[Federal Register Volume 60, Number 118 (Tuesday, June 20, 1995)]
[Rules and Regulations]
[Pages 32102-32104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14962]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 84
[Docket No. R-95-1736; FR-3639-F-02]
RIN 2501-AB97
Uniform Administrative Requirements for Grants and Agreements
With Institutions of Higher Education, Hospitals and Other Non-Profit
Organizations--OMB Circular A-110 (Revised)
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: Office of Management and Budget (OMB) Circular A-110 provides
standards for obtaining consistency and uniformity among Federal
agencies in the administration of grants and agreements with
institutions of higher education, hospitals, and other non-profit
organizations. On September 13, 1994, the Department published a final
rule which adopted the revised circular as it pertains to HUD. However,
the September 13, 1994 rule contained, in subpart E, special provisions
relating to the use of lump sum grants. Therefore, subpart E was
treated as an interim rule, and the public was invited to submit
comments on subpart E. This final rule addresses the public comments
received on subpart E and makes final the provisions of subpart E.
EFFECTIVE DATE: July 20, 1995.
FOR FURTHER INFORMATION CONTACT: Aliceann B. Muller, Policy and
Evaluation Division, Office of Procurement and Contracts, Department of
Housing and Urban Development, 451 Seventh Street, SW, Room 5262,
Washington, DC 20410. Telephone: (202) 708-0294; TDD: (202) 708-1112.
(These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: Office of Management and Budget (OMB)
Circular A-110 provides standards for obtaining consistency and
uniformity among Federal agencies in the administration of grants and
agreements with institutions of higher education, hospitals, and other
non-profit organizations.
OMB Circular A-110 was issued under the authority of 31 U.S.C. 503
(the Chief Financial Officers Act), 31 U.S.C. 1111, 41 U.S.C. 405 (the
Office of Federal Procurement Policy Act), Reorganization Plan No. 2 of
1970, and E.O. 11541 (``Prescribing the Duties of the Office of
Management and Budget and the Domestic Policy Council in the Executive
Office of the President'').
OMB issued Circular A-110 in 1976 and made a minor revision in
February 1987. To update the circular, OMB established an interagency
task force to review the circular. The task force solicited suggestions
for changes to the circular from university groups, non-profit
organizations and other interested parties and compared, for
consistency, the provisions of similar provisions applied to State and
local governments. On August 27, 1992, OMB published a notice in the
Federal Register, at 57 FR 39018, requesting comments on proposed
revisions to OMB Circular A-110. Interested parties were invited to
submit comments. OMB received over 200 comments from Federal agencies,
non-profit organizations, professional organizations and others. All
comments were considered in developing the final revision. On November
29, 1993, at 58 FR 62992, OMB issued a revised circular which reflects
the results of these efforts.
On September 13, 1994, the Department published a final rule which
adopted the revised circular as it pertains to HUD. However, the
September 13, 1994 rule contained, in subpart E, special provisions
relating to the use of lump sum grants. Therefore, subpart E was
treated as an interim rule, and the public was invited to submit
comments on subpart E. This final rule addresses the public comments
received on subpart E and makes final the provisions of subpart E.
Public Comments
The final rule published on September 13, 1994, at 59 FR 47010,
invited public comments on Subpart E regarding lump sum grants. One (1)
commenter, a national association, responded with a series of technical
questions. Below is a listing of the questions presented and the
Department's response to each question. The Department's responses set
forth additional clarifications needed to aid in the commenter's
understanding of the rule. No changes to the rule are necessary, and
none are made by this final rule.
Question: Do these lump sum awards go through the same audit
process as regular awards? [[Page 32103]]
Response: OMB Circular A-133 ``Audits of Institutions of Higher
Education and Other Nonprofit Organizations'' applies to lump-sum
awards. However, in responding to a comment on the proposed A-133
regarding applicability of A-133 to fixed price formula (performance-
based) type grants, OMB said ``Performance-funded programs are subject
to the requirements of OMB Circular A-133. However, the auditor should
tailor the auditing procedures to that type of program. For
performance-funded programs, the auditor's examination should be
directed to such matters as determining beneficiary eligibility,
verifying units of service rendered, and controlling program income.''
Therefore, the Department's view is that the recipient of a lump sum
award would be subject to all of the requirements of A-133 except that
the lump-sum grant would not be audited for incurred ``costs;'' the
auditor would tailor the review to fit the grant's terms. Internal
controls, program compliance, auditing of financial statements, and all
other aspects of an audit under A-133 would still apply.
Question: Does HUD anticipate that particular program branches of
the agency will avail themselves of these types of awards? If so, which
are they?
Response: The Department does not expect an expansion in the use of
the lump-sum provisions in the future. Historically, many of HUD's
grant programs have been managed on other than a cost-reimbursement
basis, so it is not a matter of programs ``availing'' themselves of
this option, but rather of making the Department's rule flexible enough
to allow the continuance of historical practice. For example, the
Neighborhood Development Demonstration Program (NDDP) uses a matching
formula of from one Federal dollar up to six Federal dollars being
given for each dollar the grantee raises from within the targeted
neighborhood. The ratio of the match is determined by the level of
neighborhood distress. The NDDP grantee is paid the match when the
local dollar is raised--not when costs are incurred or work is done.
