I




                                                                                                                                                        Iq








            GUIDELINES AND INFORMATION
              FOR-ASSISTING RMP's IN
             PHASING OUT RMPS SUPPORT




                       4/73













              APPLICABLE TO RMP ONLY















                                                 CONTENTS



                     ChaRters                                                      Pages
                     GRANT ADMIITISTRATION REQUIRr-ArNTS    ......................... 1-7
                     ALLOVTABLE COSTS     ........................................... 8-32
                     INDIRECT COSTS     ............................................ 33-41
                     GRANT REIATED INCOME     ...................................... 42-45
                     EQUIPMENT ACCOUNTABILITY     .................................. 46-51
                     CONTRACTING BY GRA14TEES ..........    ......................... 52-58




                         APPLICABLE TO RMP ONLY


                                 GRANT AI)MIHISTRATION REQUIREMENTS



               1.   GEMERAL RESPONSIBILITIES OF THE GRANTEE
                    The grantee is responsible for insuring compliance with all
                    Federal requirements. Specifically every grant must be  adnin-
                    istered in accordance with (1) the Act, (2) the regulations
                    thereunder, (3) other applicable regulations (i.e., Civil Rights),
                    and (4) written Federal policies (e.g., the policies contained
                    in this Manual).  Grantees are also responsible for advising
                    program staff, affiliates and all institutions and agencies
                    participating in an FM of the applicable Federal  requirements
                    and for instituting procedures to insure compliance.
                    Grantees are urged to safeguard their interests by requiring
                    that.institutions and agencies participating in the RMP execute
                    a contract or affiliation agreement regarding the administration
                    of RMPS funds. It-would be advisable for such an  agreement
                    to include appropriate references to the Act, regulations and
                    this Manual, and, further, to provide for reimbursement of the
                    grantee in the event of audit liabilities incurred by others
                    in connection with carrying out the grant.

              II.   ASSURANCES
                    The signature of the applicant's authorized representative on
                    page 2 of the grant application provides assurance to the Federal
                    Goverment that the grantee will comply with the
                    following-.
                       1.  Assurances specified in Sections 903 and 904 of the Act.

                       2.  civil Rights requirements.
                    R4PS grants must be administered in conformance with the
                    Civil Rights Act of 1964 and the regulation (45 CFR, Part 80)
                    issued pursuant thereto by the Department of Health, Education,
                    and Welfare. Title VI of the Civil Rights Act of 1964 and  the
                    Equal Employment Opportunity Act of 1972 state that no person in
                    the United States shall, on the ground of race, color# national
                    origin, or sex be excluded from participation in, be denied the
                    benefits of, or be.subjected to discrimination under any program
                    or activity receiving Federal financial assistance.  Every RMPS
                    grantee organization is required to have an Assurance of Compliance
                    (Form HEW 441) on file with the Office for Civil Pights, Office
                    of the Secretary, DHEW, before a RMPS grant may be made to that
                    institution.






                                     GRANT AD14INISTRATION REOTITREMENTS


                     Grantees are responsible for insuring  that  all  affiliates  and
                     othdr institutions participating in the  RMP  submit  HEW-441  to  the
                      rantee, where they have not already done  so,  and  comply  with
                     9
                     the assurances given.  In  addition,  all  organizations  partici-
                     patina in an PMP must comply with  Fxecutive  order  11246,  as
                     amended, and superseded by Executive  Order  11375  and  11478,
                     respectively.
                         3. Requirement for  care  and  treatment  of  laboratory  animals.
                     A special assurance relating to animal  care  must  be  submitted
                     for any RMPS program staff or  operational  activity  which  in-
                     volves the use of animals for research or other purposes.
                     Institutions and organizations  using  warm-blooded  animals  in
                     projects or activities supported with  RMPS  grant  funds  must
                     provide RMPS with written assurance that  they  will  evaluate  on
                     a continuing basis their facilities in regard to the maintenance
                     of acceptable standards for the care, use, and treatment of such
                     animals.

                     The assurance must describe accreditation by a recognized
                     professional laboratory animal accrediting body or the establishment
                     of a committee,.at least one of whose membership is a Doctor of
                     Veterinary medicine, to evaluate the  care  of  all  warm-blooded
                     animals held or used for activities supported by RMPS grants, awards,
                     or contracts and commit the institution to comply with applicable
                     portions of the Animal Welfare Act (PL  89-544,  as  amended)  and  to
                     follow the guidelines prescribed in DHF.W Publication NO. (NIH) 73-23,,
                     formerly PHS  Publication No. 1024, "Guide for the  Care  and  Use  of
                     Laboratory Animals."
                          4.  Requirement for protection of human subjects.
                     A plan for the protection of human  subjects  is  required  when
                     an-op individual wniild be 'at risk' - exposed to the  possibility
                     of physical, psychological, sociological or other  harm  -  as  a
                     result of FMPS supported activities* No  RMPS  funds  may  be  ex-
                     panded for such activities unless the  required  plan  has  been
                     approved. in addition written  prior  RMPS  approval  is  required
                     before M4PS.funds are utilized to support any activity involving
                     the use of human subjects for research or experimentation.
                     specifically, where applicable, a plan  for  the  protection  of
                     human subjects must be submitted  and  approved  in  accordance
                     with Chapter 1-40 of the HEW Gr  t@s Administration Manual.  The
                     plan must be.applicable to the institution directly responsible for
                     the activity in question (i.e.,  the  institution  identified  as  the

                                                   2






                                    GRANT ADMINISTRATICtl REQUIUMENTS


                                              es 15 and 16 of an application, RMP-34-1).
                       project sponsor on pag
                       No grant for an activity involving human subjects shall be made
                       unless the application for such support has been reviewed and
                       approved by an appropriate institutional ccmittee.
                       The institution must submit to RMPS,fdr-its review, approval and
                       official acceptance, a written assurance of its compliance with this
                       policy.  The institution must also provide with each proposal
                       involving human subjects a certification that it has been or will
                       be reviewed in accordance with the institution's assurance.  This
                       certification must be renewed annually on the basis of continuing
                       review of the supported project.  Guidlines for the establishment
                       and operation of such a           system are provided in DTIEW
                       Publication No. (NIH) 72-102, the "Institutional Guide to DHEW
                       Policy on Protection of Human Subjects," available from the Insti-
                       tutional Relations Section, Division of Research Grants, National
                       Institutes of Health, Bethesda, Maryland  20014.

                III.   PATENTS AND INVENTIONS
                       In accordance with Department of Health, Education, and Welfare
                       Regulations (45 CPR Subtitle A, Parts 6 and 8), all inventions
                       made in the course of or under any RMPS grant shall be promptly
                       and fully reported to the Assistant Secretary for Health, Department
                       of Health, Education, and Welfare.  instructions for the proper
                       method of reporting should be requested from RMPS.  Determination
                       as to ownership and disposition of invention rights, including
                       whether a patent application shall be filed, and if so, the manner
                       of obtaining, administering,, and disposing of rights under any,
                       patent application or patent which may issue shall be made either:
                       a.   by the Assistant Secretary for Health whose decision shall be
                            considered as final, or
                       b.   where the institution has a separate formal institutional
                            agreement with the Department, by the grantee institution in
                            accordance with such agreement.
                       Patent applications shall not be filed on inventions under (a) above
                       without prior written consent of the Assistant Secretary for Health
                       or his representative.  Any patent application filed by the grantee,
                       on an invention made in the course of or under a RMPS grant shall
                       include the following statement in the first paragraph of the
                       specification:

                            "The invention described herein was made in the course of, or
                            under, a grant from the Health Services and Mental Health
                            Administration, Department of Health, Education, and Welfare,"

                                                       3





                                 GRA14T ADMINISTRATIOIZ RFOIJIRF14EIlTS


                    A complete written disclosure of each invention in the form
                                                 cretary for Health,  DHEW,  shall
                    specified by the Assistant Se
                    be made by the grantee promptly after conception or first
                    actual reduction to practice, and, in any event, prior to
                    publication.  Upon request, the grantee shall furnish such duly
                    executed instruments (prepared by the Goverranent) and such other
                    papers as are deemed necessary to vest in the  Government  the
                    rights reserved to it under this policy statement  to  enable'
                    the Government to apply for and prosecute any patent application,
                    in any country, covering each invention  where  the  Goverment
                    has the right to file such application.

                    in addition to immediate reporting, grant application forms require
                    information pertaining to inventions conceived or actually reduced
                    to practice during a period of active ralPs grant support.  If no
                    inventions were made, submission of a properly executed appli-
                    cation-will provide the necessary certification to that effect
                    (i.e., on page 3 of Form IMS 34-1).  A Final Invention Statement
                    and Certification (Form OS-489) is required within 30 days following
                    the end of support of an RMPS support activity.  All inventions
                    which were conceived or first actually reduced to practice during
                    the course of work under the grant from the original effective
                    date of support through the date of completion, whether or not
                    previously reported, shall be listed on the Statement.  Each Statement
                    will require the signature of the person responsible for the grant
                    concerned and an institution official authorized to sign on behalf
                    of the institution.
                    The grantee shall obtain appropriate patent agreements to fulfill
                    the requirements of this provision from all persons who perform any
                    part of the work under the grant, except such clerical and manual
                    labor personnel as will have no access to technical data, and
                    except as otherwise authorized in writing by  the  Department.
                    The grantee shall insert in any contract or agreement made under the
                    grant which has experimental, developmental, or research work as
                    one of its purposes, a clause making this provision applicable
                    to such contractor and its employees. Agreements shall also be
                    obtained by the grantee to govern disposition of rights to inventions
                    resulting from screening of compounds synthesized under the grant.
                    As used  in this provision, the stated terms are defined as follows
                    for the  purposes hereoft
                        a.   "Invention" or "invention or discovery" includes any art,
                             machine, manufacture, design, or composition of matter, or
                             any new and useful improvement thereof, or any variety 6f
                             plant, which is or may be patentable under the Patent Laws
                             of the United States.

                                                    4





                                 GRANT ADMINISTRATION REQUIREMENTS


                        b. 'Made" when used in relation to  any  invention  or  discovery
                            means the conception or first actual  reduction  to  practice
                            of such invention in the course of the grant.

               IV.   RECORD KEEPING AND REPORTING
                     Accounting for grant funds will be in accordance  with  generally
                     accepted principles consistently applied, regardless of the
                     source of funds. All supporting records  of  project  expenditures
                     must be compatible with RMPS reporting requirements.
                     All grantees and/or their affiliated institutions are required
                     to maintain grant accounting records, identifiable by grant
                     number, until audit on behalf of the Department or five years
                     after the end of the budget period, whichever  is  less*  Accounting
                     records must contain adequate references for identifying and
                     locating original documents in support of direct  costs,  These  in-
                     clude invoices, checks, time records, and payrolls, etc.

                V.   APPEALS PROCEDURES
                     The DHEW has a policy of permitting grantees to appeal certain
                     admministrative decisions which may result in adverse  effects  on
                     the grantee.  There are two levels of appeal, an informal procedure,
                     at the HSMHA level and a formal procedure involving a Grant Appeals
                     Board at the Department level.  If an appeal is pursued, the
                     grantee must dxhaust the informal procedure of HSMHA before appealing
                     to the Grant  Appeals Bo@d, Office of the Secretary.
                     Decisions which may be appealed are: (1) termination for nonconform ty
                     with grant terms, (2) disallowance of an expenditure charged to a
                     grant, (3) a determination that the grantee has failed to account
                     for grant funds, (4) voiding of a grant award, (5) establishment of
                     indirect cost or research hospital patient care rates, and .(6)  the
                     disapproval of a grantee's request for permission to incur an
                     expenditure during the term of a grant.

