal cost
principles.
(4) The cost plus a percentage of cost and percentage of
construction cost methods of contracting shall not be used.
(g) Awarding agency review. (1) Grantees and subgrantees must make
available, upon request of the awarding agency, technical
specifications on proposed procurements where the awarding agency
believes such review is needed to ensure that the item and/or service
specified is the one being proposed for purchase. This review generally
will take place prior to the time the specification is incorporated
into a solicitation document. However, if the grantee or subgrantee
desires to have the review accomplished after a solicitation has been
developed, the awarding agency may still review the specifications,
with such review usually limited to the technical aspects of the
proposed purchase.
(2) Grantees and subgrantees must on request make available for
awarding agency pre-award review procurement documents, such as
requests for proposals or invitations for bids, independent cost
estimates, etc., when:
(i) A grantee's or subgrantee's procurement procedures or operation
fails to comply with the procurement standards in this section; or
(ii) The procurement is expected to exceed the simplified
acquisition threshold and is to be awarded without competition or only
one bid or offer is received in response to a solicitation; or
[[Page 33706]]
(iii) The procurement, which is expected to exceed the simplified
acquisition threshold, specifies a ``brand name'' product; or
(iv) The proposed award is more than the simplified acquisition
threshold and is to be awarded to other than the apparent low bidder
under a sealed bid procurement; or
(v) A proposed contract modification changes the scope of a
contract or increases the contract amount by more than the simplified
acquisition threshold.
(3) A grantee or subgrantee will be exempt from the pre-award
review in paragraph (g)(2) of this section if the awarding agency
determines that its procurement systems comply with the standards of
this section.
(i) A grantee or subgrantee may request that its procurement system
be reviewed by the awarding agency to determine whether its system
meets these standards in order for its system to be certified.
Generally, these reviews shall occur where there is a continuous high-
dollar funding, and third-party contracts are awarded on a regular
basis;
(ii) A grantee or subgrantee may self-certify its procurement
system. Such self-certification shall not limit the awarding agency's
right to survey the system. Under a self-certification procedure,
awarding agencies may wish to rely on written assurances from the
grantee or subgrantee that it is complying with these standards. A
grantee or subgrantee will cite specific procedures, regulations,
standards, etc., as being in compliance with these requirements and
have its system available for review.
(h) Bonding requirements. For construction or facility improvement
contracts or subcontracts exceeding the simplified acquisition
threshold, the awarding agency may accept the bonding policy and
requirements of the grantee or subgrantee provided the awarding agency
has made a determination that the awarding agency'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 will, 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 law of all persons
supplying labor and material in the execution of the work provided for
in the contract.
(i) Contract provisions. A grantee's and subgrantee's contracts
must contain provisions in paragraph (i) of this section. Federal
agencies are permitted to require changes, remedies, changed
conditions, access and records retention, suspension of work, and other
clauses approved by the Office of Federal Procurement Policy.
(1) Administrative, contractual, or legal remedies in instances
where contractors violate or breach contract terms, and provide for
such sanctions and penalties as may be appropriate. (Contracts more
than the simplified acquisition threshold)
(2) Termination for cause and for convenience by the grantee or
subgrantee including the manner by which it will be effected and the
basis for settlement. (All contracts in excess of $10,000)
(3) Compliance with Executive Order 11246 of September 24, 1965,
entitled ``Equal Employment Opportunity,'' as amended by Executive
Order 11375 of October 13, 1967, and as supplemented in Department of
Labor regulations (41 CFR part 60). (All construction contracts awarded
in excess of $10,000 by grantees and their contractors or subgrantees)
(4) Compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C.
874) as supplemented in Department of Labor regulations (29 CFR part
3). (All contracts and subgrants for construction or repair)
(5) Compliance with the Davis-Bacon Act (40 U.S.C. 276a to 276a-7)
as supplemented by Department of Labor regulations (29 CFR part 5).
