**DEPARTMENT OF DEFENSE**

**CFDA 12.401 NATIONAL GUARD MILITARY OPERATIONS AND MAINTENANCE (O&M)
PROJECTS**

**I. PROGRAM OBJECTIVES**

The National Guard Bureau (NGB) enters into cooperative agreements (CA)
for Army National Guard (ARNG) Facilities Programs (FP) and Air National
Guard (ANG) Facility Operations & Maintenance Activities (FOMA) with
States to provide Federal support for services provided by the State
Military Departments for authorized facilities for leases, facilities
operations, and sustainment, restoration, and modernization, including
operations and maintenance (O&M) and minor construction costs (NGR
5-1/ANGI 63-101).

**II. PROGRAM PROCEDURES**

NGB, a joint Bureau of the Department of the Army (DA) and the
Department of the Air Force (AF), enters into a CA with a State when NGB
transfers something of value, through funding or otherwise, to the State
to support the State ARNG FP and ANG FOMA instead of acquiring (by
purchase, lease, or barter) property or services for the direct benefit
or use of the ARNG or ANG and substantial involvement is expected
between the NGB and the State when carrying out the activity
contemplated in the agreement (NGR 5-1/ANGI 63-101, chapter 1-1).

Generally, a CA consists of two parts, the agreement and appendices
(Master Cooperative Agreement (MCA) and as many Appendices as apply to
that State). Policies and procedures to be followed for cooperative
agreements with States are contained in National Guard Grants and
Cooperative Agreements NGR 5-1/ANGI 63-101. The MCA includes standard
terms and conditions applicable to all Appendices under the MCA and the
required signatures of the parties. There will be a separate Appendix
for each CA functional area applicable to the State. Each Appendix shall
contain terms and conditions, allowable costs, reports, approved budget,
management controls, and administrative information applicable only to
that functional area (NGR 5-1/ANGI 63-101, chapter 2-1).

The Adjutant General (TAG) and the United States Property & Fiscal
Officer (USPFO) are responsible for the execution of the MCA and
Appendices. A CA is the means of providing all financial assistance and
other support to States for the operation of the National Guard except
for financial assistance and support provided under separate authority
(e.g., military and technician pay and the military supply system).
Single-purpose CAs will specify the responsible parties (NGR 5-1/ANGI
63-101, chapter 2-1).

The sum of Federal reimbursements and program income may not exceed the
requirements listed for each program in the approved budget. The State
Military Department must have prior written USPFO approval of an amended
budget before it may request a reimbursement or receive program income
that would bring its receipts above the maximum program funding level.
Funding transfers into the FP (chapter 13-1e) or FOMA (chapter 33-3b)
programs or funding transfers within each program do not require prior
written approval of the appropriate NGB program managers. However,
funding may not be transferred from the FP (chapter 13-1d) or FOMA
(chapter 33-3c) programs without a signed modification to the Appendix
that includes justification for the transfer from FP or without the
prior written approval of the FOMA program manager for the transfer from
FOMA.

**Source of Governing Requirements**

The NGB and States are authorized to enter into CAs under: (1) 31 USC,
Subtitle V, General Assistance Administration, Chapter 63, Using
Procurement Contracts and Grant and Cooperative Agreements; (2) 31 USC
Subtitle V, General Assistance Administration, Chapter 61, Program
Information, and Chapter 65, Intergovernmental Cooperation; (3) 32 USC
National Guard, Chapter 1, Organization; (4) 32 USC Section 101 (19);
and (5) 32 USC Section 106/107, which authorizes the NGB to contribute
funds for the support of the operation/training of the ARNG/ANG. The MCA
is a CA within the meaning of 31 USC sections 6301 through 6308.

DoD Grant and Cooperative Agreement Regulations (DoDGARs), 3210.6R, Part
21, DoD Grant and Agreements, General Matters, implements the preceding
Federal statutes.