                VI.  BONDING REQUIREMENTS
                     All non-profit organizations that are established solely  for  the
                     receipt and administration of an FMP grant must  obtain  fidelity
                     bond which will assure RMPS of the proper maintenance  of  Federal
                     funds.
                     A fidelity bond, as distinguished from burglary  insurance  provides
                     coverage solely for losses resulting from the dishonest  acts  of
                     employees of an organization, while burglary  insurance  coverage
                     other than such dishonest acts of employees of such organization.


                                                    5







                                     GRANT ADMINISTRATION REOTJIRFMFNTS



                      When an organization secures a fidelity bond, copies of such
                      must be furnished to  RMPS prior to the issuance by RMPS of an
                                                                    non-profit organization.
                      initial grant award to a newly established

                      Provision should be made that such coverage continue for the
                      length of RMPS support.  The coverage secured must provide
                      for payment of the amount of the coverage in the result of
                      any defalcation to the United States of America - DHEW-PHS-RMPS.
                      The bond should normally provide  theft  insurance  in  the  amount
                      of one month's normal draw of  funds  from  the  Federal  treasury.

               VII.   APPLICABILITY OF FEDERAL OR INSTITUTIONAL POLICIES

                      In the absence of any contrary provisions of the Law, regulations,
                      or written announced Federal policies, the institutional policies
                      of the grantee or the affiliate are applicable as prescribed by
                      the grantee.

                      Institutional policies applied to the management of grant funds
                      mutt apply equally to all institutional activities irrespective
                      of the source of funds,  That  is,the  institution  must  have  the
                      same policies for expenditures  from  grants  as  for  expenditures
                      from non-Federally supported activities.

              VIII.   PRIOR APPROVALS

                      The following cost categories and types of activities require
                      prior approval by RMPS before such costs may be incurred for
                      the purposes indicated  (See specific cost categories for details.)

                      1.  Foreign travel

                      2.  Certain categories of printing

                      3.  Certain types of films and v deotapes

                      4.  New construction


                      5.  Patient care

                      6.  Certain classes of drugs

                      7.  End stage kidney disease

                      8.  Activities jointly funded by two or more RiPs
                      19. obligation of funds derived from graht-related income
                      10. Experimentation or other  activities  involving  use  of  human
                          subjects
                                                     6





                                  GRANT ADMINISTRATIOTT RFQUIPMIF@IITS


                   11.  Alterations and renovations
                   12.  Feasibility studies related to "Health Maintenance
                        organizations'. (HMOs).
                     The applicant or grantee is responsible for requesting approval
                     as necessary.  This may be done by letter to RMPS.  in addition,
                     inclusion of costs in a final budget submitted to support an award
                     constitutes prior approval unless otherwise specified in the award.




















                                                    7





                      APPLI-CABLE TO RMP ONLY


                                      ALLOWABLE COSTS


              I.  GUIDE MATERIALS RELATING TO COSTS
                  Allowable costs under the P" program are those specified
                  below and in the following HEW Guides or the Grants
                  Administration Manual.
                        1.  "A Guide for Colleges and Universities--Establish-
                            ing Indirect Cost Rates for Grants and Contracts
                            with the Department of Health, Education, and
                            welfare."  (OASC-1, Revised, or Grants Administration
                            Manual, Chapter 2-65.)
                        2.  "A Guide for Non-Profit Institutions, cost Principles
                            and Procedures for Cost Rates for Grants and Contracts
                            with the Department of Health, Education, and Welfare."
                            (OASC:-5, Revised or Grants Administration Manual,
                            Chapter 1-76.)
                        3.  "A Guide for State Government Agencies--Establishing
                            Cost Allocation Plans and Indirect Cost Rates for
                            Grants and Contracts with the Department of Health,
                            Education, and Welfare."  (OASC-6 or Grants Adminis-
                            tration Manual, Chapter 5-60.)
                        4.  "A Guide for Hospitals--Establishing indirect Cost
                            Rates for Research Grants and Contracts with the D
                            Department of Health, Education, and Welfare."
                            '(OASC-3 or Grants Administration Manual, Chapter 2-66.)

              II.   ALLOWABLE COSTS
                   A.   Use of List of Allowable and Not Allowable Costs
                        The following list of "allowable" and "not allowable" costs
                        covers those items most frequently encountered.  The
                        stated policies apply unless otherwise specified in a
                        Notice of Grant Award, or other communication from RMPS.
                        omission of a particular item of cost is not intended to
                        imply that the omitted item is either allowable or not
                        allowable.

                   B.   Allowabilitv of Costs
                        Advertising -- Allowable to recruit staff for project,
                        procurement ot scarce items used in conduct of project,

                                                   8







                                           ALLOWAI31X!, COSTS


                                                                              ising
                        disposal of scrap or surplus materials and  bid  advert
                        under construction grant programs.
                        Alteratio and Renovation--  Allowable.  Alteration  and
                        renovation means W03     ired to  change  the  interior
                        arrangements or other physical characteristics of  an
                        existing facility Of installed (built-in)  equipment,
                        so that it may be more effectively utiliZed for its
                        current designated purpose, or adapted to a changed
                        use, as a result of a programmatic requirement.  Altera-
                        tions and Renovations may include work referred  to  as
                        improvements, conversion, rehabilitation, remodeling or
                        modernization.
                        Under the law, RMPS participation in both construction
                        and alteration and renovation (including the  costs  of
                        built-in equipment) is limited to 90% of the  costs  of
                        such construction or equipment.
                        Virtually all alterations and  renovations  supported
                        through RMPS funds consists of rearrangement  of  space
                        through relocation of non load-bearing walls or parti-
                        tions and associated appurtenances, built-in equipment
                        and/or utilities. Alteration  and  renovation  of  this
                        type should be classified as "Minor" in completing,form
                        RMPS-34-1, page 16, "Financial Data Record."
                        Regions with triennial status do not require prior RMPS
                        approval to initiate alteration or  renovation  in  the
                        amount of $25,000 or less RMPS costs.  In  all  other
                        cases prior RMPS approval is  required  for  alteration
                        and renovation.
                        Alteration and renovation costs requested in an approved
                        application require no further RMPS approvals.
                        Animals -- Charges for the acquisition, care, and use of
                        experimental animals are allowable.
                        Audits -- Allowable.  Regional Medical Programs may schedule
                        independent audits by certified public accountants provided
                        it is grantee policy and not reimbursed as indirect costs.
                        However, the HEW Audit Agency reserves the right to perform
                        an audit regardless of whether an audit has been performed
                        by a certified public accountant.


                                                  9








                                            ALLOWABLE COSTS


                                                     s -- Effective March 7, 1972
                                 Assisted
                          computer ASSlsr-ec'
                          not all( le to implement, quip or operate new computer
                          assisted electrocardiographic systems (CAE).  Limited funding
                          is allowable, however, for specific organizational phases of
                          CAE system implementation. Such funding may assist in:
                          establishing-working relationships between participants,
                          provision of technical consultation, and evaluation of the
                          CAE proposal.
                          RMPS funding is also allowable for specific CAE Studies in
                          Regions that have the technological expertise, facilities, and
                          potential EKG volume nece ssary to support an economical CAE
                          system.  Such staff support may take the form of participation
                          in assessment of needs resources and priorities; technical
                          consultation; organizational counseling; and institutional
                          liaison.
                          CAE systems receiving RMPS support on or before March 7, 1972
                          will be continued under the terms of their current approvals.
                          Additional support beyond the currently recommended period
                          of support is subject to the restrictions stated above.  (See
                          NID Vol. 6, No. 35, 3/7/72.)
                          Construction -- Allowable after specific prior approval by
                          RMPS in an application.  Construction as defined in the Act
                          means new construction of facilities for demonstrations,
                          research, and training when necessary to carry,.-out regional
                          medical programs, alteration, major repair (to the extent
                          permitted by regulations), remodeling and renovation of
                          existing buildings (including initial equipment thereof),
                          and replacement of obso ete, built-in (as determined in
                          accordance with regulations) equipment of existing
                          buildings.
                          New Construction includes the erection, installation or
                          assembly of a facility, including the expansion, addition,
                          extension of an existing facility which provides new floor
                          space, cubeage, or applicable units of measurements; total
                          replacement of a facility and/or the physical relocation of
                          a facility from one location to another.  For buildings and
                          structures, it may include site preparation, including
                          demolition, excavation, landfill, utility system connections
                          and extensions, site improvements such as roads, walks, parking
                          areas, landscaping, and exterior or interior real property
                          installed (built-in) equipment.  Completion of unfinished
                          space is to be treated as new construction.

                                                  11








                                                ALLOWABLE COSTS


                                                                both construction
                                          RMPS participation
                             Under the Law,                  in
                             and alteration and,renovation (including the costs  of
                             built-in equipment) is limited to 90% of the costs of
                             such construction or equipment.
                             Accounting for costs of construction and alteration and
                             renovation shall be in accordance with the accounting
                             policy of the grantee institution, consistently applied
                             to all sponsors, regardless of the source of funds.  The
                             grantee must maintain accounting records to reflect that
                             at least 10% of the project cost has been paid from the
                             institution or other non-Federal funds.  the cost of the
                             facility, including construction project costs, must be
                             kept in a prime account so that the grantee can furnish
                             the following upon request:

                             a. Total receipts

                             b. Total disbursements

                             C. Balance in the account
                             d. Cost data as- Prescribed in the cost estimate outline.
                             Con    t Fees     Consultant fees, including supporting
                             costs such as  avel and per diem, are allowable.  Consultant
                             Services must be procured and compensated in accordance with
                             institutional policies.
                             An employee of the grantee or affiliate not normally employed
                             in connection with RMP, may be employed as a consultant by a
                             Regional Medical Program.  In order to be paid a consultant
                             fee in addition to regular institutional salary, such
                             individual.must perform services for the RMP which are in
                             addition to h          duties and carried out beyond the
                             normal work week of    employing institution as defined
                             by that institution's policies.
                             Within institutional policies, an employee of an RMP can
                             serve as a consultant to another RMP or other health-related
                             agency during his normal work week.  Such employee may be
                             reimbursed for travel and subsistence costs by either
                             organization, but dual salary compensation for  such
                             consultation is not allowable.
                             An individual employed as a consultant by an RMP is acting
                             as a private contractor in relation to the RMP and must be
                             appointed as such.  Ordinarily, consultants should be
                             appointed only when it can be documented that:
                                                       12









                                                ALLOIIABliF, COSTS



                           1.  Services to be provided are essential and  cannot  be
                               provided by persons receiving salary support under
                               the grant or otherwise compensated for  their  services.

                           2.  A selection process has been employed to  secure  the
                               most qualified person available and that  the  selection
                               has been approved by a senior officer of  the  grantee
                               organization.
                           3.  The charge is appropriate considering the qualifications
                               of the consultant, his normal charges, and  the  nature
                               of the services rendered.

                           Employees of the grantee or affiliate paid  for  services
                           rendered to a Regional Medical Program within  their  normal
                           work week are hot consultants. The  grantee  or  affiliate
                           institution may be reimbursed in accordance with  time  or
                           effort in connection with RMP for the salary of such
                           employees. In such cases the  individual  employee  receives
                           his normal salary from the institution, and additional
                           compensation is not allowable.  Where  frequent  consultation
                           from a given individual is required,  consideration  should
                           be given to part-time employment of that person.

