Custom Federal Regulations Service™

**This is supplemental material**

**for Book A of your set of**

**Federal Regulations**

Title 38, Parts 0, 1, 2, 12,

14-16, 18--20, 25-26, 39-45, 48

*General*

**Veterans Benefits Administration**

Supplement No. 70

Covering period of *Federal Register* issues

through September 22, 2005

Copyright © 2005 Jonathan Publishing

**Need Assistance?**

Printing for all supplements is performed by the United States
Government

Printing Office. Distribution is the responsibility of the

VA Forms and Publications Depot. Accordingly:

Questions concerning **[missing supplements]{.smallcaps}**, need for
**[additional books]{.smallcaps}**, and other **[distribution
list]{.smallcaps}** issues for this loose-leaf service should be
directed to:

Department of Veterans Affairs

Veterans Benefits Administration

Directives, Forms and Records Staff

Mail Code: 20S5

810 Vermont Avenue, N.W.

Washington DC 20420

Telephone: 202/273-7080

Fax: 202/275-5947

Questions concerning the **[filing instructions]{.smallcaps}** for this
loose-leaf service,

or the reporting of **[substantive errors]{.smallcaps}** in the text,

may be directed to:

Jonathan Publishing

855 Yorks Crossing

Driftwood TX 78619

Telephone: 512/858-1225

Fax: 512/858-1230

E-mail: garyknight@ev1.net

Copyright © 2005 Jonathan Publishing

# GENERAL INSTRUCTIONS

Custom Federal Regulations Service™

**Supplemental Materials for *Book A***

**Code of Federal Regulations**

**Title 38, Parts 0, 1, 2, 12, 14-16, 18--20, 25-26, 39-45, 48**

***General***

**Veterans Benefits Administration**

**Supplement No. 70**

25 September 2005

Covering the period of Federal Register issues

through September 22, 2005

When **Book A** was originally prepared, it was current through final
regulations published in the *Federal Register* of 21 April 1992. These
supple­mental materials are designed to keep your regulations up to date.
You should file the attached pages immediately, and record the fact that
you did so on the *Supplement Filing Record* which begins on page A-8 of
Book A, *General*.

> **To ensure accuracy and timeliness of your materials,**
>
> **it is important that you follow these simple procedures:**
>
> 1\. Always file your supplemental materials immediately upon receipt.
>
> 2\. Before filing, always check the Supplement Filing Record (page
> A-8) to be sure that all prior supplements have been filed. If you are
> missing any supple­ments, contact the Veterans Benefits Administration
> at the address listed on page A-2.
>
> 3\. After filing, enter the relevant information on the Supplement
> Filing Record sheet (page A-8)---the date filed, name/initials of
> filer, and date through which the *Federal Register* is covered.
>
> 4\. If as a result of a failure to file, or an undelivered supplement,
> you have more than one supplement to file at a time, be certain to
> file them in chronological order, lower number first.
>
> 5\. Always retain the filing instructions (simply insert them at the
> back of the book) as a backup record of filing and for reference in
> case of a filing error.
>
> 6\. Be certain that you *permanently discard* any pages indicated for
> removal in the filing instructions in order to avoid confusion later.

To execute the filing instructions, simply remove *and throw away* the
pages listed under *Remove These Old Pages,* and replace them in each
case with the corres­pond­ing pages from this supplement listed under *Add
These New Pages*. Occasionally new pages will be added without removal
of any old material (reflecting new regulations), and occasionally old
pages will be removed with­out addition of any new material (reflecting
rescinded regulations)---in these cases the word *None* will appear in
the appropriate column.

> **FILING INSTRUCTIONS**

**Book A, Supplement No. 70**

**September 25, 2005**

*Remove these Add these Section(s)*

*[old pages]{.underline} [new pages]{.underline} [Affected]{.underline}*

**Do not file this supplement until you confirm that**

**all prior supplements have been filed**

**A-43 to A-54 A-43 to [A-56]{.underline} Index to Book A**

1.18-1 to 1.18-2 1.18-1 to 1.18-2 §1.18

**14.500-1 to 14.501-3 14.500-1 to 14.501-3 §14.501**

Part 41 Title page to 41.20-2 Part 41 Title page to
[41.AppB-2]{.underline} Part 41

**None Tab for Part 49 (not supplied) Part 49; add**

**after Part 48**

**None Part 49 Title page to 49.AppA-2 Part 49**

**Be sure to complete the**

***Supplement Filing Record* (page A-8)**

**when you have finished filing this material.**

> **HIGHLIGHTS**

**Book A, Supplement No. 70**

**September 25, 2005**

***Supplement* Highlights *references***: Where substantive changes are
made in the text of regulations, the paragraphs of *Highlights* sections
are cited at the end of the relevant section of text. Thus, if you are
reading §3.263, you will see a note at the end of that section which
reads: "Supplement *Highlights* references---6(2)." This means that
paragraph 2 of the *Highlights* section in Supplement No. 6 contains
information about the changes made in §3.263. By keeping and filing the
*Highlights* sections, you will have a reference source explaining all
substantive changes in the text of the regulations.

***Supplement frequency***: This Book A (*General*) was originally
supplemented twice a year, in April and October. Beginning 1 August
1995, supplements will be issued *every month* during which a final rule
addition or modification is made to the parts of Title 38 covered by
this book. Supplements will be numbered consecutively as issued.

**Modifications in this supplement include the following:**

1\. On 28 June 2005, the VA published a rule, effective retroactively to
7 October 2004, to affirm as final without change, an interim final rule
that established presumptions of service connection for atherosclerotic
heart disease, hypertensive vascular disease, and stroke in former
prisoners of war; set forth guidelines to govern future actions by the
VA to establish presumptions of service connection for other diseases
associated with service involving detention or internment as a prisoner
of war; and revised VA regulations to conform to statutory changes made
by the Veterans Benefits Act of 2003. The interim rule added §1.18.

2\. On 1 September 2005, the VA published a final rule, effective that
same date, to amend VA regulations regarding the jurisdictions and
addresses of the General Counsel\'s Regional Counsels in order to
reflect recent jurisdiction and address changes. Change:

In §14.501, revised paragraph (f).

3\. On 1 September 2005, the VA published a final rule, effective 3
October 2005, to amend VA regulations to codify provisions of revised
OMB Circular A-133 which provides standards for consistency and
uniformity among Federal agencies for the audits of States, local
governments, and non-profit organizations expending Federal awards; and
codify the provisions of former OMB Circular A-110 which provides for
uniform administrative requirements for grants and agreements with
institutions of higher education, hospitals, and other non-profit
organizations. Changes:

Revised Part 41 (§§41.100--41.530, plus two appendices); and

Added a new Part 49 (§§49.1--49.73, plus an appendix).

38.617 Prohibition of interment or memorialization of persons who have
been convicted of

Federal or State capital crimes 38.617-1

38.618 Findings concerning commission of a capital crime where a person
has not been

convicted due to death or flight to avoid prosecution 38.618-1

38.620 Persons eligible for burial 38.620-1

38.621 Disinterments 38.621-1

38.629 Outer burial receptacle allowance 38.629-1

38.630 Headstones and markers 38.630-1

38.631 Graves marked with a private headstone or marker 38.631-1

38.632 Headstone and marker application process 38.632-1

38.633 Group memorial monuments 38.633-1

# Part 39

**Aid to States for Establishment, Expansion, and Improvement of
Veterans' Cemeteries**

**Subpart A---General Provisions**

39.1 Purpose 39.1-1

39.2 Definitions 39.2-1

39.3 Decisionmakers, notifications, and additional information 39.3-1

39.4 Submissions of information and documents to VA 39.4-1

**Subpart B---Grant Requirements and Procedures**

39.5 General requirements for a grant 39.5-1

39.6 Preapplication requirements 39.6-1

39.7 Priority list 39.7-1

39.8 Plan preparation 39.8-1

39.9 Conferences . 39.9-1

39.10 Application requirements 39.10-1

39.11 Final review and approval of application 39.11-1

39.12 Hearings 39.12-1

39.13 Amendments to application . 39.13-1

39.14 Withdrawal of application 39.14-1

**Subpart C---Award of Grant**

39.15 Amount of grant 39.15-1

39.16 Line item adjustment to grant 39.16-1

39.17 Payment of grant award 39.17-1

39.18 Recapture provisions 39.18-1

**Subpart D---Standards and Requirements for Project**

39.19 General requirements for site selection and construction of
veterans' cemeteries 39.19-1

39.20 Site planning standards 39.20-1

39.21 Space criteria for support facilities . 39.21-1

39.22 Architectural design standards 39.22-1

.

**Subpart E---Responsibilities, Inspections, and Reports Following
Project Completion**

39.23 Responsibilities following project completion 39.23-1

39.24 State to retain control of operations . 39.24-1

39.25 Inspections, audits, and reports 39.25-1

**Subpart F---Forms**

39.26 Forms 39.26-1

**Part 40**

**Intergovernmental Review of Department of Veterans Affairs Programs
and Activities**

40.1 Purpose 40.1-1

40.2 Definitions 40.2-1

40.3 Programs and activities 40.3-1

40.4 General 40.4-1

40.5 Federal interagency coordination 40.5-1

40.6 Selection of programs and activities 40.6-1

40.7 Communicating with State and local officials concerning

VA's programs and activities 40.7-1

40.8 Commenting on proposed Federal financial assistance and

direct Federal development 40.8-1

40.9 Comment receipt and response to comments 40.9-1

40.10 Making efforts to accommodate intergovernmental concerns 40.10-1

40.11 Interstate 40.11-1

40.12 \[Reserved\]

40.13 Waiver 40.13-1

**Part 41**

# Audits of States, Local Governments, and Non-Profit Organizations

**Subpart A---General**

41.100 Purpose 41.100-1

41.105 Definitions 41.105-1

**Subpart B---Audits**

41.200 Audit requirements 41.200-1

41.205 Basis for determining Federal awards expended 41.205-1

41.210 Subrecipient and vendor determinations 41.210-1

41.215 Relation to other audit requirements 41.215-1

41.220 Frequency of audits 41.220-1

41.225 Sanctions 41.225-1

41.230 Audit costs 41.230-1

41.235 Program-specific audits 41.235-1

**Subpart C---Auditees**

41.300 Auditee responsibilities 41.300-1

41.305 Auditor selection 41.305-1

41.310 Financial statements 41.310-1

41.315 Audit findings follow-up 41.315-1

41.320 Report submission 41.320-1

**Subpart D---Federal Agencies and Pass-Through Entities**

41.400 Responsibilities 41.400-1

41.405 Management decision 41.405-1

**Subpart E---Auditors**

41.500 Scope of audit 41.500-1

41.505 Audit reporting 41.505-1

41.510 Audit findings 41.510-1

41.515 Audit working papers 41.515-1

41.520 Major program determination 41.520-1

41.525 Criteria for Federal program risk 41.525-1

41.530 Criteria for a low-risk auditee 41.530-1

Appendix A To Part 41---Data Collection Form (Form SF-SAC) 41.AppA-1

Appendix B To Part 41---OMB Circular A-133 Compliance Supplement
41.AppB-1

**Part 42**

**Standards Implementing the Program Fraud Civil Remedies Act**

42.1 Basis and purpose 42.1-1

42.2 Definitions 42.2-1

42.3 Basis for civil penalties and assessments 42.3-1

42.4 Investigation 42.4-1

42.5 Review by the reviewing official 42.5-1

42.6 Prerequisites for issuing a complaint 42.6-1

42.7 Complaint. 42.7-1

42.8 Service of complaint 42.8-1

42.9 Answer 42.9-1

42.10 Default upon failure to file an answer 42.10-1

42.11 Referral of complaint and answer to the

Administrative Law Judge (ALJ) 42.11-1

42.12 Notice of hearing 42.12-1

42.13 Parties to the hearing 42.13-1

42.14 Separation of functions 42.14-1

42.15 Ex parte contacts 42.15-1

42.16 Disqualification of reviewing official or ALJ 42.16-1

42.17 Rights of parties 42.17-1

42.18 Authority of the ALJ 42.18-1

42.19 Prehearing conferences 42.19-1

42.20 Disclosure of documents 42.20-1

42.21 Discovery 42.21-1

42.22 Exchange of witness lists, statements, and exhibits 42.22-1

42.23 Subpoenas for attendance at hearing 42.23-1

42.24 Protective order 42.24-1

42.25 Fees 42.25-1

42.26 Form, filing and service of papers 42.26-1

42.27 Computation of time 42.27-1

42.28 Motions 42.28-1

42.29 Sanctions 42.29-1

42.30 The hearing and burden of proof 42.30-1

42.31 Determining the amount of penalties and assessments 42.31-1

42.32 Location of hearing 42.32-1

42.33 Witnesses 42.33-1

42.34 Evidence 42.34-1

42.35 The record 42.35-1

42.36 Post-hearing briefs 42.36-1

42.37 Initial decision 42.37-1

42.38 Reconsideration of initial decision 42.38-1

42.39 Appeal to the Secretary of Veterans Affairs 42.39-1

42.40 Stays ordered by the Department of Justice 42.40-1

42.41 Stay pending appeal 42.41-1

42.42 Judicial review 42.42-1

42.43 Collection of civil penalties and assessments 42.43-1

42.44 Right to administrative offset 42.44-1

42.45 Deposit in Treasury of United States 42.45-1

42.46 Compromise and settlement 42.46-1

42.47 Limitations 42.47-1

**Part 43**

**Uniform Administration Requirements for Grants and Cooperative
Agreements**

**to State and Local Governments**

**Subpart A --- General**

43.1 Purpose and scope of this part 43.1-1

43.2 Scope of subpart 43.2-1

43.3 Definitions 43.3-1

43.4 Applicability 43.4-1

43.5 Effect on other issuances 43.5-1

43.6 Additions and exceptions 43.6-1

**Subpart B --- Pre-Award Requirements**

43.10 Forms for applying for grants 43.10-1

43.11 State plans 43.11-1

43.12 Special grant or subgrant conditions for "high-risk" grantees
43.12-1

**Subpart C --- Post-Award Requirements**

**Financial Administration**

43.20 Standards for financial management systems 43.20-1

43.21 Payment 43.21-1

43.22 Allowable costs 43.22-1

43.23 Period of availability of funds 43.23-1

43.24 Matching or cost sharing 43.24-1

43.25 Program income 43.25-1

43.26 Non-Federal audit 43.26-1

**Changes, Property, and Subawards**

43.30 Changes 43.30-1

43.31 Real property 43.31-1

43.32 Equipment 43.32-1

43.33 Supplies 43.33-1

43.34 Copyrights 43.34-1

43.35 Subawards to debarred and suspended parties 43.35-1

43.36 Procurement 43.36-1

43.37 Subgrants 43.37-1

**Reports, Records Retention, and Enforcement**

43.40 Monitoring and reporting program performance 43.40-1

43.41 Financial reporting 43.41-1

43.42 Retention and access requirements for records 43.42-1

43.43 Enforcement 43.43-1

43.44 Termination for convenience 43.44-1

**Subpart D --- After-the-Grant Requirements**

43.50 Closeout 43.50-1

43.51 Later disallowances and adjustments 43.51-1

43.52 Collection of amounts due 43.52-1

**Subpart E --- Entitlements \[Reserved\]**

**Part 44**

**Government-wide Debarment and Suspension (Nonprocurement)**

44.25 How is this part organized? 44.25-1

44.50 How is this part written? 44.50-1

44.75 Do terms in this part have special meanings? 44.75-1

**Subpart A---General**

44.100 What does this part do? 44.100-1

44.105 Does this part apply to me? 44.105-1

44.110 What is the purpose of the nonprocurement debarment and

suspension system? 44.110-1

44.115 How does an exclusion restrict a person's involvement in

covered transactions? 44.115-1

44.120 May we grant an exception to let an excluded person participate
in a

covered transaction? 44.120-1

44.125 Does an exclusion under the nonprocurement system affect a
person's

eligibility for Federal procurement contracts? 44.125-1

44.130 Does exclusion under the Federal procurement system affect a
person's

eligibility to participate in nonprocurement transactions? 44.130-1

44.135 May the Department of Veterans Affairs exclude a person who is

not currently participating in a nonprocurement transaction? 44.135-1

44.140 How do I know if a person is excluded? 44.140-1

44.145 Does this part address persons who are disqualified, as well as
those who

are excluded from nonprocurement transactions? 44.145-1

**Subpart B---Covered Transactions**

44.200 What is a covered transaction? 44.200-1

44.205 Why is it important to know if a particular transaction is a

covered transaction? 44.205-1

44.210 Which nonprocurement transactions are covered transactions?
44.210-1

44.215 Which nonprocurement transactions are not covered transactions?
44.215-1

44.220 Are any procurement contracts included as covered transactions?
44.220-1

44.225 How do I know if a transaction in which I may participate is a

covered transaction? 44.225-1

**Subpart C---Responsibilities of Participants Regarding Transactions**

*Doing Business With Other Persons*

44.300 What must I do before I enter into a covered transaction with
another

person at the next lower tier? 44.300-1

44.305 May I enter into a covered transaction with an excluded or

disqualified person? 44.305-1

44.310 What must I do if a Federal agency excludes a person with whom I
am

already doing business in a covered transaction? 44.310-1

44.315 May I use the services of an excluded person as a principal under
a

covered transaction? 44.315-1

44.320 Must I verify that principals of my covered transactions are
eligible

to participate? 44.320-1

44.325 What happens if I do business with an excluded person in a

covered transaction? 44.325-1

44.330 What requirements must I pass down to persons at lower tiers with
whom I

intend to do business? 44.330-1

*Disclosing Information---Primary Tier Participants*

44.335 What information must I provide before entering into a covered
transaction

with the Department of Veterans Affairs? 44.335-1

44.340 If I disclose unfavorable information required under §44.335,
will I be

prevented from participating in the transaction? 44.340-1

44.345 What happens if I fail to disclose the information required under
§44.335? 44.345-1

44.350 What must I do if I learn of the information required under
§44.335 after entering

into a covered transaction with the Department of Veterans Affairs?
44.350-1

*Disclosing Information---Lower Tier Participants*

44.355 What information must I provide to a higher tier participant
before

entering into a covered transaction with that participant? 44.355-1

44.360 What happens if I fail to disclose the information required under
§44.355? 44.360-1

44.365 What must I do if I learn of information required under §44.355
after

entering into a covered transaction with a higher tier participant?
44.365-1

**Subpart D---Responsibilities of Department of Veterans Affairs
Officials**

**Regarding Transactions**

44.400 May I enter into a transaction with an excluded or disqualified
person? 44.400-1

44.405 May I enter into a covered transaction with a participant if a
principal of

the transaction is excluded? 44.405-1

44.410 May I approve a participant's use of the services of an excluded
person? 44.410-1

44.415 What must I do if a Federal agency excludes the participant or a
principal

after I enter into a covered transaction? 44.415-1

44.420 May I approve a transaction with an excluded or disqualified
person at a

lower tier? 44.420-1

44.425 When do I check to see if a person is excluded or disqualified?
44.425-1

44.430 How do I check to see if a person is excluded or disqualified?
44.430-1

44.435 What must I require of a primary tier participant? 44.435-1

44.440 What method do I use to communicate those requirements to
participants? 44.440-1

44.445 What action may I take if a primary tier participant knowingly
does business

with an excluded or disqualified person? 44.445-1

44.450 What action may I take if a primary tier participant fails to
disclose the

information required under §44.335? 44.450-1

44.455 What may I do if a lower tier participant fails to disclose the
information

required under §44.355 to the next higher tier? 44.455-1

**Subpart E---Excluded Parties List System**

44.500 What is the purpose of the Excluded Parties List System (EPLS)?
44.500-1

44.505 Who uses the EPLS? 44.505-1

44.510 Who maintains the EPLS? 44.510-1

44.515 What specific information is in the EPLS? 44.515-1

44.520 Who places the information into the EPLS? 44.520-1

44.525 Whom do I ask if I have questions about a person in the EPLS?
44.525-1

44.530 Where can I find the EPLS? 44.530-1

**Subpart F---General Principles Relating to Suspension and Debarment
Actions**

44.600 How do suspension and debarment actions start? 44.600-1

44.605 How does suspension differ from debarment? 44.605-1

44.610 What procedures does the Department of Veterans Affairs use in

suspension and debarment actions? 44.610-1

44.615 How does the Department of Veterans Affairs notify a person of a

suspension and debarment action? 44.615-1

44.620 Do Federal agencies coordinate suspension and debarment actions?
44.620-1

44.625 What is the scope of a suspension or debarment action? 44.625-1

44.630 May the Department of Veterans Affairs impute the conduct of one

person to another? 44.630-1

44.635 May the Department of Veterans Affairs settle a debarment or

suspension action? 44.635-1

44.640 May a settlement include a voluntary exclusion? 44.640-1

44.645 Do other Federal agencies know if the Department of Veterans
Affairs

agrees to a voluntary exclusion? 44.645-1

**Subpart G---Suspension**

44.700 When may the suspending official issue a suspension? 44.700-1

44.705 What does the suspending official consider in issuing a
suspension? 44.705-1

44.710 When does a suspension take effect? 44.710-1

44.715 What notice does the suspending official give me if I am
suspended? 44.715-1

44.720 How may I contest a suspension? 44.720-1

44.725 How much time do I have to contest a suspension? 44.725-1

44.730 What information must I provide to the suspending official if I
contest

a suspension? 44.730-1

44.735 Under what conditions do I get an additional opportunity to
challenge the

facts on which the suspension is based? 44.735-1

44.740 Are suspension proceedings formal? 44.740-1

44.745 How is fact-finding conducted? 44.745-1

44.750 What does the suspending official consider in deciding whether to
continue

or terminate my suspension? 44.750-1

44.755 When will I know whether the suspension is continued or
terminated? 44.755-1

44.760 How long may my suspension last? 44.760-1

**Subpart H---Debarment 44.800 What are the causes for debarment?**

44.805 What notice does the debarring official give me if I am proposed

for debarment? 44.805-1

44.810 When does a debarment take effect? 44.810-1

44.815 How may I contest a proposed debarment? 44.815-1

44.820 How much time do I have to contest a proposed debarment? 44.820-1

44.825 What information must I provide to the debarring official if I
contest a

proposed debarment? 44.825-1

44.830 Under what conditions do I get an additional opportunity to
challenge

the facts on which the proposed debarment is based? 44.830-1

44.835 Are debarment proceedings formal? 44.835-1

44.840 How is fact-finding conducted? 44,840-1

44.845 What does the debarring official consider in deciding whether to
debar me? 44.845-1

44.850 What is the standard of proof in a debarment action? 44.850-1

44.855 Who has the burden of proof in a debarment action? 44.855-1

44.860 What factors may influence the debarring official's decision?
44.860-1

44.865 How long may my debarment last? 44.865-1

44.870 When do I know if the debarring official debars me? 44.870-1

44.875 May I ask the debarring official to reconsider a decision to
debar me? 44.875-1

44.880 What factors may influence the debarring official during
reconsideration? 44.880-1

44.885 May the debarring official extend a debarment? 44.885-1

**Subpart I---Definitions**

44.900 Adequate evidence 44.900-1

44.905 Affiliate 44.905-1

44.910 Agency. 44.910-1

44.915 Agent or representative 44.915-1

44.920 Civil judgment 44.920-1

44.925 Conviction 44.925-1

44.930 Debarment 44.930-1

44.935 Debarring official 44.935-1

44.940 Disqualified 44.940-1

44.945 Excluded or exclusion 44.945-1

44.950 Excluded Parties List System 44.950-1

44.955 Indictment 44.955-1

44.960 Ineligible or ineligibility 44.960-1

44.965 Legal proceedings 44.965-1

44.970 Nonprocurement transaction 44.970-1

44.975 Notice 44.975-1

44.980 Participant 44.980-1

44.985 Person 44.985-1

44.990 Preponderance of the evidence 44.990-1

44.995 Principal 44.995-1

44.1000 Respondent 44.1000-1

44.1005 State 44.1005-1

44.1010 Suspending official 44.1010-1

44.1015 Suspension 44.1015-1

44.1020 Voluntary exclusion or voluntarily excluded 44.1020-1

**Subpart J---\[Reserved\]**

Appendix to Part 44---Covered Transactions 44.App-1

**Part 45**

**New Restrictions on Lobbying**

**Subpart A --- General**

45.100 Conditions on use of funds 45.100-1

45.105 Definitions 45.105-1

45.110 Certification and disclosure 45.110-1

**Subpart B --- Activities by Own Employees**

45.200 Agency and legislative liaison 45.200-1

45.205 Professional and technical services 45.205-1

45.210 Reporting 45.210-1

**Subpart C --- Activities by Other than Own Employees**

45.300 Professional and technical services 45.300-1

**Subpart D --- Penalties and Enforcement**

45.400 Penalties 45.400-1

45.405 Penalty procedures 45.405-1

45.410 Enforcement 45.410-1

**Subpart E --- Exemptions**

45.500 Secretary of Defense 45.500-1

**Subpart F --- Agency Reports**

45.600 Semi-annual compilation 45.600-1

45.605 Inspector General report 45.605-1

Appendix A to Part 45 --- Certification Regarding Lobbying App.A-1

Appendix B to Part 45 --- Disclosure Form to Report Lobbying App.B-1

**Part 48**

**Governmentwide Requirements for Drug-Free Workplace (Financial
Assistance)**

**Subpart A---Purpose and Coverage**

48.100 What does this part do? 48.100-1

48.105 Does this part apply to me? 48.105-1

48.110 Are any of my Federal assistance awards exempt from this part?
48.110-1

48.115 Does this part affect the Federal contracts that I receive?
48.115-1

**Subpart B---Requirements for Recipients Other Than Individuals**

48.200 What must I do to comply with this part? 48.200-1

48.205 What must I include in my drug-free workplace statement? 48.205-1

48.210 To whom must I distribute my drug-free workplace statement?
48.210-1

48.215 What must I include in my drug-free awareness program? 48.215-1

48.220 By when must I publish my drug-free workplace statement and
establish my

drug-free awareness program? 48.220-1

48.225 What actions must I take concerning employees who are convicted
of drug

violations in the workplace? 48.225-1

48.230 How and when must I identify workplaces? 48.230-1

**Subpart C---Requirements for Recipients Who Are Individuals**

48.300 What must I do to comply with this part if I am an individual
recipient? 48.300-1

48.301 \[Reserved\]

