**§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)