(Construction contracts in excess of $2000 awarded by grantees and
subgrantees when required by Federal grant program legislation)
(6) Compliance with Sections 103 and 107 of the Contract Work Hours
and Safety Standards Act (40 U.S.C. 327-330) as supplemented by
Department of Labor regulations (29 CFR part 5). (Construction
contracts awarded by grantees and subgrantees in excess of $2000, and
in excess of $2500 for other contracts which involve the employment of
mechanics or laborers)
(7) Notice of awarding agency requirements and regulations
pertaining to reporting.
(8) Notice of awarding agency requirements and regulations
pertaining to patent rights with respect to any discovery or invention
which arises or is developed in the course of or under such contract.
(9) Awarding agency requirements and regulations pertaining to
copyrights and rights in data.
(10) Access by the grantee, the subgrantee, the Federal grantor
agency, the Comptroller General of the United States, or any of their
duly authorized representatives to any books, documents, papers, and
records of the contractor which are directly pertinent to that specific
contract for the purpose of making audit, examination, excerpts, and
transcriptions.
(11) Retention of all required records for three years after
grantees or subgrantees make final payments and all other pending
matters are closed.
(12) Compliance with all applicable standards, orders, or
requirements issued under section 306 of the Clear Air Act (42 U.S.C.
1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368),
Executive Order 11738, and Environmental Protection Agency regulations
(40 CFR part 15). (Contracts, subcontracts, and subgrants of amounts in
excess of $100,000)
(13) Mandatory standards and policies relating to energy efficiency
which are contained in the state energy conservation plan issued in
compliance with the Energy Policy and Conservation Act (Pub. L. 94-163,
89 Stat. 871).
Sec. 1273.37 Subgrants.
(a) States. States shall follow state law and procedures when
awarding and administering subgrants (whether on a cost reimbursement
or fixed amount basis) of financial assistance to local and Indian
tribal governments. States shall:
(1) Ensure that every subgrant includes any clauses required by
Federal statute and executive orders and their implementing
regulations;
(2) Ensure that subgrantees are aware of requirements imposed upon
them by Federal statute and regulation;
(3) Ensure that a provision for compliance with Sec. 1273.42 is
placed in every cost reimbursement subgrant; and
(4) Conform any advances of grant funds to subgrantees
substantially to the same standards of timing and amount that apply to
cash advances by Federal agencies.
(b) All other grantees. All other grantees shall follow the
provisions of this part which are applicable to
[[Page 33707]]
awarding agencies when awarding and administering subgrants (whether on
a cost reimbursement or fixed amount basis) of financial assistance to
local and Indian tribal governments. Grantees shall:
(1) Ensure that every subgrant includes a provision for compliance
with this part;
(2) Ensure that every subgrant includes any clauses required by
Federal statute and executive orders and their implementing
regulations; and
(3) Ensure that subgrantees are aware of requirements imposed upon
them by Federal statutes and regulations.
(c) Exceptions. by their own terms, certain provisions of this part
do not apply to the award and administration of subgrants:
(1) Section 1273.10;
(2) Section 1273.11;
(3) The letter-of-credit procedures specified in Treasury
Regulations at 31 CFR part 205, cited in Sec. 1273.21; and
(4) Section 1273.50.
Reports, Records, Retention, and Enforcement
Sec. 1273.40 Monitoring and reporting program performance.
(a) Monitoring by grantees. Grantees are responsible for managing
the day-to-day operations of grant and subgrant supported activities.
Grantees must monitor grant and subgrant activities to assure
compliance with applicable Federal requirements and that performance
goals are being achieved. Grantee monitoring must cover each program,
function or activity.
(b) Nonconstruction performance reports. The Federal agency may, if
it decides that performance information available from subsequent
applications contains sufficient information to meet its programmatic
needs, require the grantee to submit a performance report only upon
expiration or termination of grant support. Unless waived by the
Federal agency this report will be due on the same date as the final
Financial Status Report.
(1) Grantees shall submit annual performance reports unless the
awarding agency requires quarterly or semi-annual reports. However,
performance reports will not be required more frequently than
quarterly. Annual reports shall be due 90 days after the grant year,
quarterly or semi-annual reports shall be due 30 days after the
reporting period. The final performance report will be due 90 days
after the expiration or termination of grant support. If a justified
request is submitted by a performance report. Additionally,
requirements for unnecessary performance reports may be waived by the
Federal agency.