The housing counseling grant program works on a unit price basis; the
grantee is paid for performing a ``counseling unit,'' which is defined
in the grant. In many cases, the funding arrangement is part of the
basic program design and the enabling legislation. However, it is
highly likely that these programs will change, as HUD is currently
undergoing a major reinvention and consolidation of its grant programs.
The combined programs or new programs may take any form allowed by the
new or revised legislation and by the administrative procedures set
forth in 24 CFR part 84 (for non-profits) and part 85 (for state and
local governments).
Question: Is the underlying motivation to introduce these lump sum
awards cost saving or streamlining of procedures in a larger context of
the National Performance Review?
Response: Yes, in a way, but see also the second question above.
HUD has been using the lump-sum arrangement for many years and is very
aware of its advantages in terms of the streamlining and flexibility it
offers, including reduced grantee and Federal burden.
Question: Does a lump sum grant resemble a fixed price contract?
Response: In some cases, yes. In cases where a predetermined
payment amount is tied to a predetermined performance milestone, it
does resemble a fixed price contract. The housing counseling program
discussed above falls in this category. However, not all lump sum
grants operate in this manner. Sometimes payment is tied to an external
index or to an external event, such as economic distress, or a dollar
raised in the NDDP program. See the second question above.
Question: If a lump sum grant is fixed in price and permission is
needed for changes as specified in Sec. 84.82(d), will HUD pay
increased costs that might be incurred from denial of permission,
especially if grant performance were made impossible as a result of
such denial?
Response: Under a lump sum award, HUD is not paying for ``costs''
based on the grantee's actual cost experience in performing the work.
Therefore, an increase in the grantee's costs would not in and of
itself lead to an increase in the lump sum amount paid by HUD. Rather,
the lump sum award represents an agreement between HUD and the grantee
that a certain amount will be paid for a certain event, based on a
performance milestone, external benchmark, or other pre-defined
``event.'' (See Secs. 84.80 and 84.81 for further guidance.) However,
awarding a lump sum grant does not necessarily mean that the lump sum
could never be increased. The idea is that the Federal contribution be
sufficient to achieve the agreed-upon goal and that the grantee neither
realize a financial windfall nor find it impossible to perform. In some
instances, the HUD contribution might only be a small part of the
overall program costs, and HUD's clearly stated intention (set forth in
the grant itself and agreed to before award) is to contribute no more
than the stated HUD share. For example, a grant might be for acquiring
and rehabilitating a home for use by low income persons. During the
performance of the work, unknown conditions may come to light at the
construction site which cause increased costs. HUD might decline to
increase its lump sum amount and insist that the grantee recover these
costs from other sources, or it might agree to make an additional
contribution. Much of the answer depends on the program design and
program rules; some programs have statutory caps on individual award
amounts, while others allow for more flexibility. The key factor is
that the quid pro quo be clearly set forth in the grant document and
agreed to by both parties. In cases where there are statutory caps on
grant amounts or other constraints which limit or preclude any
adjustments in the amount, these should be made clearly known in
advance of the award. For issues which could not be foreseen, and in
the absence of a rule limiting the Grant Officer's authority, such
matters as adjustments in the lump sum amount would be determined by
the Grant Officer.
Also, please note that the conditions for getting approval under
Sec. 84.82(d) are extremely limited, consisting only of getting
approval for (1) changes in scope or objective, (2) additional Federal
funding, and (3) the subcontracting out or transfer of work not
previously contemplated. The first of these is necessary to make sure
that the grantee is still undertaking activities eligible under the
program rule and chargeable to the appropriation, and that the
activities are consistent with those for which the grantee was selected
(usually competitively). The second is obvious--if the grantee needs
additional funding, it cannot continue the grant without it, and the
Federal agency must make the funds available or explore other avenues
for resolution, BEFORE the grantee has overcommitted funds on the
assumption there will be additional Federal dollars. The third is to
ensure that the grantee who was evaluated as capable actually
accomplishes the work and does not shift performance to some unknown
party. These three situations are major and are the only ones for which
permission must be sought, compared to the many situations requiring
permission under cost-reimbursement grants.
Other Matters
Environmental Review
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969. The Finding of No Significant [[Page 32104]] Impact is
available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Office of the General
Counsel, Department of Housing and Urban Development, Room 10276, 451
Seventh Street, S.W., Washington, D.C. 20410.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. It pertains
only to the administration of grants and agreements with institutions
of higher education, hospitals, and other nonprofit organizations.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this rule
does not have ``federalism implications'' because it does not have
substantial direct effects on the States (including their political
subdivisions), or on the distribution of power and responsibilities
among the various levels of government.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this rule does not have
potential significant impact on family formation, maintenance, and
general well-being. It pertains only to the administration of grants
and agreements with institutions of higher education, hospitals, and
other nonprofit organizations.
Semi-Annual Agenda of Regulations
This rule was listed as item number 1384 in the Department's
Semiannual Agenda of Regulations published on May 8, 1995 (60 FR 23368,
23379) in accordance with Executive Order 12866 and the Regulatory
Flexibility Act.
List of Subjects in 24 CFR Part 84
Accounting, Colleges and universities, Grant programs, Loan
programs, Nonprofit organizations, Reporting and recordkeeping
requirements.
Accordingly, subpart E of part 84 of title 24 of the Code of
Federal Regulations is adopted as final, without change, as it was
published on September 13, 1994, at 59 FR 47010.
Dated: June 13, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 95-14962 Filed 6-19-95; 8:45 am]
BILLING CODE 4210-32-P