                           Members of the Regional Advisory Group may  be  reimbursed
                           for actual and necessary expenses incurred  in  connection
                           with service to the RMP. A RAG member may not  serve  as  a
                           @ld consultant to the same RMP, since all advice and
                           assistance to that RMP is provided in his capacity as  a  RAG
                           member. Non-profossional RAG members,  however,  who  suffer
                           loss of salary as a result of attending RAG  meetings  or
                           other RMP activities, may be reimbursed for  such  losses.

                           Contingency Funds or Reserves -- Not allowable.,

                           Contracts -- Allowable. Contracts may be  used  by  grantee
                           institutions for awards to affiliates, and by  both  grantees
                           and affiliates for purchase of material and  general  support
                           services. Care should be taken to insure t  at  Contrac  ors,
                           grantees and affiliates observe all applicable Federal
                           requirements.
                           Dependency Allowances -- See "Stipends and  Training  Costs."

                                                     13








                                             ALLOIIABLE COSTS


                         Depreciation or  Us    r es (if equitably applied to all
                         services) -- Not allowable as a direct cost but may be
                         included in the grantee's indirect cost pool.  Deprecia-
                         tion on that   rtion of equipment charged to Federal  grant
                                     PO
                         or contract funds is unallowable except where  specifically
                         authorized by a policy waiver and included in program
                         guidelines.
                         Direct Assistance -- Allowable.  At the request of any
                         recipient of a grant for a Regional Medical Program, the
                         payments to such recipient may be reduced by the fair
                         market value of any equipment, supplies, or services
                         furnished by the Secretary to such recipient and by the
                         amount of,the  pay, allowance, traveling expenses, and
                         any other costs  in connection with the detail of an officer
                         or employee of  the Government to the recipient when such
                         furnishing or  such detail, as the case may be, is for the
                         convenience of  and at the request of such recipient and
                         for the purpose  of carrying out the Regional Medical Program
                         to which the  grant is made.
                         Dialysis -- See "Kidney Disease Activities."
                         Donors -- Payment is allowable to volunteers or research
                         subjects who contribute blood, urine samples, and other
                         body fluids or tissues which are specifically project related.
                         Drugs -- Federal funds will not be expended for purchasing
                         any drug or drug product for which the Food and Drug
                         Administration has made an initial determination published
                         in the Federal Register that there is a lack of substantial
                         evidence of effectiveness for all indications.  This policy
                         applies to all identical, similar, or related products,
                         whether or not they are specifically mentioned in the
                         Federal Register notice.
                         The following are exceptions to the above policy:
                         a.  Federal funds may be expended to purchase  those  drugs
                             contained on the list filed by the Food and Drug
                             Administration with the United States District Court
                             for the District of Columbia and which therefore may
                             remain on the market pending completion  of  scientific
                             studies to determine effectiveness because there  is  a
                             compelling justification of the medical need for the
                             drug.



                                                     14








                                              ALLOWABIY. COSTS


                          b. Federal funds may be expended to  purchase  drugs  which
                              lack substantial evidence of efficacy for use  in  the
                              pursuit of approved clinical research projects.
                          List of drugs (1) which lack substantial evidence  of  efficacy
                          and (2) which are exempt from this policy  for  compelling
                          medical need are available from the Office of  the  Assistant
                          Secretary for Health, Department of Health,  Education,  and
                          Welfare, Washington, D.C.  20201.
                          Dues, Institutional -- Costs of the grantee  or  affiliate
                          institution's membership in civic, business,  technical,  and
                          professional organizations are allowable when  necessary  to
                          accomplish the objectives of RMP.
                          Dues, Personal -- Costs of personal memberships  in  civic,
                          business, technical and professional organizations are
                          allowable only to the extent that they are (1)  limited  to
                          one individual per headquarters or major  field  installation
                          of the Regional Medical Program; (2) can be purchased  at  a
                          lower price than institutional membership; (3)  are  required
                          to obtain publications or for other  purposes  necessary  to
                          accomplish the objectives of RMP.
                          Entertairanent -- Costs of amusements, social  activities,
                          entertainment, or incidental costs related thereto  are  not
                          allowable.

                          Equipment -- Costs of Rental, purchase, maintenance,  taxes,,
                          and delivery of equipment, including diagnostic  and  treatment
                          equipment, for the planning or implementation of  a  program
                          are allowable. when acquiring major items  of  equipment,  con-
                          sideration of the relative advantages of lease versus purchase
                          should be considered. Rental of equipment owned  by  a  grantee
                          or affiliate is not allowable, but equipment may  be  charged
                          to a grant if issued from a central stockroom.
                          Federal Employee Compensation -- Grant funds may generally not
                          be used to pay fees and supporting costs to  U.S.  Government
                          employees regardless of their employment or pay status, except
                          that grant funds may be used to pa@ consultant fees  to  U.S.
                          Government employees when:
                          a.  These employees are medical personnel of  the  Uniformed
                              Services of the United States  (excepting  commissioned
                              officers of the Public Health Service) qualified to
                              provide the kind, type, and extent of  medical  services
                              approved in the grant award.

                                                    15









                                             ALLOWABLR. COSTS



                        b.  Adequate numbers of qualified civilian medical personnel
                            are not available to provide the kind, type, and extent
                            of medical services approved in the grant award and
                            medical personnel of the Uniformed Services of the
                            United States (except commissioned officers of the Public
                            Health Service) are hired only in addition to those qualified
                            civilian'medical personnel, if any, who are  available.

                        c.  The medical personnel of the Uniformed Services of  the
                            United States (excepting commissioned officers of the
                            Public Health Service) hiked as consultants have  prior
                            written authorization from their commanding officers
                            to work on the grant supported activity and to be  paid
                            for their efforts.


                        Travel or other supporting costs, but not consultant  fees,
                        for Federal employees may be paid when consultative  assistance
                        is required from a Federal program other than RMPS.  (For
                        example, if an RMP needed consultation from an Office of
                        Education employee, it could pay his travel and subsistence
                        in the event that the OE's travel funds were  limited.  Payment
                        to Federal employees are also allowable when the employee is
                        a patient or subject undergoing study in connection with
                        research supported by the grant.  In addition, salaries and
                        travel for Federal employees are allowable when the employee
                        is:

                        a.  working under a grant to a Public Health Service  Hospital,
                            Indian Health Service Hospital, Saint Elizabeth's Hospital,
                            the veterans Administration, or the the Bureau of  Prisons.


                        b.  either on Leave Without Pay (LWOP) status or on  detail
                            to the States,,,the U.S. possessions and its territories
                            and reimbursement is in accordance with terms  mutually
                            acceptable to the employing agency and RMPS

                        Films, Videotapes, and other Audiovisual Materials -- Allow-
                        ible provided that the films or other audiovisual  material
                        is intended for viewing by restricted audiences.  Grant
                        funds may not be used to produce films, videotapes or other
                        audiovisual materials, for viewing by the general public
                        without prior approval of the Regional Medical Programs
                        Service. While there is no universal rule  for  determining
                        whether the intended audience for audiovisual material should
                        be regarded as "general" or "restricted" the following situations
                        are routinely considered as involving the general public:


                                                16









                                                 ALLOT-IABLR COSTS



                                                                  tional public  television
                            a.  Broadcast on commercial or educa

                            b.  Showing in commercial movie houses

                            c.  showing in public places such as airports, waiting
                                rooms, bus or railroad  depots,  vacation  resort
                                facilities, etc.

                            d.  Showing to civic  associations,  schools  (except
                                when used as a teaching tool in  a  classroom  setting),
                                clubs, fraternal organizations, or similar lay groups.

                            Particular care must be exercised to assure  that  films  or
                            other audiovisual materials to be produced with @S funds
                            facilitates the purpose for which the funds were awarded
                            and that acknowledgement of RMPS support is indicated in
                            the film, videotape or recording.  Such acknowledgement
                            must be expressed in the following language:

                                 "The production of this film  was  supported  by
                                 Grant No.            from the  Regional  medical
                                 Programs Service.  However, its contents are
                                 solely the responsibility of     (name of grantee
                                   organization)       and are in no way the
                                 responsibility of the Regional medical Programs
                                 Service, the Health Services and Mental Health
                                 Administration or the Department of Health,
                                 Education, and Welfare."

                            Grantees or their affiliated institutions  may  produce  and
                            distribute audiovisual materials, or  contract  for  production
                            and distribution of such materials with  RMPS  funds,  provided
                            that the materials in question include the required acknow-
                            ledgement of RMPS assistance and the  disclaimer  shown  Above.

                            when audiovisual materials or publications are developed
                            with RMPS support, the grantee is free to arrange for
                            copyright without prior RMPS approval.  Copyrighted materials
                            are subject to a royalty-free, nonexclusive and irrevocable
                            license to the Federal Government to reproduce, translate,
                            and publish them, and to authorize others to do so.

                            Audiovisual materials produced for the purposes  of  the  grant
                            with RMP funds are the property of the grantee institution.
                            Therefore, any contract entered into  for  their  production
                            and/or distribution would have to involve  the  grantee  and
                            the distributing or producing organization.


                                                    17









                                            ALLOWABLE COSTS



                          Grantees should copyright audiovisual materials  produced
                          through grants, since the copyright would afford  grantees
                          a legal basis for receipt of any income derived from  the
                          distribution of such materials.

                          Audiovisual materials developed with grant funds may  be
                          disposed of as follows:

                          a.  They may be sold by the grantee to a  distributing
                              organization,

                          b.  They may be retained by the grantee institution,  and
                              distributed as appropriate,

                          c.  They may be turned over to a Federal  distribution
                              center, (i.e., National Audio-visual Center,  GSA).

                          All royalties or other fees received by grantees or  their
                          affiliated institutions from the use or distribution  of
                          audiovisual materials produced with grant funds, up to  the
                          amount they charged to the grant for production of  the
                          audiovisual materials, must be refunded to RMPS.  In  this
                          regard, grantees shall be responsible for  maintaining
                          records for the receipt and disposition of the  Federal
                          share of income received from the distribution of  these
                          audiovisual materials in the same manner as required  for
                          the funds provided by the grant which gave rise to  this
                          income. Upon notification from a grantee that  income  has
                          been generated from the distribution of the  audiovisual
                          materials, grantees will be advised as to the  disposition
                          of such funds. Any income received by a grantee  or  an
                          affiliated institution from distribution of these  audio-
                          visual materials that is over and above the amount that  is
                          charged to the grant may be used by the grantee at  its
                          discretion.  (See "Grant Related Income" for specific details.)

                          Consult Chapter 1-450 of the HEW Grants  Administration
                          Manual for detailed requirements concerning  audiovisual
                          materials. It should be noted that Chapter 1-450  does  not
                          (1) restrict the distribution of these audiovisual materials
                          once produced in accordance with the policy  contained
                          therein; and (2) is not applicable where audiovisual
                          materials are produced with other than Federal grant funds.

                          Foreign Travel -- Allowable only with prior RMPS  approval.


                                                  is









                                                  ALLOWA33LP COSTS


                             Fringe Benefits -- The employer's   share  is allowable as a
                             direct cost,if not included as an   indirect  cost  in  propor-
                             tion to the salary charged to the   grant,,to the  extent  that
                             such payments are made under formally established and
                             consistently applied institutional policies.  The employee's
                             share is part of the  gross  salary  and  included  therein.

