**Federal Demonstration Partnership (FDP) Task Force**

**Initiative to Reduce Administrative Burden (IRAB)**

The FDP is a cooperative initiative among federal agencies and
institutional recipients of federal funds. It was established to
increase research productivity by streamlining the administrative
process and minimizing the administrative burden on institutions while
maintaining effective stewardship of federal funds. The IRAB Task Force
was established in May 2002 to identify burdensome administrative
requirements in the OMB Circulars that could be streamlined, simplified
or eliminated without sacrificing accountability.

The IRAB task force provided comments on the August 12, 2002 proposed
changes to OMB Circular A-21. In our response, we expressed concern that
the proposed changes did not address many of the current administrative
requirements that could be eliminated or streamlined with little or no
loss of accountability over federal funds. These administrative
requirements are overly complicated and unnecessary. We recommend that
serious consideration be given to eliminating or streamlining the
following requirements in the future revisions of Circular A-21:

1.  Reasonableness of the Cost of New Construction

2.  Monthly Cash Flow Analysis for Debt Arrangements in Excess of
    \$1,000,000

3.  Lease Purchase Analysis

4.  Requirement to Use Depreciation Recoveries to Acquire or Improve
    Research Facilities

5.  Requirement for Notification and Cost Adjustments for "Substantial
    Relocation" of Federal Programs from Financed Facilities

6.  Simplify Language in Circular A-21

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1.  **Reasonableness of the Cost of New Construction**

[Regulation -- OMB A-21 Section F.2.c. Large Research
Facilities:]{.underline}

\(1\) When an institution has large research facilities, of which 40
percent or more of total assignable space is expected for Federal use,
the institution must maintain an adequate review and approval process to
ensure that construction costs are reasonable. The review process shall
address and document relevant factors affecting construction costs such
as: Life cycle costs, Unique research needs, Special building needs...

\(2\) For research facilities costing more than \$25 million, of which
50 percent or more of total assignable space is expected for Federal
use, the institution must document the review steps performed to assure
that construction costs are reasonable. The review should include an
analysis of construction costs and a comparison of these costs with
relevant construction data, including the National Science Foundation
data for research facilities based on its biennial survey, "Science and
Engineering Facilities at Colleges and Universities." The documentation
must be made available for review by Federal negotiators, when
requested.

[Issue:]{.underline}

Circular A-21 already contains a provision for the reasonableness of
costs in Section C.3. This provision applies to all costs and is
sufficiently broad to mandate and allow for prudent financial management
within institutions. Prescribing the review and documentation of factors
affecting construction costs adds unnecessary complexity and adds
confusion by leaving unanswered the question of what constitutes a
satisfactory level of review, documentation, and ultimately, cost.

Section F.2.c. stipulates that construction costs must be compared to
relevant construction data and includes the National Science
Foundation's (NSF) biennial facilities survey as a reference document to
compare facility costs. The NSF itself has stated that the data
contained in the biennial survey is not appropriate for such cost
comparisons. Additionally, the NSF no longer obtains cost data as part
of its biennial survey so comparison is no longer possible. Further,
Section F.2.c. does not specify what other data would be considered
relevant for comparison. This leaves a big question as to what would
constitute relevant data to meet the documentation requirements. It also
does not specify how this comparative data should be interpreted and
used to measure the actual construction costs.

Universities have no reason to ignore their normal financial controls
and budgetary pressures simply because the Federal government will be
using some portion of a facility to perform research and in return
reimbursing the university for its use. The federal government assumes
no financial responsibility for the facility and provides no guarantees
to the institutions. Since institutions assume 100% of the risk, it is
in the institutions' best interest to review and control costs no matter
how the facility is used. The language in Section F.2.c. implies that
any cost above the lowest cost must be reviewed, approved, and
justified. It is not in the best interest of the institution and the
Federal government to always consider the lowest cost as the only
acceptable default level of cost. There are many mitigating design,
regulatory, programmatic, regional, and scheduling factors that drive
the cost of a facility. Attempting to document and justify all of these
factors on a building-by-building basis to the satisfaction of a
government financial auditor is an unwarranted and valueless process.

It is not unreasonable to expect institutions to have a review and
approval process in place for construction projects. Most institutions
would not be able to function as an on-going concern if they did not
have some process in place to control costs and approve funding within
an acceptable design plan. The requirements for reasonable costs stated
in Section C.3. are adequate to meet the government's concerns about
costs.