**Availability of Other Program Information**

The National Guard Internal Review Office (which reports to the USPFO)
can provide information about risk assessments and audits performed by
their office which may be helpful in planning the audit. Contact Vincent
Latona, National Guard Headquarters Internal Review Office, at
703-607-0476 (direct) and 703-607-0730 (main) or by e-mail to
latonav@ngb.ang.af.mil for information on the Internal Review Offices
for a particular state.

**III. COMPLIANCE REQUIREMENTS**

**In developing the audit procedures to test compliance with the
requirements for a Federal program, the auditor should first look to
Part 2, Matrix of Compliance Requirements, to identify which of the 14
types of compliance requirements described in Part 3 are applicable and
then look to Parts 3 and 4 for the details of the requirements.**

**A. Activities Allowed or Unallowed**

> 1\. Federal funding under the CA shall be on a requirements basis
> within Federal budget limitations and funding availability. Funding
> shall be provided to support those items designated in the CA or
> facilities authorized support in the Facilities Inventory and Support
> Plan (FISP). Facilities used in excess of those authorized shall be
> supported with other than Federal funds (NGR 5-1/ANGI 63-101 chapters
> 13-5a, 33-5a, 33-4b, and 33-6a).
>
> 2\. FP (NGR 5-1/ANGI 63-101 chapter 13-5c) and FOMA (NGR 5-1/ANGI
> 63-101 chapter 33-6a and 33-6b ) Appendix support shall be provided
> within available funding limitations for authorized facilities and
> supporting elements such as sidewalks, fire hydrants, gasoline and
> diesel fuel dispensing systems, flammable materials buildings, roads,
> utilities systems, fencing and hard stand. Sustainment, restoration,
> and modernization, facilities operations, and minor construction
> support is provided for space or facilities as detailed in the NGR
> 5-1/ANGI 63-101 chapter13-3a(2)-(4), 33-4(a), and 33-4(b).
>
> 3\. Funds may be used for sustainment/restoration/modernization or
> construction of real property and facilities if authorized on the
> FISP. Construction is the erection, installation, or assembly of a new
> facility; the relocation of a facility; the complete replacement of an
> existing facility; or the addition, expansion, alteration, or
> conversion (to a new type use) of an existing facility. This includes
> equipment (but not fixed or moveable personal property) installed and
> made a part of a facility and related site preparation, excavation,
> filling and landscaping, or other land improvements. It also includes
> increases in components of facilities for functional reasons and the
> extension of utilities to areas not previously reserved. The State may
> complete these projects with employees reimbursed under the FP
> Appendix or they may subcontract with a private firm or another
> governmental agency to do the work.
>
> If the estimated cost to restore/modernize a facility exceeds 50
> percent of the cost to construct a replacement facility, a new
> facility should be constructed. If the State elects to do a repair
> project, if the estimated cost to repair the facility exceeds 50
> percent of the cost to construct a replacement facility, and if the
> project costs exceeds \$750,000, then the TAG must request approval
> through NGB-ARI to the Assistant Secretary of the Army (Installations
> and the Environment) (NRG 5-1/ANGI 63-101, chapter 13-5k(5). The
> Federal share of project costs cannot exceed the statutory ceiling in
> 10 USC 18233b (NRG 5-1/ANGI 63-101, chapter 13-5l(1).
>
> 4\. Unallowable activities are those activities that are described as
> unauthorized charges and detailed in the NGR 5-1/ANGI 63-101, chapters
> 13-6 and 33-7.