                             Tuitioil. or tuition remission for an individual is allowable
                             as a fringe  benefit  under  the  following  conditions:  (a)
                             benefits are granted  in  accordance  with  established  insti-
                             tutional policy consistently  applied  without  regard  to  the
                             source of the funds; (b) a bona-fide employer-employee
                             relationship exists  between  the  grantee  institution  and
                             the individual; and (c) the charges are directly proportional
                             to the time or effort on  the  RMPS  supported  activity  and
                             the salary or wage accrued,  with  the  proportion  based  on
                             the number of hours ordinarily required for full-time
                             employment for the specific class of employees.

                             Fund Raisin2 -- Not allowable.
                             Home Dialysis Training  --  See  "Kidney  Disease  Activities."

                             Honoraria -- Not  allowable.  An  honorarium  is  considered  a
                             payment or reward where the  primary  intent  is  to  confer
                             distinction on, or to symbolize respect, esteem, or
                             admiration for the recipient.

                             Insurance -- Insurance  is  usually  treated  and  reimbursed
                             as an indirect cost.  In certain situations, however, where
                             special insurance is required  because  of  risks  peculiar  to
                             a particular activity, the premium may be charged as a
                             direct  cost.  Consistent  with  institutional  policy,  such
                             premiums might include those on hazard, malpractice,
                             fidelity bonds and other liability insurance to cover full-
                             time grant-supported personnel and activities.

                             A.  Grantee Patients -- Payment of health insurance premiums
                                 for target populations can  be  charged  to  RMPS  grants
                                 when specifically approved and under the following
                                 conditions:

                                 1.  The recipient  is  otherwise  qualified  to  receive
                                     the benefits  of  the  gtant-targeted  services  but
                                     does not have access  to  coverage  under  other  grant
                                     programs or third-party mechanisms such as Medicare
                                     and Medicaid;



                                                        19








                                            ALLOWARTR COSTS


                        f.  Organ Procurement and communication Activities    Allow-
                            able.  Such activities must provide optimal use  of
                            harvested organs through sharing among many transplant
                            centers serving several areas.  These activities should,
                            like other kidney disease activities, become  self-
                            sufficient over time as RMPS funding is reduced and
                            eventually withdrawn. It is,  however,  more  difficult
                            for these activities to be financed by  third-party
                            carriers, and the costs of managing the organ-procure-
                            ment network may be added to the individual cost per
                            organ harvested.
                        g.  Public Education -- Allowable to provide limited support
                            for appropriate public education activities  which  are
                            clearly related to specific output of the end-stage
                            renal program.

                        h.  Satellite Dialysis Facilities -- Allowable where
                            appropriate to serve the backup needs of  patients
                            who are geographically removed from tertiary  care
                            facilities.
                        i.  Tissue Typing -- Allowable for start-up costs provided
                            that the tissue typing labs are not redundant  and
                            duplicative.
                        j.  Transplantation    Allowable for establishment of trans-
                            plantation programs in areas of  need.  Direct  patient
                            care costs are not allowable.

                        Awards for end-stage kidney disease activities will be issued
                        as part of the total award to the Regional Medical Program.
                        The amount allocated for the kidney activity will be specified
                        in Item 14, under "Remarks!lof the Notice of Grant Awat , Form
                        HSM-457, or noted in the covering letter  accompanying  the
                        award.
                        In some cases, an end-stage kidney proposal may be approved
                        by RMPS but unfunded.  An RMP may fund such a kidney pkoject
                        through rebudgeting other RBIP funds to the kidney activity,
                        but only to the level shown in the  award.  Rebudgeting  of
                        this nature should be undertaken only after the RAG has
                        carefully considered the effect of such action on  the
                        remainder of the RMP program, and approved the rebudgeting
                        of funds into end-stage kidney activities.  The RAG may also
                        approve rebudgeting among approved end-stage renal activities
                        within the total amount specified for kidney in  the  award
                        documents.  The total amount available for end-stage kidney
                        activities may not be increased or decreased through r6budgeting

                                                   21








                                             ALLOWABLR COSTS


                         without prior ap             h the RAG and RMPS.  The  total
                                         proval by bot
                         amount available is the amount specified for kidney in  the
                         award documents plu:k any additional RMPS funds rebudgeted
                         to end-stage kidney activities.
                         No RMPS funds, including grant related income, may be  used
                         to support any end-stage kidney disease activity unless
                         the activity has been recommended by the National  Advisory
                         Council and approved by RMPS. Grant related income  may  not
                         be spent for any purpose without prior RAG and RMPS  approval.
                         Where RMPS approves the rebudgeting of funds into  end-stage
                         kidney activities, it should not be anticipated that RMPS
                         will provide additional funds in the future to support  the
                         increased level of expenditure that has been created by  the
                         rebudgeting. Funds rebudgeted into end-stage  kidney  acti-
                         vities must be spent for such activities, and in no case  may
                         unexpended balances accruing in end-stage kidney  activities
                        .be rebudgeted to non-kidney activities without prior RAG  and
                         RMPS approval.

                         where funds are rebudgeted into or out of end-gtage renal
                         activities RMPS should be notified.

                         Leave -- Allowable fQr employees when earned on the  project
                         which the grant is supporting and prorated in accordance  with
                         the salary charged to the grant. Leave is not  allowable  for
                         trainees and fellows.  Trainees and fellows in academic
                         institutions are not entitled to vacations as such.  They are,
                         however, entitled to the normal short student holidays observed
                         by their training institutions. Trainees and fellows  in  non-
                         academic institutions are entitled to the holiday and vacation
                         schedule applicable to all trainees at the institution.
                         Additional pa@ent'for leave not taken may not  be  claimed,
                         but terminal leave is allowable.
                         Legal Fees -- Allowable when separately incurred  specifically
                         for a grant related purpose, such as establishment of a  new
                         corporation to administer the RMP or the development of  new
                         nonprofit educational consortia. when the grantee  or  affili-
                         ate is reimbursed indirect type costs by means of An  indirect
                         cost rate legal fees incurred by the grantee or affiliate  on
                         a "retainer basis" may be reimbursed only through the indirect
                         cost allowance, and may not be charged directly to the  grant.


                                                    22








                                            ALLOWABLE COSTS


                         Registration Fees -- Allowable if it can be shown that
                         they are necessary to accomplish program objectives.
                         Rental of E@ipment -- See "Equipment."
                         Rental      ce -- Allowable when charges are made in con-
                         formance with normal grantee policies regardless of the source
                         of funds.  No rental charge may be made for space owned or
                         controlled (manag6d or administered) by the grantee or by  an
                         affiliate; except that a charge may be allowed equivalent
                         to the cost oflownership, e.g., depreciation or use allowance
                         taxes and normal maintenance and operating costs unless
                         included in indirect cost. Also, when an organization  trans-
                         fers a facility to a third party through sale, lease, or
                         otherwise, and then leases the facility back from that  third
                         party, the lease costs which may be charged to the grant  may
                         not exceed the equivalent of the ','cost of ownership-
                         Rental costs under unexpired leases, i.e., leases for  space,
                         equipment, and/or maintenance contracts, ets., are  generally
                         allowable if (a) the amount of such rental claims does not
                         exceed the reasonable use value of the property leased for
                         the period of the activity, and (b) the grantee and affiliates
                         make all reasonable efforts to terminate, Assign,  settle  or
                         otherwise reduce the cost of such lease.
                         Sabbatical Leave -- Sabbatical leave salary, as such, is  not
                         allowable, but sabbatical leave costs to the institution  may
                         be included in a composite fringe benefit rate.  Salary  from
                         a grant for services rendered the project by an individual
                         during his sabbatical period is allowable provided  that  the
                         salary is proportional to the service  rendered.  RMPS  funds
                         may not be used to pay a total salary during  the  sabbatical
                         leave period which exceeds the individuals regular full-
                         time salary from the institution.
                         Salaries and Wages -- Allowable for time spent on a grant-
                         supported activity.  No supplementation of base salary is
                         permitted.  Salary and wage rates must be in conformity
                         with those permitted by institutional wage and salary
                         scales and policies.  RMP program staff salaries should
                         be reasonab le and not exceed the salaries of full-time
                         personnel with equivalent responsibilities in  major  medical
                         institutions in the Region.  Direct charges for professionals
                         must be supported by either:


                                                    26







                                            ALLoilABLE COSTS


                                                         orkload  distribution  system,
                         a.  An adequate appointment and w
                                                                              onsible
                             accompanied by monthly reviews performed by resp
                             officials.and a reporting of any significant  change  in
                             workload distribution of each professional (i.e., an
                             exception reporting system) or
                         b.  A monthly after-the-fact certification system which will
                             require persons in supervisory positions having  firsthand
                             knowledge of the services performed to report  the
                             distribution of effort (i.e., a positive reporting
                             system).  Such reports must account for the total salaried
                             effort of the persons covered. A system  which  provides
                             for the reporting only of effort applicable to
                             Federally-sponsored activities is not  acceptable.
                         c.  Direct charges for salaries and wages of non-professionals
                             must-be support by time and attendance and payroll  dis-
                             tribution records.
                             An employee or consultant may not receive additional
                             compensation for services performed for an RMP where
                             such services are performed within the individuals
                             full-time work week.  (See "Consultant Fees.")
                             The grant may be charged in proportion to  the  percentage
                             of time or effort iLn individual devotes to the grant
                             within his full-time work week.
                          "Full-time salaries may include such activities as (a)
                          scholarly writing, (b) service on advisory groups, (c)  de-
                          livery of.an occasional lecture, or symposium related to  the
                          project provided these activities remain.incidental and are
                          undertaken within the policy of the grantee institution.
                          Where the individual is "part-time" (including  "geographic
                          full-time"), the base salary on which the percentage may
                          apply will be the salary wiich he would have earned if  he
                          had been ful 1-time. Where an  institution  provides  a
                          guaranteed salary, plus an additional amount dependent  on
                          such things as the total income of a group clinic  operated
                          by the institution, full-time salary may be considered  to
                          be the combination of the guaranteed amount and of the
                          additional amount, not to exceed a formally established
                          ceiling, or the amount that reflects the  individuals  most
                          recent full-year's experience, whichever is  smaller.