[Recommendation:]{.underline}

The overly specific levels of review and documentation stated in Section
F.2.c, and the vagueness of what would be accepted as meeting that
burden, is unwarranted and should be removed from the document.
Furthermore, this requirement applies to universities only and not to
other Federal grant recipients. Rescinding this requirement will correct
this inequity.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

2.  **Monthly Cash Flow Analysis for Debt Arrangements in Excess of \$1
    million**

[Regulation -- OMB A-21 Sections J. 22. f. (5)(a) & (6)(a):]{.underline}

Section J.22. (5)(a) -- For debt arrangements over \$1 million, unless
the educational institution makes an initial equity contribution to the
asset purchase of 25 percent or more, interest claims must be reduced by
an amount equal to imputed interest earnings on excess cash flows.
Section J.22.f. (6)(a) defines "asset costs" as the capitalizable costs
of an asset, including construction costs, acquisition costs, and other
costs capitalized in accordance with GAAP.

[Issue:]{.underline}

The requirements for interest cost recovery for institutions incurring
debt in excess of \$1 million with equity contributions of less than 25%
are inordinately complex and inequitable. Given their complexity, these
requirements should be rescinded altogether or suspended until suitable
alternatives can be developed.

The laborious and complicated calculations of monthly cash flow
computations, from inception throughout the life of the project, add to
the cost of compliance with A-21 and derive no significant benefit to
either the government or institutions. Imposing penalties of reduced
interest claims based on the prescribed excess cash flow calculations is
inequitable. These requirements do not recognize institutions' economic
costs of capital when using their own funds for research facilities.
Because institutions are at risk when investing in research buildings in
order to execute federally funded projects, hindering their cost
recovery will not facilitate the much-needed additions or improvements
to the nation's research infrastructure. To remedy the complexity and
inequity of these requirements, they should be either rescinded or
suspended.

If rescinding or suspending these requirements altogether is not
possible, mitigating alternatives should be considered. In A-21 J. 22,
"equity contributions" are not clearly defined and should include the
fair market value of the land upon which projects are situated.
Buildings and their underlying properties are inseparable and
interdependent in function and value. Thus the fair market value of land
associated with debt-financed buildings, or their capital renovations,
should be allowed when equity contributions are necessary. To simplify
the cash flow reporting requirements, reduce the frequency of analysis
from monthly to annual. Also, equity contributions should not be limited
to the initial equity contribution; they should be recognized anytime
they are made.

[Recommendation:]{.underline}

-   Rescind or suspend section J. 22. f. (5) (a) altogether.

-   If these requirements must remain, they should be simplified and
    more equitable, with the following remedies:

-   in section J. 22. f. (5) (a), replace the requirement for monthly
    cash flow reports with annual reports and simplify current language;
    and,

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-   in section J. 22. f. (6) (a), include the fair market value of the
    land associated with a debt-financed project, in the definition of
    "initial equity contribution."

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-   Simplify the wording by eliminating complicating factors such as the
    requirement to reduce principal payments by the amount attributable
    to land.

> Proposed rewording of A-21 section on interest if it is not possible
> to rescind or suspend:

J. 22. *Interest, fundraising and investment management costs.*

f\. (5) Educational institutions are also subject to the following
conditions:

> \(a\) For debt arrangements over \$1 million, unless an equity
> contribution to the asset purchase of 25 percent or more is made,
> educational institutions shall reduce claims for interest cost by an
> amount equal to imputed interest earnings on excess cash flow, which
> is to be calculated as follows. Annually, educational institutions
> shall prepare a cumulative (from the inception of the project) report
> of cash flows comprising inflows and outflows, regardless of the
> funding source. Inflows consist of depreciation expense, amortization
> of capitalized construction interest, and annual interest cost.
> Outflows consist of equity contributions, debt principal payments and
> interest payments. When cumulative inflows exceed cumulative outflows,
> interest earnings shall be calculated on the excess derived for the
> year and be treated as a reduction to allowable interest cost
> recovery. The rate of interest to be used to compute earnings on
> excess cash flows shall be the three-month Treasury bill closing rate
> at the end of the year in which the excess cash flow was determined.