(2) Performance reports will contain, for each grant, brief
information on the following:
(i) A comparison of actual accomplishments to the objectives
established for the period. Where the output of the project can be
quantified, a computation of the cost per unit of output may be
required if that information will be useful.
(ii) The reasons for slippage if established objectives were not
met.
(iii) Additional pertinent information including, when appropriate,
analysis and explanation of cost overruns or high unit costs.
(3) Grantees will not be required to submit more than the original
and two copies of performance reports.
(4) Grantees will adhere to the standards in this section in
prescribing performance reporting requirements for subgrantees.
(c) Construction performance reports. For the most part, on-site
technical inspections and certified percentage-of-completion data are
relied on heavily by Federal agencies to monitor progress under
construction grants and subgrants. The Federal agency will require
additional formal performance reports only when considered necessary,
and never more frequently than quarterly.
(d) Significant developments. Events may occur between the
scheduled performance reporting dates which have significant impact
upon the grant or subgrant supported activity. In such cases, the
grantee must inform the Federal agency as soon as the following types
of conditions become known:
(1) Problems, delays, or adverse conditions which will materially
impair the ability to meet the objective of the award. This disclosure
must include a statement of the action taken, or contemplated, and any
assistance needed to resolve the situation.
(2) Favorable developments which enable meeting time schedules and
objectives sooner or at less cost than anticipated or producing more
beneficial results than originally planned.
(e) Federal agencies may make site visits as warranted by program
needs.
(f) Waivers, extensions. (1) Federal agencies may waive any
performance report required by this part if not needed.
(2) The grantee may waive any performance report from a subgrantee
when not needed. The grantee may extend the due date for any
performance report from a subgrantee if the grantee will still be able
to meet its performance reporting obligations to the Federal agency.
Sec. 1273.41 Financial reporting.
(a) General. (1) Except as provided in paragraphs (a) (2) and (5)
of this section, grantees will use only the forms specified in
paragraphs (a) through (e) of this section, and such supplementary or
other forms as may from time to time be authorized by OMB, for:
(i) Submitting financial reports to Federal agencies, or
(ii) Requesting advances or reimbursements when letters or credit
are not used.
(2) Grantees need not apply the forms prescribed in this section in
dealing with their subgrantees. However, grantees shall not impose more
burdensome requirements on subgrantees.
(3) Grantees shall follow all applicable standard and supplemental
Federal agency instructions approved by OMB to the extent required
under the Paperwork Reduction Act of 1980 for use in connection with
forms specified in paragraphs (b) through (e) of this section. Federal
agencies may issue substantive supplementary instructions only with the
approval of OMB. Federal agencies may shade out or instruct the grantee
to disregard any line item that the Federal agency finds unnecessary
for its decisionmaking purposes.
(4) Grantees will not be required to submit more than the original
and two copies of forms required under this part.
(5) Federal agencies may provide computer outputs to grantees to
expedite or contribute to the accuracy of reporting. Federal agencies
may accept the required information from grantees in machine usable
format or computer printouts instead of prescribed forms.
(6) Federal agencies may waive any report required by this section
if not needed.
(7) Federal agencies may extend the due date of any financial
report upon receiving a justified request from a grantee.
(b) Financial Status Report--(1) Form. Grantees will use Standard
Form 269 or 269A, Financial Status Report, to report the status of
funds for all nonconstruction grants and for construction grants when
required in accordance with paragraph Sec. 1273.41(e)(2)(iii) of this
section.
(2) Accounting basis. Each grantee will report program outlays and
program income on a cash or accrual basis as prescribed by the awarding
agency. If the Federal agency requires accrual information and the
grantee's accounting records are not normally kept on the accrual
basis, the grantee
[[Page 33708]]
shall not be required to convert its accounting system but shall
develop such accrual information through and analysis of the
documentation on hand.
(3) Frequency. The Federal agency may prescribe the frequency of
the report for each project or program. However, the report will not be
required more frequently than quarterly. If the Federal agency does not
specify the frequency of the report, it will be submitted annually. A
final report will be required upon expiration or termination of grant
support.