**Subpart D---Responsibilities of the Department of Veterans Affairs
Awarding Officials**

48.400 What are my responsibilities as a Department of Veterans Affairs

awarding official? 48.400-1

**Subpart E---Violations of This Part and Consequences**

48.500 How are violations of this part determined for recipients other
than

individuals? 48.500-1

48.505 How are violations of this part determined for recipients who are

individuals? 48.505-1

48.510 What actions will the Federal Government take against a recipient

determined to have violated this part? 48.510-1

48.515 Are there any exceptions to those actions? 48.515-1

**Subpart F---Definitions**

48.605 Award 48.605-1

48.610 Controlled substance 48.610-1

48.615 Conviction 48.615-1

48.620 Cooperative agreement 48.620-1

48.625 Criminal drug statute 48.625-1

48.630 Debarment 48.630-1

48.635 Drug-free workplace 48.635-1

48.640 Employee 48.640-1

48.645 Federal agency or agency 48.645-1

48.650 Grant 48.650-1

48.655 Individual 48.655-1

48.660 Recipient 48.660-1

48.665 State 48.665-1

48.670 Suspension 48.670-1

**Part 49**

**Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and other Non-Profit
Organizations**

**Subpart A---General**

49.1 Purpose 49.1-1

49.2 Definitions 49.2-1

49.3 Effect on other issuances 49.3-1

49.4 Deviations 49.4-1

49.5 Subawards 49.5-1

**Subpart B---Pre-Award Requirements**

49.10 Purpose 49.10-1

49.11 Pre-award policies 49.11-1

49.12 Forms for applying for Federal assistance 49.12-1

49.13 Debarment and suspension 49.13-1

49.14 Special award conditions 49.14-1

49.15 Metric system of measurement 49.15-1

49.16 Resource Conservation and Recovery Act 49.16-1

49.17 Certifications and representations 49.17-1

**Subpart C---Post-Award Requirements**

*Financial and Program Management*

49.20 Purpose of financial and program management 49.20-1

49.21 Standards for financial management systems 49.21-1

49.22 Payment 49.22-1

49.23 Cost sharing or matching 49.23-1

49.24 Program income 49.24-1

49.25 Revision of budget and program plans 49.25-1

49.26 Non-Federal audits 49.26-1

49.27 Allowable costs 49.27-1

49.28 Period of availability of funds 49.28-1

49.29 Conditional exemptions 49.29-1

*Property Standards*

49.30 Purpose of property standards 49.30-1

49.31 Insurance coverage 49.31-1

49.32 Real property 49.32-1

49.33 Federally-owned and exempt property 49.33-1

49.34 Equipment 49.34-1

49.35 Supplies and other expendable property 49.35-1

49.36 Intangible property 49.36-1

49.37 Property trust relationship 49.37-1

*Procurement Standards*

49.40 Purpose of procurement standards 49.40-1

49.41 Recipient responsibilities 49.41-1

49.42 Codes of conduct 49.42-1

49.43 Competition 49.43-1

49.44 Procurement procedures 49.44-1

49.45 Cost and price analysis 49.45-1

49.46 Procurement records 49.46-1

49.47 Contract administration 49.47-1

49.48 Contract provisions 49.48-1

*Reports and Records*

49.50 Purpose of reports and records 49.50-1

49.51 Monitoring and reporting program performance 49.51-1

49.52 Financial reporting 49.52-1

49.53 Retention and access requirements for records 49.53-1

*Termination and Enforcement*

49.60 Purpose of termination and enforcement 49.60-1

49.61 Termination 49.61-1

49.62 Enforcement 49.62-1

**Subpart D---After-the-Award Requirements**

49.70 Purpose 49.70-1

49.71 Closeout procedures 49.71-1

49.72 Subsequent adjustments and continuing responsibilities 49.72-1

49.73 Collection of amounts due 49.73-1

Appendix A to Part 49---Contract Provisions 49.AppA-1

**§1.18 Guidelines for establishing presumptions of service connection
for former prisoners**

> **of war.**

\(a\) *Purpose*. The Secretary of Veterans Affairs will establish
presumptions of service connection for former prisoners of war when
necessary to prevent denials of benefits in significant numbers of
meritorious claims.

\(b\) *Standard*. The Secretary may establish a presumption of service
connection for a disease when the Secretary finds that there is at least
limited/suggestive evidence that an increased risk of such disease is
associated with service involving detention or internment as a prisoner
of war and an association between such detention or internment and the
disease is biologically plausible.

\(1\) *Definition*. The phrase "limited/suggestive evidence" refers to
evidence of a sound scientific or medical nature that is reasonably
suggestive of an association between prisoner-of-war experience and the
disease, even though the evidence may be limited because matters such as
chance, bias, and confounding could not be ruled out with confidence or
because the relatively small size of the affected population restricts
the data available for study.

\(2\) *Examples*. "Limited/suggestive evidence" may be found where one
high-quality study detects a statistically significant association
between the prisoner-of-war experience and disease, even though other
studies may be inconclusive. It also may be satisfied where several
smaller studies detect an association that is consistent in magnitude
and direction. These examples are not exhaustive.

\(c\) *Duration of detention or internment*. In establishing a
presumption of service connection under paragraph (b) of this section,
the Secretary may, based on sound scientific or medical evidence,
specify a minimum duration of detention or internment necessary for
application of the presumption.

\(d\) *Association*. The requirement in paragraph (b) of this section
that an increased risk of disease be "associated" with prisoner-of-war
service may be satisfied by evidence that demonstrates either a
statistical association or a causal association.

\(e\) *Evidence*. In making determinations under paragraph (b) of this
section, the Secretary will consider, to the extent feasible:

> \(1\) Evidence regarding the increased incidence of disease in former
> prisoners of war;
>
> \(2\) Evidence regarding the health effects of circumstances or
> hardships similar to those experienced by prisoners of war (such as
> malnutrition, torture, physical abuse, or psychological stress);
>
> \(3\) Evidence regarding the duration of exposure to circumstances or
> hardships experienced by prisoners of war that is associated with
> particular health effects; and
>
> \(4\) Any other sound scientific or medical evidence the Secretary
> considers relevant.

\(f\) *Evaluation of studies*. In evaluating any study for the purposes
of this section, the Secretary will consider:

> \(1\) The degree to which the study\'s findings are statistically
> significant;
>
> \(2\) The degree to which any conclusions drawn from the study data
> have withstood peer review;
>
> \(3\) Whether the methodology used to obtain the data can be
> replicated;
>
> \(4\) The degree to which the data may be affected by chance, bias, or
> confounding factors; and
>
> \(5\) The degree to which the data may be relevant to the experience
> of prisoners of war in view of similarities or differences in the
> circumstances of the study population.

\(g\) *Contracts for Scientific Review and Analysis*. To assist in
making determinations under this section, the Secretary may contract
with an appropriate expert body to review and summarize the scientific
evidence, and assess the strength thereof, concerning the association
between detention or internment as a prisoner of war and the occurrence
of any disease, or for any other purpose relevant to the Secretary\'s
determinations.

Authority: 38 U.S.C. 501(a), 1110.

\[69 FR 60089, Oct. 7, 2004, as amended at 70 FR 37042, June 28, 2005\]

**Supplement *Highlights* references**: 65(1), 70(1).

*Next Section is §1.200*

**Part 14 - Legal Services, General Counsel**

**Authority**: 5 U.S.C. 301; 28 U.S.C. 2671--2680; 38 U.S.C. 501(a),
5502,

5902--5905, unless otherwise noted.

**Source**: 19 FR 5552, Aug. 31, 1954,

unless otherwise noted.

**§14.500 Functions and responsibilities of General Counsel.**

The General Counsel is responsible to the Secretary for the following:

\(a\) All litigation arising in, or out of, the activities of the
Department of Veterans Affairs or involving any employee thereof in his
or her official capacity.

\(b\) All interpretative legal advice involving construction or
application of laws, including statutes, regulations, and decisional as
well as common law.

\(c\) All legal services, advice and assistance required to implement
any law administered by the Department of Veterans Affairs.

\(d\) All delegations of authority and professional guidance required to
meet these responsibilities.

\(e\) Maintenance of a system of field offices capable of providing
legal advice and assistance to all Department of Veterans Affairs field
installations and acting for the General Counsel as provided by
Department of Veterans Affairs Regulations and instructions, or as
directed by the General Counsel in special cases. This includes
cooperation with U.S. Attorneys in all civil and criminal cases
pertaining to the Department of Veterans Affairs and reporting to the
U.S. Attorneys, as authorized, or to the General Counsel, or both,
criminal matters coming to the attention of the Regional Counsel.

\(f\) Other matters assigned.

\[42 FR 41410, Aug. 17,1977, as amended at 61 FR 7216, Feb. 27, 1996\]

**§14.501 Functions and responsibilities of Regional Counsels.**

\(a\) Functions and responsibilities of the Regional Counsels are those
set forth in this part and all other matters assigned by the General
Counsel.

\(b\) In any matter within the jurisdiction of the General Counsel,
delegated or otherwise assigned, the Regional Counsel and designated
staff attorneys are authorized to conduct investigations, examine
witnesses, take affidavits, administer oaths and affirmations and
certify copies of public or private documents.

\(c\) The Regional Counsel is authorized to, and shall, under the
guidance of the General Counsel, provide legal services, advice and
assistance to Department of Veterans Affairs installations within the
district assigned. In any area of regulatory, assigned or delegated
responsibility, the Regional Counsel may delegate to staff members or
other Department of Veterans Affairs attorneys authority to perform, to
the extent specified, any legal function under the professional
direction of the Regional Counsel. Conversely, the Regional Counsel may
modify, suspend, or rescind any authority delegated hereunder.

\(d\) The Regional Counsel is authorized to cooperate with affiliated
organizations, legislative committees, and with local and State bar
associations to the end that any State law deficiencies relating to
Department of Veterans Affairs operations may be removed. No commitment
as to proposed legislation will be made without the approval of the
General Counsel.

\(e\) In any case wherein the Regional Counsel is authorized to take
legal action and payment of costs and necessary expenses incident
thereto are involved, the administration requesting such action will pay
such cost and expenses. Where it is impractical for the Regional Counsel
to perform the legal service because of cost, distance, etc., the
customary fee for the service rendered by a local attorney employed by
the Regional Counsel will be borne by the administration requesting such
action.

\(f\) The jurisdictions and addresses of Regional Counsels are as
follows:

\(1\) Region 1: (JURISDICTION) Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island; (ADDRESS) VAMC, 200 Springs Road, Bldg. 61,
Bedford, MA 01730.

\(2\) Region 2: (JURISDICTION) New Jersey, Metropolitan New York City;
(ADDRESS) 800 Poly Place, Building 14, Brooklyn, NY 11209.

\(3\) Region 3: (JURISDICTION) District of Columbia; Fairfax, Virginia;
Arlington, Virginia; Alexandria, Virginia; Martinsburg, West Virginia;
and Maryland; (ADDRESS) 3900 Loch Raven Blvd., Bldg. 4, Baltimore, MD
21218.

\(4\) Region 4: (JURISDICTION) Pennsylvania, Delaware; (ADDRESS)
University & Woodland Avenues, Philadelphia, PA 19104.

\(5\) Region 5: (JURISDICTION) Georgia, South Carolina; (ADDRESS) 1700
Clairmont Rd., Decatur, GA 30033-4032.

\(6\) Region 6: (JURISDICTION) Florida, Puerto Rico; (ADDRESS) P.O. Box
5005, Building 22, Room 333, Bay Pines, FL 33744.

\(7\) Region 7: (JURISDICTION) Ohio, West Virginia (excluding
Martinsburg, West Virginia); (ADDRESS) 10000 Brecksville Rd., Bldg. 1,
5th Floor, Brecksville, OH 44141.

\(8\) Region 8: (JURISDICTION) Arkansas, Tennessee; (ADDRESS) 110 9th
Ave., South Room A-201A, Nashville, TN 37203.

\(9\) Region 9: (JURISDICTION) Alabama, Mississippi; (ADDRESS) 1500 E.
Woodrow Wilson Dr., Jackson, MS 39216.

\(10\) Region 10: (JURISDICTION) Illinois, Iowa; (ADDRESS) VA Medical
Center, Bldg. 1, G Section 1st Floor, P. O. Box 1427, Hines, IL 60141.

\(11\) Region 11: (JURISDICTION) Michigan, Wisconsin; (ADDRESS) Patrick
V. McNamara Federal Bldg., Suite 1460, 477 Michigan Ave., Detroit, MI
48226.

\(12\) Region 12: (JURISDICTION) Kansas, Missouri, Nebraska; (ADDRESS) 1
Jefferson Barracks Drive, St. Louis, MO 63125-4185.

\(13\) Region 13: (JURISDICTION) Oklahoma, Northern Texas; (ADDRESS)
4800 Memorial Drive, Bldg. 12, Waco, TX 76711.

\(14\) Region 14: (JURISDICTION) Louisiana, Southern Texas; (ADDRESS)
6900 Almeda Road, Houston, TX 77030.

\(15\) Region 15: (JURISDICTION) Minnesota, North Dakota, South Dakota;
(ADDRESS) VA Medical Center, One Veterans Drive, Bldg. 73, Minneapolis,
MN 55417.

\(16\) Region 16: (JURISDICTION) Colorado, Wyoming, Utah, Montana;
(ADDRESS) Box 25126, 155 Van Gordon Street, Denver, CO 80225.

\(17\) Region 18: (JURISDICTION) California, Hawaii, and Philippine
Islands; (ADDRESS) VA Medical Center, 4150 Clement Street, Bldg. 210,
San Francisco, CA 94121.

\(18\) Region 19: (JURISDICTION) Arizona, Nevada, and New Mexico;
(ADDRESS) 650 E. Indian School Rd., Bldg. 24, Phoenix AZ 85012.

\(19\) Region 20: (JURISDICTION) Idaho, Oregon, Washington, Alaska;
(ADDRESS) 1220 S.W. Third Ave., Suite 1224, Portland, OR 97204.

\(20\) Region 21: (JURISDICTION) New York (except Metropolitan New York
City), Vermont; (ADDRESS) 120 LeBrun, Buffalo, NY 14215.

\(21\) Region 22: (JURISDICTION) Indiana, Kentucky; (ADDRESS) 575 N.
Pennsylvania Street, Room 309, Indianapolis, IN 46204.

\(22\) Region 23: (JURISDICTION) North Carolina, Virginia (excluding
Fairfax, Arlington, and Alexandria); (ADDRESS) Hiram H. Ward Federal
Bldg., 251 N. Main Street, Winston-Salem, NC 27155.

\[42 FR 41411, Aug. 17, 1977, as amended at 61 FR 7216, Feb. 27, 1996;
70 FR 52015, Sept. 1, 2005\]

**Supplement *Highlights* reference**: 70(2)

**Part 41**

**Audits of States, Local Governments**

**and**

**Non-profit Organizations**

**Part 41**

**Audits of States, Local Governments, and**

**Non-Profit Organizations**

**Authority**: 5 U.S.C. 301; 31 U.S.C. 7501, *et seq*.; 38 U.S.C. 501,
OMB Circular A-133, and as noted in specific sections.

**Source**: 70 FR 52249, September 1, 2005, unless otherwise noted.

**--- Section Title Index ---**

**Auditees**

Audit findings follow-up 41.315-1

Auditee responsibilities 41.300-1

Auditor selection 41.305-1

Financial statements 41.310-1

Report submission 41.320-1

**Auditors**

Audit findings 41.510-1

Audit reporting 41.505-1

Audit working papers 41.515-1

Criteria for a low-risk auditee 41.530-1

Criteria for Federal program risk 41.525-1

Major program determination 41.520-1

Scope of audit 41.500-1

**Audits**

Audit costs 41.230-1

Audit requirements 41.200-1

Basis for determining Federal awards expended 41.205-1

Frequency of audits 41.220-1

Program-specific audits 41.235-1

Relation to other audit requirements 41.215-1

Sanctions 41.225-1

Subrecipient and vendor determinations 41.210-1

**Federal Agencies and Pass-Through Entities**

Management decision 41.405-1

Responsibilities 41.400-1

# 

#  General

Definitions 41.105-1

Purpose 41.100-1

Appendix A To Part 41---Data Collection Form (Form SF-SAC) 41.AppA-1

Appendix B To Part 41---OMB Circular A-133 Compliance Supplement
41.AppB-1

**Part 41**

# Audits of States, Local Governments, and Non-Profit Organizations

**Authority**: 5 U.S.C. 301; 31 U.S.C. 7501 et seq.; 38 U.S.C. 501, OMB
Circular A-133,

and as noted in specific sections.

**Source**: 70 FR 52249, September 1, 2005, unless otherwise noted.

**Subpart A---General**

**§41.100 Purpose.**

This part sets forth standards for obtaining consistency and uniformity
among Federal agencies for the audit of non-Federal entities expending
Federal awards. (Authority: Pub. L. 104-156; 110 Stat. 1396)

> Next section is §41.105

**§41.105 Definitions.**

*Audit finding* means deficiencies which the auditor is required by
§41.510(a) to report in the schedule of findings and questioned costs.

*Auditee* means any non-Federal entity that expends Federal awards which
must be audited under this part.

*Auditor* means an auditor, that is a public accountant or a Federal,
State or local government audit organization, which meets the general
standards specified in generally accepted government auditing standards
(GAGAS). The term auditor does not include internal auditors of
non-profit organizations.

*CFDA number* means the number assigned to a Federal program in the
Catalog of Federal Domestic Assistance (CFDA).

*Cluster of programs* means a grouping of closely related programs that
share common compliance requirements. The types of clusters of programs
are research and development (R&D), student financial aid (SFA), and
other clusters. "Other clusters" are as defined by the Office of
Management and Budget (OMB) in the compliance supplement or as
designated by a State for Federal awards the State provides to its
subrecipients that meet the definition of a cluster of programs. When
designating an "other cluster," a State shall identify the Federal
awards included in the cluster and advise the subrecipients of
compliance requirements applicable to the cluster, consistent with
§41.400(d)(1) and §41.400(d)(2), respectively. A cluster of programs
shall be considered as one program for determining major programs, as
described in §41.520, and, with the exception of R&D as described in
§41.200(c), whether a program-specific audit may be elected.

*Cognizant agency for audit* means the Federal agency designated to
carry out the responsibilities described in §41.400(a).

*Compliance supplement* refers to the Circular A-133 Compliance
Supplement, included as Appendix B to Circular A-133, or such documents
as OMB or its designee may issue to replace it. This document is
available from the Government Printing Office, Superintendent of
Documents, Washington, DC 20402-9325.

*Corrective action* means action taken by the auditee that:

> \(1\) Corrects identified deficiencies;
>
> \(2\) Produces recommended improvements; or
>
> \(3\) Demonstrates that audit findings are either invalid or do not
> warrant auditee action.

*Federal agency* has the same meaning as the term agency in section
551(1) of title 5, United States Code.

*Federal award* means Federal financial assistance and Federal
cost-reimbursement contracts that non-Federal entities receive directly
from Federal awarding agencies or indirectly from pass-through entities.
It does not include procurement contracts, under grants or contracts,
used to buy goods or services from vendors. Any audits of such vendors
shall be covered by the terms and conditions of the contract. Contracts
to operate Federal Government owned, contractor operated facilities
(GOCOs) are excluded from the requirements of this part.

*Federal awarding agency* means the Federal agency that provides an
award directly to the recipient.

*Federal financial assistance* means assistance that non-Federal
entities receive or administer in the form of grants, loans, loan
guarantees, property (including donated surplus property), cooperative
agreements, interest subsidies, insurance, food commodities, direct
appropriations, and other assistance, but does not include amounts
received as reimbursement for services rendered to individuals as
described in §41.205(h) and §41.205(i).

*Federal program* means:

> \(1\) All Federal awards to a non-Federal entity assigned a single
> number in the CFDA.
>
> \(2\) When no CFDA number is assigned, all Federal awards from the
> same agency made for the same purpose should be combined and
> considered one program.
>
> \(3\) Notwithstanding paragraphs (1) and (2) of this definition, a
> cluster of programs. The types of clusters of programs are:
>
> \(i\) Research and development (R&D);
>
> \(ii\) Student financial aid (SFA); and
>
> \(iii\) "Other clusters," as described in the definition of cluster of
> programs in this section.

*GAGAS* means generally accepted government auditing standards issued by
the Comptroller General of the United States, which are applicable to
financial audits.

*Generally accepted accounting principles* has the meaning specified in
generally accepted auditing standards issued by the American Institute
of Certified Public Accountants (AICPA).

*Indian tribe* means any Indian tribe, band, nation, or other organized
group or community, including any Alaskan Native village or regional or
village corporation (as defined in, or established under, the Alaskan
Native Claims Settlement Act) that is recognized by the United States as
eligible for the special programs and services provided by the United
States to Indians because of their status as Indians.

*Internal control* means a process, effected by an entity's management
and other personnel, designed to provide reasonable assurance regarding
the achievement of objectives in the following categories:

\(1\) Effectiveness and efficiency of operations;

\(2\) Reliability of financial reporting; and

\(3\) Compliance with applicable laws and regulations.

*Internal control pertaining to the compliance requirements for Federal
programs (Internal control over Federal programs)* means a
process---effected by an entity's management and other
personnel---designed to provide reasonable assurance regarding the
achievement of the following objectives for Federal programs:

> \(1\) Transactions are properly recorded and accounted for to:
>
> \(i\) Permit the preparation of reliable financial statements and
> Federal reports;
>
> \(ii\) Maintain accountability over assets; and
>
> \(iii\) Demonstrate compliance with laws, regulations, and other
> compliance requirements;
>
> \(2\) Transactions are executed in compliance with:
>
> \(i\) Laws, regulations, and the provisions of contracts or grant
> agreements that could have a direct and material effect on a Federal
> program; and
>
> \(ii\) Any other laws and regulations that are identified in the
> compliance supplement; and
>
> \(3\) Funds, property, and other assets are safeguarded against loss
> from unauthorized use or disposition.

*Loan* means a Federal loan or loan guarantee received or administered
by a non-Federal entity.

*Local government* means any unit of local government within a State,
including a county, borough, municipality, city, town, township, parish,
local public authority, special district, school district, intrastate
district, council of governments, and any other instrumentality of local
government.

*Major program* means a Federal program determined by the auditor to be
a major program in accordance with §41.520 or a program identified as a
major program by a Federal agency or pass-through entity in accordance
with §41.215(c).

*Management decision* means the evaluation by the Federal awarding
agency or pass-through entity of the audit findings and corrective
action plan and the issuance of a written decision as to what corrective
action is necessary.

*Non-Federal entity* means a State, local government, or non-profit
organization.

*Non-profit organization* means:

> \(1\) Any corporation, trust, association, cooperative, or other
> organization that:
>
> \(i\) Is operated primarily for scientific, educational, service,
> charitable, or similar purposes in the public interest;
>
> \(ii\) Is not organized primarily for profit; and
>
> \(iii\) Uses its net proceeds to maintain, improve, or expand its
> operations; and
>
> \(2\) The term non-profit organization includes non-profit
> institutions of higher education and hospitals.

*OMB* means the Executive Office of the President, Office of Management
and Budget.

*Oversight agency for audit* means the Federal awarding agency that
provides the predominant amount of direct funding to a recipient not
assigned a cognizant agency for audit. When there is no direct funding,
the Federal agency with the predominant indirect funding shall assume
the oversight responsibilities. The duties of the oversight agency for
audit are described in §41.400(b). A Federal agency with oversight for
an auditee may reassign oversight to another Federal agency, which
provides substantial funding and agrees to be the oversight agency for
audit. Within 30 days after any reassignment, both the old and the new
oversight agency for audit shall notify the auditee, and, if known, the
auditor of the reassignment.

*Pass-through entity* means a non-Federal entity that provides a Federal
award to a subrecipient to carry out a Federal program.

*Program-specific audit* means an audit of one Federal program as
provided for in §41.200(c) and §41.235.

*Questioned cost* means a cost that is questioned by the auditor because
of an audit finding:

> \(1\) Which resulted from a violation or possible violation of a
> provision of a law, regulation, contract, grant, cooperative
> agreement, or other agreement or document governing the use of Federal
> funds, including funds used to match Federal funds;
>
> \(2\) Where the costs, at the time of the audit, are not supported by
> adequate documentation; or
>
> \(3\) Where the costs incurred appear unreasonable and do not reflect
> the actions a prudent person would take in the circumstances.

*Recipient* means a non-Federal entity that expends Federal awards
received directly from a Federal awarding agency to carry out a Federal
program.

*Research and development* (R&D) means all research activities, both
basic and applied, and all development activities that are performed by
a non-Federal entity. Research is defined as a systematic study directed
toward fuller scientific knowledge or understanding of the subject
studied. The term research also includes activities involving the
training of individuals in research techniques where such activities
utilize the same facilities as other research and development activities
and where such activities are not included in the instruction function.
Development is the systematic use of knowledge and understanding gained
from research directed toward the production of useful materials,
devices, systems, or methods, including design and development of
prototypes and processes.