                                                   27









                                             ALLOWABLE COSTS


                          No overtime pay for professional personnel may be  charged
                          to grant funds.  When all of the salary of nonprofessional
                          personnel is.charged to projects supported by grants  and
                          contracts, overtime may be charged to RMPS grants on which
                          the overtime was worked.  When the salary is'charg@d partly
                          to grant or contract funds and partly to institution funds,
                          the total of the salary (both the regular rate amount  and
                          the premium rate amount) must be prorated in accordance with
                          the time spent on the RMP project. Where  the  institution
                          has a policy of charging premium overtime to the  indirect
                          cost pool, no premium overtime can be charged directly  to
                          an RMP grant.
                          Where personnel costs apply to two or more grants, the costs
                          will be prorated to each grant involved.
                          Satellite Dialysis Facilities -- See "Kidney Disease Activities."
                          Service Charges -- Allowable for use of certain types  of
                          services and central facilities owned by the grantee insti-
                          tution, e.g., computer services, motor pool, animal facilities,
                          etc., providing the charge is designed to cover only  the
                          actual costs and is applied equally to all users and  not
                          included in the indirect cost pool.
                          Severance Pay -- All6w&ble.  Severance pay is an allowable
                          cost only when it is required by (a) law, (b) employer-
                          employee agreement, (c) established policy that constitutes,
                          in effect,' an implied agreement on the institution's part@ or
                          (d) circumstances of the particular  employment.  Regional
                          Medical Programs Service will not consider severance pay an
                          allowable cost unless the basis for payment for any of the
                          four options listed above is a formal written policy or
                          agreement of the grantee institution, which existed  prior
                          to the February 1, 1973, notice of phase-out.
                          Stipends and Training Costs -- Allowable.  Grant funds may
                          be used for the payment of stipends and other benefits
                          related to RMP training activities. stipends may  not  be
                          paid for short-term training of more than a single academic
                          session or training conferences and seminars.  maximum
                          allowances for long term training are set forth below:

                          Post-doctoral
                          1.  $6,000  (no relevant post-doctoral experience)


                                                 28









                                               ALLOIQABLE COSTS



                         2.  $6,500  (one year relevant post-doctoral experience)

                         3.  $7,000  (two or more years relevant post-doctoral experience)

                         Pre-dOctoral

                         1.  $2,400  (first post-baccalaureate year)

                         2.  $2,600  (years between first and terminal year)

                         3.  $2,800  (terminal year)

                         Pre-doctoral    Experienced Student Support -

                         *Months of Related Professional
                           Work Experience                           Yearly Stipend Amount

                         Less than 12 months                              $3,000

                         12-23  months                                    $3,300

                         24-35  months                                    $3f6OO

                         36-47  months                                    $3,900

                         48 or more months                                $4,200

                         * Each single  full-time academic year of graduate experience
                         as defined by,the institution, beyond the baccalaureate level,
                         shall equal-12 months of related professional work experience
                         for stipend level purposes.

                         Dependen6y allowances for those long"term trainees, who are
                         in training for a full academic year, may be awarded an,
                         amount not to exceed $600 per annum for each depen ent w
                         would meet the criteria developed by the Internal Revenue
                         service for dependency.  (Consult IRS for details.)

                         Reimbursement,for per them and travel for trainees should be
                         made in accordance with the travel policies of the grantee
                         institution, or in the absence thereof, in accordance with
                         currently effective DHEW travel regulations.


                                                     29









                                              ALLOWABLE COSTS



                        Subgranting     Not allowable.  However, allocation of RMPS
                        funds by grantees to affiliates and other institutions to
                        support RMP activities is necessary to establish the  regional
                        cooperative arrangements among health, medicaland related
                        institutions required by Title IX of the Public Health
                        Service Act, as amended. Such allocations, therefore,  do  not
                        constitute subgrants.

                        Subject Costs -- (See "Patient Care.")

                        Supplies -- Allowable for supplies directly required for
                        RMP activities.


                        Taxes -- Allowable.  Taxes which an institution is required to
                        pay as they relate to employment, services, travel, renting,
                        or purchasing for a project are allowable. Property  taxes  on
                        land, building,'equipment, or supplies in other than construction
                        programs are not allowable.  Institutions should avail themselves
                        of any tax-free status exemptions for which activities supported
                        by Federal funds may qualify.  On construction projects, State
                        sales and use taxes for materials and equipment are  allowable
                        only when no refund or exemption,on such taxes is granted by
                        the States to the grantee.

                        Transplantation -- See."Kidney Disease Activities."

                        Transportation -- when equipment is moved from one grantee
                        institution to another, the cost of transportation may be
                        charged to the grant at either the original or the new  insti-
                        tution, depending upon the circumstances, and the availability
                        of funds in the appropriate active grant.

                        Travel    Allowable where such travel will provid e direct
                        benefit to the program being supported, including attendance
                        at meetings.

                        The costs of transporting patients to the site where  services
                        are being provided are allowable.  This cost may include public
                        transportation and purchase of motor vehicles provided the
                        purchase is treated as an item of equipment and prior approval'
                        of the awarding component is obtained.

                        Prior RMPS approval is required for each foreign trip and
                        attendant travel expenditure.  Domestic travel is performed
                        within the grantee's own country and travel between the


                                                     30








                                               ALLt)wABLF ROSTS


                    3. Separation of Cost Categories
                        Funds awarded for indirect costs may not be transferred to
                        any direct cost category.







































                                                     32



                            APPLICABLE TO RMP ONLY


                                           INDIRECT COSTS



                    NAT= OF INDIRECT COSTS

                    A.   Definition and Elaborations
                         Indirect costs are those costs of an institution which are
                         not readily identifiable with a particular project or activity,
                         but neverthless are necessary to the general operation of the
                         institution and the conduct of the activities it performs.
                         Indirect coste.aiZ?. pot peculiar to government sponsored activi-
                         ties, as they are generated to some extent by all business
                         ventures.  Indirect costs are normally calculated as a per-
                         centago of either (a) direct salaries and wages, or (b) total
                         direct costs exclusive of capital expenditures.  Indirect--costs
                         are earned by the institution and may be used for general
                         institutional purposes without further accounting to the
                         Federal Goverroent.
                         Examples of Usual Types of Indi    Costs
                         The following type expenses of an institution are normally
                         considered as indirect costs, and are reimbursed to an institu-
                         tion by means of an indirect cost rate:
                         1.  The cost of operating and maintaining buildings and equip-
                             mnt--which usually includes:  heating, air conditioning,
                             lighting, service cleaning and maintenance contracts, and
                             minor repairs.
                         2.  Depreciation--which usually includes writing off the cost
                             ofIbuildings 'and'equipment over their estimated useful life.
                         3.  Salaries of administrative officials concerned with general
                             management of the institution--usually include  the person-
                             nel employed in central executive offices, the purchasing
                             office, the public relations office, and the accounting
                             and finance deparments.
                         4.  General telephone expenses--which usually include  the
                             monthly rental and usage charge for all telephone  and
                             long distance calls by the administrative staff.
                         5.  General travel, supplies, and other expenses--which usually
                             include all travel by the central administrative staff (not
                             program staff), all supplies necessary for the operation
                             and maintenance of the building,as well as the offices and
                             facilities within the building,and the insurance, payroll
                             taxes, other taxes, and any other fringe benefits, generated
                             by the administrative payrolls.


                                                    33






                                               I

                                             INDIRECT COSTS


                   C.     incurrence of Indirect Cost
                                                                     other   central   service
                          Where any of the above types of costs or
                          costs are used'by A grantee  or  affiliated  institution  to  justi-
                          fy an indirect cost rate in connection with RMP supported
                          activities, the services for  which  the  costs  are  incurred  mist
                          -actually be provided to the grant supported activity.  (e.g.,
                          if all equipment and supplies for an activity are purchased
                          by the RMP program staff, an affiliated       titution    sponsoring
                          the activity could not include the costs of its central pur-
                          chasing departmnt as part of the justification for its indirect
                          cost rate.)
                    FACTORS AFFECTING DETERM              RMP INDIRECT COST RATES

                    A.    Guides for Institutions
                          Indirect cost rate is simply a device for determining fairly
                          and expeditiously what proportion of an inatitution's over-
                          head expenses should be charged to grant-supported projects
                          or  activities.  The  Department  has  issued  separate  guides  for
                          educational  institutions,  hospitals,  State  government  agencies,
                          and  nonprofit  institutions  which  set  forth  uniform  principles
                          for the establishment of indirect cost rates.
                          The cost principles set forth in the guide covering
                          the specific  type  of  institution  receiving  RMPS  funds  will  be
                          used as the basis for computing a submission for a proposed
                          indirect cost rate.
                     B.   Special Indirect Cost Rates forRHIlp
                          Because of the complex organizational structure of RMPS, a single
                          ICR applicable  to  all  RNP-supported  activities  will  ordinarily
                          not be able to be developed.  in some RMPS, program staff is
                          employed by more than one institution and operational activities
                          are carried on  by  various  institutions  which  change  over  time
                          as old activities are phased out and replaced by new activities
                          under  different  sponsorship.  For  these  reasons,  RMP   indirect
                          cost ratesi when requested, will have to be determined separately
                          for the grantee institution and for each affiliate which receives
                          24PS funds either  for  support  of  program  staff  or  operational
                          activities.
                          While many  RMP  grantees  and  affiliates  have  approved  in  rect
                          cost rates applicable to biomedical research projects, different
                          indirect  cowt  rates  specifically  applicable  to  R14PS-supported
                          functions me  have                         the case of  RMP,  ma!iy@
                                                                  In
                          types of expenses ordinarily treated as general a(Ninistration,costs
                          by the grantee tor other types  of  grants  are  charged  as  direct
                          costs  to  RMP.  For  example,  many  @  provide   for   their   own
                          purchasing,  personnel  administration,  financial  management   and


                                                          34







                                          INDIRECT COSTS


                        bookeeping, whereas the usual research grant would rely on
                        the-central administrative mechaniomm of the grantee insti-
                        tution for such services.
                        For the above reasons, then, it will usually be necessary to
                        determine an appropriate RMP indirect cost rate for the grantee
                        and each affiliated institution.  In addition, the indirect
                        cost rate determined for a given institution for RMP will usually
                        be different from the indirect cost rate approved for other types
                        of grants.  The methods for negotiation and approval of indirect
                        cost rates for:  (a) RIIP grantee&; and (b) affiliated institu-
                        tions receiving RMP support is discussed in the following sections.
              III  ME = ZATION OF INDIRECT COST RATES FOR GRAYrEg INSTITUTIONS

                   A.   Method of Neitotiation
                        The Office of Grants Administration Policy, (OGAP), in the
                        Department of Health, Education, and Welfare, has the responsi-
                        bility for negotiating indirect cost rates with each grantee
                        institution requesting indirect costs.
                        Each grantee which wishes to be reimbursed for indirect cost
                        must submit an annual indirect cost rate proposal within six
                        months after the last day of each of the fiscal years for which
                        it receives an RNPS grant.
                        Each institution's indirect cost rate proposal shou   propose
                        as many indirect cost rates as are deemed necessary for the
                        equitable allocation of indirect costs to its awards.  For
                        example, if the grantee conducts R14P activities at severs
                        different locations, it may propose separate rates for each,
                        where apprdpvbate (i.e., on-campus rates, off-campus rates, etc.).
                        Indirect cost rate proposals should be submitted to:
                                       Division of Cost Policy and N6gotiation
                                       Office of Grants Administration Policy
                                       Department of Health, Education, and Welfare
                                       330 Independence Avenue, S.W.
                                       Washington, D.C.  20201
                        Once an indirect cost rate has been negotiated by OGAP,
                        it will be incorporated into an official negotiation agreement
                        setting forth the results of the negotiation indicating
                        therein the applicable rate for RMPS grants.

                    B.  Provisional--and Final Rates
                        The indirect cost rate negotiated by OGAP may be either a
                        provisional or a final rate.