Additional Proposed rewording of A-21 section on interest:

J. 22. *Interest, fundraising and investment management costs.*

f\. (6) The following definitions are to be used for purposes of this
section:

(a) \"Initial equity contribution\" means the amount or value of
    contributions made by non-Federal entities for the acquisition of
    the asset including the fair market value of land associated with
    building acquisition, renovation or alteration.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

**3. Lease Purchase Analysis**

[Regulation -- OMB A-21 Section J.22.f. (1) Facilities Costing Over
\$500,000:]{.underline}

For facilities costing over \$500,000, the educational institution shall
prepare, prior to the acquisition or replacement of the facility, a
lease-purchase analysis which shows that a financed purchase, including
a capital lease is less costly to the educational institution than other
operating lease alternatives, on a net present value basis. The
lease-purchase analysis shall include a comparison of the net present
value of the projected total cost comparisons of both alternatives over
the period the asset is expected to be used by the educational
institution. Projected operating lease costs shall be based on the
anticipated cost of leasing comparable facilities at fair market rates.

[Issue:]{.underline}

This requirement has no real value in controlling costs and is largely
an unproductive administrative exercise. Leasing research facilities is
not an option for many institutions, and even when it is, leasing is
virtually never less costly than purchasing. Purchasing does not include
a profit factor associated with a lease, universities have access to low
cost financing through tax-exempt debt that is not available when
facilities are leased, and the institutions are exempt from property
taxes.

Even if it was less expensive to lease space rather than building a new
facility, an institution should have the right to include other factors
in its decision-making process. For instance, often the physical
location of leased facilities is not conducive to the interactive
intellectual process necessary for successful research.

One of the basic concepts in A-21 is that costs are considered
reasonable if they reflect the action that a prudent person would have
taken under the circumstances prevailing at the time the decision to
incur the cost was made. Universities have their own extensive
procedures to insure that facilities needed to carry out research and
educational programs (including those sponsored by the government) are
acquired with due prudence. Costs incurred for the construction of
buildings must be incurred consistently with established institutional
policies and practices. It is also important to recognize that
universities are incurring all of the risk for facility investments,
since the majority of the costs of facilities are not reimbursed by the
government, the government provides no guarantee of continued funding.
The institutions, therefore, already have a strong motivation to control
costs, and a complex set of federal rules to accomplish this is
unnecessary.

[Recommendation:]{.underline}

Eliminate the requirement for a lease-purchase analysis as a condition
for allowing interest costs.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

**4. Requirement to Use Depreciation Recoveries to Acquire**

**or Improve Research Facilities**

[Regulation -- OMB A-21 Section J.12.f. (1) and (2)]{.underline}

\(1\) Institutions shall expend currently, or reserve for expenditure
within the next five years, the portion of F&A cost payments made for
depreciation or use allowances under sponsored research agreements,
consistent with Section F.2, to acquire or improve research facilities.
This provision applies only to Federal agreements which reimburse F&A
costs at a full negotiated rate. These funds may only be used for (a)
liquidation of the principal of debts incurred to acquire assets that
are used directly for organized research activities, or (b) payments to
acquire, repair, renovate, or improve buildings or equipment directly
used for organized research. For buildings or equipment not exclusively
used for organized research activity, only appropriately proportionate
amounts will be considered to have been expended for research
facilities.

\(2\) An assurance that an amount equal to the Federal reimbursements
has been appropriately expended or reserved to acquire or improve
research facilities shall be submitted as part of each F&A cost proposal
submitted to the cognizant Federal agency which is based on costs
incurred on or after October 1, 1991. This assurance will cover the
cumulative amounts of funds received and expended during the period
beginning after the period covered by the previous assurance and ending
with the fiscal year on which the proposal is based. The assurance shall
also cover any amounts reserved from a prior period in which the funds
received exceeded the amounts expended.

[Issue:]{.underline}

The requirement is unreasonable, overly prescriptive, and difficult to
track and implement. Furthermore, it is inequitable since it applies to
universities only and not to other Federal grant recipients.
Depreciation is a reimbursement for expenses already incurred. An
institution should not need to guarantee current or future expenditures
or reserves in order to be reimbursed for expenses previously incurred.
No other section in A-21 dictates how recovered F&A costs can be used.
The over-riding principles in A-21 indicate that universities shall be
reimbursed for their reasonable, allowable and allocable costs. The cost
principles provide guidance on the composition, allowability and
allocability of costs, not how reimbursements are to be used by
institutions. This requirement applies only to universities and not to
other Federal grant recipients, rescinding it will correct this
inequity.