*Single audit* means an audit, which includes both the entity's
financial statements, and the Federal awards as described in §41.500.

*State* means any State of the United States, the District of Columbia,
the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American
Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust
Territory of the Pacific Islands, any instrumentality thereof, any
multi-State, regional, or interstate entity, which has governmental
functions, and any Indian tribe as defined in this section.

*Student Financial Aid* (SFA) includes those programs of general student
assistance, such as those authorized by Title IV of the Higher Education
Act of 1965, as amended, (20 U.S.C. 1070, *et seq*.) which is
administered by the U.S. Department of Education, and similar programs
provided by other Federal agencies. It does not include programs which
provide fellowships or similar Federal awards to students on a
competitive basis, or for specified studies or research.

*Subrecipient* means a non-Federal entity that expends Federal awards
received from a pass-through entity to carry out a Federal program, but
does not include an individual that is a beneficiary of such a program.
A subrecipient may also be a recipient of other Federal awards directly
from a Federal awarding agency. Guidance on distinguishing between a
subrecipient and a vendor is provided in §41.210.

*Types of compliance requirements* refers to the types of compliance
requirements listed in the compliance supplement. Examples include:
Activities allowed or unallowed; allowable costs/cost principles; cash
management; eligibility; matching, level of effort, earmarking; and,
reporting.

*Vendor* means a dealer, distributor, merchant, or other seller
providing goods or services that are required for the conduct of a
Federal program. These goods or services may be for an organization's
own use or for the use of beneficiaries of the Federal program.
Additional guidance on distinguishing between a subrecipient and a
vendor is provided in §41.210. (Authority: Pub. L. 104-156; 110 Stat.
1396)

## Next section is §41.200

**Subpart B---Audits**

**§41.200 Audit requirements.**

\(a\) *Audit required*. Non-Federal entities that expend \$500,000 or
more in a year in Federal awards shall have a single or program-specific
audit conducted for that year in accordance with the provisions of this
part. Guidance on determining Federal awards expended is provided in
§41.205.

\(b\) *Single audit*. Non-Federal entities that expend \$500,000 or more
in a year in Federal awards shall have a single audit conducted in
accordance with §41.500 except when they elect to have a
program-specific audit conducted in accordance with paragraph (c) of
this section.

\(c\) *Program-specific audit election*. When an auditee expends Federal
awards under only one Federal program (excluding R&D) and the Federal
program's laws, regulations, or grant agreements do not require a
financial statement audit of the auditee, the auditee may elect to have
a program-specific audit conducted in accordance with §41.235. A
program-specific audit may not be elected for R&D unless all of the
Federal awards expended were received from the same Federal agency, or
the same Federal agency and the same pass-through entity, and that
Federal agency, or pass-through entity in the case of a subrecipient,
approves in advance a program-specific audit.

\(d\) *Exemption when Federal awards expended are less than \$500,000*.
Non-Federal entities that expend less than \$500,000 a year in Federal
awards are exempt from Federal audit requirements for that year, except
as noted in §41.215(a), but records must be available for review or
audit by appropriate officials of the Federal agency, pass-through
entity, and General Accounting Office (GAO).

\(e\) *Federally Funded Research and Development Centers (FFRDC)*.
Management of an auditee that owns or operates a FFRDC may elect to
treat the FFRDC as a separate entity for purposes of this part.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.205

**§41.205 Basis for determining Federal awards expended.**

\(a\) *Determining Federal awards expended*. The determination of when
an award is expended should be based on when the activity related to the
award occurs. Generally, the activity pertains to events that require
the non-Federal entity to comply with laws, regulations, and the
provisions of contracts or grant agreements, such as:
expenditure/expense transactions associated with grants,
cost-reimbursement contracts, cooperative agreements, and direct
appropriations; the disbursement of funds passed through to
subrecipients; the use of loan proceeds under loan and loan guarantee
programs; the receipt of property; the receipt of surplus property; the
receipt or use of program income; the distribution or consumption of
food commodities; the disbursement of amounts entitling the non-Federal
entity to an interest subsidy; and, the period when insurance is in
force.

\(b\) *Loan and loan guarantees (loans)*. Since the Federal Government
is at risk for loans until the debt is repaid, the following guidelines
shall be used to calculate the value of Federal awards expended under
loan programs, except as noted in paragraphs (c) and (d) of this
section:

\(1\) Value of new loans made or received during the fiscal year; plus

\(2\) Balance of loans from previous years for which the Federal
Government imposes continuing compliance requirements; plus

\(3\) Any interest subsidy, cash, or administrative cost allowance
received.

\(c\) *Loan and loan guarantees (loans) at institutions of higher
education*. When loans are made to students of an institution of higher
education but the institution does not make the loans, then only the
value of loans made during the year shall be considered Federal awards
expended in that year. The balance of loans for previous years is not
included as Federal awards expended because the lender accounts for the
prior balances.

\(d\) *Prior loan and loan guarantees (loans)*. Loans, the proceeds of
which were received and expended in prior-years, are not considered
Federal awards expended under this part when the laws, regulations, and
the provisions of contracts or grant agreements pertaining to such loans
impose no continuing compliance requirements other than to repay the
loans.

\(e\) *Endowment funds*. The cumulative balance of Federal awards for
endowment funds, which are federally restricted, are considered awards
expended in each year in which the funds are still restricted.

\(f\) *Free rent*. Free rent received by itself is not considered a
Federal award expended under this part. However, free rent received as
part of an award to carry out a Federal program shall be included in
determining Federal awards expended and subject to audit under this
part.

\(g\) *Valuing non-cash assistance*. Federal non-cash assistance, such
as free rent, food stamps, food commodities, donated property, or
donated surplus property, shall be valued at fair market value at the
time of receipt or the assessed value provided by the Federal agency.

\(h\) *Medicare*. Medicare payments to a non-Federal entity for
providing patient care services to Medicare eligible individuals are not
considered Federal awards expended under this part.

\(i\) *Medicaid*. Medicaid payments to a subrecipient for providing
patient care services to Medicaid eligible individuals are not
considered Federal awards expended under this part unless a State
requires the funds to be treated as Federal awards expended because
reimbursement is on a cost-reimbursement basis.

\(j\) *Certain loans provided by the National Credit Union
Administration*. For purposes of this part, loans made from the National
Credit Union Share Insurance Fund and the Central Liquidity Facility
that are funded by contributions from insured institutions are not
considered Federal awards expended. (Authority: Pub. L. 104-156; 110
Stat. 1396)

## Next section is §41.210

**§41.210 Subrecipient and vendor determinations.**

\(a\) *General*. An auditee may be a recipient, a subrecipient, and a
vendor. Federal awards expended as a recipient or a subrecipient would
be subject to audit under this part. The payments received for goods or
services provided as a vendor would not be considered Federal awards.
The guidance in paragraphs (b) and (c) of this section should be
considered in determining whether payments constitute a Federal award or
a payment for goods and services.

\(b\) *Federal award*. Characteristics indicative of a Federal award
received by a subrecipient are when the organization:

> \(1\) Determines who is eligible to receive what Federal financial
> assistance;
>
> \(2\) Has its performance measured against whether the objectives of
> the Federal program are met;
>
> \(3\) Has responsibility for programmatic decision making;
>
> \(4\) Has responsibility for adherence to applicable Federal program
> compliance requirements; and
>
> \(5\) Uses the Federal funds to carry out a program of the
> organization as compared to providing goods or services for a program
> of the pass-through entity.

\(c\) *Payment for goods and services*. Characteristics indicative of a
payment for goods and services received by a vendor are when the
organization:

> \(1\) Provides the goods and services within normal business
> operations;
>
> \(2\) Provides similar goods or services to many different purchasers;
>
> \(3\) Operates in a competitive environment;
>
> \(4\) Provides goods or services that are ancillary to the operation
> of the Federal program; and
>
> \(5\) Is not subject to compliance requirements of the Federal
> program.

\(d\) *Use of judgment in making determination*. There may be unusual
circumstances or exceptions to the listed characteristics. In making the
determination of whether a subrecipient or vendor relationship exists,
the substance of the relationship is more important than the form of the
agreement. It is not expected that all of the characteristics will be
present and judgment should be used in determining whether an entity is
a subrecipient or vendor.

\(e\) *For-profit subrecipient*. Since this part does not apply to
for-profit subrecipients, the pass-through entity is responsible for
establishing requirements, as necessary, to ensure compliance by
for-profit subrecipients. The contract with the for-profit subrecipient
should describe applicable compliance requirements and the for-profit
subrecipient's compliance responsibility. Methods to ensure compliance
for Federal awards made to for-profit subrecipients may include
pre-award audits, monitoring during the contract, and post-award audits.

\(f\) *Compliance responsibility for vendors*. In most cases, the
auditee's compliance responsibility for vendors is only to ensure that
the procurement, receipt, and payment for goods and services comply with
laws, regulations, and the provisions of contracts or grant agreements.
Program compliance requirements normally do not pass through to vendors.
However, the auditee is responsible for ensuring compliance for vendor
transactions, which are structured such that the vendor is responsible
for program compliance or the vendor's records must be reviewed to
determine program compliance. Also, when these vendor transactions
relate to a major program, the scope of the audit shall include
determining whether these transactions are in compliance with laws,
regulations, and the provisions of contracts or grant agreements.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.215

**§41.215 Relation to other audit requirements.**

\(a\) *Audit under this part in lieu of other audits*. An audit made in
accordance with this part shall be in lieu of any financial audit
required under individual Federal awards. To the extent this audit meets
a Federal agency's needs, it shall rely upon and use such audits. The
provisions of this part neither limit the authority of Federal agencies,
including their Inspectors General, or GAO to conduct or arrange for
additional audits (e.g., financial audits, performance audits,
evaluations, inspections, or reviews) nor authorize any auditee to
constrain Federal agencies from carrying out additional audits. Any
additional audits shall be planned and performed in such a way as to
build upon work performed by other auditors.

\(b\) *Federal agency to pay for additional audits*. A Federal agency
that conducts or contracts for additional audits shall, consistent with
other applicable laws and regulations, arrange for funding the full cost
of such additional audits.

\(c\) *Request for a program to be audited as a major program*. A
Federal agency may request an auditee to have a particular Federal
program audited as a major program in lieu of the Federal agency
conducting or arranging for the additional audits. To allow for
planning, such requests should be made at least 180 days prior to the
end of the fiscal year to be audited. The auditee, after consultation
with its auditor, should promptly respond to such request by informing
the Federal agency whether the program would otherwise be audited as a
major program using the risk-based audit approach described in §41.520
and, if not, the estimated incremental cost. The Federal agency shall
then promptly confirm to the auditee whether it wants the program
audited as a major program. If the program is to be audited as a major
program based upon this Federal agency request, and the Federal agency
agrees to pay the full incremental costs, then the auditee shall have
the program audited as a major program. A pass-through entity may use
the provisions of this paragraph for a subrecipient. (Authority: Pub. L.
104-156; 110 Stat. 1396)

## Next section is §41.220

**§41.220 Frequency of audits.**

Except for the provisions for biennial audits provided in paragraphs (a)
and (b) of this section, audits required by this part shall be performed
annually. Any biennial audit shall cover both years within the biennial
period.

\(a\) A State or local government that is required by constitution or
statute, in effect on January 1, 1987, to undergo its audits less
frequently than annually, is permitted to undergo its audits pursuant to
this part biennially. This requirement must still be in effect for the
biennial period under audit.

\(b\) Any non-profit organization that had biennial audits for all
biennial periods ending between July 1, 1992, and January 1, 1995, is
permitted to undergo its audits pursuant to this part biennially.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.225

**§41.225 Sanctions.**

No audit costs may be charged to Federal awards when audits required by
this part have not been made or have been made but not in accordance
with this part. In cases of continued inability or unwillingness to have
an audit conducted in accordance with this part, Federal agencies and
pass-through entities shall take appropriate action using sanctions such
as:

\(a\) Withholding a percentage of Federal awards until the audit is
completed satisfactorily;

\(b\) Withholding or disallowing overhead costs;

\(c\) Suspending Federal awards until the audit is conducted; or

\(d\) Terminating the Federal award. (Authority: Pub. L. 104-156; 110
Stat. 1396)

## Next section is §41.230

**§41.230 Audit costs.**

\(a\) *Allowable costs*. Unless prohibited by law, the cost of audits
made in accordance with the provisions of this part is allowable charges
to Federal awards. The charges may be considered a direct cost or an
allocated indirect cost, as determined in accordance with the provisions
of applicable OMB cost principles circulars, the Federal Acquisition
Regulation (FAR) (48 CFR parts 30 and 31), or other applicable cost
principles or regulations.

\(b\) *Unallowable costs*. A non-Federal entity shall not charge the
following to a Federal award:

\(1\) The cost of any audit under the Single Audit Act Amendments of
1996 (31 U.S.C. 7501, *et seq*.) not conducted in accordance with this
part.

\(2\) The cost of auditing a non-Federal entity, which has Federal
awards, expended of less than \$500,000 per year and is thereby exempted
under §41.200(d) of this chapter from having an audit conducted under
this part. However, this does not prohibit a pass-through entity from
charging Federal awards for the cost of limited scope audits to monitor
its subrecipients in accordance with §41.400(d)(3), provided the
subrecipient does not have a single audit. For purposes of this part,
limited scope audits only include agreed-upon procedures engagements
conducted in accordance with either the AICPA's generally accepted
auditing standards or attestation standards, that are paid for and
arranged by a pass-through entity and address only one or more of the
following types of compliance requirements: activities allowed or
unallowed; allowable costs/cost principles; eligibility; matching, level
of effort, earmarking; and, reporting. (Authority: Pub. L. 104-156; 110
Stat. 1396)

## Next section is §41.235

**§41.235 Program-specific audits.**

\(a\) *Program-specific audit guide available*. In many cases, a
program-specific audit guide will be available to provide specific
guidance to the auditor with respect to internal control, compliance
requirements, suggested audit procedures, and audit reporting
requirements. The auditor should contact the Office of Inspector General
of the Federal agency to determine whether such a guide is available.
When a current program-specific audit guide is available, the auditor
shall follow GAGAS and the guide when performing a program-specific
audit.

\(b\) *Program-specific audit guide not available*.

\(1\) When a program-specific audit guide is not available, the auditee
and auditor shall have basically the same responsibilities for the
Federal program as they would have for an audit of a major program in a
single audit.

\(2\) The auditee shall prepare the financial statement(s) for the
Federal program that includes, at a minimum, a schedule of expenditures
of Federal awards for the program and notes that describe the
significant accounting policies used in preparing the schedule, a
summary schedule of prior audit findings consistent with the
requirements of §41.315(b), and a corrective action plan consistent with
the requirements of §41.315(c).

\(3\) The auditor shall:

\(i\) Perform an audit of the financial statement(s) for the Federal
program in accordance with GAGAS;

\(ii\) Obtain an understanding of internal control and perform tests of
internal control over the Federal program consistent with the
requirements §41.500(c) for a major program;

\(iii\) Perform procedures to determine whether the auditee has complied
with laws, regulations, and the provisions of contracts or grant
agreements that could have a direct and material effect on the Federal
program consistent with the requirements of §41.500(d) for a major
program; and

\(iv\) Follow up on prior audit findings, perform procedures to assess
the reasonableness of the summary schedule of prior audit findings
prepared by the auditee, and report, as a current year audit finding,
when the auditor concludes that the summary schedule of prior audit
findings materially misrepresents the status of any prior audit finding
in accordance with the requirements of §41.500(e).

\(4\) The auditor's report(s) may be in the form of either combined or
separate reports and may be organized differently from the manner
presented in this section. The auditor's report(s) shall state that the
audit was conducted in accordance with this part and include the
following:

\(i\) An opinion (or disclaimer of opinion) as to whether the financial
statement(s) of the Federal program is presented fairly in all material
respects in conformity with the stated accounting policies;

\(ii\) A report on internal control related to the Federal program,
which shall describe the scope of testing of internal control and the
results of the tests;

\(iii\) A report on compliance which includes an opinion (or disclaimer
of opinion) as to whether the auditee complied with laws, regulations,
and the provisions of contracts or grant agreements which could have a
direct and material effect on the Federal program; and

\(iv\) A schedule of findings and questioned costs for the Federal
program that includes a summary of the auditor's results relative to the
Federal program in a format consistent with §41.505(d)(1) and findings
and questioned costs consistent with the requirements of §41.505(d)(3).

\(c\) *Report submission for program-specific audits*.

\(1\) The audit shall be completed and the reporting required by
paragraph (c)(2) or (c)(3) of this section submitted within the earlier
of 30 days after receipt of the auditor's report(s), or nine months
after the end of the audit period, unless a longer period is agreed to
in advance by the Federal agency that provided the funding or a
different period is specified in a program-specific audit guide.
(However, for fiscal years beginning on or before June 30, 1998, the
audit shall be completed and the required reporting shall be submitted
within the earlier of 30 days after receipt of the auditor's report(s),
or 13 months after the end of the audit period, unless a different
period is specified in a program-specific audit guide.) Unless
restricted by law or regulation, the auditee shall make report copies
available for public inspection.

\(2\) When a program-specific audit guide is available, the auditee
shall submit to the Federal clearinghouse designated by OMB the data
collection form prepared in accordance with §41.320(b), as applicable to
a program-specific audit, and the reporting required by the
program-specific audit guide to be retained as an archival copy. Also,
the auditee shall submit to the Federal awarding agency or pass-through
entity the reporting required by the program-specific audit guide.

\(3\) When a program-specific audit guide is not available, the
reporting package for a program-specific audit shall consist of the
financial statement(s) of the Federal program, a summary schedule of
prior audit findings, and a corrective action plan as described in
paragraph (b)(2) of this section, and the auditor's report(s) described
in paragraph (b)(4) of this section. The data collection form prepared
in accordance with §41.320(b), as applicable to a program-specific
audit, and one copy of this reporting package shall be submitted to the
Federal clearinghouse designated by OMB to be retained as an archival
copy. Also, when the schedule of findings and questioned costs disclosed
audit findings or the summary schedule of prior audit findings reported
the status of any audit findings, the auditee shall submit one copy of
the reporting package to the Federal clearinghouse on behalf of the
Federal awarding agency, or directly to the pass-through entity in the
case of a subrecipient. Instead of submitting the reporting package to
the pass-through entity, when a subrecipient is not required to submit a
reporting package to the pass-through entity, the subrecipient shall
provide written notification to the pass-through entity, consistent with
the requirements of §41.320(e)(2). A subrecipient may submit a copy of
the reporting package to the pass-through entity to comply with this
notification requirement.

\(d\) *Other sections of this part may apply*. Program-specific audits
are subject to §41.100 through §41.215(b), §41.220 through §41.230,
§41.300 through §41.305, §41.315, §41.320(f) through §41.320(j), §41.400
through §41.405, §41.510 through §41.515, and other referenced
provisions of this part unless contrary to the provisions of this
section, a program-specific audit guide, or program laws and
regulations. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.300

**Subpart C---Auditees**

**§41.300 Auditee responsibilities.**

The auditee shall:

\(a\) Identify, in its accounts, all Federal awards received and
expended and the Federal programs under which they were received.
Federal program and award identification shall include, as applicable,
the CFDA title and number, award number and year, name of the Federal
agency, and name of the pass-through entity.

\(b\) Maintain internal control over Federal programs that provides
reasonable assurance that the auditee is managing Federal awards in
compliance with laws, regulations, and the provisions of contracts or
grant agreements that could have a material effect on each of its
Federal programs.

\(c\) Comply with laws, regulations, and the provisions of contracts or
grant agreements related to each of its Federal programs.

\(d\) Prepare appropriate financial statements, including the schedule
of expenditures of Federal awards in accordance with §41.310.

\(e\) Ensure that the audits required by this part are properly
performed and submitted when due. When extensions to the report
submission due date required by §41.320(a) are granted by the cognizant
or oversight agency for audit, promptly notify the Federal clearinghouse
designated by OMB and each pass-through entity providing Federal awards
of the extension.

\(f\) Follow up and take corrective action on audit findings, including
preparation of a summary schedule of prior audit findings and a
corrective action plan in accordance with §41.315(b) and §41.315(c),
respectively. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.305

**§41.305 Auditor selection.**

\(a\) *Auditor procurement*. In procuring audit services, auditees shall
follow the procurement standards prescribed by part 43 of this chapter,
OMB Circular A-110 (codified at 2 CFR part 215), "Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals and Other Non-Profit Organizations," or the FAR (48
CFR part 42), as applicable (OMB Circulars are available from the Office
of Administration, Publications Office, room 2200, New Executive Office
Building, Washington, DC 20503). Whenever possible, auditees shall make
positive efforts to utilize small businesses, minority-owned firms, and
women's business enterprises, in procuring audit services as stated in
part 43 of this chapter, OMB Circular A-110 (codified at 2 CFR part
215), or the FAR (48 CFR part 42), as applicable. In requesting
proposals for audit services, the objectives and scope of the audit
should be made clear. Factors to be considered in evaluating each
proposal for audit services include the responsiveness to the request
for proposal, relevant experience, availability of staff with
professional qualifications and technical abilities, the results of
external quality control reviews, and price.

\(b\) *Restriction on auditor preparing indirect cost proposals*. An
auditor who prepares the indirect cost proposal or cost allocation plan
may not also be selected to perform the audit required by this part when
the indirect costs recovered by the auditee during the prior year
exceeded \$1 million. This restriction applies to the base year used in
the preparation of the indirect cost proposal or cost allocation plan
and any subsequent years in which the resulting indirect cost agreement
or cost allocation plan is used to recover costs.

\(c\) *Use of Federal auditors*. Federal auditors may perform all or
part of the work required under this part if they comply fully with the
requirements of this part. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.310

**§41.310 Financial statements.**

\(a\) *Financial statements*. The auditee shall prepare financial
statements that reflect its financial position, results of operations or
changes in net assets, and, where appropriate, cash flows for the fiscal
year audited. The financial statements shall be for the same
organizational unit and fiscal year that is chosen to meet the
requirements of this part. However, organization-wide financial
statements may also include departments, agencies, and other
organizational units that have separate audits in accordance with
§41.500(a) and prepare separate financial statements.

\(b\) *Schedule of expenditures of Federal awards*. The auditee shall
also prepare a schedule of expenditures of Federal awards for the period
covered by the auditee's financial statements. While not required, the
auditee may choose to provide information requested by Federal awarding
agencies and pass-through entities to make the schedule easier to use.
For example, when a Federal program has multiple award years, the
auditee may list the amount of Federal awards expended for each award
year separately. At a minimum, the schedule shall:

\(1\) List individual Federal programs by Federal agency. For Federal
programs included in a cluster of programs, list individual Federal
programs within a cluster of programs. For R&D, total Federal awards
expended shall be shown either by individual award or by Federal agency
and major subdivision within the Federal agency. For example, the
National Institutes of Health is a major subdivision in the Department
of Health and Human Services.

\(2\) For Federal awards received as a subrecipient, the name of the
pass-through entity and identifying number assigned by the pass-through
entity shall be included.

\(3\) Provide total Federal awards expended for each individual Federal
program and the CFDA number or other identifying number when the CFDA
information is not available.

\(4\) Include notes that describe the significant accounting policies
used in preparing the schedule.

\(5\) To the extent practical, pass-through entities should identify in
the schedule the total amount provided to subrecipients from each
Federal program.

\(6\) Include, in either the schedule or a note to the schedule, the
value of the Federal awards expended in the form of non-cash assistance,
the amount of insurance in effect during the year, and loans or loan
guarantees outstanding at year-end. While not required, it is preferable
to present this information in the schedule. (Authority: Pub. L.
104-156; 110 Stat. 1396)

## Next section is §41.315

**§41.315 Audit findings follow-up.**

\(a\) *General*. The auditee is responsible for follow-up and corrective
action on all audit findings. As part of this responsibility, the
auditee shall prepare a summary schedule of prior audit findings. The
auditee shall also prepare a corrective action plan for current year
audit findings. The summary schedule of prior audit findings and the
corrective action plan shall include the reference numbers the auditor
assigns to audit findings under §41.510(c). Since the summary schedule
may include audit findings from multiple years, it shall include the
fiscal year in which the finding initially occurred.

\(b\) *Summary schedule of prior audit findings*. The summary schedule
of prior audit findings shall report the status of all audit findings
included in the prior audit's schedule of findings and questioned costs
relative to Federal awards. The summary schedule shall also include
audit findings reported in the prior audit's summary schedule of prior
audit findings except audit findings listed as corrected in accordance
with paragraph (b)(1) of this section, or no longer valid or not
warranting further action in accordance with paragraph (b)(4) of this
section.

\(1\) When audit findings were fully corrected, the summary schedule
need only list the audit findings and state that corrective action was
taken.

\(2\) When audit findings were not corrected or were only partially
corrected, the summary schedule shall describe the planned corrective
action as well as any partial corrective action taken.

\(3\) When corrective action taken is significantly different from
corrective action previously reported in a corrective action plan or in
the Federal agency's or pass-through entity's management decision, the
summary schedule shall provide an explanation.

\(4\) When the auditee believes the audit findings are no longer valid
or do not warrant further action, the reasons for this position shall be
described in the summary schedule. A valid reason for considering an
audit finding as not warranting further action is that all of the
following have occurred:

\(i\) Two years have passed since the audit report in which the finding
occurred was submitted to the Federal clearinghouse;

\(ii\) The Federal agency or pass-through entity is not currently
following up with the auditee on the audit finding; and

\(iii\) A management decision was not issued.