                                                     35







                                           INDIRECT COSTS

                        A provisional indirect cost rate is a  temporAry  rate  established
                        to allow the obligation and payment of funds  RMPS  grants,  until
                        such time as actual indirect costs can be determined  and  a  final
                        indirect cost rate established.  Provisional indirect cost
                        rates are subject to adjustment by OGAP at some future date.
                        A provisional rate is used to compute indirect  costs  on  grant
                        applications and on grant reports of expenditures.
                        A final indirect cost rate is established  after  an  institution's
                        actual cost for a given accounting  period  (normally  its  fiscal
                        year) are known. Once established,  a  final  indirect  cost  rate
                        is used as its current provisional rate.
                        If r44RS makes an award to an institution that has in  good  faith
                        negotiated on indirect cost rate with OGAP, that  rate  will  be
                        used on a provisional basis by RMPS, irrespective  of  the  appli-
                        cability of this rate to RMPS, subject to  the  finalization  by
                        OGAP of an indirect cost rate applicable to the RMPS grant.
               ,TV  NEMIATING INDIRECT COST RATES FOR AFFIL

                    A.  Ctantee Responsibilities

                        1.  Required Grantee Action
                             The grantee institution is responsible for negotiating indirect
                             cost rates for RMP affiliates when:
                             a.  The affiliate has no established indirect  coat  rate  and
                                 none is currently being negotiated with  OGAP  for  any
                                 other HEW program.
                             b.  An indirect cost rate has been  negotiated  for  specific
                                 progrms of the affiliate other than RMP and is not
                                 applicable across the board to all HEW support
                             The grantee is also responsible for  verifying  the  appropri-
                             ateness for RMPS supported activities of  any  indirect  cost
                             rates previously negotiated with the affiliate by OGAP
                             In the case of any discrepancy, the  grantee  is  responsible
                             for informing OGAP and for establishing a  special  rate  for
                             the affiliate's RMPS supported activities.
                         2.  CasejL--in which the_ (;raq@q!@NMqt_tgtion is not  Required
                             The grabtee is not required to  negotiate  an  indirect  cost
                             rate for an affiliate when:
                             a.  There is an established rate for the affiliated institution
                                 which is applicable to all  HEW  support  and  determined
                                 by the grantee to be appropriate for RNPS supported activities.


                                                      36







                                         INDIRECT COSTS


                            b. @OGAP is in the process of negotiating the  affiliate's
                               indirect cost rate for other HEW programs  (in  which
                               case,, OGAP will simultaneously establish a rate  for
                               RMPS support).
                            C. The grantee decides at its discretion to reimburse
                               all of an affiliate's coats as direct  charges  to  the
                               grant.
                        3.  Staffing for Indirect Cost Studies by the Grantee
                            A grantees negotiation or verification  of  indirect  cost
                            rates for affiliates can be cArri ed out by either the
                            grantee's own financial staff or through the  employment
                            of qualified accountants or accounting firms as consultants.
                            In addition, OG&P may be called upon for advice as necessary.
                   Bo   Provisional and Final Rates for Affiliates
                        Where the grantee institution negotiates indirect costs
                        directly with an affiliated institution,it will be the grantee's
                        responsibility to negotiate both provisional and final  indirect
                        cost rates with each affiliate institution.  once a final rate
                        is agreed upon between the grantee and an affiliate,  it  will
                        not be subject to further review or change, and will  be  con-
                        sidered to be the final,rate as if negotiated by OGAP.
                        Before finalizing an indirect cost rate, the  following  steps
                        must be taken by the grantee to support the reasonableness of
                        the finally established indirect cost rate:
                        1.  Review the adequacy of the  affiliates  procedures,  the
                            reliability of the retordej and the effectiveness  of  their
                            internal controls.
                        2.  Review the completeness of the base used for distributing
                            the overhead costs, including an evaluation of the reasonable-
                            ness and applicability of the base utilized (i.e., direct
                            labor hours, direct labor dollars, etc.)  to  the  subject
                            and purpose of the project to which applied.
                        3.  Review the pool of indirect expenses  for  those  expenses which
                            May be fully or partially unallovable,  based  upon  their nature
                            or content.
                        4.  Selectively analyze the remining accounts in the overhea
                            pool for applicability to the RMP activity.  Eliminate from
                            the pool any expenses where similar type  expenditures  were
                            previously recovered as a direct charge.  Do  not  automati-
                            cally eliminate overhead accounts from the  pool  purely  by
                            expense nomenclature  if item of the same expense category
                            are recovered as direct  charges.  Before  elimination  of

                                                     37






                                      INDIPECT COSTS

                     11. To obtain an indirect cost rate, the total amount of
                         direct costs is' divided by the total amount of indirect
                         costs (after the exclusion of unallowable items).  The
                         resulting percentage is the indirect cost rate.
                     12. The resulting rate should be applied to the direct costs
                         of the project to arrive at the allowable amount of indirect
                         costs.
                  Full documentation of the above steps should be retained by the
                  grantee institution as evidence that required procedures have
                  been carried out.
                  PROCEDURE FOR EFFECTI          OF DIFFERENCES BETWEEN
                  PROVISIONAL AND FINAL IND    OST RATES
                  A.   Surmry Re    of                     Sheet
                       Chapter 1-80, of the DHEW Grants Administration Manual entitled,
                       "Award and Payment of indirect Costs on Project Grants," relates
                       to the award and paymeInt of indirect costs on grants and the
                       method for effecting settlement of claims for unrecovered indirect
                       costs resulting from the establishment of final negotiated rates.
                       Chapter 1-80 specifies that "A Sumary Report of Expenditure
                       Adjustment Sheet (SROEAS) shall be submitted by each grantee
                       to the Office of Financial Management (NIH) reflecting the nec-
                       essary adjustment (upward or downward) in the indirect costs
                       to be made on each grant by operating agency and appropriation."
                       The format for a SROEAS is illustrated in Chapter 1-80.
                       Wherever the Grantee for a Regional Medical Program submits
                       a Report of Expenditures, using provisional indirect cost
                       rates, for either their own or an Affiliated organization, and
                       a final rate is subsequently established by the Office of Grants
                       Administration Policy, for either their own or an affiliated
                       organization, RWS will expect the grantee to initiate a SROEAS
                       to process any adjustments resulting from the difference between
                       provisional and final indirect cost rates.
                       As indicated in 3-4, above, grantees are responsible for negotiat-
                       ing final As well as provisional indirect cost rates for affiliated
                       institutions, that do not have an OGAP established indirect cost.
                       rate.  When establishing final indirect cost rates for affiliates,
                       RMPS grantees shall report the difference between the final and
                       provisional indirect cost rates in accordance with procedures
                       specified in 3-5, below. A SROEAS must be submitted to reflect
                       final rates that are lower than the provisional rate, as well
                       as those that are higher.
                       When afinal rate is established that is different from the provis-
                       ional rate, it is not-necessary to revise any previously submitted

                                                 39




                          @APPLICABLE TO RMP ONLY

                                      GRANT-MLATED INCOME


                    COMPONENTS OF GRANT RELATED INCOME
                    A.-   Definition.and Elaboration
                          Grant related income is the Federal share of the net income
                          derived by a grantee or affiliate ffrroomm ffeeles or charges made
                          irk connection with activities supported in whole, or in part,
                          by an RMPS grant, or, where applicable, derived from the
                          sale of items developed with RMPS grant support (e.g.,,
                          publications, films, medical or other devices).
                          Net income is income derived from an RMPS supported activity
                          less any direct or administrative cost relating to the gener-
                          ation 6f,such income.
                     B.   Treatment of Commonly Occuring Items of IincoLmiiec
                          1.  Income from Construction
                              Where RMPS funds are awarded for construction of a facility,
                              the income derived from the operation of the completed
                              facility does not constitute grant-telated income except
                              where the in@ome-is generated through specific RMPS sup-
                              ported activities carried on in the facility.
                          2.  Income from Government Agencies
                              Income received from other F44Ps or from Federal or other
                              governmental agencies on jointly-supported projects is not
                              grant related income.  Income derived from fees, or charges,
                              or sales to such agencies, however, would constitute grant-
                              related income.

                          3.  Credits
                              Credits or receipts (e.g., refunds, rebates, discounts,
                              adjustments, and other allowances) which offset or reduce
                              an expense chargeable to a grant do not constitute grant-
                              related income.

                          4.  income from Educational Programs
                              Normally, tuition and related fees received by an educational
                              institution for a regularly offered course are not considered
                              to be grant related income.  Tuition and related fees, however,

                                                   42







                                           GRANT RELATED INCOME


                              received by an educational institution must be treated
                              as grant-rdlated income when the course of instruction
                              developed, sponsored, and supported by an RMP is not a
                              regularly offered course.  A regularly offered course
                              is a course that:
                               a.  is regularly offered during school semester.
                               b.  is required or can count toward a degree.
                               c.  requires a formal set of prerequisite courses prior
                                   ,to enrollment.
                               d.  is open to all students meeting the necessary pre-
                                   requisites, subject to space availability.
                         5.    other Common Examples of Grant-Related Income
                              Examples of grant-related income that may result from
                              RMPS supported activities are:
                               a.  sale of services such as laboratory tests or computer
                                   time.
                               bo  payments received from patients or third parties for
                                   medical or hospital services.
                               co  fees received for personal services performed  in
                                   connection with and during the period of grant support.
                               d.  lease or rental of films or videotapes and
                               e.  rights or royalty payments resulting from patents and
                                   copyrights developed or acquired by the rd4P in con-
                                   nection with RMPS grants.

                         6.   Gifts and Donations
                              Grant related income does not include contributions, gifts,
                              donations or other grants given to an organization to further
                              an RMPS supported activity.  A contribution, gift or donation
                              is distinguished from grant related income if the donor or
                              the grantor neither expects, nor receives any goods or service
                              in return for his financial support.

                         7.   Investment Income
                              interest or other income to a grantee or affiliate derived.
                              from investment of RMPS grant funds is not treated as grant-
                              related income.  All such investment income must be repaid
                              to the Federal Government and may not be waived to  or
                               etai@ed by a grantee or affiliate.

                II.  USE,            LATFD INCOME
                     Except for royalties from copyrights and patents, special treatment
                     of which is discussed below, all gran -related income shall be

                                                   43







                                              GRANT RELATED INCOME,


                       treated -in accordance with one or a combination of the following
                       options:
                          1.  used by the grantee for any purposes which further the
                              objectives of legislation underwhich the grant was madel

                          2.  deducted from the total project costs.
                       RMPS may, and ordinarily will, authorize the use of grant-related
                       income to further the purposes of the Me.,
                       Grantees are required to submit written requests for the disposition
                       of net  grant-related  income.  Such  requests  should  indicate,  in
                       sb[ffiibierit-detail, the expected sources and amounts of such revenues
                       and plans for their use.
                       Where grant-r6lated income is  expected  to  be  generated  during  a
                       budget period, a prospective plan for the disposition of such income
                       in connection with F44P must be submitted as early as possible  based
                       on estimates of sources and amounts of funds.  Grant-related income
                       must be spent within the budget period in which it'is earned.
                       After evaluating such plans, RMPS will advise the grantee of the
                       amounts and authorized uses of grant-related income waived to the
                       grantee, and/or the amount to be refunded to the Federal Government,
                       if any.
                       Grant-telated income can be used (where permission is requested and
                       granted by RMPS) for purposes such as the following  (1) to assist
                       in phasing-in community  support  for  activities  initiated  by  an'
                       F44P, (2) to expand successful operational or program staff activities,
                                                                    in the scope of the program
                       (3) to initiate additional activities with                                 #I
                       and (4) to continue kidney dialysis and transplant activities,  Grant-
                       related income may be used only for allowable costs.
                III.   CALCULATING THE AMOUNT OF GRANT-RELATED INCCKE THAT MUST BE REPORTED
                       TO THE FEDERAL GOVERNMENT
                       The amount of grant-related income to be reported to the Federal
                       Government is determined by (1) the RKP's share of the direct costs
                       of the project; (2)  the  production  costs  of  the  material  which
                       generated the income; and (3) the amount of revenue generated by the.
                       material.  Grantees and affiliates are accountable for and must
                       report such income, whether earned during or after the period of
                       active MWS support.
                       The 24P's share of the direct costs is the ratio of RKP direct costs
                       to the total project cost.  if the entire direct cost of a project
                       is provided by an M4P, the R4P's share is 1.0.  If half the direct
                       costs are provided by the RMP and half by other funding sources,
                       the RMP's share would be 0.5, etc.