This regulation could also encourage unnecessary spending as
institutions are compelled to keep up with prior building programs even
when more facility space is not needed. For instance, an institution may
undertake a major building program to create space for new research
programs or rebuild after a natural disaster. It does not necessarily
follow that further building or renovations need to be undertaken within
a five-year period. Following the J.12.f. regulation would require the
institution to spend or reserve an amount equal to the reimbursements
during the next five years whether or not such expenditures were needed.
This regulation can therefore create an inefficient cycle of spending.

[Recommendation:]{.underline}

The requirement should be withdrawn and eliminated from A-21.

[Impact of Implementing Recommendation:]{.underline}

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

5.  **Requirement for notification and cost adjustments for
    \"substantial relocation\" of Federal Programs from financed
    facilities**

# Regulation -- OMB A-21 Section J.22.f. (5)(b): 

Substantial relocation of federally-sponsored activities from a facility
financed by indebtedness, the cost of which was funded in whole or part
through Federal reimbursements, to another facility prior to the
expiration of a period of 20 years requires notice to the cognizant
agency.

[Issue:]{.underline}

Compliance with requirements for notification and cost adjustments for
\"substantial relocation\" of Federal programs is especially difficult
because of A-21's vague guidance and ambiguous terminology.

The term "substantial" is not defined and is subject to wide
interpretation. As well, A-21 is silent on when relocation would be
considered to be "substantial." Institutions' facilities typically
undergo gradual and continual changes in occupancy and use over time.
For example, a research lab may begin its life with 100% occupancy by
Federally funded projects. As projects and funding sources change, the
lab's Federal project occupancy may continually change over time. Under
these circumstances determining when a "substantial relocation" has
occurred would be extremely difficult. Moreover, as the occupancy
changes, reimbursement of the interest on the debt changes to reflect
the use of the space.

If the original intent of this section was to prevent abuses due to
relocating Federally-funded projects, it is unwarranted as no evidence
of attempting such abuse has been documented. Given the vagueness of
this requirement, the problems of implementing it in practice and the
lack of apparent need, it should be rescinded from A-21.

[Recommendation:]{.underline}

Eliminate the requirement for notification and cost adjustments for
\"substantial relocation\" of Federal Programs from financed facilities.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

6.  **Simplify language in A-21**

**a) Lobbying Costs**

# Regulations -- OMB A-21 Sections J.17 & J.24 Lobbying costs

Section J.17 -- Costs incurred in attempting to improperly influence
either directly or indirectly, an employee or officer of the Executive
Branch of the Federal Government to give consideration or to act
regarding a sponsored agreement or a regulatory matter are unallowable.
Section J.24 -- References made to numerous federal documents on
lobbying, plus voluminous additional text on lobbying cost restrictions.

[Issue:]{.underline}

Lobbying is not a significant activity at educational institutions. When
it does occur, the costs involved are relatively small. Given the minor
role of lobbying, A-21 sections J.17 and J.24 are disproportionate and
complex. Combining sections J.17 and J.24 and removing unnecessary
language would simplify A-21 guidance on lobbying and facilitate
compliance.

[Recommendations]{.underline}:

-   Remove section J. 17 but incorporate relevant parts into a revised
    section J. 24.

-   Remove section J. 24's references to five other external CFR federal
    documents to focus attention on a few simple rules. Making the
    reader depend on five external documents complicates compliance.

-   Remove section J.24. d. The lobbying cost certification is covered
    by A-21's overall certification of unallowable costs in
    institutions' F&A proposals. There is no need for additional
    certification for compliance.

-   Remove section J.24. g. This section allows federal agencies to
    formalize individual exceptions to these rules, which could be
    inconsistent among agencies, and further complicate universities'
    compliance with the intent of lobbying cost restrictions.