\(c\) *Corrective action plan*. At the completion of the audit, the
auditee shall prepare a corrective action plan to address each audit
finding included in the current year auditor's reports. The corrective
action plan shall provide the name(s) of the contact person(s)
responsible for corrective action, the corrective action planned, and
the anticipated completion date. If the auditee does not agree with the
audit findings or believes corrective action is not required, then the
corrective action plan shall include an explanation and specific
reasons. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.320

**§41.320 Report submission.**

\(a\) *General*. The audit shall be completed and the data collection
form described in paragraph (b) of this section and reporting package
described in paragraph (c) of this section shall be submitted within the
earlier of 30 days after receipt of the auditor's report(s), or nine
months after the end of the audit period, unless a longer period is
agreed to in advance by the cognizant or oversight agency for audit.
Unless restricted by law or regulation, the auditee shall make copies
available for public inspection.

\(b\) *Data Collection*.

\(1\) The auditee shall submit a data collection form, which states
whether the audit was completed in accordance with this part and
provides information about the auditee, its Federal programs, and the
results of the audit. The form shall be approved by OMB, available from
the Federal clearinghouse designated by OMB, and include data elements
similar to those presented in this paragraph. A senior level
representative of the auditee (e.g., State controller, director of
finance, chief executive officer, or chief financial officer) shall sign
a statement to be included as part of the form certifying that: the
auditee complied with the requirements of this part, the form was
prepared in accordance with this part (and the instructions accompanying
the form), and the information included in the form, in its entirety,
are accurate and complete.

\(2\) The data collection form shall include the following data
elements:

\(i\) The type of report the auditor issued on the financial statements
of the auditee (i.e., unqualified opinion, qualified opinion, adverse
opinion, or disclaimer of opinion).

\(ii\) Where applicable, a statement that reportable conditions in
internal control were disclosed by the audit of the financial statements
and whether any such conditions were material weaknesses.

\(iii\) A statement as to whether the audit disclosed any noncompliance,
which is material to the financial statements of the auditee.

\(iv\) Where applicable, a statement that reportable conditions in
internal control over major programs were disclosed by the audit and
whether any such conditions were material weaknesses.

\(v\) The type of report the auditor issued on compliance for major
programs (i.e., unqualified opinion, qualified opinion, adverse opinion,
or disclaimer of opinion).

\(vi\) A list of the Federal awarding agencies, which will receive a
copy of the reporting package pursuant to §41.320(d)(2).

\(vii\) A yes or no statement as to whether the auditee qualified as a
low-risk auditee under §41.530.

\(viii\) The dollar threshold used to distinguish between Type A and
Type B programs as defined in §41.520(b).

\(ix\) The Catalog of Federal Domestic Assistance (CFDA) number for each
Federal program, as applicable.

\(x\) The name of each Federal program and identification of each major
program. Individual programs within a cluster of programs should be
listed in the same level of detail as they are listed in the schedule of
expenditures of Federal awards.

\(xi\) The amount of expenditures in the schedule of expenditures of
Federal awards associated with each Federal program.

\(xii\) For each Federal program, a yes or no statement as to whether
there are audit findings in each of the following types of compliance
requirements and the total amount of any questioned costs:

\(A\) Activities allowed or unallowed.

\(B\) Allowable costs/cost principles.

\(C\) Cash management.

\(D\) Davis-Bacon Act.

\(E\) Eligibility.

\(F\) Equipment and real property management.

\(G\) Matching, level of effort, earmarking.

\(H\) Period of availability of Federal funds.

\(I\) Procurement and suspension and debarment.

\(J\) Program income.

\(K\) Real property acquisition and relocation assistance.

\(L\) Reporting.

\(M\) Subrecipient monitoring.

\(N\) Special tests and provisions.

\(xiii\) Auditee name, employer identification number(s), name and title
of certifying official, telephone number, signature, and date.

\(xiv\) Auditor name, name and title of contact person, auditor address,
auditor telephone number, signature, and date.

\(xv\) Whether the auditee has either a cognizant or oversight agency
for audit.

\(xvi\) The name of the cognizant or oversight agency for audit
determined in accordance with §41.400(a) and §41.400(b), respectively.

\(3\) Using the information included in the reporting package described
in paragraph (c) of this section, the auditor shall complete the
applicable sections of the form. The auditor shall sign a statement to
be included as part of the data collection form that indicates, at a
minimum, the source of the information included in the form, the
auditor's responsibility for the information, that the form is not a
substitute for the reporting package described in paragraph (c) of this
section, and that the content of the form is limited to the data
elements prescribed by OMB.

\(c\) *Reporting package*. The reporting package shall include the:

\(1\) Financial statements and schedule of expenditures of Federal
awards discussed in §41.310(a) and §41.310(b), respectively;

\(2\) Summary schedule of prior audit findings discussed in §41.315(b);

\(3\) Auditor's report(s) discussed in §41.505; and

\(4\) Corrective action plan discussed in §41.315(c).

\(d\) *Submission to clearinghouse*. All auditees shall submit to the
Federal clearinghouse designated by OMB the data collection form
described in paragraph (b) of this section and one copy of the reporting
package described in paragraph (c) of this section for:

\(1\) The Federal clearinghouse to retain as an archival copy; and

\(2\) Each Federal awarding agency when the schedule of findings and
questioned costs disclosed audit findings relating to Federal awards
that the Federal awarding agency provided directly or the summary
schedule of prior audit findings reported the status of any audit
findings relating to Federal awards that the Federal awarding agency
provided directly.

\(e\) *Additional submission by subrecipients*.

\(1\) In addition to the requirements discussed in paragraph (d) of this
section, auditees that are also subrecipients shall submit to each
pass-through entity one copy of the reporting package described in
paragraph (c) of this section for each pass-through entity when the
schedule of findings and questioned costs disclosed audit findings
relating to Federal awards that the pass-through entity provided or the
summary schedule of prior audit findings reported the status of any
audit findings relating to Federal awards that the pass-through entity
provided.

\(2\) When a subrecipient is not required to submit a reporting package
to a pass-through entity pursuant to paragraph (e)(1) of this section,
the subrecipient shall provide written notification to the pass-through
entity that: an audit of the subrecipient was conducted in accordance
with this part (including the period covered by the audit and the name,
amount, and CFDA number of the Federal award(s) provided by the
pass-through entity); the schedule of findings and questioned costs
disclosed no audit findings relating to the Federal award(s) that the
pass-through entity provided; and, the summary schedule of prior audit
findings did not report on the status of any audit findings relating to
the Federal award(s) that the pass-through entity provided. A
subrecipient may submit a copy of the reporting package described in
paragraph (c) of this section to a pass-through entity to comply with
this notification requirement.

\(f\) *Requests for report copies*. In response to requests by a Federal
agency or pass-through entity, auditees shall submit the appropriate
copies of the reporting package described in paragraph (c) of this
section and, if requested, a copy of any management letters issued by
the auditor.

\(g\) *Report retention requirements*. Auditees shall keep one copy of
the data collection form described in paragraph (b) of this section and
one copy of the reporting package described in paragraph (c) of this
section on file for three years from the date of submission to the
Federal clearinghouse designated by OMB. Pass-through entities shall
keep subrecipients' submissions on file for three years from date of
receipt.

\(h\) *Clearinghouse responsibilities*. The Federal clearinghouse
designated by OMB shall distribute the reporting packages received in
accordance with paragraph (d)(2) of this section and §41.235(c)(3) to
applicable Federal awarding agencies, maintain a data base of completed
audits, provide appropriate information to Federal agencies, and follow
up with known auditees which have not submitted the required data
collection forms and reporting packages.

\(i\) *Clearinghouse address*. The address of the Federal clearinghouse
currently designated by OMB is Federal Audit Clearinghouse, Bureau of
the Census, 1201 E. 10th Street, Jeffersonville, IN 47132.

\(j\) *Electronic filing*. Nothing in this part shall preclude
electronic submissions to the Federal clearinghouse in such manner as
may be approved by OMB. With OMB approval, the Federal clearinghouse may
pilot test methods of electronic submissions. (Authority: Pub. L.
104-156; 110 Stat. 1396)

## Next section is §41.400

**Subpart D---Federal Agencies and Pass-Through Entities**

**§41.400 Responsibilities.**

\(a\) *Cognizant agency for audit responsibilities*. Recipients
expending more than \$50 million a year in Federal awards shall have a
cognizant agency for audit. The designated cognizant agency for audit
shall be the Federal awarding agency that provides the predominant
amount of direct funding to a recipient unless OMB makes a specific
cognizant agency for audit assignment. The determination of the
predominant amount of direct funding shall be based upon direct Federal
awards expended in the recipient's fiscal years ending in 2004, 2009,
2014, and every fifth year thereafter. For example, audit cognizance for
periods ending in 2006 through 2010 will be determined based on Federal
awards expended in 2004. (However, for 2001 through 2005, cognizant
agency for audit is determined based on the predominant amount of direct
Federal awards expended in the recipient's fiscal year ending in 2000).
Notwithstanding the manner in which audit cognizance is determined, a
Federal awarding agency with cognizance for an auditee may reassign
cognizance to another Federal awarding agency which provides substantial
direct funding and agrees to be the cognizant agency for audit. Within
30 days after any reassignment, both the old and the new cognizant
agency for audit shall notify the auditee, and, if known, the auditor of
the reassignment. The cognizant agency for audit shall:

\(1\) Provide technical audit advice and liaison to auditees and
auditors.

\(2\) Consider auditee requests for extensions to the report submission
due date required by §41.320(a). The cognizant agency for audit may
grant extensions for good cause.

\(3\) Obtain or conduct quality control reviews of selected audits made
by non-Federal auditors, and provide the results, when appropriate, to
other interested organizations.

\(4\) Promptly inform other affected Federal agencies and appropriate
Federal law enforcement officials of any direct reporting by the auditee
or its auditor of irregularities or illegal acts, as required by GAGAS
or laws and regulations.

\(5\) Advise the auditor and, where appropriate, the auditee of any
deficiencies found in the audits when the deficiencies require
corrective action by the auditor. When advised of deficiencies, the
auditee shall work with the auditor to take corrective action. If
corrective action is not taken, the cognizant agency for audit shall
notify the auditor, the auditee, and applicable Federal awarding
agencies and pass-through entities of the facts and make recommendations
for follow-up action. Major inadequacies or repetitive substandard
performance by auditors shall be referred to appropriate State licensing
agencies and professional bodies for disciplinary action.

\(6\) Coordinate, to the extent practical, audits or reviews made by or
for Federal agencies that are in addition to the audits made pursuant to
this part, so that the additional audits or reviews build upon audits
performed in accordance with this part.

\(7\) Coordinate a management decision for audit findings that affect
the Federal programs of more than one agency.

\(8\) Coordinate the audit work and reporting responsibilities among
auditors to achieve the most cost-effective audit.

\(9\) For biennial audits permitted under §41.220, consider auditee
requests to qualify as a low-risk auditee under §41.530(a).

\(b\) *Oversight agency for audit responsibilities*. An auditee, which
does not have a designated cognizant agency for audit, will be under the
general oversight of the Federal agency determined in accordance with
§41.105. The oversight agency for audit:

\(1\) Shall provide technical advice to auditees and auditors as
requested.

\(2\) May assume all or some of the responsibilities normally performed
by a cognizant agency for audit.

\(c\) *Federal awarding agency responsibilities*. The Federal awarding
agency shall perform the following for the Federal awards it makes:

\(1\) Identify Federal awards made by informing each recipient of the
CFDA title and number, award name and number, award year, and if the
award is for R&D. When some of this information is not available, the
Federal agency shall provide information necessary to clearly describe
the Federal award.

\(2\) Advise recipients of requirements imposed on them by Federal laws,
regulations, and the provisions of contracts or grant agreements.

\(3\) Ensure that audits are completed and reports are received in a
timely manner and in accordance with the requirements of this part.

\(4\) Provide technical advice and counsel to auditees and auditors as
requested.

\(5\) Issue a management decision on audit findings within six months
after receipt of the audit report and ensure that the recipient takes
appropriate and timely corrective action.

\(6\) Assign a person responsible for providing annual updates of the
compliance supplement to OMB.

\(d\) *Pass-through entity responsibilities*. A pass-through entity
shall perform the following for the Federal awards it makes:

\(1\) Identify Federal awards made by informing each subrecipient of
CFDA title and number, award name and number, award year, if the award
is R&D, and name of Federal agency. When some of this information is not
available, the pass-through entity shall provide the best information
available to describe the Federal award.

\(2\) Advise subrecipients of requirements imposed on them by Federal
laws, regulations, and the provisions of contracts or grant agreements
as well as any supplemental requirements imposed by the pass-through
entity.

\(3\) Monitor the activities of subrecipients as necessary to ensure
that Federal awards are used for authorized purposes in compliance with
laws, regulations, and the provisions of contracts or grant agreements
and that performance goals are achieved.

\(4\) Ensure that subrecipients expending \$500,000 or more in Federal
awards during the subrecipient's fiscal year have met the audit
requirements of this part for that fiscal year.

\(5\) Issue a management decision on audit findings within six months
after receipt of the subrecipient's audit report and ensure that the
subrecipient takes appropriate and timely corrective action.

\(6\) Consider whether subrecipient audits necessitate adjustment of the
pass-through entity's own records.

\(7\) Require each subrecipient to permit the pass-through entity and
auditors to have access to the records and financial statements as
necessary for the pass-through entity to comply with this part.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.405

**§41.405 Management decision.**

\(a\) *General*. The management decision shall clearly state whether or
not the audit finding is sustained, the reasons for the decision, and
the expected auditee action to repay disallowed costs, make financial
adjustments, or take other action. If the auditee has not completed
corrective action, a timetable for follow-up should be given. Prior to
issuing the management decision, the Federal agency or pass-through
entity may request additional information or documentation from the
auditee, including a request for auditor assurance related to the
documentation, as a way of mitigating disallowed costs. The management
decision should describe any appeal process available to the auditee.

\(b\) *Federal agency*. As provided in §41.400(a)(7), the cognizant
agency for audit shall be responsible for coordinating a management
decision for audit findings that affect the programs of more than one
Federal agency. As provided in §41.400(c)(5), a Federal awarding agency
is responsible for issuing a management decision for findings that
relate to Federal awards it makes to recipients. Alternate arrangements
may be made on a case-by-case basis by agreement among the Federal
agencies concerned.

\(c\) *Pass-through entity*. As provided in §41.400(d)(5), the
pass-through entity shall be responsible for making the management
decision for audit findings that relate to Federal awards it makes to
subrecipients.

\(d\) *Time requirements*. The entity responsible for making the
management decision shall do so within six months of receipt of the
audit report. Corrective action should be initiated within six months
after receipt of the audit report and proceed as rapidly as possible.

\(e\) *Reference numbers*. Management decisions shall include the
reference numbers the auditor assigned to each audit finding in
accordance with §41.510(c). (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.500

**Subpart E---Auditors**

**§41.500 Scope of audit.**

\(a\) *General*. The audit shall be conducted in accordance with GAGAS.
The audit shall cover the entire operations of the auditee; or, at the
option of the auditee, such audit shall include a series of audits that
cover departments, agencies, and other organizational units which
expended or otherwise administered Federal awards during such fiscal
year, provided that each such audit shall encompass the financial
statements and schedule of expenditures of Federal awards for each such
department, agency, and other organizational unit, which shall be
considered to be a non-Federal entity. The financial statements and
schedule of expenditures of Federal awards shall be for the same fiscal
year.

\(b\) *Financial statements*. The auditor shall determine whether the
financial statements of the auditee are presented fairly in all material
respects in conformity with generally accepted accounting principles.
The auditor shall also determine whether the schedule of expenditures of
Federal awards is presented fairly in all material respects in relation
to the auditee's financial statements taken as a whole.

\(c\) *Internal control*.

\(1\) In addition to the requirements of GAGAS, the auditor shall
perform procedures to obtain an understanding of internal control over
Federal programs sufficient to plan the audit to support a low assessed
level of control risk for major programs.

\(2\) Except as provided in paragraph (c)(3) of this section, the
auditor shall:

\(i\) Plan the testing of internal control over major programs to
support a low assessed level of control risk for the assertions relevant
to the compliance requirements for each major program; and

\(ii\) Perform testing of internal control as planned in paragraph
(c)(2)(i) of this section.

\(3\) When internal control over some or all of the compliance
requirements for a major program are likely to be ineffective in
preventing or detecting noncompliance, the planning and performing of
testing described in paragraph (c)(2) of this section are not required
for those compliance requirements. However, the auditor shall report a
reportable condition (including whether any such condition is a material
weakness) in accordance with §41.510, assess the related control risk at
the maximum, and consider whether additional compliance tests are
required because of ineffective internal control.

\(d\) *Compliance*.

\(1\) In addition to the requirements of GAGAS, the auditor shall
determine whether the auditee has complied with laws, regulations, and
the provisions of contracts or grant agreements that may have a direct
and material effect on each of its major programs.

\(2\) The principal compliance requirements applicable to most Federal
programs and the compliance requirements of the largest Federal programs
are included in the compliance supplement.

\(3\) For the compliance requirements related to Federal programs
contained in the compliance supplement, an audit of these compliance
requirements will meet the requirements of this part. Where there have
been changes to the compliance requirements and the changes are not
reflected in the compliance supplement, the auditor shall determine the
current compliance requirements and modify the audit procedures
accordingly. For those Federal programs not covered in the compliance
supplement, the auditor should use the types of compliance requirements
contained in the compliance supplement as guidance for identifying the
types of compliance requirements to test, and determine the requirements
governing the Federal program by reviewing the provisions of contracts
and grant agreements and the laws and regulations referred to in such
contracts and grant agreements.

\(4\) The compliance testing shall include tests of transactions and
such other auditing procedures necessary to provide the auditor
sufficient evidence to support an opinion on compliance.

\(e\) *Audit follow-up*. The auditor shall follow-up on prior audit
findings, perform procedures to assess the reasonableness of the summary
schedule of prior audit findings prepared by the auditee in accordance
with §41.315(b), and report, as a current year audit finding, when the
auditor concludes that the summary schedule of prior audit findings
materially misrepresents the status of any prior audit finding. The
auditor shall perform audit follow-up procedures regardless of whether a
prior audit finding relates to a major program in the current year.

\(f\) *Data Collection Form*. As required in §41.320(b)(3), the auditor
shall complete and sign specified sections of the data collection form.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.505

**§41.505 Audit reporting.**

The auditor's report(s) may be in the form of either combined or
separate reports and may be organized differently from the manner
presented in this section. The auditor's report(s) shall state that the
audit was conducted in accordance with this part and include the
following:

\(a\) An opinion (or disclaimer of opinion) as to whether the financial
statements are presented fairly in all material respects in conformity
with generally accepted accounting principles and an opinion (or
disclaimer of opinion) as to whether the schedule of expenditures of
Federal awards is presented fairly in all material respects in relation
to the financial statements taken as a whole.

\(b\) A report on internal control related to the financial statements
and major programs. This report shall describe the scope of testing of
internal control and the results of the tests, and, where applicable,
refer to the separate schedule of findings and questioned costs
described in paragraph (d) of this section.

\(c\) A report on compliance with laws, regulations, and the provisions
of contracts or grant agreements, noncompliance with which could have a
material effect on the financial statements. This report shall also
include an opinion (or disclaimer of opinion) as to whether the auditee
complied with laws, regulations, and the provisions of contracts or
grant agreements which could have a direct and material effect on each
major program, and, where applicable, refer to the separate schedule of
findings and questioned costs described in paragraph (d) of this
section.

\(d\) A schedule of findings and questioned costs, which shall include
the following three components:

\(1\) A summary of the auditor's results, which shall include:

\(i\) The type of report the auditor issued on the financial statements
of the auditee (i.e., unqualified opinion, qualified opinion, adverse
opinion, or disclaimer of opinion);

\(ii\) Where applicable, a statement that reportable conditions in
internal control were disclosed by the audit of the financial statements
and whether any such conditions were material weaknesses;

\(iii\) A statement as to whether the audit disclosed any noncompliance,
which is material to the financial statements of the auditee;

\(iv\) Where applicable, a statement that reportable conditions in
internal control over major programs were disclosed by the audit and
whether any such conditions were material weaknesses;

\(v\) The type of report the auditor issued on compliance for major
programs (i.e., unqualified opinion, qualified opinion, adverse opinion,
or disclaimer of opinion);

\(vi\) A statement as to whether the audit disclosed any audit findings,
which the auditor is required to report under §41.510(a);

\(vii\) An identification of major programs;

\(viii\) The dollar threshold used to distinguish between Type A and
Type B programs, as described in §41.520(b); and

\(ix\) A statement as to whether the auditee qualified as a low-risk
auditee under §41.530.

\(2\) Findings relating to the financial statements, which are required
to be reported in accordance with GAGAS.

\(3\) Findings and questioned costs for Federal awards which shall
include audit findings as defined in §41.510(a).

\(i\) Audit findings (e.g., internal control findings, compliance
findings, questioned costs, or fraud) which relate to the same issue
should be presented as a single audit finding. Where practical, audit
findings should be organized by Federal agency or pass-through entity.

\(ii\) Audit findings which relate to both the financial statements and
Federal awards, as reported under paragraphs (d)(2) and (d)(3) of this
section, respectively, should be reported in both sections of the
schedule. However, the reporting in one section of the schedule may be
in summary form with a reference to a detailed reporting in the other
section of the schedule. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.510

**§41.510 Audit findings.**

\(a\) *Audit findings reported*. The auditor shall report the following
as audit findings in a schedule of findings and questioned costs:

\(1\) Reportable conditions in internal control over major programs. The
auditor's determination of whether a deficiency in internal control is a
reportable condition for the purpose of reporting an audit finding is in
relation to a type of compliance requirement for a major program or an
audit objective identified in the compliance supplement. The auditor
shall identify reportable conditions, which are individually or
cumulatively material weaknesses.

\(2\) Material noncompliance with the provisions of laws, regulations,
contracts, or grant agreements related to a major program. The auditor's
determination of whether a noncompliance with the provisions of laws,
regulations, contracts, or grant agreements is material for the purpose
of reporting an audit finding is in relation to a type of compliance
requirement for a major program or an audit objective identified in the
compliance supplement.

\(3\) Known questioned costs, which are greater than \$10,000, for a
type of compliance requirement for a major program. Known questioned
costs are those specifically identified by the auditor. In evaluating
the effect of questioned costs on the opinion on compliance, the auditor
considers the best estimate of total costs questioned (likely questioned
costs), not just the questioned costs specifically identified (known
questioned costs). The auditor shall also report known questioned costs
when likely questioned costs are greater than \$10,000 for a type of
compliance requirement for a major program. In reporting questioned
costs, the auditor shall include information to provide proper
perspective for judging the prevalence and consequences of the
questioned costs.

\(4\) Known questioned costs, which are greater than \$10,000, for a
Federal program, which is not audited as a major program. Except for
audit follow-up, the auditor is not required under this part to perform
audit procedures for such a Federal program; therefore, the auditor will
normally not find questioned costs for a program, which is not audited
as a major program. However, if the auditor does become aware of
questioned costs for a Federal program which is not audited as a major
program (e.g., as part of audit follow-up or other audit procedures) and
the known questioned costs are greater than \$10,000, then the auditor
shall report this as an audit finding.

\(5\) The circumstances concerning why the auditor's report on
compliance for major programs is other than an unqualified opinion,
unless such circumstances are otherwise reported as audit findings in
the schedule of findings and questioned costs for Federal awards.

\(6\) Known fraud affecting a Federal award, unless such fraud is
otherwise reported as an audit finding in the schedule of findings and
questioned costs for Federal awards. This paragraph does not require the
auditor to make an additional reporting when the auditor confirms that
the fraud was reported outside of the auditor's reports under the direct
reporting requirements of GAGAS.

\(7\) Instances where the results of audit follow-up procedures
disclosed that the summary schedule of prior audit findings prepared by
the auditee in accordance with §41.315(b) materially misrepresents the
status of any prior audit finding.

\(b\) *Audit finding detail*. Audit findings shall be presented in
sufficient detail for the auditee to prepare a corrective action plan
and take corrective action and for Federal agencies and pass-through
entities to arrive at a management decision. The following specific
information shall be included, as applicable, in audit findings:

\(1\) Federal program and specific Federal award identification
including the CFDA title and number, Federal award number and year, name
of Federal agency, and name of the applicable pass-through entity. When
information, such as the CFDA title and number or Federal award number,
is not available, the auditor shall provide the best information
available to describe the Federal award.

\(2\) The criteria or specific requirement upon which the audit finding
is based, including statutory, regulatory, or other citation.

\(3\) The condition found, including facts that support the deficiency
identified in the audit finding.

\(4\) Identification of questioned costs and how they were computed.

\(5\) Information to provide proper perspective for judging the
prevalence and consequences of the audit findings, such as whether the
audit findings represent an isolated instance or a systemic problem.
Where appropriate, instances identified shall be related to the universe
and the number of cases examined and be quantified in terms of dollar
value.

\(6\) The possible asserted effect to provide sufficient information to
the auditee and Federal agency, or pass-through entity in the case of a
subrecipient, to permit them to determine the cause and effect to
facilitate prompt and proper corrective action.

\(7\) Recommendations to prevent future occurrences of the deficiency
identified in the audit finding.

\(8\) Views of responsible officials of the auditee when there is
disagreement with the audit findings, to the extent practical.