(4) Due date. When reports are required on a quarterly or
semiannual basis, they will be due 30 days after the reporting period.
When required on an annual basis, they will be due 90 days after the
grant year. Final reports will be due 90 days after the expiration or
termination of grant support.
(c) Federal Cash Transactions Report--(1) Form. (i) For grants paid
by letter or credit, Treasury check advances or electronic transfer of
funds, the grantee will submit the Standard Form 272, Federal Cash
Transactions Report, and when necessary, its continuation sheet,
Standard Form 272a, unless the terms of the award exempt the grantee
from this requirement.
(ii) These reports will be used by the Federal agency to monitor
cash advanced to grantees and to obtain disbursement or outlay
information for each grant from grantees. The format of the report may
be adapted as appropriate when reporting is to be accomplished with the
assistance of automatic data processing equipment provided that the
information to be submitted is not changed in substance.
(2) Forecasts of Federal cash requirements. Forecasts of Federal
cash requirements may be required in the ``Remarks'' section of the
report.
(3) Cash in hands of subgrantees. When considered necessary and
feasible by the Federal agency, grantees may be required to report the
amount of cash advances in excess of three days' needs in the hands of
their subgrantees or contractors and to provide short narrative
explanations of actions taken by the grantee to reduce the excess
balances.
(4) Frequency and due date. Grantees must submit the report no
later than 15 working days following the end of each quarter. However,
where an advance either by letter of credit or electronic transfer of
funds is authorized at an annualized rate of one million dollars or
more, the Federal agency may require the report to be submitted within
15 working days following the end of each month.
(d) Request for advance or reimbursement--(1) Advance payments.
Requests for Treasury check advance payments will be submitted on
Standard Form 270, Request for Advance or Reimbursement. (This form
will not be used for drawdowns under a letter of credit, electronic
funds transfer or when Treasury check advance payments are made to the
grantee automatically on a predetermined basis.)
(2) Reimbursements. Requests for reimbursement under
nonconstruction grants will also be submitted on Standard Form 270.
(For reimbursement requests under construction grants, see paragraph
(e)(1) of this section.)
(3) The frequency for submitting payment requests is treated in
Sec. 1273.41(b)(3).
(e) Outlay report and request for reimbursement for construction
programs. (1) Grants that support construction activities paid by
reimbursement method.
(i) Requests for reimbursement under construction grants will be
submitted on Standard Form 271, Outlay Report and Request for
Reimbursement for Construction Programs. Federal agencies may, however,
prescribe the Request for Advance or Reimbursement form, specified in
Sec. 1273.41(d), instead of this form.
(ii) The frequency for submitting reimbursement requests is treated
in Sec. 1273.41(b)(3).
(2) Grants that support construction activities paid by letter of
credit, electronic funds transfer or Treasury check advance.
(i) When a construction grant is paid by letter of credit,
electronic funds transfer or Treasury check advances, the grantee will
report its outlays to the Federal agency using Standard Form 271,
Outlay Report and Request for Reimbursement for Construction Programs.
The Federal agency will provide any necessary special instruction.
However, frequency and due date shall be governed by Sec. 1273.41(b)
(3) and (4).
(ii) When a construction grant is paid by Treasury check advances
based on periodic requests from the grantee, the advances will be
requested on the form specified in Sec. 1273.41(d).
(iii) The Federal agency may substitute the Financial Status Report
specified in Sec. 1273.41(b) for the Outlay Report and Request for
Reimbursement for Construction Programs.
(3) Accounting basis. The accounting basis for the Outlay Report
and Request for Reimbursement for Construction Programs shall be
governed by Sec. 1273.41(b)(2).
Sec. 1273.42 Retention and access requirements for records.
(a) Applicability. (1) This section applies to all financial and
programmatic records, supporting documents, statistical records, and
other records of grantees or subgrantees which are:
(i) Required to be maintained by the terms of this part, program
regulations or the grant agreement, or
(ii) Otherwise reasonably considered as pertinent to program
regulations or the grant agreement.