[Proposed rewording of A-21 section on lobbying costs,]{.underline}
incorporating J.17 into J.24 and simplifying language:

J. 24 *Lobbying*.

a\. The following costs of lobbying are unallowable:

\(1\) Attempting to influence outcomes of any Federal, State, or local
election, referendum, initiative, or similar procedure;

\(2\) Establishing, administering, contributing to, or paying the
expenses of a political party, campaign, political action committee, or
other organization established for the purpose of influencing the
outcomes of elections;

\(3\) Attempting to influence the Federal or State legislation;

\(4\) Legislative liaison activities, including attendance at
legislative sessions or committee hearings, gathering information
regarding legislation, and analyzing the effect of legislation, when
such activities are carried on in support of or in knowing preparation
for an effort to engage in unallowable lobbying.

\(5\) Attempting to improperly influence an employee or officer of the
Executive Branch of the Federal Government to give consideration of or
to act regarding a sponsored agreement or a regulatory matter. Improper
influence means any influence that induces or tends to induce a Federal
employee or officer to give consideration or to act regarding a
federally-sponsored agreement or regulatory matter on any basis other
than the merits of the matter.

b\. The following costs are allowable:

\(1\) Presentations on topics directly related to the performance of a
grant, contract, or other agreement; or

\(2\) Any lobbying made unallowable by subsection a. (3) to influence
Federal or State legislation in order to directly reduce the cost, or to
avoid material impairment of the institution\'s authority to perform the
grant, contract, or other agreement; or

\(3\) Any activity specifically authorized by statute to be undertaken
with funds from the grant, contract, or other agreement.

c\. When an institution seeks reimbursement for F&A costs, total
lobbying costs shall be separately identified in the F&A rate proposal,
and be treated as "other institutional activity" in accordance with the
procedures of Section B.1.d.

d\. Institutions shall maintain adequate records to demonstrate that the
determination of costs as being allowable or unallowable pursuant to
this section complies with the requirements of this Circular.

e\. Time logs, calendars, or similar records shall not be required to be
created for purposes of complying with this section during any calendar
month when:

\(1\) the employee engages in lobbying (as defined in subsections a and
b) 25 percent or less of the employee\'s compensated hours of employment
during that calendar month, and

\(2\) within the preceding five-year period, the institution has not
materially misstated unallowable lobbying costs, including legislative
lobbying costs.

When conditions (1) and (2) are met, institutions are not required to
establish records to support the allowability of claimed costs in
addition to records already required or maintained. Also, when
conditions (1) and (2) are met, the absence of time logs, calendars, or
similar records will not serve as a basis for disallowing costs by
contesting estimates of lobbying time spent by employees during a
calendar month.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

**b) Defense and prosecution costs**

[Regulation -- OMB Section J. 11:]{.underline}

This section defines allowable and unallowable defense and prosecution
costs.

[Issue:]{.underline}

The rules in A-21 Section J.11 are lengthy and complex. The language in
Sections J.11.a -- f tracks language contained in 10 USC 2324(k) which
is the US Code section cited in A-87 Attachment B (14). The A-87
provision and 10 USC 2324(k) are both limited to contracts with the
Department of Defense.

[Recommended modifications to A-21]{.underline}:

• Limit A-21 Section J.11. a -- e to apply only to contracts with the
Department of Defense. This would provide consistency with the language
and intent of A-87 and USC 2324(k) to allow the costs of administrative
appeals. Administrative appeals are an integral part of the decision
making process of federal agencies. It makes no sense to deny
reimbursement of the costs of following the administrative procedures
the government itself has set up to resolve disputes.

• Revise J.11.g to allow for administrative costs. Rationale: agencies
have extensive procedures in place that provide for an administrative
process to handle the defense and prosecution of criminal and civil
proceedings, claims appeals, and patent infringement. These proceedings
are very valuable because they allow the parties to dispute or to
adjudicate a dispute and move forward. It would be in the best interest
of the Government and the Academic Community to maximize the use of
these procedures by allowing the costs of administrative procedures.

[Proposed rewording of A-21 section on criminal and civil proceedings
costs]{.underline}:

J. 11. g.

> Costs of legal, accounting, consultant services, and related
> administrative costs incurred in connection with defense against
> Federal Government claims or appeals in a judicial proceeding, or the
> prosecution of claims or appeals against the Federal Government in a
> judicial proceeding, are unallowable. Costs of legal, accounting,
> consultant services, and related administrative costs incurred in an
> administrative proceeding are allowable.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

**c) Advertising and public relations costs**

[Regulation -- OMB Section J.1:]{.underline}

This section defines allowable and unallowable advertising and public
relations costs.