\(c\) *Reference numbers*. Each audit finding in the schedule of
findings and questioned costs shall include a reference number to allow
for easy referencing of the audit findings during follow-up. (Authority:
Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.515

**§41.515 Audit working papers.**

\(a\) *Retention of working papers*. The auditor shall retain working
papers and reports for a minimum of three years after the date of
issuance of the auditor's report(s) to the auditee, unless the auditor
is notified in writing by the cognizant agency for audit, oversight
agency for audit, or pass-through entity to extend the retention period.
When the auditor is aware that the Federal awarding agency, pass-through
entity, or auditee is contesting an audit finding, the auditor shall
contact the parties contesting the audit finding for guidance prior to
destruction of the working papers and reports.

\(b\) *Access to working papers*. Audit working papers shall be made
available upon request to the cognizant or oversight agency for audit or
its designee, a Federal agency providing direct or indirect funding, or
GAO at the completion of the audit, as part of a quality review, to
resolve audit findings, or to carry out oversight responsibilities
consistent with the purposes of this part. Access to working papers
includes the right of Federal agencies to obtain copies of working
papers, as is reasonable and necessary. (Authority: Pub. L. 104-156; 110
Stat. 1396)

## Next section is §41.520

**§41.520 Major program determination.**

\(a\) *General*. The auditor shall use a risk-based approach to
determine which Federal programs are major programs. This risk-based
approach shall include consideration of: Current and prior audit
experience, oversight by Federal agencies and pass-through entities, and
the inherent risk of the Federal program. The process in paragraphs (b)
through (i) of this section shall be followed.

\(b\) *Step 1*.

\(1\) The auditor shall identify the larger Federal programs, which
shall be labeled Type A programs. Type A programs are defined as Federal
programs with Federal awards expended during the audit period exceeding
the larger of:

\(i\) \$300,000 or three percent (.03) of total Federal awards expended
in the case of an auditee for which total Federal awards expended equal
or exceed \$300,000 but are less than or equal to \$100 million.

\(ii\) \$3 million or three-tenths of one percent (.003) of total
Federal awards expended in the case of an auditee for which total
Federal awards expended exceed \$100 million but are less than or equal
to \$10 billion.

\(iii\) \$30 million or 15 hundredths of one percent (.0015) of total
Federal awards expended in the case of an auditee for which total
Federal awards expended exceed \$10 billion.

\(2\) Federal programs not labeled Type A under paragraph (b)(1) of this
section shall be labeled Type B programs.

\(3\) The inclusion of large loan and loan guarantees (loans) should not
result in the exclusion of other programs as Type A programs. When a
Federal program providing loans significantly affects the number or size
of Type A programs, the auditor shall consider this Federal program as a
Type A program and exclude its values in determining other Type A
programs.

\(4\) For biennial audits permitted under §41.220, the determination of
Type A and Type B programs shall be based upon the Federal awards
expended during the two-year period.

\(c\) *Step 2*.

\(1\) The auditor shall identify Type A programs, which are low-risk.
For a Type A program to be considered low-risk, it shall have been
audited as a major program in at least one of the two most recent audit
periods (in the most recent audit period in the case of a biennial
audit), and, in the most recent audit period, it shall have had no audit
findings under §41.510(a). However, the auditor may use judgment and
consider that audit findings from questioned costs under §41.510(a)(3)
and §41.510(a)(4), fraud under §41.510(a)(6), and audit follow-up for
the summary schedule of prior audit findings under §41.510(a)(7) do not
preclude the Type A program from being low-risk. The auditor shall
consider: the criteria in §41.525(c), §41.525(d)(1), §41.525(d)(2), and
§41.525(d)(3); the results of audit follow-up; whether any changes in
personnel or systems affecting a Type A program have significantly
increased risk; and apply professional judgment in determining whether a
Type A program is low-risk.

\(2\) Notwithstanding paragraph (c)(1) of this section, OMB may approve
a Federal awarding agency's request that a Type A program at certain
recipients may not be considered low-risk. For example, it may be
necessary for a large Type A program to be audited as major each year at
particular recipients to allow the Federal agency to comply with the
Government Management Reform Act of 1994 (31 U.S.C. 3515). The Federal
agency shall notify the recipient and, if known, the auditor at least
180 days prior to the end of the fiscal year to be audited of OMB's
approval.

\(d\) *Step 3*.

\(1\) The auditor shall identify Type B programs, which are high-risk,
using professional judgment and the criteria in §41.525. However, should
the auditor select Option 2 under Step 4 (paragraph (e)(2)(i)(B) of this
section), the auditor is not required to identify more high-risk Type B
programs than the number of low-risk Type A programs. Except for known
reportable conditions in internal control or compliance problems as
discussed in §41.525(b)(1), §41.525(b)(2), and §41.525(c)(1), a single
criteria in §41.525 would seldom cause a Type B program to be considered
high-risk.

\(2\) The auditor is not expected to perform risk assessments on
relatively small Federal programs. Therefore, the auditor is only
required to perform risk assessments on Type B programs that exceed the
larger of:

\(i\) \$100,000 or three-tenths of one percent (.003) of total Federal
awards expended when the auditee has less than or equal to \$100 million
in total Federal awards expended.

\(ii\) \$300,000 or three-hundredths of one percent (.0003) of total
Federal awards expended when the auditee has more than \$100 million in
total Federal awards expended.

\(e\) *Step 4*. At a minimum, the auditor shall audit all of the
following as major programs:

\(1\) All Type A programs, except the auditor may exclude any Type A
programs identified as low-risk under Step 2 (paragraph (c)(1) of this
section).

\(2\) (i) High-risk Type B programs as identified under either of the
following two options:

\(A\) *Option 1*. At least one half of the Type B programs identified as
high-risk under Step 3 (paragraph (d) of this section), except this
paragraph (e)(2)(i)(A) does not require the auditor to audit more
high-risk Type B programs than the number of low-risk Type A programs
identified as low-risk under Step 2.

\(B\) *Option 2*. One high-risk Type B program for each Type A program
identified as low-risk under Step 2.

\(ii\) When identifying which high-risk Type B programs to audit as
major under either Option 1 or 2 in paragraph (e)(2)(i)(A) or (B) of
this section, the auditor is encouraged to use an approach which
provides an opportunity for different high-risk Type B programs to be
audited as major over a period of time.

\(3\) Such additional programs as may be necessary to comply with the
percentage of coverage rule discussed in paragraph (f) of this section.
This paragraph (e)(3) may require the auditor to audit more programs as
major than the number of Type A programs.

\(f\) *Percentage of coverage rule*. The auditor shall audit as major
programs Federal programs with Federal awards expended that, in the
aggregate, encompass at least 50 percent of total Federal awards
expended. If the auditee meets the criteria in §41.530 for a low-risk
auditee, the auditor need only audit as major programs Federal programs
with Federal awards expended that, in the aggregate, encompass at least
25 percent of total Federal awards expended.

\(g\) *Documentation of risk*. The auditor shall document in the working
papers the risk analysis process used in determining major programs.

\(h\) *Auditor's judgment*. When the major program determination was
performed and documented in accordance with this part, the auditor's
judgment in applying the risk-based approach to determine major programs
shall be presumed correct. Challenges by Federal agencies and
pass-through entities shall only be for clearly improper use of the
guidance in this part. However, Federal agencies and pass-through
entities may provide auditors guidance about the risk of a particular
Federal program and the auditor shall consider this guidance in
determining major programs in audits not yet completed.

\(i\) *Deviation from use of risk criteria*. For first-year audits, the
auditor may elect to determine major programs as all Type A programs
plus any Type B programs as necessary to meet the percentage of coverage
rule discussed in paragraph (f) of this section. Under this option, the
auditor would not be required to perform the procedures discussed in
paragraphs (c), (d), and (e) of this section.

\(1\) A first-year audit is the first year the entity is audited under
this part or the first year of a change of auditors.

\(2\) To ensure that a frequent change of auditors would not preclude
audit of high-risk Type B programs, this election for first-year audits
may not be used by an auditee more than once in every three years.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.525

**§41.525 Criteria for Federal program risk.**

\(a\) *General*. The auditor's determination should be based on an
overall evaluation of the risk of noncompliance occurring, which could
be material to the Federal program. The auditor shall use auditor
judgment and consider criteria, such as described in paragraphs (b),
(c), and (d) of this section, to identify risk in Federal programs.
Also, as part of the risk analysis, the auditor may wish to discuss a
particular Federal program with auditee management and the Federal
agency or pass-through entity.

\(b\) *Current and prior audit experience*.

\(1\) Weaknesses in internal control over Federal programs would
indicate higher risk. Consideration should be given to the control
environment over Federal programs and such factors as the expectation of
management's adherence to applicable laws and regulations and the
provisions of contracts and grant agreements and the competence and
experience of personnel who administer the Federal programs.

\(i\) A Federal program administered under multiple internal control
structures may have higher risk. When assessing risk in a large single
audit, the auditor shall consider whether weaknesses are isolated in a
single operating unit (e.g., one college campus) or pervasive throughout
the entity.

\(ii\) When significant parts of a Federal program are passed through to
subrecipients, a weak system for monitoring subrecipients would indicate
higher risk.

\(iii\) The extent to which computer processing is used to administer
Federal programs, as well as the complexity of that processing, should
be considered by the auditor in assessing risk. New and recently
modified computer systems may also indicate risk.

\(2\) Prior audit findings would indicate higher risk, particularly when
the situations identified in the audit findings could have a significant
impact on a Federal program or have not been corrected.

\(3\) Federal programs not recently audited as major programs may be of
higher risk than Federal programs recently audited as major programs
without audit findings.

\(c\) *Oversight exercised by Federal agencies and pass-through
entities*.

\(1\) Oversight exercised by Federal agencies or passthrough entities
could indicate risk. For example, recent monitoring or other reviews
performed by an oversight entity, which disclosed no significant
problems, would indicate lower risk. However, monitoring which disclosed
significant problems would indicate higher risk.

\(2\) Federal agencies, with the concurrence of OMB, may identify
Federal programs, which are higher risk. OMB plans to provide this
identification in the compliance supplement.

\(d\) *Inherent risk of the Federal program*.

\(1\) The nature of a Federal program may indicate risk. Consideration
should be given to the complexity of the program and the extent to which
the Federal program contracts for goods and services. For example,
Federal programs that disburse funds through third party contracts or
have eligibility criteria may be of higher risk. Federal programs
primarily involving staff payroll costs may have a high-risk for time
and effort reporting, but otherwise be at low-risk.

\(2\) The phase of a Federal program in its life cycle at the Federal
agency may indicate risk. For example, a new Federal program with new or
interim regulations may have higher risk than an established program
with time-tested regulations. Also, significant changes in Federal
programs, laws, regulations, or the provisions of contracts or grant
agreements may increase risk.

\(3\) The phase of a Federal program in its life cycle at the auditee
may indicate risk. For example, during the first and last years that an
auditee participates in a Federal program, the risk may be higher due to
start-up or closeout of program activities and staff.

\(4\) Type B programs with larger Federal awards expended would be of
higher risk than programs with substantially smaller Federal awards
expended. (Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is §41.530

**§41.530 Criteria for a low-risk auditee.**

An auditee, which meets all of the following conditions for each of the
preceding two years (or, in the case of biennial audits, preceding two
audit periods), shall qualify as a low-risk auditee and be eligible for
reduced audit coverage in accordance with §41.520:

\(a\) Single audits were performed on an annual basis in accordance with
the provisions of this part. A non-Federal entity that has biennial
audits does not qualify as a low-risk auditee, unless agreed to in
advance by the cognizant or oversight agency for audit.

\(b\) The auditor's opinions on the financial statements and the
schedule of expenditures of Federal awards were unqualified. However,
the cognizant or oversight agency for audit may judge that an opinion
qualification does not affect the management of Federal awards and
provide a waiver.

\(c\) There were no deficiencies in internal control, which were
identified as material weaknesses under the requirements of GAGAS.
However, the cognizant or oversight agency for audit may judge that any
identified material weaknesses do not affect the management of Federal
awards and provide a waiver.

\(d\) None of the Federal programs had audit findings from any of the
following in either of the preceding two years (or, in the case of
biennial audits, preceding two audit periods) in which they were
classified as Type A programs:

\(1\) Internal control deficiencies which were identified as material
weaknesses;

\(2\) Noncompliance with the provisions of laws, regulations, contracts,
or grant agreements which have a material effect on the Type A program;
or

\(3\) Known or likely questioned costs that exceed five percent of the
total Federal awards expended for a Type A program during the year.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

## Next section is Part 41, Appendix A

**Appendix A to Part 41---Data Collection Form (Form SF-SAC)**

**Note**: Data Collection Form SF-SAC and instructions for its
completion may be obtained from the following Web page:
*http://harvester.census.gov/fac/collect/sfsac_01.pdf*. It is also
available from the address provided in §41.320(i).

## Next section is Part 41, Appendix B

**Appendix B to Part 41---OMB Circular A-133 Compliance Supplement**

**Note**: OMB Circular A-133 Compliance is available on the OMB home
page at *http://www.whitehouse.gov/omb/grants/grants_circulars.html*.

## End of Part 41 

Reserved

**Part 49**

**Uniform Administrative Requirements**

**for Grants and Agreements with**

**Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations**

**Part 49**

**Uniform Administrative Requirements for Grants and Agreements**

**with Institutions of Higher Education, Hospitals,**

**and other Non-Profit Organizations**

**Authority**: 5 U.S.C. 301; 38 U.S.C. 501, OMB Circular A-110 (2 CFR
part 215),

and as noted in specific sections.

**Source**: 70 FR 52261, September 1, 2005, unless otherwise noted.

**--- Section Title Index ---**

**After-the-Award Requirements**

Closeout procedures 49.71-1

Collection of amounts due 49.73-1

Purpose 49.70-1

Subsequent adjustments and continuing responsibilities 49.72-1

**General**

Definitions 49.2-1

Deviations 49.4-1

Effect on other issuances 49.3-1

Purpose 49.1-1

Subawards 49.5-1

**Post-Award Requirements**

***Financial and Program Management***

Allowable costs 49.27-1

Conditional exemptions 49.29-1

Cost sharing or matching 49.23-1

Non-Federal audits 49.26-1

Payment 49.22-1

Period of availability of funds 49.28-1

Program income 49.24-1

Purpose of financial and program management 49.20-1

Revision of budget and program plans 49.25-1

Standards for financial management systems 49.21-1

***Procurement Standards***

Codes of conduct 49.42-1

Competition 49.43-1

Contract administration 49.47-1

Contract provisions 49.48-1

Cost and price analysis 49.45-1

Procurement procedures 49.44-1

Procurement records 49.46-1

Purpose of procurement standards 49.40-1

Recipient responsibilities 49.41-1

> ***Property Standards***

Equipment 49.34-1

Federally-owned and exempt property 49.33-1

Insurance coverage 49.31-1

Intangible property 49.36-1

Property trust relationship 49.37-1

Purpose of property standards 49.30-1

Real property 49.32-1

Supplies and other expendable property 49.35-1

***Reports and Records***

Financial reporting 49.52-1

Monitoring and reporting program performance 49.51-1

Purpose of reports and records 49.50-1

Retention and access requirements for records 49.53-1

***Termination and Enforcement***

Enforcement 49.62-1

Purpose of termination and enforcement 49.60-1

Termination 49.61-1

**Pre-Award Requirements**

Purpose 49.10-1

Pre-award policies 49.11-1

Forms for applying for Federal assistance 49.12-1

Debarment and suspension 49.13-1

Special award conditions 49.14-1

Metric system of measurement 49.15-1

Resource Conservation and Recovery Act 49.16-1

Certifications and representations 49.17-1

Appendix A to Part 49---Contract Provisions 49.App-1

**Part 49**

**Uniform Administrative Requirements for Grants and Agreements**

**with Institutions of Higher Education, Hospitals,**

**and other Non-Profit Organizations**

**Authority**: 5 U.S.C. 301; 38 U.S.C. 501, OMB Circular A-110 (2 CFR
part 215),

and as noted in specific sections.

**Source**: 70 FR 52261, September 1, 2005, unless otherwise noted.

**Subpart A---General**

**§49.1 Purpose.**

This part establishes uniform administrative requirements for Federal
grants and agreements awarded to institutions of higher education,
hospitals, and other non-profit organizations. Federal awarding agencies
shall not impose additional or inconsistent requirements, except as
provided in §§49.4, and 49.14 or unless specifically required by Federal
statute or executive order. Non-profit organizations that implement
Federal programs for the States are also subject to State requirements.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.2 Definitions.**

\(a\) *Accrued expenditures* means the charges incurred by the recipient
during a given period requiring the provision of funds for:

> \(1\) Goods and other tangible property received;
>
> \(2\) Services performed by employees, contractors, subrecipients, and
> other payees; and,
>
> \(3\) Other amounts becoming owed under programs for which no current
> services or performance is required.

\(b\) *Accrued income* means the sum of:

> \(1\) Earnings during a given period from:
>
> \(i\) Services performed by the recipient, and
>
> \(ii\) Goods and other tangible property delivered to purchasers, and
>
> \(2\) Amounts becoming owed to the recipient for which no current
> services or performance is required by the recipient.

\(c\) *Acquisition cost of equipment* means the net invoice price of the
equipment, including the cost of modifications, attachments,
accessories, or auxiliary apparatus necessary to make the property
usable for the purpose for which it was acquired. Other charges, such as
the cost of installation, transportation, taxes, duty or protective
in-transit insurance, shall be included or excluded from the unit
acquisition cost in accordance with the recipient's regular accounting
practices.

\(d\) *Advance* means a payment made by Treasury check or other
appropriate payment mechanism to a recipient upon its request either
before outlays are made by the recipient or through the use of
predetermined payment schedules.

\(e\) *Award* means financial assistance that provides support or
stimulation to accomplish a public purpose. Awards include grants and
other agreements in the form of money or property in lieu of money, by
the Federal Government to an eligible recipient. The term does not
include: technical assistance, which provides services instead of money;
other assistance in the form of loans, loan guarantees, interest
subsidies, or insurance; direct payments of any kind to individuals;
and, contracts which are required to be entered into and administered
under procurement laws and regulations.

\(f\) *Cash contributions* means the recipient's cash outlay, including
the outlay of money contributed to the recipient by third parties.

\(g\) *Closeout* means the process by which a Federal awarding agency
determines that all applicable administrative actions and all required
work of the award have been completed by the recipient and Federal
awarding agency.

\(h\) *Contract* means a procurement contract under an award or
subaward, and a procurement subcontract under a recipient's or
subrecipient's contract.

\(i\) *Cost sharing or matching* means that portion of project or
program costs not borne by the Federal Government.

\(j\) *Date of completion* means the date on which all work under an
award is completed or the date on the award document, or any supplement
or amendment thereto, on which Federal sponsorship ends.

\(k\) *Disallowed costs* means those charges to an award that the
Federal awarding agency determines to be unallowable, in accordance with
the applicable Federal cost principles or other terms and conditions
contained in the award.

\(l\) *Equipment* means tangible nonexpendable personal property
including exempt property charged directly to the award having a useful
life of more than one year and an acquisition cost of \$5000 or more per
unit. However, consistent with recipient policy, lower limits may be
established.

\(m\) *Excess property* means property under the control of any Federal
awarding agency that, as determined by the head thereof, is no longer
required for its needs or the discharge of its responsibilities.

\(n\) *Exempt property* means tangible personal property acquired in
whole or in part with Federal funds, where the Federal awarding agency
has statutory authority to vest title in the recipient without further
obligation to the Federal Government. An example of exempt property
authority is contained in the Federal Grant and Cooperative Agreement
Act (31 U.S.C. 6306), for property acquired under an award to conduct
basic or applied research by a non-profit institution of higher
education or non-profit organization whose principal purpose is
conducting scientific research.

\(o\) *Federal awarding agency* means the Federal agency that provides
an award to the recipient.

\(p\) *Federal funds authorized* means the total amount of Federal funds
obligated by the Federal Government for use by the recipient. This
amount may include any authorized carryover of unobligated funds from
prior funding periods when permitted by agency regulations or agency
implementing instructions.

\(q\) *Federal share of real property, equipment, or supplies* means
that percentage of the property's acquisition costs and any improvement
expenditures paid with Federal funds.

\(r\) *Funding period* means the period of time when Federal funding is
available for obligation by the recipient.

\(s\) *Intangible property and debt instruments* means, but is not
limited to, trademarks, copyrights, patents and patent applications and
such property as loans, notes and other debt instruments, lease
agreements, stock and other instruments of property ownership, whether
considered tangible or intangible.

\(t\) *Obligations* means the amounts of orders placed, contracts and
grants awarded, services received and similar transactions during a
given period that require payment by the recipient during the same or a
future period.

\(u\) *Outlays or expenditures* means charges made to the project or
program. They may be reported on a cash or accrual basis. For reports
prepared on a cash basis, outlays are the sum of cash disbursements for
direct charges for goods and services, the amount of indirect expense
charged, the value of third party in-kind contributions applied and the
amount of cash advances and payments made to subrecipients. For reports
prepared on an accrual basis, outlays are the sum of cash disbursements
for direct charges for goods and services, the amount of indirect
expense incurred, the value of in-kind contributions applied, and the
net increase (or decrease) in the amounts owed by the recipient for
goods and other property received, for services performed by employees,
contractors, subrecipients and other payees and other amounts becoming
owed under programs for which no current services or performance are
required.

\(v\) *Personal property* means property of any kind except real
property. It may be tangible, having physical existence, or intangible,
having no physical existence, such as copyrights, patents, or
securities.

\(w\) *Prior approval* means written approval by an authorized official
evidencing prior consent.

\(x\) *Program income* means gross income earned by the recipient that
is directly generated by a supported activity or earned as a result of
the award (see exclusions in §49.24 (e) and (h)). Program income
includes, but is not limited to, income from fees for services
performed, the use or rental of real or personal property acquired under
federally-funded projects, the sale of commodities or items fabricated
under an award, license fees and royalties on patents and copyrights,
and interest on loans made with award funds. Interest earned on advances
of Federal funds is not program income. Except as otherwise provided in
Federal awarding agency regulations or the terms and conditions of the
award, program income does not include the receipt of principal on
loans, rebates, credits, discounts, etc., or interest earned on any of
them.

\(y\) *Project costs* means all allowable costs, as set forth in the
applicable Federal cost principles, incurred by a recipient and the
value of the contributions made by third parties in accomplishing the
objectives of the award during the project period.

\(z\) *Project period* means the period established in the award
document during which Federal sponsorship begins and ends.

(aa) *Property* means, unless otherwise stated, real property,
equipment, intangible property and debt instruments.

(bb) *Real property* means land, including land improvements, structures
and appurtenances thereto, but excludes movable machinery and equipment.

\(cc\) *Recipient* means an organization receiving financial assistance
directly from Federal awarding agencies to carry out a project or
program. The term includes public and private institutions of higher
education, public and private hospitals, and other quasi-public and
private non-profit organizations such as, but not limited to, community
action agencies, research institutes, educational associations, and
health centers. The term may include commercial organizations, foreign
or international organizations (such as agencies of the United Nations)
which are recipients, subrecipients, or contractors or subcontractors of
recipients or subrecipients at the discretion of the Federal awarding
agency. The term does not include government-owned contractor-operated
facilities or research centers providing continued support for
mission-oriented, large-scale programs that are government-owned or
controlled, or are designated as federally-funded research and
development centers.

(dd) *Research and development* means all research activities, both
basic and applied, and all development activities that are supported at
universities, colleges, and other non-profit institutions. "Research" is
defined as a systematic study directed toward fuller scientific
knowledge or understanding of the subject studied. "Development" is the
systematic use of knowledge and understanding gained from research
directed toward the production of useful materials, devices, systems, or
methods, including design and development of prototypes and processes.
The term research also includes activities involving the training of
individuals in research techniques where such activities utilize the
same facilities as other research and development activities and where
such activities are not included in the instruction function.

(ee) *Small awards* means a grant or cooperative agreement not exceeding
the small purchase threshold fixed at 41 U.S.C. 403(11) (\$100,000).

(ff) *Subaward* means an award of financial assistance in the form of
money, or property in lieu of money, made under an award by a recipient
to an eligible subrecipient or by a subrecipient to a lower tier
subrecipient. The term includes financial assistance when provided by
any legal agreement, even if the agreement is called a contract, but
does not include procurement of goods and services nor does it include
any form of assistance, which is excluded from the definition of "award"
in paragraph (e) of this section.

(gg) *Subrecipient* means the legal entity to which a subaward is made
and which is accountable to the recipient for the use of the funds
provided. The term may include foreign or international organizations
(such as agencies of the United Nations) at the discretion of the
Federal awarding agency.

(hh) *Supplies* means all personal property excluding equipment,
intangible property, and debt instruments as defined in this section,
and inventions of a contractor conceived or first actually reduced to
practice in the performance of work under a funding agreement ("subject
inventions"), as defined in 37 CFR 401.2(d)

\(ii\) *Suspension* means an action by a Federal awarding agency that
temporarily withdraws Federal sponsorship under an award, pending
corrective action by the recipient or pending a decision to terminate
the award by the Federal awarding agency. Suspension of an award is a
separate action from suspension under Federal agency regulations
implementing E.O.s 12549 and 12689, "Debarment and Suspension."

(jj) *Termination* means the cancellation of Federal sponsorship, in
whole or in part, under an agreement at any time prior to the date of
completion.

(kk) *Third party in-kind contributions* means the value of non-cash
contributions provided by non-Federal third parties. Third party in-kind
contributions may be in the form of real property, equipment, supplies
and other expendable property, and the value of goods and services
directly benefiting and specifically identifiable to the project or
program.

(ll) *Unliquidated obligations, for financial reports prepared on a cash
basis,* means the amount of obligations incurred by the recipient that
have not been paid. For reports prepared on an accrued expenditure
basis, they represent the amount of obligations incurred by the
recipient for which an outlay has not been recorded.