                                                      44






                                         GPM4T RELATED INCOME


                     Production costs are the direct costs of producing the income
                     generating materials- including the time, effort# material and
                     other costs directly attributable to their development,, manu-
                     facture and distribution.
                     The amount of grant-related income that must be reported to
                     the Federal Goverment is calculated as follows:
                       1.  Where the income exceeds production costs, the MP's
                           share of the production costs must be reported.
                     Accountable Amount ='MP Direct Costs    x   Production Costs
                                        Total Direct Costs
                       2.  Where the income is equal to or less than production costs,
                           the accountable amount is the RMP's share of the income.
                     Accountable Amount M7 Direct Costs      X   Income
                                        Total Direct Costs
                     Grantees and affiliates do not have to account to the Federa
                     Government for any grant-related income which is in excess of
                     the amounts determined aobve.
               IV.   SPECIAL RULES FOR CALCULATING INCOME FROM PATENTS AND COPYRIGHTS
                     RMPS, grantees and affiliates from time to time derive income from
                     patented or copyrighted materials--usually films, videotapes, or
                     ublications. Special policies apply to the disposition of such
                     p
                     grant-related income.
                     Any royalties or other proceeds from patented or copyrighted material
                     developed in whole or in part with MPS funds must be credited to
                     the grant account or returned to the Federal Government IIP to the
                     accountable amount.  (See Section III, above.)
                V.   REPORTS, RECORDS AND ACCOUNTABILITY
                     The grantee is expected to maintain or require affiliates to
                     maintain adequate records to support the computation of net RMP
                     grant-related income.
                     The grantee. is accountable to .94PS for grant-related income earned
                     by the RMP or affiliates.








                                                 45




                                                     .TO RMP ONLY
                                APPLICABLE


                                       EQUIPMENT ACCOUNTABILITY


                  I.    GM4ERAL PROVISIONS
                        Title to equipment acquired either partially or fully with EMPS
                        funds is normally vested in the grantee institution, irrespective
                        of whether the equipment is acquired by the grantee or one of its
                        affiliated organizations.  Thus, although an affiliated institu-
                        tion purchases equipment with grant funds for a specific  RMP
                        activity, title to, and accountability for equipment is normally
                        vested with the grantee institution for the life of the equipment.
                        Grantees, however, may request RMPS to grant permission for a
                        waiver of title to or accountability for equipment,  or.both,
                        purchased with Title IX grant funds from the grantee to either
                        an affiliated institution or an institution not affiliated with
                        the Ie4P, as long as their is an assurance that the equipment
                        will be used in support of an activity specifically  approved
                        by the Rt4PS or an activity that would be supportable under
                        Title IX of the PHS Act.

                  II.   MANAGEMENT REOUIREMENTS
                        Grantees and their affiliates are expected to apply to equipment
                        acquired with Rt4PS funds the same policies, procedures,  and
                        controls normally applied to all of their other equipment,
                        provided that the following requirements are met.
                        Grantees and affiliates are required to be prudent in the
                        acquisition and management of equipment acquired with grant funds.
                        Careful screening should take place to assure that equipment is
                        needed and that the need cannot be met with equipment already in
                        the possession of the institution.  A grantee or an af f iliate may
                        be reimbursed for an item of equipment already owned  by  the
                        respective institution only when such equipment is  n an
                        institution's central purchasing department and held in a central
                        stock room for issuance and sale to a using activity.
                        For purposes of charging the grant, the cost of a single  tem or
                        piece of equipment includes necessary accessories, duty, excise and
                        sales taxes.  If the institution policy provides that charges for
                        transportation, protective in-transit insurance, and installation
                        are a part of the cost of equipment, such charges may be included
                        as direct costs of equipment.
                        When equipmen t is sold by a grantee or an affiliate, the net
                        proceeds of sale must be credited to the grant account.

                                                        46





                                         EPUIPME NT ACCOUNTABILITY

                                                    ity has not been waived may, subject
                       Equipment for which accountabil
                                                                            termination
                       to M4PS approval, be disposed of by the grantee after
                                    period provided the grant account is credited with
                       of the project
                       the fair market value as of the date of disposition of such
                       equipment,  The accounting obligation shall apply to that portion
                       of new equipment that has been purchased by using accountable
                       equipment as a credit or trade-in. (This is not  applicable
                       to equipment which has a residual value of less than $100.)
                       WAI"R OF TITLE AND ACCOUNTABILITY
                       once support of an activity is terminated, it is expected that
                       the affiliated institution will continue to support the activity.
                       Howevert when support of the activity is discontinued, the insti-
                       tution sponsoring the activity may no longer be affiliated with the
                       grantee institution who has retained title to and accountability
                       for the equipment purchased for the activity.  Grantees may elect
                       to permit the institution supporting the activity to retain posses-
                       sion and obtain title to and accountability for such equipment.
                       If a need does not exist for the equipment at the grantee
                       institution, grantees may relinquish title to, and accountability
                       for such equipment in the following manner:
                       1.   The P44PS Grants Management Branch will entertain requests
                            from grantees to transfer either title to or accountability
                            for equipment, or both, to another institution upon termination
                            of project support.
                       2.   Upon receipt of such requests, 94PS will advise grantees
                            as to whether their disposition of the equipment is approv-
                            ed, or if the M4PS has other plans for the equipment for
                            which disposition instructions will be forwarded to grantees.
                       3.   Grantees will be responsible for documenting their records,
                            and advising the Grants Management Branch of the basis for
                            the proposed action.  This documentation should include as
                            a minimum an itemization of the specific equipment to be
                            transferred with signed disposition and receipt records
                            by responsible parties of each institution and an assurance
                            from the recipient institution that such equipment will be
                            used for the furtherance of RMPS activities.  Subsequent to
                            approval by F44PS of the proposed action, grantees may make
                            final arrangements for the transferrance of either title to
                            or accountability for the proposed equipment,or  both.
                        4.  Grantees will also be responsible for advising the  recipients
                            of the proposed equipment that any transfer to such  equipment
                            is made conditionally upon compliance by the recipients with the
                            obligation to use the equipment for the purposes for which the

                                                      47






                                       EOUIPMF,NT ACCOUNTA13ILITY

                        original grant was made during the enitre useful life  of
                        the equipment.  if the recipient of the proposed equipment
                        does not fulfill this obligation, the  Federal  Goverment
                        may exercise its right to recover its proportionate share of
                        the residual value of said equipment from the so designated
                        recipient:,'  The recipient of said equipment shall label
                        the equipment to distinguish it from all other  equipment
                        within its facility, and keep appropriate records of the current
                        current status, location and eventual disposition of said
                        equipment at thelampletion of its useful life.

               IV. SUGGESTED POF44S
                    Suggested forms are attached that may be utilized by RMPs  to
                    transfer title and accountability for equipment purchased with
                    R4PS@'funds to -another appropriate institution,
                    A.  Comunication from grantee to M4PS requesting transfer
                    Be  Cormnunication from grantee to affiliate advising of
                        approval of transfer
                    C.  Affiliate's certification re:  continued use of equipment

















                                                    48





                                       EipUIPMENT ACCOUNTABILITY


                                                 A



                                                     s Service
                        To:  Regional Medical Program

                        From:  Grantee Institution

                        The requested transfer is recommended for approval.  if
                        approved by Regional Medical Programs Service, the af-
                        filiated institution will be advised at the time of transfer
                        regarding its responsibilities for the maintenance and use of
                        such equipment, the maintenance of appropriate records, and
                        the rights of the U.S. Government should the institution not
                        fulfill its obligations as certified above.




                                                  Authorized Office, Grantee Institution
























                                                     49





                                      EQLIIPMENT ACCOUNTABILITY


                                                B




                 To
                   (Affiliated Inst-.


              From Grantee Institution


              Transfer of title and accountability for the equipment listed
              has been approved by the Regional Medical Programs Service.

               You are advised that the following conditions apply:
                    The equipment will continue to be used forlthe furtherance
                    of RMPS activities.
                 2. The equipment shall be labeled to distinguish  if from all
                    other equipment within the facility.
                 3. Appropriate records will be kept of the current status,
                    location, and eventual disposition of said equipment at
                    the completion of its useful life.
                 4. The Federal Government may exercise its right to recover
                    its proportionate share of the original value if said
                    equipment of the above three conditions are not met.


                                                 Authorized Of  dial, Grantee Institution


                  Item    I.D. No.     Descr   ion     Purchase Date                 St
                  1
                  2
                  3
                  4
                  5
                  6
                  7










                                                       50





                                       EQUIP@IENT ACCOTINIPA:RTT-TTV

                                                c




                To




                Fro





                The
                                          1 Medical Program operational
                no longer receiving Rdgiona  .                          funding and
                requests,the transfer of title to and accountability for the equip-
                ment listed.  All of this equipment was purchased with RMPS funds
                under Grant Number

                (Proj4
                IV is hereby certified that all of the equipment listed will continue
                to be used during its useful life for an activity which is approved
                by the Regional Medical Programs Service or supportable under Title IX
                of the Act.  In the even  the equipment at any time ceases to be used,
                the Regional Medical,Programs Service, Grants Management Branch, will
                be notified.




                                                     uthorized
                                                    Institution




                From


                To Grantee Institution
                The above requested transfer is recommended for approval.


                                                                         tor



                                                     RMPS Grant









                                                       51





                           AP


                                    CONTRACTING BY GRANTEES


                   INTRODUCTION
                                                               institutions for
                   In general, contracts may be used by grantee
                   (1) awards to affiliates and/or, (2) purchases of equipment,
                   supplies " services.  The purpose of this chapter is to
                   outline  recommended contracting procedures which will help
                   to avoid audit problems.
                   This chapter covers suggested procedures for both competi-
                   tive bidding and for sole source contracts.  Discussion
                   of competitive bidding is necessarily more extensive than that
                   relating to sole source contrac a.  It should hot be inferred,
                   however, that RMPS necessarily prefers or requires competitive
                   bidding where contracts are used.
                   In making contracts, the grantee  hould follow its own institu-
                   tional policies.  Where the grant:e has no formal contracting
                   policies or where such policies are not as extensive as those
                   outined below, it is recommended that the procedures discussed
                   in this Sub-Chapter be followed.
               It  USE OF CONTRACTS BY RNPS GRANTEES
                   While the use of contracts for purchasing is generally well
                   understood, their use by RMPS grantees as a mechanism for allocating
                   grant funds to affiliates or other organizations for carrying out
                   the purposes of the grant requires some discussion.
                   A.   Distinction Between Affiliation Aitreements and Obligation of Funds
                        Most RMPS grantees have some form of written affiliation agree-
                        ment with the other institutions carrying out program staff
                        and operational activities.  In most cases, an affiliation
                        agreement can be regarded as a memorandum of understanding be-
                        tween the grantee and other parties, but is is not an award or
                        obligations of funds.  It usually does not commit specific
                        amounts of grant funds to the affiliate, and the agreement usually
                        has an indeterminate life for the duration of the affiliate's
                        participation in the RMP program.
                    B.  Obligation of Fund           -making..Organizations
                        While An affiliate must always be nonprofit, the grantee may
                        make use of the services of profit making firms.  Profit
                        making firms may be paid from grant funds for the use of
                        facilities, the purchase of equipment and supplies, and for
                        services rendered.  (These types of expenses are normally
                        budgeted under the "sub-contract" budget category for the
                        applicable activity.)