[Issue:]{.underline}

OMB Circular A-21 section J.1 addresses advertising and public relations
costs in unnecessary detail. The wording of this section can be
significantly streamlined and simplified.

[Recommended deletions from A-21]{.underline}:

• Remove A-21 sections J. 1. a and f.

• Add new section J. 1. d.

[Proposed rewording of A-21 section on advertising and public relations
costs.]{.underline}

*J. 1. Advertising and public relations costs.*

a\. The only allowable advertising costs are those which are solely for:

> \(1\) The recruitment of personnel;

\(2\) The procurement of goods and services;

\(3\) The disposal of scrap or surplus materials except when
institutions are reimbursed for disposal costs at a predetermined amount
in accordance with Circular A-110; or

\(4\) Other specific purposes necessary to meet the requirements of the
sponsored agreement.

b\. The only allowable public relations costs are:

> \(1\) Costs specifically required by sponsored agreements;

\(2\) Costs of communicating with the public and press pertaining to
specific activities or accomplishments which result from the performance
of sponsored agreements; or

\(3\) Costs of conducting general liaison with news media and government
public relations officers, limited to communication and liaison
necessary to keep the public informed on matters of public concern, such
as notices of contract/grant awards, financial matters, etc.

c\. Costs identified in subsections a and b if incurred for more than
one sponsored agreement or for both sponsored work and other work of the
institution, are allowable to the extent that the principles in Sections
D (Direct Costs) and E (F&A Costs) are observed.

d.  All other advertising and public relations costs are unallowable.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

d)  **Professional services costs**

[Regulation -- OMB Section J.32:]{.underline}

This section defines unallowable and allowable professional service
costs.

[Issue:]{.underline}

Professional services are commonly used by educational institutions when
needed for executing their missions or projects. Given the necessity of
professional services, cost guidelines should be clear to facilitate
their compliance. OMB Circular A-21's guidelines on professional
services are complex, overly prescriptive, and should be rewritten for
clarity and brevity.

[Recommended deletions from A-21]{.underline}:

• Remove section J. 32. b as it contains conditions that are both
confusing and irrelevant to the effective control of such costs.

[Proposed rewording of A-21 section on professional services
costs.]{.underline}

J. 32. *Professional services costs.*

Costs of professional, legal and consulting services rendered by members
of a particular profession who are not employees of the institution are
allowable, subject to Section J. 11. Such costs must be reasonable in
relation to the services rendered and not contingent upon recovery from
the Federal government. Retainer fees, to be allowable, must be
reasonably supported by evidence of services rendered.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.

**e) Recruitment costs**

[Regulation -- OMB Section J.37:]{.underline}

This section defines allowable and unallowable recruitment costs.

[Issue:]{.underline}

Like professional service costs, A-21's treatment of recruitment costs
is complex and overly prescriptive. It should be rewritten for clarity
and brevity.

[Recommended deletions from A-21]{.underline}:

• Remove section J. 37. b. as it is overly prescriptive and adequately
covered by guidelines in A-21 section J. 1.

[Proposed rewording of A-21 section on recruiting costs]{.underline}

J. 37. *Recruiting costs.*

a\. Subject to subsections b and c, recruitment and relocation costs are
allowable. These costs include but are not limited to:

\(1\) costs of \"help wanted\" advertising;

\(2\) operating an employment office necessary to secure and maintain
staff;

\(3\) operating an aptitude and educational testing program;

\(4\) travel by employees while engaged in recruiting personnel;

\(5\) travel by applicants for interviews for prospective employment;
and,

\(6\) relocation costs incurred incident to recruitment of new
employees.

b\. Costs of recruitment and relocation incurred to attract professional
personnel from other institutions that do not conform with the
established practices of the institution are unallowable.

c.  When relocation costs incurred in the recruitment of a new employee
    have been allowed either as an allocable direct or F&A cost, and the
    employee resigns for reasons within his control within 12 months
    after hired, the institution will be required to refund or credit
    such relocation costs to the Federal government.

# Impact of Implementing Recommendation:

This change would eliminate an unnecessary administrative requirement
without loss of accountability or increasing the cost to the government.