(2) This section does not apply to records maintained by
contractors or subcontractors. For a requirement to place a provision
concerning records in certain kinds of contracts, see
Sec. 1273.36(i)(10).
(b) Length of retention period. (1) Except as otherwise provided,
records must be retained for three years from the starting date
specified in paragraph (c) of this section.
(2) If any litigation, claim, negotiation, audit or other action
involving the records has been started before the expiration of the 3-
year period, the records must be retained until completion of the
action and resolution of all issues which arise from it, or until the
end of the regular 3-year period, whichever is later.
(3) To avoid duplicate recordkeeping, awarding agencies may make
special arrangements with grantees and subgrantees to retain any
records which are continuously needed for joint use. The awarding
agency will request transfer of records to its custody when it
determines that the records possess long-term retention value. When the
records are transferred to or maintained by the Federal agency, the 3-
year retention requirement is not applicable to the grantee or
subgrantee.
(c) Starting date of retention period--(1) General. When grant
support is continued or renewed at annual or other intervals, the
retention period for the records of each funding period starts on the
day the grantee or subgrantee submits to the awarding agency its single
or last expenditure report for that period. However, if grant support
is continued or renewed quarterly, the retention period for each year's
records starts on the day the grantee submits its expenditure report
for the last quarter of the Federal fiscal year. In all other cases,
the retention period starts on the day the grantee submits its final
expenditure report. If an expenditure report has been waived, the
retention period starts on the day the report would have been due.
(2) Real property and equipment records. The retention period for
real property and equipment records starts
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from the date of the disposition or replacement or transfer at the
direction of the awarding agency.
(3) Records for income transactions after grant or subgrant
support. In some cases grantees must report income after the period of
grant support. Where there is such a requirement, the retention period
for the records pertaining to the earning of the income starts from the
end of the grantee's fiscal year in which the income is earned.
(4) Indirect cost rate proposals, cost allocations plans, etc. This
paragraph applies 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).
(i) If submitted for negotiation. If the proposal, plan, or other
computation is required to be submitted to the Federal Government (or
to the grantee) to form the basis for negotiation of the rate, then the
3-year retention period for its supporting records starts from the date
of such submission.
(ii) If not submitted for negotiation. If the proposal, plan, or
other computation is not required to be submitted to the Federal
Government (or to the grantee) for negotiation purposes, then the 3-
year retention period for the proposal plan, or computation and its
supporting records starts from end of the fiscal year (or other
accounting period) covered by the proposal, plan, or other computation.
(d) Substitution of microfilm. Copies made by microfilming,
photocopying, or similar methods may be substituted for the original
records.
(e) Access to records--(1) Records of grantees and subgrantees. The
awarding agency and the Comptroller General of the United States, or
any of their authorized representatives, shall have the right of access
to any pertinent books, documents, papers, or other records of grantees
and subgrantees which are pertinent to the grant, in order to make
audits, examinations, excerpts, and transcripts.
(2) Expiration of right of access. The rights of access in this
section must not be limited to the required retention period but shall
last as long as the records are retained.
(f) Restrictions on public access. The Federal Freedom of
Information Act (5 U.S.C. 552) does not apply to records unless
required by Federal, State, or local law, grantees and subgrantees are
not required to permit public access to their records.
Sec. 1273.43 Enforcement.
(a) Remedies for noncompliance. If a grantee or subgrantee
materially fails to comply with any term of an award, whether stated in
a Federal statute or regulation, an assurance, in a State plan or
application, a notice of award, or elsewhere, the award agency may 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 grantee or subgrantee or more severe enforcement
action by the awarding agency.
(2) Disallow (that is, deny both use of funds and 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 for the
grantee's or subgrantee's program,
(4) Withhold further awards for the program, or
(5) Take other remedies that may be legally available.
(b) Hearings, appeals. In taking an enforcement action, the
awarding agency will provide the grantee or subgrantee an opportunity
for such hearing, appeal, or other administrative proceeding to which
the grantee or subgrantee is entitled under any statute or regulation
applicable to the action involved.