**B. Allowable Costs/Cost Principles**

> 1\. *Budget* -- Costs must be in accordance with any restrictions,
> limitations, or instructions contained in the CA budget (NGR 5-1/ANGI
> 63-101, chapter 13-4 and 33-5).
>
> 2\. *Indirect costs are unallowable* -- Indirect costs, except fringe
> benefits, are unallowable (NGR 5-1/ANGI 63-101, chapter 5-4).
>
> 3\. *Employee compensation* -- Individual employee compensation
> comprises a significant portion of total costs charged to CA
> appendices. The auditor should give particular attention to the
> allocability of these costs. The distribution of individual employee
> compensation to projects must follow applicable Federal cost
> principles, NGR 5-1/ANGI63-101, and the terms and conditions in
> agreement appendices. Therefore, the auditor's testing should include
> tests of the time and effort reporting system to support the
> distribution of compensation costs.
>
> 4\. *Fringe benefits* -- Fringe benefits for which the State does not
> bill the State Military Department directly, such as workmen's
> compensation, unemployment compensation, State sponsored life and
> health insurance, and retirement benefits are allowable if they are
> part of the State's Central Service Cost Allocation Plan approved by
> the Department of Health and Human Services (HHS). However, for these
> costs to be reimbursable, all of the following conditions have to be
> met (NGR 5-1/ANGI 63-101 chapter 5):
>
> a\. The individual cost items have to be reimbursable under the terms
> of individual appendices.
>
> b\. Fringe benefit costs for which the State does not bill the State
> Military Department directly shall be reimbursable by applying a
> fringe benefit rate to the costs of actual salaries paid to employees.
>
> c\. Fringe benefits which are neither direct costs nor included in the
> billed central services section of the State's Central Service Cost
> Allocation Plan approved by HHS are not reimbursable.

**D. Davis-Bacon Act**

> The Davis-Bacon Act applies only to environmental remediation
> construction subject to the Comprehensive Environmental Response,
> Compensation, and Liability Act of 1980, as amended. Environmental
> remediation construction is that portion of the remedial work which
> calls for excavation, substantial earth moving, removal of
> contaminated soil, and the actual mobilization of the incinerator
> followed by restoration of the landscape, regardless of whether such
> activities are performed with any other construction activities done
> any other buildings or other structures at the cleanup site (NGR
> 5-1/ANGI 63-101 chapter 14-1c).

**G. Matching, Level of Effort, Earmarking**

**1. Matching**

> The rate of reimbursement to the State for all authorized charges,
> unless expressly stated otherwise, shall be based on the FISP support
> code for the facility generating the expenditure. For example,
> employee, repair, supplies, equipment, utility, etc. costs directly
> and exclusively associated with a facility authorized 75 percent
> support shall be reimbursed to the State Military Department 75
> percent. Costs that are generated for facilities that are authorized
> at several different support levels shall be reimbursed at a rate that
> reflects the actual level of effort. However, nothing shall preclude
> the State Military Department from requesting reimbursement at a rate
> less than what is authorized (NGR 5-1/ANGI 63-101, chapter 13-5).