\(mm\) *Unobligated balance* means the portion of the funds authorized
by the Federal awarding agency that has not been obligated by the
recipient and is determined by deducting the cumulative obligations from
the cumulative funds authorized.

(nn) *Unrecovered indirect cost* means the difference between the amount
awarded and the amount, which could have been awarded under the
recipient's approved negotiated indirect cost rate.

(oo) *Working capital advance* means a procedure where by funds are
advanced to the recipient to cover its estimated disbursement needs for
a given initial period. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.3 Effect on other issuances.**

For awards subject to this part, all administrative requirements of
codified program regulations, program manuals, handbooks and other
nonregulatory materials which are inconsistent with the requirements of
this part shall be superseded, except to the extent they are required by
statute, or authorized in accordance with the deviations provision in
§49.4. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.4 Deviations.**

The Office of Management and Budget (OMB) may grant exceptions for
classes of grants or recipients subject to the requirements of this part
when exceptions are not prohibited by statute. However, in the interest
of maximum uniformity, exceptions from the requirements of this part
shall be permitted only in unusual circumstances. Federal awarding
agencies may apply more restrictive requirements to a class of
recipients when approved by OMB. Federal awarding agencies may apply
less restrictive requirements when awarding small awards, except for
those requirements, which are statutory. Exceptions on a case-by-case
basis may also be made by Federal awarding agencies. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.5 Subawards.**

Unless sections of this part specifically exclude subrecipients from
coverage, the provisions of this part shall be applied to subrecipients
performing work under awards if such subrecipients are institutions of
higher education, hospitals or other non-profit organizations. State and
local government subrecipients are subject to the provisions of
regulations in part 43 of this chapter. (Authority: Pub. L. 104-156; 110
Stat. 1396)

*Next Section is §49.10*

**Subpart B---Pre-Award Requirements**

**§49.10 Purpose.**

Sections 49.11 through 49.17 prescribes forms and instructions and other
pre-award matters to be used in applying for Federal awards. (Authority:
Pub. L. 104-156; 110 Stat. 1396)

**§49.11 Pre-award policies.**

\(a\) *Use of grants and cooperative agreements, and contracts*. In each
instance, the Federal awarding agency shall decide on the appropriate
award instrument (i.e., grant, cooperative agreement, or contract). The
Federal Grant and Cooperative Agreement Act (31 U.S.C. 6301-08) governs
the use of grants, cooperative agreements and contracts. A grant or
cooperative agreement shall be used only when the principal purpose of a
transaction is to accomplish a public purpose of support or stimulation
authorized by Federal statute. The statutory criterion for choosing
between grants and cooperative agreements is that for the latter,
"substantial involvement is expected between the executive agency and
the State, local government, or other recipient when carrying out the
activity contemplated in the agreement." Contracts shall be used when
the principal purpose is acquisition of property or services for the
direct benefit or use of the Federal Government.

\(b\) *Public notice and priority setting*. Federal awarding agencies
shall notify the public of its intended funding priorities for
discretionary grant programs, unless funding priorities are established
by Federal statute. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.12 Forms for applying for Federal assistance.**

\(a\) Federal awarding agencies shall comply with the applicable report
clearance requirements of 5 CFR part 1320, "Controlling Paperwork
Burdens on the Public," with regard to all forms used by the Federal
awarding agency in place of or as a supplement to the Standard Form 424
(SF-424) series.

\(b\) Applicants shall use the SF-424 series or those forms and
instructions prescribed by the Federal awarding agency.

\(c\) For Federal programs covered by E.O. 12372, "Intergovernmental
Review of Federal Programs," the applicant shall complete the
appropriate sections of the SF-424 (Application for Federal Assistance)
indicating whether the application was subject to review by the State
Single Point of Contact (SPOC). The name and address of the SPOC for a
particular State can be obtained from the Federal awarding agency or the
Catalog of Federal Domestic Assistance. The SPOC shall advise the
applicant whether the program for which application is made has been
selected by that State for review.

\(d\) Federal awarding agencies that do not use the SF-424 form should
indicate whether the application is subject to review by the State under
E.O. 12372. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.13 Debarment and suspension.**

Federal awarding agencies and recipients shall comply with part 44 of
this chapter, which restricts subawards and contracts with certain
parties that are debarred, suspended or otherwise excluded from or
ineligible for participation in Federal assistance programs or
activities. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.14 Special award conditions.**

If an applicant or recipient has a history of poor performance, is not
financially stable, has a management system that does not meet the
standards prescribed in this part, has not conformed to the terms and
conditions of a previous award, or is not otherwise responsible, Federal
awarding agencies may impose additional requirements as needed, provided
that such applicant or recipient is notified in writing as to: the
nature of the additional requirements, the reason why the additional
requirements are being imposed, the nature of the corrective action
needed, the time allowed for completing the corrective actions, and the
method for requesting reconsideration of the additional requirements
imposed. Any special conditions shall be promptly removed once the
conditions that prompted them have been corrected. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.15 Metric system of measurement.**

The Metric Conversion Act, as amended by the Omnibus Trade and
Competitiveness Act (15 U.S.C. 205) declares that the metric system is
the preferred measurement system for U.S. trade and commerce. The Act
requires each Federal agency to establish a date or dates in
consultation with the Secretary of Commerce, when the metric system of
measurement will be used in the agency's procurements, grants, and other
business-related activities. Metric implementation may take longer where
the use of the system is initially impractical or likely to cause
significant inefficiencies in the accomplishment of federally-funded
activities. Federal awarding agencies shall follow the provisions of
E.O. 12770, "Metric Usage in Federal Government Programs." (Authority:
Pub. L. 104-156; 110 Stat. 1396)

**§49.16 Resource Conservation and Recovery Act (RCRA).**

Under the RCRA (Pub. L. 94-580, codified at 42 U.S.C. 6962), any State
agency or agency of a political subdivision of a State which is using
appropriated Federal funds must comply with Section 6002. Section 6002
requires that preference be given in procurement programs to the
purchase of specific products containing recycled materials identified
in guidelines developed by the Environmental Protection Agency (EPA) (40
CFR parts 247-254). Accordingly, State and local institutions of higher
education, hospitals, and non-profit organizations that receive direct
Federal awards or other Federal funds shall give preference in their
procurement programs funded with Federal funds to the purchase of
recycled products pursuant to the EPA guidelines. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.17 Certifications and representations.**

Unless prohibited by statute or codified regulation, each Federal
awarding agency is authorized and encouraged to allow recipients to
submit certifications and representations required by statute, executive
order, or regulation on an annual basis, if the recipients have ongoing
and continuing relationships with the agency. Annual certifications and
representations shall be signed by responsible officials with the
authority to ensure recipients' compliance with the pertinent
requirements. (Authority: Pub. L. 104-156; 110 Stat. 1396)

*Next Section is §49.20*

**Subpart C---Post-Award Requirements**

***Financial and Program Management***

**§49.20 Purpose of financial and program management.**

Sections 49.21 through 49.28 prescribe standards for financial
management systems, methods for making payments and rules for:
satisfying cost sharing and matching requirements, accounting for
program income, budget revision approvals, making audits, determining
allowability of cost, and establishing fund availability. (Authority:
Pub. L. 104-156; 110 Stat. 1396)

**§49.21 Standards for financial management systems.**

\(a\) Federal awarding agencies shall require recipients to relate
financial data to performance data and develop unit cost information
whenever practical.

\(b\) Recipients' financial management systems shall provide for the
following.

\(1\) Accurate, current and complete disclosure of the financial results
of each federally-sponsored project or program in accordance with the
reporting requirements set forth in §49.52. If a Federal awarding agency
requires reporting on an accrual basis from a recipient that maintains
its records on other than an accrual basis, the recipient shall not be
required to establish an accrual accounting system. These recipients may
develop such accrual data for its reports on the basis of an analysis of
the documentation on hand.

\(2\) Records that identify adequately the source and application of
funds for federally-sponsored activities. These records shall contain
information pertaining to Federal awards, authorizations, obligations,
unobligated balances, assets, outlays, income and interest.

\(3\) Effective control over and accountability for all funds, property
and other assets. Recipients shall adequately safeguard all such assets
and assure they are used solely for authorized purposes.

\(4\) Comparison of outlays with budget amounts for each award. Whenever
appropriate, financial information should be related to performance and
unit cost data.

\(5\) Written procedures to minimize the time elapsing between the
transfer of funds to the recipient from the U.S. Treasury and the
issuance or redemption of checks, warrants or payments by other means
for program purposes by the recipient. To the extent that the provisions
of the Cash Management Improvement Act (CMIA) (Pub. L. 101-453) govern,
payment methods of State agencies, instrumentalities, and fiscal agents
shall be consistent with CMIA Treasury-State Agreements or the CMIA
default procedures codified at 31 CFR part 205, "Withdrawal of Cash from
the Treasury for Advances under Federal Grant and Other Programs."

\(6\) Written procedures for determining the reasonableness,
allocability and allowability of costs in accordance with the provisions
of the applicable Federal cost principles and the terms and conditions
of the award.

\(7\) Accounting records including cost accounting records that are
supported by source documentation.

\(c\) Where the Federal Government guarantees or insures the repayment
of money borrowed by the recipient, the Federal awarding agency, at its
discretion, may require adequate bonding and insurance if the bonding
and insurance requirements of the recipient are not deemed adequate to
protect the interest of the Federal Government.

\(d\) The Federal awarding agency may require adequate fidelity bond
coverage where the recipient lacks sufficient coverage to protect the
Federal Government's interest.

\(e\) Where bonds are required in the situations described in paragraphs
(a) through (d) of this section, the bonds shall be obtained from
companies holding certificates of authority as acceptable sureties, as
prescribed in 31 CFR part 223, "Surety Companies Doing Business with the
United States." (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.22 Payment.**

\(a\) Payment methods shall minimize the time elapsing between the
transfer of funds from the United States Treasury and the issuance or
redemption of checks, warrants, or payment by other means by the
recipients. Payment methods of State agencies or instrumentalities shall
be consistent with Treasury-State CMIA agreements or default procedures
codified at 31 CFR part 205.

\(b\) Recipients are to be paid in advance, provided they maintain or
demonstrate the willingness to maintain written procedures that minimize
the time elapsing between the transfer of funds and disbursement by the
recipient, and financial management systems that meet the standards for
fund control and accountability as established in §49.21. Cash advances
to a recipient organization shall be limited to the minimum amounts
needed and be timed to be in accordance with the actual, immediate cash
requirements of the recipient organization in carrying out the purpose
of the approved program or project. The timing and amount of cash
advances shall be as close as is administratively feasible to the actual
disbursements by the recipient organization for direct program or
project costs and the proportionate share of any allowable indirect
costs.

\(c\) Whenever possible, advances shall be consolidated to cover
anticipated cash needs for all awards made by the Federal awarding
agency to the recipient.

\(1\) Advance payment mechanisms include, but are not limited to,
Treasury check and electronic funds transfer.

\(2\) Advance payment mechanisms are subject to 31 CFR part 205.

\(3\) Recipients shall be authorized to submit requests for advances and
reimbursements at least monthly when electronic fund transfers are not
used.

\(d\) Requests for Treasury check advance payment shall be submitted on
SF-270, "Request for Advance or Reimbursement," or other forms as may be
authorized by OMB. This form is not to be used when Treasury check
advance payments are made to the recipient automatically through the use
of a predetermined payment schedule or if precluded by special Federal
awarding agency instructions for electronic funds transfer.

\(e\) Reimbursement is the preferred method when the requirements in
paragraph (b) of this section cannot be met. Federal awarding agencies
may also use this method on any construction agreement, or if the major
portion of the construction project is accomplished through private
market financing or Federal loans, and the Federal assistance
constitutes a minor portion of the project.

\(1\) When the reimbursement method is used, the Federal awarding agency
shall make payment within 30 days after receipt of the billing, unless
the billing is improper.

\(2\) Recipients shall be authorized to submit request for reimbursement
at least monthly when electronic funds transfers are not used.

\(f\) If a recipient cannot meet the criteria for advance payments and
the Federal awarding agency has determined that reimbursement is not
feasible because the recipient lacks sufficient working capital, the
Federal awarding agency may provide cash on a working capital advance
basis. Under this procedure, the Federal awarding agency shall advance
cash to the recipient to cover its estimated disbursement needs for an
initial period generally geared to the awardee's disbursing cycle.
Thereafter, the Federal awarding agency shall reimburse the recipient
for its actual cash disbursements. The working capital advance method of
payment shall not be used for recipients unwilling or unable to provide
timely advances to their subrecipient to meet the subrecipient's actual
cash disbursements.

\(g\) To the extent available, recipients shall disburse funds available
from repayments to and interest earned on a revolving fund, program
income, rebates, refunds, contract settlements, audit recoveries and
interest earned on such funds before requesting additional cash
payments.

\(h\) Unless otherwise required by statute, Federal awarding agencies
shall not withhold payments for proper charges made by recipients at any
time during the project period unless either of the following conditions
apply.

\(1\) A recipient has failed to comply with the project objectives, the
terms and conditions of the award, or Federal reporting requirements.

\(2\) The recipient or subrecipient is delinquent in a debt to the
United States as defined in OMB Circular A-129, "Managing Federal Credit
Programs." Under such conditions, the Federal awarding agency may, upon
reasonable notice, inform the recipient that payments shall not be made
for obligations incurred after a specified date until the conditions are
corrected or the indebtedness to the Federal Government is liquidated.

\(i\) Standards governing the use of banks and other institutions as
depositories of funds advanced under awards are as follows.

\(1\) Except for situations described in paragraph (i)(2) of this
section, Federal awarding agencies shall not require separate depository
accounts for funds provided to a recipient or establish any eligibility
requirements for depositories for funds provided to a recipient.
However, recipients must be able to account for the receipt, obligation
and expenditure of funds.

\(2\) Advances of Federal funds shall be deposited and maintained in
insured accounts whenever possible.

\(j\) Consistent with the national goal of expanding the opportunities
for women-owned and minority-owned business enterprises, recipients
shall be encouraged to use women-owned and minority-owned banks (a bank
which is owned at least 50 percent by women or minority group members).

\(k\) Recipients shall maintain advances of Federal funds in interest
bearing accounts, unless any of the following conditions apply.

\(1\) The recipient receives less than \$120,000 in Federal awards per
year.

\(2\) The best reasonably available interest bearing account would not
be expected to earn interest in excess of \$250 per year on Federal cash
balances.

\(3\) The depository would require an average or minimum balance so high
that it would not be feasible within the expected Federal and
non-Federal cash resources.

\(l\) For those entities where CMIA and its implementing regulations do
not apply, interest earned on Federal advances deposited in interest
bearing accounts shall be remitted annually to Department of Health and
Human Services, Payment Management System, Rockville, MD 20852. Interest
amounts up to \$250 per year may be retained by the recipient for
administrative expense. State universities and hospitals shall comply
with CMIA, as it pertains to interest. If an entity subject to CMIA uses
its own funds to pay pre-award costs for discretionary awards without
prior written approval from the Federal awarding agency, it waives its
right to recover the interest under CMIA.

\(m\) Except as noted elsewhere in this part, only the following forms
shall be authorized for the recipients in requesting advances and
reimbursements. Federal agencies shall not require more than an original
and two copies of these forms.

\(1\) SF-270, Request for Advance or Reimbursement. Each Federal
awarding agency shall adopt the SF-270 as a standard form for all
nonconstruction programs when electronic funds transfer or predetermined
advance methods are not used. Federal awarding agencies, however, have
the option of using this form for construction programs in lieu of the
SF-271, "Outlay Report and Request for Reimbursement for Construction
Programs."

\(2\) SF-271, Outlay Report and Request for Reimbursement for
Construction Programs. Each Federal awarding agency shall adopt the
SF-271 as the standard form to be used for requesting reimbursement for
construction programs. However, a Federal awarding agency may substitute
the SF-270 when the Federal awarding agency determines that it provides
adequate information to meet Federal needs. (Authority: Pub. L. 104-156;
110 Stat. 1396)

**§49.23 Cost sharing or matching.**

\(a\) All contributions, including cash and third party in-kind, shall
be accepted as part of the recipient's cost sharing or matching when
such contributions meet all of the following criteria.

> \(1\) Are verifiable from the recipient's records.
>
> \(2\) Are not included as contributions for any other
> federally-assisted project or program.
>
> \(3\) Are necessary and reasonable for proper and efficient
> accomplishment of project or program objectives.
>
> \(4\) Are allowable under the applicable cost principles.
>
> \(5\) Are not paid by the Federal Government under another award,
> except where authorized by Federal statute to be used for cost sharing
> or matching.
>
> \(6\) Are provided for in the approved budget when required by the
> Federal awarding agency.
>
> \(7\) Conform to other provisions of this part, as applicable.

\(b\) Unrecovered indirect costs may be included as part of cost sharing
or matching only with the prior approval of the Federal awarding agency.

\(c\) Values for recipient contributions of services and property shall
be established in accordance with the applicable cost principles. If a
Federal awarding agency authorizes recipients to donate buildings or
land for construction/facilities acquisition projects or long-term use,
the value of the donated property for cost sharing or matching shall be
the lesser of the following.

\(1\) The certified value of the remaining life of the property recorded
in the recipient's accounting records at the time of donation.

\(2\) The current fair market value. However, when there is sufficient
justification, the Federal awarding agency may approve the use of the
current fair market value of the donated property, even if it exceeds
the certified value at the time of donation to the project.

\(d\) Volunteer services furnished by professional and technical
personnel, consultants, and other skilled and unskilled labor may be
counted as cost sharing or matching if the service is an integral and
necessary part of an approved project or program. Rates for volunteer
services shall be consistent with those paid for similar work in the
recipient's organization. In those instances in which the required
skills are not found in the recipient organization, rates shall be
consistent with those paid for similar work in the labor market in which
the recipient competes for the kind of services involved. In either
case, paid fringe benefits that are reasonable, allowable, and allocable
may be included in the valuation.

\(e\) When an employer other than the recipient furnishes the services
of an employee, these services shall be valued at the employee's regular
rate of pay (plus an amount of fringe benefits that are reasonable,
allowable, and allocable, but exclusive of overhead costs), provided
these services are in the same skill for which the employee is normally
paid.

\(f\) Donated supplies may include such items as expendable equipment,
office supplies, laboratory supplies or workshop and classroom supplies.
Value assessed to donated supplies included in the cost sharing or
matching share shall be reasonable and shall not exceed the fair market
value of the property at the time of the donation.

\(g\) The method used for determining cost sharing or matching for
donated equipment, buildings and land for which title passes to the
recipient may differ according to the purpose of the award, if either of
the following conditions apply.

\(1\) If the purpose of the award is to assist the recipient in the
acquisition of equipment, buildings or land, the total value of the
donated property may be claimed as cost sharing or matching.

\(2\) If the purpose of the award is to support activities that require
the use of equipment, buildings or land, normally only depreciation or
use charges for equipment and buildings may be made. However, the full
value of equipment or other capital assets and fair rental charges for
land may be allowed, provided that the Federal awarding agency has
approved the charges.

\(h\) The value of donated property shall be determined in accordance
with the usual accounting policies of the recipient, with the following
qualifications.

\(1\) The value of donated land and buildings shall not exceed its fair
market value at the time of donation to the recipient as established by
an independent appraiser (e.g., certified real property appraiser or
General Services Administration representative) and certified by a
responsible official of the recipient.

\(2\) The value of donated equipment shall not exceed the fair market
value of equipment of the same age and condition at the time of
donation.

\(3\) The value of donated space shall not exceed the fair rental value
of comparable space as established by an independent appraisal of
comparable space and facilities in a privately-owned building in the
same locality.

\(4\) The value of loaned equipment shall not exceed its fair rental
value.

\(5\) The following requirements pertain to the recipient's supporting
records for in-kind contributions from third parties.

\(i\) Volunteer services shall be documented and, to the extent
feasible, supported by the same methods used by the recipient for its
own employees.

\(ii\) The basis for determining the valuation for personal service,
material, equipment, buildings and land shall be documented. (Authority:
Pub. L. 104-156; 110 Stat. 1396)

**§49.24 Program income.**

\(a\) Federal awarding agencies shall apply the standards set forth in
this section in requiring recipient organizations to account for program
income related to projects financed in whole or in part with Federal
funds.

\(b\) Except as provided in paragraph (h) of this section, program
income earned during the project period shall be retained by the
recipient and, in accordance with Federal awarding agency regulations or
the terms and conditions of the award, shall be used in one or more of
the ways listed in the following:

\(1\) Added to funds committed to the project by the Federal awarding
agency and recipient and used to further eligible project or program
objectives.

\(2\) Used to finance the non-Federal share of the project or program.

\(3\) Deducted from the total project or program allowable cost in
determining the net allowable costs on which the Federal share of costs
is based.

\(c\) When an agency authorizes the disposition of program income as
described in paragraphs (b)(1) or (b)(2) of this section, program income
in excess of any limits stipulated shall be used in accordance with
paragraph (b)(3) of this section.

\(d\) In the event that the Federal awarding agency does not specify in
its regulations or the terms and conditions of the award how program
income is to be used, paragraph (b)(3) of this section shall apply
automatically to all projects or programs except research. For awards
that support research, paragraph (b)(1) of this section shall apply
automatically unless the awarding agency indicates in the terms and
conditions another alternative on the award or the recipient is subject
to special award conditions, as indicated in §49.14.

\(e\) Unless Federal awarding agency regulations or the terms and
conditions of the award provide otherwise, recipients shall have no
obligation to the Federal Government regarding program income earned
after the end of the project period.

\(f\) If authorized by Federal awarding agency regulations or the terms
and conditions of the award, costs incident to the generation of program
income may be deducted from gross income to determine program income,
provided these costs have not been charged to the award.

\(g\) Proceeds from the sale of property shall be handled in accordance
with the requirements of the Property Standards (See §§49.30 through
49.37).

\(h\) Unless Federal awarding agency regulations or the terms and
condition of the award provide otherwise, recipients shall have no
obligation to the Federal Government with respect to program income
earned from license fees and royalties for copyrighted material,
patents, patent applications, trademarks, and inventions produced under
an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply
to inventions made under an experimental, developmental, or research
award. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.25 Revision of budget and program plans.**

\(a\) The budget plan is the financial expression of the project or
program as approved during the award process. It may include either the
Federal and non-Federal share, or only the Federal share, depending upon
Federal awarding agency requirements. It shall be related to performance
for program evaluation purposes whenever appropriate.

\(b\) Recipients are required to report deviations from budget and
program plans, and request prior approvals for budget and program plan
revisions, in accordance with this section.

\(c\) For nonconstruction awards, recipients shall request prior
approvals from Federal awarding agencies for one or more of the
following program or budget related reasons.

\(1\) Change in the scope or the objective of the project or program
(even if there is no associated budget revision requiring prior written
approval).

\(2\) Change in a key person specified in the application or award
document.

\(3\) The absence for more than three months, or a 25 percent reduction
in time devoted to the project, by the approved project director or
principal investigator.

\(4\) The need for additional Federal funding.

\(5\) The transfer of amounts budgeted for indirect costs to absorb
increases in direct costs, or vice versa, if approval is required by the
Federal awarding agency.

\(6\) The inclusion, unless waived by the Federal awarding agency, of
costs that require prior approval in accordance with OMB Circular A-21,
"Cost Principles for Educational Institutions," OMB Circular A-122,
"Cost Principles for Non-Profit Organizations," or 45 CFR part 74
Appendix E, "Principles for Determining Costs Applicable to Research and
Development under Grants and Contracts with Hospitals," or 48 CFR part
31, "Contract Cost Principles and Procedures," as applicable.

\(7\) The transfer of funds allotted for training allowances (direct
payment to trainees) to other categories of expense.

\(8\) Unless described in the application and funded in the approved
awards, the subaward, transfer or contracting out of any work under an
award. This provision does not apply to the purchase of supplies,
material, equipment or general support services.

\(d\) No other prior approval requirements for specific items may be
imposed unless a deviation has been approved by OMB.

\(e\) Except for requirements listed in paragraphs (c)(1) and (c)(4) of
this section, Federal awarding agencies are authorized, at their option,
to waive cost-related and administrative prior written approvals
required by this part and OMB Circulars A-21 and A-122. Such waivers may
include authorizing recipients to do any one or more of the following.

\(1\) Incur pre-award costs 90 calendar days prior to award or more than
90 calendar days with the prior approval of the Federal awarding agency.
All pre-award costs are incurred at the recipient's risk (i.e., the
Federal awarding agency is under no obligation to reimburse such costs
if for any reason the recipient does not receive an award or if the
award is less than anticipated and inadequate to cover such costs).

\(2\) Initiate a one-time extension of the expiration date of the award
of up to 12 months unless one or more of the following conditions apply.
For one-time extensions, the recipient must notify the Federal awarding
agency in writing with the supporting reasons and revised expiration
date at least 10 days before the expiration date specified in the award.
This one-time extension may not be exercised merely for the purpose of
using unobligated balances.

> \(i\) The terms and conditions of award prohibit the extension.
>
> \(ii\) The extension requires additional Federal funds.
>
> \(iii\) The extension involves any change in the approved objectives
> or scope of the project.

\(3\) Carry forward unobligated balances to subsequent funding periods.

\(4\) For awards that support research, unless the Federal awarding
agency provides otherwise in the award or in the agency's regulations,
the prior approval requirements described in paragraph (e) of this
section are automatically waived (i.e., recipients need not obtain such
prior approvals) unless one of the conditions included in paragraph
(e)(2) of this section applies.