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                                      CONTRACTING BY GRANTEES


                  C.    Required Allocations Throug
                        Grantees can allocate funds to affiliates or  others  through
                        either a contract or other instrument of commitment (i.e., a letter, a
                        special purpose form, etc.)  Contracts, however, must be used
                        to allocate grant funds when:
                        1.  The funds are provided to a profit making firm.
                        2.  Material having a security classification is involved.
                        3. Payment of an amount in excess of actual  costs  (i.e.,  a
                            profit or fee) is cont @ lated.
                  D.    Choice of Methods for Allocation of Funds bv Grantees
                        Except where contr acts are required as indicated above,
                        the choice of whether grantees should allocate funds
                        through contracts or other instruments is up to  the  grantee
                        institution.  Small purchases will usually be made through
                        purchase orders in accordance with institutional policy.
                        In general, a contract is considered to be the most desirable
                        mechanism for allocating funds when:
                        1.  The funds are to be used for the purchase of  a  specified
                            service
                        2.  The funds are to be used for the purchase of a particular
                            end product, such as a publication, report, or device.
                        3.  considerable direction and control by the grantee is
                            required with respect to the manner of performance or
                            timing of the work.
                        4.  The funds must be formally obligated within a specific time
                            period.
                        RMPS experience indicates that most grantees do not use formal
                        contracts in allocating funds to affiliates to carry out
                        specific activities.  Usually, letters or other documents are
                        issued by the grantee indicating the  amounts,  purposes  and
                        period for which funds are allocated, and the grantee relies
                        on the understandings in the affiliation agreement to insure
                        proper use of funds and compliance with  federal  and  grantee
                        requirements. Dealing with affiliates  in  this  manner  pro-
                        vides greater financial flexibility than  the  usual  contract
                        and enhances the RMPS concept of 'ecooperative  arrangementsit
                        among the institutions participating in  a  Regional  Medical
                        Program.
                        The source of a proposal should not necessarily Influence
                        the choice of an award mechanism.  For example, a contract is
                        not necessarily required because the initiative for an activity
                        originated with an affiliate.




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                                    CONTRACTING BY GRANTEES

                  E.    Types of Contracts
                        Where contracts are used, these may be of two types, (1) fixed
                        price, (2) cost-reimbursement.  A fixed price contract may be
                        used where a definite cost can be established in advance.  A.
                        cost-reimbursement contract, therefore, specifies an estimated
                        rather than an actual cost.

                  F.    obligations and Expenditures
                        All contract# (and purchase orders) by grantees for REO purposes
                        constitute obligations of grant funds for Federal accounting
                        pu rposes.  Federal auditors have taken the position that other
                        forms of allocations do not constitute obligations.
                        Where a grantee makes a contract which continues beyond the
                        fiscal year of the grant, the funds are obligated iumdiately
                        (even though actually paid out later) and would be shown in
                        the entire amount of the contract on the expenditure report
                        for the fiscal year in which the contract was initiated.
                        Adjustments for any unexpended balance would be reported on the
                        expenditure report submitted for the subsequent fiscal year in
                        which the contract terminated.
                   RECOMMENDED CONTRACTING PROC
                   It is recommended that grantees follow the procedures recommended
                   below when making contracts involving RIMPS funds.

                   A.   Requests for Bids
                        Where competitive bidding is used, the grantee must prepare
                        a e'Request for Bids" to inform potential contractors.  The
                        "Request for Bids" should include the following information,
                        as applicable:
                        1. A "scope of work" statement which includes (1) a broad,
                           non-technical description of the work to be done or items
                           or services to be purchased, (2) stages of work, technical
                           specifications, reports, drawings and publications.
                        2. The period of performance.
                        3. The quantity needed.
                        4. A list of property to be furnished by the grantee or the
                           contractor, if any.
                        5. Delivery requirements.
                        6. Reports required. (e.g., progress reports, etc.)
                        7. @e initial dollar estimate of costs.
                        8. Required approvals And clearances.
                        9. other necessary technical information or instructions.
                        10. A list of potential contractors, if known.
                        A Reguest.for Bids should be worded to make more than one in-
                        terpretation virtually impossible.  It should state specifically
                        what the contractor and grantee are to do.  Ambiguous work
                        statements can lead to unsatisfactory performance, delays, and
                        disputes and possibly result in increased costs.

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                                      CONTRACTING BY GRANTEES
                        When completed the Request for Bids can be disseminated
                        to potential bidders through advertising in appropriate
                                        through direct notification by mail.
                        publications or

                   B.   Evaluation of Bids
                        Bids submitted should be evaluated from (1) a technical   and
                        (2) a business standpoint.

                        1.   Technical Ev   tio
                             The technical evaluation of bids should be  based  on  the
                                            ria contained in the  "request"  and  a
                             evaluation crate
                             rating or weight should be assigned to each criterion.
                             The technical rating and the accompanying narrative of
                             evaluation generally should cover:
                             a.  The Contractor's understanding of the  scope  of  work
                                 as whown by the scientific and technical approach
                                 proposed.
                             b.  Availability and competence of experienced scientific
                                 and technical personnel.
                             c.  Availability of necessary facilities.
                             d.  Experience or pertinent novel ideas  in  the  specific
                                 branch of science involved.
                             e.  The contractor's willingness to devote his resources
                                 to the proposed work.
                             f.  The contractor's proposed plan for achieving the
                                 quality of performance required.
                             g.  The reasonableness of the proposed manhours, validity
                                 of subcontracting, and the necessity of proposed travel.
                             After the offers are rated, a narrative statement should
                             be prepared expressing the strength or weakness of each
                             proposal and any reservations or qoalificat ons that might
                             bear on the selection of the source of negotiation or award.

                         2.  Busi           tiorL
                             The business evaluation usually  centers  around  cost
                             analysis and analysis of  the  cnntractor's  financial
                             strength and management capability.  Elements considered
                             in cost analysis generally  include  direct  material  and
                             labor costs, subcontracting, overhead rates, general
                             and administrative expense, travel costs, and profit or
                             fee.  Elements considered in evaluating the contractor's
                             financial strength and management capability include

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                                     CONTRACTING BY G@EES
                            organization, past performance,, reputation for reliability,
                            availability of required facilities, cost control, person-
                            nel practices, financial resources, etc.

                   C.  Contract Issuance

                       1.   -Type of Contract.
                            Once it is decided to issue a contract, a dec ision should
                            be made by respons'ible grantee personnel as to the most
                            effective contract instrument available, fixed price, or
                            cost reimbursement.
                            The influencing factors in selecting and negotiating a
                            contract are:
                               a.  Type and complexity of the product or service.

                               b.  Stability of the design.
                               c.  Prospective period of the contract performance.
                               d.  Adequacy of the contractor's estimating and accounting
                                     system.

                               e.  Urgency of the requirement.

                               f.  Degree of the competition.
                               g.  Availability of the comparative cost or pricing
                                     data, market prices  and wage levels.
                                                       21

                               h.  Administrative cost to both parties.

                       2.   Negotiation
                            Once the type of contract is determined, negotiations normally
                            commence between the representative of the grantee institu-
                            tion and the proposed contractor.  The contract negotiation
                            will usually entail:
                               a.   Reaching agreement with a proposed contractor on
                                    the  technical requirements--which is included
                                    In the workscope (if there is a true change in the
                                    requirements, all offerors must be given an opportunity
                                    to revise their proposals.)
                               b.  Reaching an agreement on the type of contract--the
                                     objective is to negotiate that type of contract
                                     and price which includes a reasonable amount of
                                     cost responsibility and risk to the contractor,
                                     while at the same time, providing him with the
                                     greatest incentive for efficient and economical
                                     performance.
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                                      CONTRACTING By GRANTEES


                           c.  Reaching an agreement on the     in  and all other
                               Provisions which will condition his performance of
                               the contract.
                           d. -Setting forth all terms and    ditions in a mutually
                               acceptable contractual docun                     Ms
                               and conditions required in i
                               and (2) wage rates and related matters as specified in
                                ection 904 of the Act.

                           e.  Justifying and documenting the contract negotiated.

                    D.  Contract Administration
                        Once the contract is issued and performance commences, the
                        grantee institution should assign a project officer to
                        administer the contract.  This function will normally entail
                        the following:

                        1.    Monitoring of Performance
                              The project officer should be responsible for providing
                              technical assistance and monitoring the performance of
                              the contract.  It is essential that he monitor a con-
                              tractbr's progress closely and identify problems that
                              threaten contract performance so that remedial measures
                              may be taken if necessary.  The contractor should usually
                              be required to submit periodic progress reports which
                              could be used by the project officer to evaluate con-
                              tradtual progress.  These reports should provide the
                              project officer with most of the information necessary
                              regarding the progress of the work.
                         The terms of the contract govern and they can only be modified
                         by the Project officer after he has reached an agreement with
                         the  contractor.

                         2.   Contract Modifications
                              During the administration of a contract, different types
                              of modifications may be necessary to incorporate new
                              requirements or to handle contingencies which may develop
                              after contract placement.  The project officer must be
                              careful in distinguishing between a modification and a
                              new contract.

                         3.   Property Administration
                              When property is provided by a grantee to a contractor,
                              the project officer should be called upon to advise or
                              assist in the Acquistion and/or utilization of property
                              to be furnished.  His assistance or advice may be required:
                              a.  In determining the necessity for the property to be provided.





                                       CO@ITRACTIT-IG BY GMITEFS



                             b. In determining the kind and quantity of property required
                                and the period-of use.
                             c. In ensuring proper utilization of property.


                         4.  Inspection and Ac   ance
                             The project officer must ensure that the work performed
                             under the contract is measured against the work statement.
                             If performance does not meet contract requirements, it is
                             incumbent upon the project officer to identify deficiencies,
                             and plan for remedial action that can be taken.
                             Once final acceptance of the work effort by the project
                             officer has been,accomplished, the contractor is no longer
                             responsible for unsatisfactory efforti  This concludes
                             performance by the contractor, except for administrative
                             details relating to contract closing.

                         5.  g 0-11
                             A contract is completed when all services have been
                             rendered, all articles, material, reports data, exhibits, etc.,
                             have been delivered and accepted; all administrative actions
                             accomplished; and final payment has been made to the con-
                             tractor.

                     E.  Final Audit and Closemout
                         Upon the physical completion of the contract, action should
                         be taken to provide assurance that:
                         1.  All services have been rendered.
                         2.  All articles have been delivered and accepted.
                         3.  All payments and collections have been accomplished.
                         4.  Release from liabilities, obligations, and claims  have
                             been executed b  the contractor.
                         5.  All administrative actions have been completed, including
                             disputes, protests, litigation, determination of  final
                             overhead rates, release of funds, etc.
                         Before final payment is made under a cost-reimbursement type
                         contract, a representative of the grantee institution should
                         verify the allowabtlity and reasonableness of all costs re-
                         imbursed.  When appropriate, verification of total costs
                         reimbursed tan be obtained from the DHEW audit agency in the
                         form of a final audit report.  Similar verification of actual
                         costs.must be made for fixed price contracts when costs incentives
                         or price redetermination is involved.





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