**2. Level of Effort** -- Not Applicable

**3. Earmarking** -- Not Applicable

**H. Period of Availability of Federal Funds**

> 1\. National Guard Operations and Maintenance agreements are funded
> with one year appropriations and, as such, State obligations may not
> be incurred against Federal funds for a specified year before or after
> the Federal fiscal year in which the funds were appropriated. State
> obligation means any action under State law or procedure requiring
> payment by the State. A representation by competent authority within a
> State that it obligated funds under State law may be relied upon (NGR
> 5-1/ANGI 63-101, chapters 12-1, 12-6, 32-1, and 32-6).
>
> 2\. A CA shall be executed by the USPFO and the TAG prior to any
> request for reimbursement or advance payment. The State shall also
> have an approved Appendix covering each functional area for which the
> reimbursement or an advance is requested. The State shall not request
> reimbursement for any expenditures it made before the date that all
> required parties execute the MCA and the covering Appendices unless
> the MCA or appropriate Appendix expressly authorize expenditures made
> during the funding period, but prior to the date of final signature
> (NGR 5-1/ANGI 63-101, chapter 2-1).
>
> 3\. Work or task performance must serve a bona fide need that exists
> in the fiscal year in which the work or tasking is issued; otherwise,
> a valid obligation is not accomplished. It is not intended that the
> rule of bona fide need of the fiscal year rule be construed to
> preclude lead time. Thus, where materials, for example, cannot be
> obtained in the same fiscal year in which they are needed, a provision
> for delivery in the subsequent fiscal year does not violate the bona
> fide need rule so long as the time intervening between placing of the
> order and delivery is not excessive and the work order is not for
> standard commercial items readily available from other sources. Bona
> fide need generally is a determination of the NGB activity and not
> that of the State performing the activity. The State shall prepare and
> the USPFO shall review and approve a bona fide need determination (NGR
> 5-1/ANGI 63-101, chapter 2-2b) and finding to reflect this need. A
> State performing the activity should, however, refuse to accept a work
> order if it is obvious that the work order does not serve a need
> existing in the fiscal year in which issued (NGR 5-1/ANGI 63-101,
> chapter 2-2).
>
> 4\. Within 90 days after the end of the Federal fiscal year or upon
> termination of the CA, whichever is earlier, the State Military
> Department shall promptly deliver to the USPFO, as a representative of
> NGB, a final accounting of all funding and disbursements under the
> agreement for the fiscal year (NGR 5-1/ANGI 63-101, chapters 12-6 and
> 32-6).
>
> 5\. If unliquidated claims and undisbursed obligations arising from
> the State's performance of the agreement will remain 90 days after the
> close of the fiscal year, the State Military Department shall provide
> a detailed listing of uncleared obligations and a projected timetable
> for their liquidation and disbursement no later than 31 December. The
> USPFO shall then set an appropriate new timetable for the State
> Military Department to submit their final accounting.
>
> 6\. Costs incurred in a fiscal year which are not disclosed by the
> State Military Department within 90 days of the end of the fiscal
> year, except costs associated with unliquidated claims and undisbursed
> obligations arising from the State's performance of the agreement
> which the State Military Department has reported per paragraph 12-6c,
> shall not be eligible for reimbursement by NGB. The USPFO may extend
> the 90 day limit for good cause shown.

**J. Program Income**

> Program income in an NGB CA shall mean the gross income, received by a
> State Military Department from fees for services performed and from
> the use, rental, or sale of real or personal property, the operation
> and maintenance of which is supported under the CA. The following
> exceptions are applicable (NGR 5-1/ANGI 63-101, chapter 7):
>
> 1\. Income received from the use or rental of State-owned, federally
> supported armories is not program income. However, the State must
> fulfill its obligations under 10 USC 18236(c) on the use of these
> funds. 10 USC 18236(c) permits States to rent out armories if the
> State uses the rental income to maintain the armory. In addition, as a
> condition for continued Federal support, the State must increase its
> contribution to the CA by at least the amount of all Identifiable
> Incremental Costs (IIC), as defined in NGR 5-1/ANGI 63-101, chapter
> 7-3b(2), for which it receives Federal support (e.g., utilities).
>
> 2\. Reimbursements made to NGB by another Federal agency for the use
> of an NGB-supported National Guard facility are not program income but
> are considered to be direct reimbursement of costs incurred. However,
> they will increase the maximum funding limitations of the appropriate
> appendices to the CA.
>
> 3\. Amounts paid directly to a State Military Department by a Federal
> agency, a State agency, or any other user for the use of a State
> Military Department-owned, leased, or licensed real property
> (exclusive of armories) or equipment acquired or supported under an
> NGB CA pursuant to a direct relationship between the Federal or State
> agency, or other user and the State Military Department are program
> income.

**L. Reporting**

**1. Financial Reporting**

a\. SF-269, *Financial Status Report* -- Not Applicable

b\. SF-270, *Request for Advance or Reimbursement* -- Applicable

> c\. SF-271, *Outlay Report and Request for Reimbursement for
> Construction Programs* -- Not Applicable
>
> d\. SF-272, *Federal Cash Transactions Report* -- Applicable

**2. Performance Reporting --** Not Applicable

> **3. Special Reporting** -- Not Applicable