\(f\) The Federal awarding agency may, at its option, restrict the
transfer of funds among direct cost categories or programs, functions
and activities for awards in which the Federal share of the project
exceeds \$100,000 and the cumulative amount of such transfers exceeds or
is expected to exceed 10 percent of the total budget as last approved by
the Federal awarding agency. No Federal awarding agency shall permit a
transfer that would cause any Federal appropriation or part thereof to
be used for purposes other than those consistent with the original
intent of the appropriation.

\(g\) All other changes to nonconstruction budgets, except for the
changes described in paragraph (j) of this section, do not require prior
approval.

\(h\) For construction awards, recipients shall request prior written
approval promptly from Federal awarding agencies for budget revisions
whenever any of the following conditions apply.

\(1\) The revision results from changes in the scope or the objective of
the project or program.

\(2\) The need arises for additional Federal funds to complete the
project.

\(3\) A revision is desired which involves specific costs for which
prior written approval requirements may be imposed consistent with
applicable OMB cost principles listed in §49.27.

\(i\) No other prior approval requirements for specific items may be
imposed unless a deviation has been approved by OMB.

\(j\) When a Federal awarding agency makes an award that provides
support for both construction and nonconstruction work, the Federal
awarding agency may require the recipient to request prior approval from
the Federal awarding agency before making any fund or budget transfers
between the two types of work supported.

\(k\) For both construction and nonconstruction awards, Federal awarding
agencies shall require recipients to notify the Federal awarding agency
in writing promptly whenever the amount of Federal authorized funds is
expected to exceed the needs of the recipient for the project period by
more than \$5000 or five percent of the Federal award, whichever is
greater. This notification shall not be required if an application for
additional funding is submitted for a continuation award.

\(l\) When requesting approval for budget revisions, recipients shall
use the budget forms that were used in the application unless the
Federal awarding agency indicates a letter of request suffices.

\(m\) Within 30 calendar days from the date of receipt of the request
for budget revisions, Federal awarding agencies shall review the request
and notify the recipient whether the budget revisions have been
approved. If the revision is still under consideration at the end of 30
calendar days, the Federal awarding agency shall inform the recipient in
writing of the date when the recipient may expect the decision.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.26 Non-Federal audits.**

\(a\) Recipients and subrecipients that are institutions of higher
education or other non-profit organizations (including hospitals) shall
be subject to the audit requirements contained in the Single Audit Act
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-133,
"Audits of States, Local Governments, and Non-Profit Organizations."

\(b\) State and local governments shall be subject to the audit
requirements contained in the Single Audit Act Amendments of 1996 (31
U.S.C. 7501-7507) and revised OMB Circular A-133, "Audits of States,
Local Governments, and Non-Profit Organizations."

\(c\) For-profit hospitals not covered by the audit provisions of
revised OMB Circular A-133 shall be subject to the audit requirements of
the Federal awarding agencies.

\(d\) Commercial organizations shall be subject to the audit
requirements of the Federal awarding agency or the prime recipient as
incorporated into the award document. (Authority: Pub. L. 104-156; 110
Stat. 1396)

**§49.27 Allowable costs.**

For each kind of recipient, there is a set of Federal principles for
determining allowable costs. Allowability of costs shall be determined
in accordance with the cost principles applicable to the entity
incurring the costs. Thus, allowability of costs incurred by State,
local or federally-recognized Indian tribal governments is determined in
accordance with the provisions of OMB Circular A-87, "Cost Principles
for State, Local, and Indian Tribal Governments." The allowability of
costs incurred by non-profit organizations is determined in accordance
with the provisions of OMB Circular A-122, "Cost Principles for
Non-Profit Organizations." The allowability of costs incurred by
institutions of higher education is determined in accordance with the
provisions of OMB Circular A-21, "Cost Principles for Educational
Institutions." The allowability of costs incurred by hospitals is
determined in accordance with the provisions of Appendix E of 45 CFR
part 74, "Principles for Determining Costs Applicable to Research and
Development Under Grants and Contracts with Hospitals." The allowability
of costs incurred by commercial organizations and those non-profit
organizations listed in Attachment C to Circular A-122 is determined in
accordance with the provisions of the Federal Acquisition Regulation
(FAR) at 48 CFR part 31. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.28 Period of availability of funds.**

Where a funding period is specified, a recipient may charge to the grant
only allowable costs resulting from obligations incurred during the
funding period and any pre-award costs authorized by the Federal
awarding agency. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.29 Conditional exemptions.**

\(a\) OMB authorizes conditional exemption from OMB administrative
requirements and cost principles circulars for certain Federal programs
with statutorily-authorized consolidated planning and consolidated
administrative funding, that are identified by a Federal agency and
approved by the head of the Executive department or establishment. A
Federal agency shall consult with OMB during its consideration of
whether to grant such an exemption.

\(b\) To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have specific
statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these covered
State-administered, non-entitlement grant programs from certain OMB
grants management requirements. The exemptions would be from all but the
allocability of costs provisions of OMB Circulars A-87 (Attachment A,
subsection C.3), "Cost Principles for State, Local, and Indian Tribal
Governments," A-21 (Section C, subpart 4), "Cost Principles for
Educational Institutions," and A-122 (Attachment A, subsection A.4),
"Cost Principles for Non-Profit Organizations," and from all of the
administrative requirements provisions of OMB Circular A-110, "Uniform
Administrative Requirements for Grants and Agreements with Institutions
of Higher Education, Hospitals, and Other Non-Profit Organizations," and
part 43 of this chapter.

\(c\) When a Federal agency provides this flexibility, as a prerequisite
to a State's exercising this option, a State must adopt its own written
fiscal and administrative requirements for expending and accounting for
all funds, which are consistent with the provisions of OMB Circular
A-87, and extend such policies to all subrecipients. These fiscal and
administrative requirements must be sufficiently specific to ensure
that: Funds are used in compliance with all applicable Federal statutory
and regulatory provisions, costs are reasonable and necessary for
operating these programs, and funds are not be used for general expenses
required to carry out other responsibilities of a State or its
subrecipients. (Authority: Pub. L. 104-156; 110 Stat. 1396)

***Property Standards***

**§49.30 Purpose of property standards.**

Sections 49.31 through 49.37 set forth uniform standards governing
management and disposition of property furnished by the Federal
Government whose cost was charged to a project supported by a Federal
award. Federal awarding agencies shall require recipients to observe
these standards under awards and shall not impose additional
requirements, unless specifically required by Federal statute. The
recipient may use its own property management standards and procedures
provided it observes the provisions of §§49.31 through 49.37.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.31 Insurance coverage.**

Recipients shall, at a minimum, provide the equivalent insurance
coverage for real property and equipment acquired with Federal funds as
provided to property owned by the recipient. Federally-owned property
need not be insured unless required by the terms and conditions of the
award. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.32 Real property.**

Each Federal awarding agency shall prescribe requirements for recipients
concerning the use and disposition of real property acquired in whole or
in part under awards. Unless otherwise provided by statute, such
requirements, at a minimum, shall contain the following:

\(a\) Title to real property shall vest in the recipient subject to the
condition that the recipient shall use the real property for the
authorized purpose of the project as long as it is needed and shall not
encumber the property without approval of the Federal awarding agency.

\(b\) The recipient shall obtain written approval by the Federal
awarding agency for the use of real property in other
federally-sponsored projects when the recipient determines that the
property is no longer needed for the purpose of the original project.
Use in other projects shall be limited to those under
federally-sponsored projects (i.e., awards) or programs that have
purposes consistent with those authorized for support by the Federal
awarding agency.

\(c\) When the real property is no longer needed as provided in
paragraphs (a) and (b) of this section, the recipient shall request
disposition instructions from the Federal awarding agency or its
successor Federal awarding agency. The Federal awarding agency shall
observe one or more of the following disposition instructions.

\(1\) The recipient may be permitted to retain title without further
obligation to the Federal Government after it compensates the Federal
Government for that percentage of the current fair market value of the
property attributable to the Federal participation in the project.

\(2\) The recipient may be directed to sell the property under
guidelines provided by the Federal awarding agency and pay the Federal
Government for that percentage of the current fair market value of the
property attributable to the Federal participation in the project (after
deducting actual and reasonable selling and fix-up expenses, if any,
from the sales proceeds). When the recipient is authorized or required
to sell the property, proper sales procedures shall be established that
provide for competition to the extent practicable and result in the
highest possible return.

\(3\) The recipient may be directed to transfer title to the property to
the Federal Government or to an eligible third party provided that, in
such cases, the recipient shall be entitled to compensation for its
attributable percentage of the current fair market value of the
property. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.33 Federally-owned and exempt property.**

\(a\) *Federally-owned property*.

\(1\) Title to federally-owned property remains vested in the Federal
Government. Recipients shall submit annually an inventory listing of
federally-owned property in their custody to the Federal awarding
agency. Upon completion of the award or when the property is no longer
needed, the recipient shall report the property to the Federal awarding
agency for further Federal agency utilization.

\(2\) If the Federal awarding agency has no further need for the
property, it shall be declared excess and reported to the General
Services Administration, unless the Federal awarding agency has
statutory authority to dispose of the property by alternative methods
(e.g., the authority provided by the Federal Technology Transfer Act (15
U.S.C. 3710(I)) to donate research equipment to educational and
non-profit organizations in accordance with E.O. 12821, "Improving
Mathematics and Science Education in Support of the National Education
Goals.") Appropriate instructions shall be issued to the recipient by
the Federal awarding agency.

\(b\) *Exempt property*. When statutory authority exists, the Federal
awarding agency has the option to vest title to property acquired with
Federal funds in the recipient without further obligation to the Federal
Government and under conditions the Federal awarding agency considers
appropriate. Such property is "exempt property." Should a Federal
awarding agency not establish conditions, title to exempt property upon
acquisition shall vest in the recipient without further obligation to
the Federal Government. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.34 Equipment.**

\(a\) Title to equipment acquired by a recipient with Federal funds
shall vest in the recipient, subject to conditions of this section.

\(b\) The recipient shall not use equipment acquired with Federal funds
to provide services to non-Federal outside organizations for a fee that
is less than private companies charge for equivalent services, unless
specifically authorized by Federal statute, for as long as the Federal
Government retains an interest in the equipment.

\(c\) The recipient shall use the equipment in the project or program
for which it was acquired as long as needed, whether or not the project
or program continues to be supported by Federal funds and shall not
encumber the property without approval of the Federal awarding agency.
When no longer needed for the original project or program, the recipient
shall use the equipment in connection with its other federally-sponsored
activities, in the following order of priority:

\(1\) Activities sponsored by the Federal awarding agency, which funded
the original project, then

\(2\) Activities sponsored by other Federal awarding agencies.

\(d\) During the time that equipment is used on the project or program
for which it was acquired, the recipient shall make it available for use
on other projects or programs if such other use will not interfere with
the work on the project or program for which the equipment was
originally acquired. First preference for such other use shall be given
to other projects or programs sponsored by the Federal awarding agency
that financed the equipment; second preference shall be given to
projects or programs sponsored by other Federal awarding agencies. If
the equipment is owned by the Federal Government, use on other
activities not sponsored by the Federal Government shall be permissible
if authorized by the Federal awarding agency. User charges shall be
treated as program income.

\(e\) When acquiring replacement equipment, the recipient may use the
equipment to be replaced as trade-in or sell the equipment and use the
proceeds to offset the costs of the replacement equipment subject to the
approval of the Federal awarding agency.

\(f\) The recipient's property management standards for equipment
acquired with Federal funds and federally-owned equipment shall include
all of the following.

\(1\) Equipment records shall be maintained accurately and shall include
the following information.

\(i\) A description of the equipment.

\(ii\) Manufacturer's serial number, model number, Federal stock number,
national stock number, or other identification number.

\(iii\) Source of the equipment, including the award number.

\(iv\) Whether title vests in the recipient or the Federal Government.

\(v\) Acquisition date (or date received, if the equipment was furnished
by the Federal Government) and cost.

\(vi\) Information from which one can calculate the percentage of
Federal participation in the cost of the equipment (not applicable to
equipment furnished by the Federal Government).

\(vii\) Location and condition of the equipment and the date the
information was reported.

\(viii\) Unit acquisition cost.

\(ix\) Ultimate disposition data, including date of disposal and sales
price or the method used to determine current fair market value where a
recipient compensates the Federal awarding agency for its share.

\(2\) Equipment owned by the Federal Government shall be identified to
indicate Federal ownership.

\(3\) A physical inventory of equipment shall be taken and the results
reconciled with the equipment records at least once every two years. Any
differences between quantities determined by the physical inspection and
those shown in the accounting records shall be investigated to determine
the causes of the difference. The recipient shall, in connection with
the inventory, verify the existence, current utilization, and continued
need for the equipment.

\(4\) A control system shall be in effect to insure adequate safeguards
to prevent loss, damage, or theft of the equipment. Any loss, damage, or
theft of equipment shall be investigated and fully documented; if the
equipment was owned by the Federal Government, the recipient shall
promptly notify the Federal awarding agency.

\(5\) Adequate maintenance procedures shall be implemented to keep the
equipment in good condition.

\(6\) Where the recipient is authorized or required to sell the
equipment, proper sales procedures shall be established which provide
for competition to the extent practicable and result in the highest
possible return.

\(g\) When the recipient no longer needs the equipment, the equipment
may be used for other activities in accordance with the following
standards. For equipment with a current per unit fair market value of
\$5000 or more, the recipient may retain the equipment for other uses
provided that compensation is made to the original Federal awarding
agency or its successor. The amount of compensation shall be computed by
applying the percentage of Federal participation in the cost of the
original project or program to the current fair market value of the
equipment. If the recipient has no need for the equipment, the recipient
shall request disposition instructions from the Federal awarding agency.
The Federal awarding agency shall determine whether the equipment can be
used to meet the agency's requirements. If no requirement exists within
that agency, the availability of the equipment shall be reported to the
General Services Administration by the Federal awarding agency to
determine whether a requirement for the equipment exists in other
Federal agencies. The Federal awarding agency shall issue instructions
to the recipient no later than 120 calendar days after the recipient's
request and the following procedures shall govern.

\(1\) If so instructed or if disposition instructions are not issued
within 120 calendar days after the recipient's request, the recipient
shall sell the equipment and reimburse the Federal awarding agency an
amount computed by applying to the sales proceeds the percentage of
Federal participation in the cost of the original project or program.
However, the recipient shall be permitted to deduct and retain from the
Federal share \$500 or ten percent of the proceeds, whichever is less,
for the recipient's selling and handling expenses.

\(2\) If the recipient is instructed to ship the equipment elsewhere,
the recipient shall be reimbursed by the Federal Government by an amount
which is computed by applying the percentage of the recipient's
participation in the cost of the original project or program to the
current fair market value of the equipment, plus any reasonable shipping
or interim storage costs incurred.

\(3\) If the recipient is instructed to otherwise dispose of the
equipment, the recipient shall be reimbursed by the Federal awarding
agency for such costs incurred in its disposition.

\(4\) The Federal awarding agency may reserve the right to transfer the
title to the Federal Government or to a third party named by the Federal
Government when such third party is otherwise eligible under existing
statutes. Such transfer shall be subject to the following standards.

\(i\) The equipment shall be appropriately identified in the award or
otherwise made known to the recipient in writing.

\(ii\) The Federal awarding agency shall issue disposition instructions
within 120 calendar days after receipt of a final inventory. The final
inventory shall list all equipment acquired with grant funds and
federally-owned equipment. If the Federal awarding agency fails to issue
disposition instructions within the 120 calendar day period, the
recipient shall apply the standards of this section, as appropriate.

\(iii\) When the Federal awarding agency exercises its right to take
title, the equipment shall be subject to the provisions for
federally-owned equipment. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.35 Supplies and other expendable property.**

\(a\) Title to supplies and other expendable property shall vest in the
recipient upon acquisition. If there is a residual inventory of unused
supplies exceeding \$5000 in total aggregate value upon termination or
completion of the project or program and the supplies are not needed for
any other federally-sponsored project or program, the recipient shall
retain the supplies for use on non-Federal sponsored activities or sell
them, but shall, in either case, compensate the Federal Government for
its share. The amount of compensation shall be computed in the same
manner as for equipment.

\(b\) The recipient shall not use supplies acquired with Federal funds
to provide services to non-Federal outside organizations for a fee that
is less than private companies charge for equivalent services, unless
specifically authorized by Federal statute as long as the Federal
Government retains an interest in the supplies. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.36 Intangible property.**

\(a\) The recipient may copyright any work that is subject to copyright
and was developed, or for which ownership was purchased, under an award.
The Federal awarding agency(ies) reserve a royalty-free, nonexclusive
and irrevocable right to reproduce, publish, or otherwise use the work
for Federal purposes, and to authorize others to do so.

\(b\) Recipients are subject to applicable regulations governing patents
and inventions, including government-wide regulations issued by the
Department of Commerce at 37 CFR part 401, "Rights to Inventions Made by
Nonprofit Organizations and Small Business Firms Under Government
Grants, Contracts and Cooperative Agreements."

\(c\) The Federal Government has the right to:

> \(1\) Obtain, reproduce, publish or otherwise use the data first
> produced under an award; and
>
> \(2\) Authorize others to receive, reproduce, publish, or otherwise
> use such data for Federal purposes.

\(d\) (1) In addition, in response to a Freedom of Information Act
(FOIA) request for research data relating to published research findings
produced under an award that were used by the Federal Government in
developing an agency action that has the force and effect of law, the
Federal awarding agency shall request, and the recipient shall provide,
within a reasonable time, the research data so that they can be made
available to the public through the procedures established under the
FOIA. If the Federal awarding agency obtains the research data solely in
response to an FOIA request, the agency may charge the requester a
reasonable fee equaling the full incremental cost of obtaining the
research data. This fee should reflect costs incurred by the agency, the
recipient, and applicable subrecipients. This fee is in addition to any
fees the agency may assess under the FOIA (5 U.S.C. 522(a)(4)(A)).

\(2\) The following definitions apply for purposes of paragraph (d) of
this section:

\(i\) Research data is defined as the recorded factual material commonly
accepted in the scientific community as necessary to validate research
findings, but not any of the following: preliminary analyses, drafts of
scientific papers, plans for future research, peer reviews, or
communications with colleagues. This "recorded" material excludes
physical objects (e.g., laboratory samples). Research data also do not
include:

\(A\) Trade secrets, commercial information, materials necessary to be
held confidential by a researcher until they are published, or similar
information which is protected under law; and

\(B\) Personnel and medical information and similar information the
disclosure of which would constitute a clearly unwarranted invasion of
personal privacy, such as information that could be used to identify a
particular person in a research study.

\(ii\) Published is defined as either when:

\(A\) Research findings are published in a peer-reviewed scientific or
technical journal; or

\(B\) A Federal agency publicly and officially cites the research
findings in support of an agency action that has the force and effect of
law.

\(iii\) Used by the Federal Government in developing an agency action
that has the force and effect of law is defined as when an agency
publicly and officially cites the research findings in support of an
agency action that has the force and effect of law.

\(e\) Title to intangible property and debt instruments acquired under
an award or subaward vests upon acquisition in the recipient. The
recipient shall use that property for the originally-authorized purpose,
and the recipient shall not encumber the property without approval of
the Federal awarding agency. When no longer needed for the originally
authorized purpose, disposition of the intangible property shall occur
in accordance with the provisions of §49.34(g). (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.37 Property trust relationship.**

Real property, equipment, intangible property and debt instruments that
are acquired or improved with Federal funds shall be held in trust by
the recipient as trustee for the beneficiaries of the project or program
under which the property was acquired or improved. Agencies may require
recipients to record liens or other appropriate notices of record to
indicate that personal or real property has been acquired or improved
with Federal funds and that use and disposition conditions apply to the
property. (Authority: Pub. L. 104-156; 110 Stat. 1396)

*Next Section is §49.40*

***Procurement Standards***

**§49.40 Purpose of procurement standards.**

Sections 49.41 through 49.48 set forth standards for use by recipients
in establishing procedures for the procurement of supplies and other
expendable property, equipment, real property and other services with
Federal funds. These standards are furnished to ensure that such
materials and services are obtained in an effective manner and in
compliance with the provisions of applicable Federal statutes and
executive orders. No additional procurement standards or requirements
shall be imposed by the Federal awarding agencies upon recipients,
unless specifically required by Federal statute or executive order or
approved by OMB. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.41 Recipient responsibilities.**

The standards contained in §§49.41 through 49.48 do not relieve the
recipient of the contractual responsibilities arising under its
contract(s). The recipient is the responsible authority, without
recourse to the Federal awarding agency, regarding the settlement and
satisfaction of all contractual and administrative issues arising out of
procurements entered into in support of an award or other agreement.
This includes disputes, claims, protests of award, source evaluation or
other matters of a contractual nature. Matters concerning violation of
statute are to be referred to such Federal, State or local authority as
may have proper jurisdiction. (Authority: Pub. L. 104-156; 110 Stat.
1396)

**§49.42 Codes of conduct.**

The recipient shall maintain written standards of conduct governing the
performance of its employees engaged in the award and administration of
contracts. No employee, officer, or agent shall participate in the
selection, award, or administration of a contract supported by Federal
funds if a real or apparent conflict of interest would be involved. Such
a conflict would arise when the employee, officer, or agent, any member
of his or her immediate family, his or her partner, or an organization
which employs or is about to employ any of the parties indicated herein,
has a financial or other interest in the firm selected for an award. The
officers, employees, and agents of the recipient shall neither solicit
nor accept gratuities, favors, or anything of monetary value from
contractors, or parties to subagreements. However, recipients may set
standards for situations in which the financial interest is not
substantial or the gift is an unsolicited item of nominal value. The
standards of conduct shall provide for disciplinary actions to be
applied for violations of such standards by officers, employees, or
agents of the recipient. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.43 Competition.**

All procurement transactions shall be conducted in a manner to provide,
to the maximum extent practical, open and free competition. The
recipient shall be alert to organizational conflicts of interest as well
as noncompetitive practices among contractors that may restrict or
eliminate competition or otherwise restrain trade. In order to ensure
objective contractor performance and eliminate unfair competitive
advantage, contractors that develop or draft specifications,
requirements, statements of work, invitations for bids and/or requests
for proposals shall be excluded from competing for such procurements.
Awards shall be made to the bidder or offeror whose bid or offer is
responsive to the solicitation and is most advantageous to the
recipient, price, quality and other factors considered. Solicitations
shall clearly set forth all requirements that the bidder or offeror
shall fulfill in order for the bid or offer to be evaluated by the
recipient. Any and all bids or offers may be rejected when it is in the
recipient's interest to do so. (Authority: Pub. L. 104-156; 110 Stat.
1396)

**§49.44 Procurement procedures.**

\(a\) All recipients shall establish written procurement procedures.
These procedures shall provide for, at a minimum, that all of the
following conditions apply.

\(1\) Recipients avoid purchasing unnecessary items.

\(2\) Where appropriate, an analysis is made of lease and purchase
alternatives to determine which would be the most economical and
practical procurement for the Federal Government.

\(3\) Solicitations for goods and services provide for all of the
following.

\(i\) A clear and accurate description of the technical requirements for
the material, product or service to be procured. In competitive
procurements, such a description shall not contain features, which
unduly restrict competition.

\(ii\) Requirements, which the bidder/offeror must fulfill, and all
other factors to be used in evaluating bids or proposals.

\(iii\) A description, whenever practicable, of technical requirements
in terms of functions to be performed or performance required, including
the range of acceptable characteristics or minimum acceptable standards.

\(iv\) The specific features of "brand name or equal" descriptions that
bidders are required to meet when such items are included in the
solicitation.

\(v\) The acceptance, to the extent practicable and economically
feasible, of products and services dimensioned in the metric system of
measurement.

\(vi\) Preference, to the extent practicable and economically feasible,
for products and services that conserve natural resources and protect
the environment and are energy efficient.

\(b\) Positive efforts shall be made by recipients to utilize small
businesses, minority-owned firms, and women's business enterprises,
whenever possible. Recipients of Federal awards shall take all of the
following steps to further this goal.

\(1\) Ensure that small businesses, minority-owned firms, and women's
business enterprises are used to the fullest extent practicable.

\(2\) Make information on forthcoming opportunities available and
arrange time frames for purchases and contracts to encourage and
facilitate participation by small businesses, minority-owned firms, and
women's business enterprises.

\(3\) Consider in the contract process whether firms competing for
larger contracts intend to subcontract with small businesses,
minority-owned firms, and women's business enterprises.

\(4\) Encourage contracting with consortiums of small businesses,
minority-owned firms and women's business enterprises when a contract is
too large for one of these firms to handle individually.

\(5\) Use the services and assistance, as appropriate, of such
organizations as the Small Business Administration and the Department of
Commerce's Minority Business Development Agency in the solicitation and
utilization of small businesses, minority-owned firms and women's
business enterprises.

\(c\) The type of procuring instruments used (e.g., fixed price
contracts, cost reimbursable contracts, purchase orders, and incentive
contracts) shall be determined by the recipient but shall be appropriate
for the particular procurement and for promoting the best interest of
the program or project involved. The "cost-plus-a-percentage-of-cost" or
"percentage of construction cost" methods of contracting shall not be
used.

\(d\) Contracts shall be made only with responsible contractors who
possess the potential ability to perform successfully under the terms
and conditions of the proposed procurement. Consideration shall be given
to such matters as contractor integrity, record of past performance,
financial and technical resources or accessibility to other necessary
resources. In certain circumstances, contracts with certain parties are
restricted by agencies' implementation of E.O.s 12549 and 12689,
"Debarment and Suspension."

\(e\) Recipients shall, on request, make available for the Federal
awarding agency, pre-award review and procurement documents, such as
request for proposals or invitations for bids, independent cost
estimates, etc., when any of the following conditions apply.