(c) Effects of suspension and termination. Costs of grantee or
subgrantee resulting from obligations incurred by the grantee or
subgrantee during a suspension or after termination of an award are not
allowable unless the awarding agency expressly authorizes them in the
notice of suspension or termination or subsequently. Other grantee or
subgrantee costs during suspension or after termination which are
necessary and not reasonably avoidable are allowable if:
(1) The costs result from obligations which were properly incurred
by the grantee or subgrantee before the effective date of suspension or
termination, are not in anticipation of it, and, in the case of a
termination, are noncancellable, and,
(2) The costs would be allowable if the award were not suspended or
expired normally at the end of the funding period 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 grantee or subgrantee from being subject
to ``Debarment and Suspension'' under E.O. 12549 (see Sec. 1273.35).
Sec. 1273.44 Termination for convenience.
Except as provided in Sec. 1273.43 awards may be terminated in
whole or in part only as follows:
(a) By the awarding agency with the consent of the grantee or
subgrantee 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, or
(b) By the grantee or subgrantee upon written notification to the
awarding agency, setting forth the reasons for such termination, the
effective date, and in the case of partial termination, the portion to
be terminated. However, if, in the case of a partial termination, the
awarding agency determines that the remaining portion of the award will
not accomplish the purposes for which the award was made, the awarding
agency may terminate the award in its entirety under either
Sec. 1273.43 or paragraph (a) of this section.
Subpart D--After-The-Grant Requirements
Sec. 1273.50 Closeout.
(a) General. The Federal agency will close out the award when it
determines that all applicable administrative actions and all required
work of the grant has been completed.
(b) Reports. Within 90 days after the expiration or termination of
the grant, the grantee must submit all financial, performance, and
other reports required as a condition of the grant. Upon request by the
grantee, Federal agencies may extend this timeframe. These may include
but are not limited to:
(1) Final performance or progress report.
(2) Financial Status Report (SF 269) or Outlay Report and Request
for Reimbursement for Construction Programs (SF-271) (as applicable).
(3) Final request for payment (SF-270) (if applicable).
(4) Invention disclosure (if applicable).
(5) Federally-owned property report: In accordance with
Sec. 1273.32(f), a grantee must submit an inventory of all federally
owned property (as distinct from property acquired with grant funds)
for which it is accountable and request disposition instructions from
the Federal agency of property no longer needed.
(c) Cost adjustment. The Federal agency will, within 90 days after
receipt of reports in paragraph (b) of this section, make upward or
downward adjustments to the allowable costs.
(d) Cash adjustments. (1) The Federal agency will make prompt
payment to
[[Page 33710]]
the grantee for allowable reimbursable costs.
(2) The grantee must immediately refund to the Federal agency any
balance of unobligated (unencumbered) cash advanced that is not
authorized to be retained for use on other grants.
Sec. 1273.51 Later disallowances and adjustments.
The closeout of a grant does not affect:
(a) The Federal agency's right to disallow costs and recover funds
on the basis of a later audit or other review;
(b) The grantee's obligation to return any funds due as a result of
later refunds, corrections, or other transactions;
(c) Records retention as required in Sec. 1273.42;
(d) Property management requirements in Secs. 1273.31 and 1273.32;
and
(e) Audit requirements in Sec. 1273.26.
Sec. 1273.52 Collection of amounts due.
(a) Any funds paid to a grantee in excess of the amount to which
the grantee is finally determined to be entitled under the terms of the
award constitute a debt to the Federal Government. If not paid within a
reasonable period after demand, the Federal agency may reduce the debt
by:
(1) Making an administrative offset against other requests for
reimbursement,
(2) Withholding advance payments otherwise due to the grantee, or
(3) Other action permitted by law.
(b) Except where otherwise provided by statutes or regulations, the
Federal agency will charge interest on an overdue debt in accordance
with the Federal Claims Collection Standards (4 CFR Ch. II). The date
from which interest is computed is not extended by litigation or the
filing of any form of appeal.
Subpart E--Entitlements (Reserved)
[FR Doc. 95-15898 Filed 6-28-95; 8:45 am]
BILLING CODE 7510-01-P