\(1\) A recipient's procurement procedures or operation fails to comply
with the procurement standards in the Federal awarding agency's
implementation of this part.

\(2\) The procurement is expected to exceed the small purchase threshold
fixed at 41 U.S.C. 403 (11) (currently \$25,000) and is to be awarded
without competition or only one bid or offer is received in response to
a solicitation.

\(3\) The procurement, which is expected to exceed the small purchase
threshold, specifies a "brand name" product.

\(4\) The proposed award over the small purchase threshold is to be
awarded to other than the apparent low bidder under a sealed bid
procurement.

\(5\) A proposed contract modification changes the scope of a contract
or increases the contract amount by more than the amount of the small
purchase threshold. (Authority: Pub. L. 104-156; 110 Stat. 1396

**§49.45 Cost and price analysis.**

Some form of cost or price analysis shall be made and documented in the
procurement files in connection with every procurement action. Price
analysis may be accomplished in various ways, including the comparison
of price quotations submitted, market prices and similar indicia,
together with discounts. Cost analysis is the review and evaluation of
each element of cost to determine reasonableness, allocability and
allowability. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.46 Procurement records.**

Procurement records and files for purchases in excess of the small
purchase threshold shall include the following at a minimum:

> \(a\) Basis for contractor selection,
>
> \(b\) Justification for lack of competition when competitive bids or
> offers are not obtained, and
>
> \(c\) Basis for award cost or price. (Authority: Pub. L. 104-156; 110
> Stat. 1396)

**§49.47 Contract administration.**

A system for contract administration shall be maintained to ensure
contractor conformance with the terms, conditions and specifications of
the contract and to ensure adequate and timely follow up of all
purchases. Recipients shall evaluate contractor performance and
document, as appropriate, whether contractors have met the terms,
conditions and specifications of the contract. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.48 Contract provisions.**

The recipient shall include, in addition to provisions to define a sound
and complete agreement, the following provisions in all contracts. The
following provisions shall also be applied to subcontracts.

\(a\) Contracts in excess of the small purchase threshold shall contain
contractual provisions or conditions that allow for administrative,
contractual, or legal remedies in instances in which a contractor
violates or breaches the contract terms, and provide for such remedial
actions as may be appropriate.

\(b\) All contracts in excess of the small purchase threshold shall
contain suitable provisions for termination by the recipient, including
the manner by which termination shall be effected and the basis for
settlement. In addition, such contracts shall describe conditions under
which the contract may be terminated for default as well as conditions
where the contract may be terminated because of circumstances beyond the
control of the contractor.

\(c\) Except as otherwise required by statute, an award that requires
the contracting (or subcontracting) for construction or facility
improvements shall provide for the recipient to follow its own
requirements relating to bid guarantees, performance bonds, and payment
bonds unless the construction contract or subcontract exceeds \$100,000.
For those contracts or subcontracts exceeding \$100,000, the Federal
awarding agency may accept the bonding policy and requirements of the
recipient, provided the Federal awarding agency has made a determination
that the Federal Government's interest is adequately protected. If such
a determination has not been made, the minimum requirements shall be as
follows.

\(1\) A bid guarantee from each bidder equivalent to five percent of the
bid price. The "bid guarantee" shall consist of a firm commitment such
as a bid bond, certified check, or other negotiable instrument
accompanying a bid as assurance that the bidder shall, upon acceptance
of his bid, execute such contractual documents as may be required within
the time specified.

\(2\) A performance bond on the part of the contractor for 100 percent
of the contract price. A "performance bond" is one executed in
connection with a contract to secure fulfillment of all the contractor's
obligations under such contract.

\(3\) A payment bond on the part of the contractor for 100 percent of
the contract price. A "payment bond" is one executed in connection with
a contract to assure payment as required by statute of all persons
supplying labor and material in the execution of the work provided for
in the contract.

\(4\) Where bonds are required in the situations described herein, the
bonds shall be obtained from companies holding certificates of authority
as acceptable sureties pursuant to 31 CFR part 223, "Surety Companies
Doing Business with the United States."

\(d\) All negotiated contracts (except those for less than the small
purchase threshold) awarded by recipients shall include a provision to
the effect that the recipient, the Federal awarding agency, the
Comptroller General of the United States, or any of their duly
authorized representatives, shall have access to any books, documents,
papers and records of the contractor which are directly pertinent to a
specific program for the purpose of making audits, examinations,
excerpts and transcriptions.

\(e\) All contracts, including small purchases, awarded by recipients
and their contractors shall contain the procurement provisions of
Appendix A to this part, as applicable. (Authority: Pub. L. 104-156; 110
Stat. 1396)

*Next Section is §49.50*

***Reports and Records***

**§49.50 Purpose of reports and records.**

Sections 49.51 through 49.53 set forth the procedures for monitoring and
reporting on the recipient's financial and program performance and the
necessary standard reporting forms. They also set forth record retention
requirements. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.51 Monitoring and reporting program performance.**

\(a\) Recipients are responsible for managing and monitoring each
project, program, subaward, function or activity supported by the award.
Recipients shall monitor subawards to ensure subrecipients have met the
audit requirements as delineated in §49.26.

\(b\) The Federal awarding agency shall prescribe the frequency with
which the performance reports shall be submitted. Except as provided in
§49.51(f) of this section, performance reports shall not be required
more frequently than quarterly or, less frequently than annually. Annual
reports shall be due 90 calendar days after the grant year; quarterly or
semi-annual reports shall be due 30 days after the reporting period. The
Federal awarding agency may require annual reports before the
anniversary dates of multiple year awards in lieu of these requirements.
The final performance reports are due 90 calendar days after the
expiration or termination of the award.

\(c\) If inappropriate, a final technical or performance report shall
not be required after completion of the project.

\(d\) When required, performance reports shall generally contain, for
each award, brief information on each of the following.

\(1\) A comparison of actual accomplishments with the goals and
objectives established for the period, the findings of the investigator,
or both. Whenever appropriate and the output of programs or projects can
be readily quantified, such quantitative data should be related to cost
data for computation of unit costs.

\(2\) Reasons why established goals were not met, if appropriate.

\(3\) Other pertinent information including, when appropriate, analysis
and explanation of cost overruns or high unit costs.

\(e\) Recipients shall not be required to submit more than the original
and two copies of performance reports.

\(f\) Recipients shall immediately notify the Federal awarding agency of
developments that have a significant impact on the award-supported
activities. Also, notification shall be given in the case of problems,
delays, or adverse conditions which materially impair the ability to
meet the objectives of the award. This notification shall include a
statement of the action taken or contemplated, and any assistance needed
to resolve the situation.

\(g\) Federal awarding agencies may make site visits, as needed.

\(h\) Federal awarding agencies shall comply with clearance requirements
of 5 CFR part 1320 when requesting performance data from recipients.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.52 Financial reporting.**

\(a\) The following forms or such other forms as may be approved by OMB
are authorized for obtaining financial information from recipients.

\(1\) SF-269 or SF-269A, Financial Status Report.

\(i\) Each Federal awarding agency shall require recipients to use the
SF-269 or SF-269A to report the status of funds for all nonconstruction
projects or programs. A Federal awarding agency may, however, have the
option of not requiring the SF-269 or SF-269A when the SF-270, Request
for Advance or Reimbursement, or SF-272, Report of Federal Cash
Transactions, is determined to provide adequate information to meet its
needs, except that a final SF-269 or SF-269A shall be required at the
completion of the project when the SF-270 is used only for advances.

\(ii\) The Federal awarding agency shall prescribe whether the report
shall be on a cash or accrual basis. If the Federal awarding agency
requires accrual information and the recipient's accounting records are
not normally kept on the accrual basis, the recipient shall not be
required to convert its accounting system, but shall develop such
accrual information through best estimates based on an analysis of the
documentation on hand.

\(iii\) The Federal awarding agency shall determine the frequency of the
Financial Status Report for each project or program, considering the
size and complexity of the particular project or program. However, the
report shall not be required more frequently than quarterly or less
frequently than annually. A final report shall be required at the
completion of the agreement.

\(iv\) The Federal awarding agency shall require recipients to submit
the SF-269 or SF-269A (an original and no more than two copies) no later
than 30 days after the end of each specified reporting period for
quarterly and semi-annual reports, and 90 calendar days for annual and
final reports. Extensions of reporting due dates may be approved by the
Federal awarding agency upon request of the recipient.

\(2\) SF-272, Report of Federal Cash Transactions.

\(i\) When funds are advanced to recipients the Federal awarding agency
shall require each recipient to submit the SF-272 and, when necessary,
its continuation sheet, SF-272a. The Federal awarding agency shall use
this report to monitor cash advanced to recipients and to obtain
disbursement information for each agreement with the recipients.

\(ii\) Federal awarding agencies may require forecasts of Federal cash
requirements in the "Remarks" section of the report.

\(iii\) When practical and deemed necessary, Federal awarding agencies
may require recipients to report in the "Remarks" section the amount of
cash advances received in excess of three days. Recipients shall provide
short narrative explanations of actions taken to reduce the excess
balances.

\(iv\) Recipients shall be required to submit not more than the original
and two copies of the SF-272 15 calendar days following the end of each
quarter. The Federal awarding agencies may require a monthly report from
those recipients receiving advances totaling \$1 million or more per
year.

\(v\) Federal awarding agencies may waive the requirement for submission
of the SF-272 for any one of the following reasons:

> \(A\) When monthly advances do not exceed \$25,000 per recipient,
> provided that such advances are monitored through other forms
> contained in this section;
>
> \(B\) If, in the Federal awarding agency's opinion, the recipient's
> accounting controls are adequate to minimize excessive Federal
> advances; or,
>
> \(C\) When the electronic payment mechanisms provide adequate data.

\(b\) When the Federal awarding agency needs additional information or
more frequent reports, the following shall be observed.

\(1\) When additional information is needed to comply with legislative
requirements, Federal awarding agencies shall issue instructions to
require recipients to submit such information under the "Remarks"
section of the reports.

\(2\) When a Federal awarding agency determines that a recipient's
accounting system does not meet the standards in §49.21, additional
pertinent information to further monitor awards may be obtained upon
written notice to the recipient until such time as the system is brought
up to standard. The Federal awarding agency, in obtaining this
information, shall comply with report clearance requirements of 5 CFR
part 1320.

\(3\) Federal awarding agencies are encouraged to shade out any line
item on any report if not necessary.

\(4\) Federal awarding agencies may accept the identical information
from the recipients in machine readable format or computer printouts or
electronic outputs in lieu of prescribed formats.

\(5\) Federal awarding agencies may provide computer or electronic
outputs to recipients when such expedites or contributes to the accuracy
of reporting. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.53 Retention and access requirements for records.**

\(a\) This section sets forth requirements for record retention and
access to records for awards to recipients. Federal awarding agencies
shall not impose any other record retention or access requirements upon
recipients.

\(b\) Financial records, supporting documents, statistical records, and
all other records pertinent to an award shall be retained for a period
of three years from the date of submission of the final expenditure
report or, for awards that are renewed quarterly or annually, from the
date of the submission of the quarterly or annual financial report, as
authorized by the Federal awarding agency. The only exceptions are the
following.

\(1\) If any litigation, claim, or audit is started before the
expiration of the 3-year period, the records shall be retained until all
litigation, claims or audit findings involving the records have been
resolved and final action taken.

\(2\) Records for real property and equipment acquired with Federal
funds shall be retained for 3 years after final disposition.

\(3\) When records are transferred to or maintained by the Federal
awarding agency, the 3-year retention requirement is not applicable to
the recipient.

\(4\) Indirect cost rate proposals, cost allocations plans, etc. as
specified in §49.53(g) of this section.

\(c\) Copies of original records may be substituted for the original
records if authorized by the Federal awarding agency.

\(d\) The Federal awarding agency shall request transfer of certain
records to its custody from recipients when it determines that the
records possess long term retention value. However, in order to avoid
duplicate recordkeeping, a Federal awarding agency may make arrangements
for recipients to retain any records that are continuously needed for
joint use.

\(e\) The Federal awarding agency, the Inspector General, Comptroller
General of the United States, or any of their duly authorized
representatives, have the right of timely and unrestricted access to any
books, documents, papers, or other records of recipients that are
pertinent to the awards, in order to make audits, examinations,
excerpts, transcripts and copies of such documents. This right also
includes timely and reasonable access to a recipient's personnel for the
purpose of interview and discussion related to such documents. The
rights of access in this paragraph are not limited to the required
retention period, but shall last as long as records are retained.

\(f\) Unless required by statute, no Federal awarding agency shall place
restrictions on recipients that limit public access to the records of
recipients that are pertinent to an award, except when the Federal
awarding agency can demonstrate that such records shall be kept
confidential and would have been exempted from disclosure pursuant to
the Freedom of Information Act (5 U.S.C. 552) if the records had
belonged to the Federal awarding agency.

\(g\) Indirect cost rate proposals, cost allocations plans, etc.
Paragraphs (g)(1) and (g)(2) of this section apply to the following
types of documents, and their supporting records: indirect cost rate
computations or proposals, cost allocation plans, and any similar
accounting computations of the rate at which a particular group of costs
is chargeable (such as computer usage chargeback rates or composite
fringe benefit rates).

\(1\) *If submitted for negotiation*. If the recipient submits to the
Federal awarding agency or the subrecipient submits to the recipient the
proposal, plan, or other computation to form the basis for negotiation
of the rate, then the 3-year retention period for its supporting records
starts on the date of such submission.

\(2\) *If not submitted for negotiation*. If the recipient is not
required to submit to the Federal awarding agency or the subrecipient is
not required to submit to the recipient the proposal, plan, or other
computation for negotiation purposes, then the 3-year retention period
for the proposal, plan, or other computation and its supporting records
starts at the end of the fiscal year (or other accounting period)
covered by the proposal, plan, or other computation. (Authority: Pub. L.
104-156; 110 Stat. 1396)

*Next Section is §49.60*

***Termination and Enforcement***

**§49.60 Purpose of termination and enforcement.**

Sections 49.61 and 49.62 set forth uniform suspension, termination and
enforcement procedures. (Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.61 Termination.**

\(a\) Awards may be terminated in whole or in part only if paragraphs
(a)(1), (a)(2) or (a)(3) of this section apply.

\(1\) By the Federal awarding agency, if a recipient materially fails to
comply with the terms and conditions of an award.

\(2\) By the Federal awarding agency with the consent of the recipient,
in which case the two parties shall agree upon the termination
conditions, including the effective date and, in the case of partial
termination, the portion to be terminated.

\(3\) By the recipient upon sending to the Federal awarding agency
written notification setting forth the reasons for such termination, the
effective date, and, in the case of partial termination, the portion to
be terminated. However, if the Federal awarding agency determines in the
case of partial termination that the reduced or modified portion of the
grant will not accomplish the purposes for which the grant was made, it
may terminate the grant in its entirety under either paragraphs (a)(1)
or (2) of this section.

\(b\) If costs are allowed under an award, the responsibilities of the
recipient referred to in §49.71(a), including those for property
management as applicable, shall be considered in the termination of the
award, and provision shall be made for continuing responsibilities of
the recipient after termination, as appropriate. (Authority: Pub. L.
104-156; 110 Stat. 1396)

**§49.62 Enforcement.**

\(a\) *Remedies for noncompliance*. If a recipient materially fails to
comply with the terms and conditions of an award, whether stated in a
Federal statute, regulation, assurance, application, or notice of award,
the Federal awarding agency may, in addition to imposing any of the
special conditions outlined in §49.14, take one or more of the following
actions, as appropriate in the circumstances.

\(1\) Temporarily withhold cash payments pending correction of the
deficiency by the recipient or more severe enforcement action by the
Federal awarding agency.

\(2\) Disallow (that is, deny both use of funds and any applicable
matching credit for) all or part of the cost of the activity or action
not in compliance.

\(3\) Wholly or partly suspend or terminate the current award.

\(4\) Withhold further awards for the project or program.

\(5\) Take other remedies that may be legally available.

\(b\) *Hearings and appeals*. In taking an enforcement action, the
awarding agency shall provide the recipient an opportunity for hearing,
appeal, or other administrative proceeding to which the recipient is
entitled under any statute or regulation applicable to the action
involved.

\(c\) *Effects of suspension and termination*. Costs of a recipient
resulting from obligations incurred by the recipient during a suspension
or after termination of an award are not allowable unless the awarding
agency expressly authorizes them in the notice of suspension or
termination or subsequently. Other recipient costs during suspension or
after termination, which are necessary and not reasonably avoidable, are
allowable if the following conditions apply.

\(1\) The costs result from obligations which were properly incurred by
the recipient before the effective date of suspension or termination,
are not in anticipation of it, and in the case of a termination, are
noncancellable.

\(2\) The costs would be allowable if the award were not suspended or
expired normally at the end of the funding period in which the
termination takes effect.

\(d\) *Relationship to debarment and suspension*. The enforcement
remedies identified in this section, including suspension and
termination, do not preclude a recipient from being subject to debarment
and suspension under E.O.s 12549 and 12689 and the Federal awarding
agency implementing regulations (see §49.13). (Authority: Pub. L.
104-156; 110 Stat. 1396)

*Next Section is §49.70*

**Subpart D---After-the-Award Requirements**

**§49.70 Purpose.**

Sections 49.71 through 49.73 contain closeout procedures and other
procedures for subsequent disallowances and adjustments. (Authority:
Pub. L. 104-156; 110 Stat. 1396)

**§49.71 Closeout procedures.**

\(a\) Recipients shall submit, within 90 calendar days after the date of
completion of the award, all financial, performance, and other reports
as required by the terms and conditions of the award. The Federal
awarding agency may approve extensions when requested by the recipient.

\(b\) Unless the Federal awarding agency authorizes an extension, a
recipient shall liquidate all obligations incurred under the award not
later than 90 calendar days after the funding period or the date of
completion as specified in the terms and conditions of the award or in
agency implementing instructions.

\(c\) The Federal awarding agency shall make prompt payments to a
recipient for allowable reimbursable costs under the award being closed
out.

\(d\) The recipient shall promptly refund any balances of unobligated
cash that the Federal awarding agency has advanced or paid and that is
not authorized to be retained by the recipient for use in other
projects. OMB Circular A-129 governs unreturned amounts that become
delinquent debts.

\(e\) When authorized by the terms and conditions of the award, the
Federal awarding agency shall make a settlement for any upward or
downward adjustments to the Federal share of costs after closeout
reports are received.

\(f\) The recipient shall account for any real and personal property
acquired with Federal funds or received from the Federal Government in
accordance with §§49.31 through 49.37.

\(g\) In the event a final audit has not been performed prior to the
closeout of an award, the Federal awarding agency shall retain the right
to recover an appropriate amount after fully considering the
recommendations on disallowed costs resulting from the final audit.
(Authority: Pub. L. 104-156, OMB Circular A-110)

**§49.72 Subsequent adjustments and continuing responsibilities.**

\(a\) The closeout of an award does not affect any of the following.

> \(1\) The right of the Federal awarding agency to disallow costs and
> recover funds on the basis of a later audit or other review.
>
> \(2\) The obligation of the recipient to return any funds due as a
> result of later refunds, corrections, or other transactions.
>
> \(3\) Audit requirements in §49.26.
>
> \(4\) Property management requirements in §§49.31 through 49.37.
>
> \(5\) Records retention as required in §49.53.

\(b\) After closeout of an award, a relationship created under an award
may be modified or ended in whole or in part with the consent of the
Federal awarding agency and the recipient, provided the responsibilities
of the recipient referred to in §49.73(a), including those for property
management as applicable, are considered and provisions made for
continuing responsibilities of the recipient, as appropriate.
(Authority: Pub. L. 104-156; 110 Stat. 1396)

**§49.73 Collection of amounts due.**

\(a\) Any funds paid to a recipient in excess of the amount to which the
recipient is finally determined to be entitled under the terms and
conditions of the award constitute a debt to the Federal Government. If
not paid within a reasonable period after the demand for payment, the
Federal awarding agency may reduce the debt by any of the following
methods.

\(1\) Making an administrative offset against other requests for
reimbursements.

\(2\) Withholding advance payments otherwise due to the recipient.

\(3\) Taking other action permitted by statute.

\(b\) Except as otherwise provided by law, the Federal awarding agency
shall charge interest on an overdue debt in accordance with 4 CFR
Chapter II, "Federal Claims Collection Standards." (Authority: Pub. L.
104-156; 110 Stat. 1396)

## Next Section is Part 49, Appendix A

**Appendix A to Part 49---Contract Provisions**

All contracts, awarded by a recipient including small purchases, shall
contain the following provisions as applicable:

1\. *Equal Employment Opportunity*---All contracts shall contain a
provision requiring compliance with E.O. 11246, "Equal Employment
Opportunity," as amended by E.O. 11375, "Amending Executive Order 11246
Relating to Equal Employment Opportunity," and as supplemented by
regulations at 41 CFR part 60, "Office of Federal Contract Compliance
Programs, Equal Employment Opportunity, Department of Labor."

2\. *Copeland "Anti-Kickback" Act (18 U.S.C. 874 and 40 U.S.C.
276c)*---All contracts and subgrants in excess of \$2000 for
construction or repair awarded by recipients and subrecipients shall
include a provision for compliance with the Copeland "Anti-Kickback" Act
(18 U.S.C. 874), as supplemented by Department of Labor regulations (29
CFR part 3, "Contractors and Subcontractors on Public Building or Public
Work Financed in Whole or in Part by Loans or Grants from the United
States"). The Act provides that each contractor or subrecipient shall be
prohibited from inducing, by any means, any person employed in the
construction, completion, or repair of public work, to give up any part
of the compensation to which he is otherwise entitled. The recipient
shall report all suspected or reported violations to the Federal
awarding agency.

3\. *Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)*---When
required by Federal program legislation, all construction contracts
awarded by the recipients and subrecipients of more than \$2000 shall
include a provision for compliance with the Davis-Bacon Act (40 U.S.C.
276a to a-7) and as supplemented by Department of Labor regulations (29
CFR part 5, "Labor Standards Provisions Applicable to Contracts
Governing Federally Financed and Assisted Construction"). Under this
Act, contractors shall be required to pay wages to laborers and
mechanics at a rate not less than the minimum wages specified in a wage
determination made by the Secretary of Labor. In addition, contractors
shall be required to pay wages not less than once a week. The recipient
shall place a copy of the current prevailing wage determination issued
by the Department of Labor in each solicitation and the award of a
contract shall be conditioned upon the acceptance of the wage
determination. The recipient shall report all suspected or reported
violations to the Federal awarding agency.

4\. *Contract Work Hours and Safety Standards Act (40 U.S.C.
327-333)*---Where applicable, all contracts awarded by recipients in
excess of \$2000 for construction contracts and in excess of \$2500 for
other contracts that involve the employment of mechanics or laborers
shall include a provision for compliance with Sections 102 and 107 of
the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as
supplemented by Department of Labor regulations (29 CFR part 5). Under
Section 102 of the Act, each contractor shall be required to compute the
wages of every mechanic and laborer on the basis of a standard work week
of 40 hours. Work in excess of the standard work week is permissible
provided that the worker is compensated at a rate of not less than 1-1/2
times the basic rate of pay for all hours worked in excess of 40 hours
in the work week. Section 107 of the Act is applicable to construction
work and provides that no laborer or mechanic shall be required to work
in surroundings or under working conditions, which are unsanitary,
hazardous or dangerous. These requirements do not apply to the purchases
of supplies or materials or articles ordinarily available on the open
market, or contracts for transportation or transmission of intelligence.

5\. *Rights to Inventions Made Under a Contract or
Agreement*---Contracts or agreements for the performance of
experimental, developmental, or research work shall provide for the
rights of the Federal Government and the recipient in any resulting
invention in accordance with 37 CFR part 401, "Rights to Inventions Made
by Nonprofit Organizations and Small Business Firms Under Government
Grants, Contracts and Cooperative Agreements," and any implementing
regulations issued by the awarding agency.

6\. *Clean Air Act (42 U.S.C. 7401, et seq.) and the Federal Water
Pollution Control Act (33 U.S.C. 1251, et seq.), as amended*---Contracts
and subgrants of amounts in excess of \$100,000 shall contain a
provision that requires the recipient to agree to comply with all
applicable standards, orders or regulations issued pursuant to the Clean
Air Act (42 U.S.C. 7401, *et seq*.) and the Federal Water Pollution
Control Act as amended (33 U.S.C. 1251, *et seq*.). Violations shall be
reported to the Federal awarding agency and the Regional Office of the
Environmental Protection Agency (EPA).

7\. *Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)*---Contractors who
apply or bid for an award of \$100,000 or more shall file the required
certification. Each tier certifies to the tier above that it will not
and has not used Federal appropriated funds to pay any person or
organization for influencing or attempting to influence an officer or
employee of any agency, a member of Congress, officer or employee of
Congress, or an employee of a member of Congress in connection with
obtaining any Federal contract, grant or any other award covered by 31
U.S.C. 1352. Each tier shall also disclose any lobbying with non-Federal
funds that takes place in connection with obtaining any Federal award.
Such disclosures are forwarded from tier to tier up to the recipient.

8\. *Debarment and Suspension (E.O.s 12549 and 12689)*---No contract
shall be made to parties listed on the General Services Administration's
List of Parties Excluded from Federal Procurement or Nonprocurement
Programs in accordance with E.O.s 12549 and 12689, "Debarment and
Suspension." This list contains the names of parties debarred,
suspended, or otherwise excluded by agencies, and contractors declared
ineligible under statutory or regulatory authority other than E.O.
12549. Contractors with awards that exceed the small purchase threshold
shall provide the required certification regarding its exclusion status
and that of its principal employees.

## End of Part 49