45 CFR Parts 160 & 164 (CFR Annual Edition) organization are allow- able with prior approval by the HHS awarding agency or pass-through enti- ty. (d) Costs of membership in any coun- try club or social or dining club or or- ganization are unallowable. (e) Costs of membership in organiza- tions whose primary purpose is lob- bying are unallowable. See also § 75.450. § 75.455 Organization costs. Costs such as incorporation fees, bro- kers’ fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment counselor, whether or not employees of the non- Federal entity in connection with es- tablishment or reorganization of an or- ganization, are unallowable except with prior approval of the HHS award- ing agency. § 75.456 Participant support costs. Participant support costs as defined in § 75.2 are allowable with the prior ap- proval of the HHS awarding agency. [81 FR 3018, Jan. 20, 2016] § 75.457 Plant and security costs. Necessary and reasonable expenses incurred for protection and security of facilities, personnel, and work products 326 Dept. of Health and Human Services § 75.461 are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security ac cilities, personnel, and work products 326 Dept. of Health and Human Services § 75.461 are allowable. Such costs include, but are not limited to, wages and uniforms of personnel engaged in security activi- ties; equipment; barriers; protective (non-military) gear, devices, and equip- ment; contractual security services; and consultants. Capital expenditures for plant security purposes are subject to § 75.439. § 75.458 Pre-award costs. Pre-award costs are those incurred prior to the effective date of the Fed- eral award directly pursuant to the ne- gotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely per- formance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written ap- proval of the HHS awarding agency. non-Federal entity in favor of incur- ring the cost, particularly where the services rendered are not of a con- tinuing nature and have little relation- ship to work under Federal awards. (6) Whether the service can be per- formed more economically by direct employment rather than contracting. (7) The qualifi - tinuing nature and have little relation- ship to work under Federal awards. (6) Whether the service can be per- formed more economically by direct employment rather than contracting. (7) The qualifications of the indi- vidual or concern rendering the service and the customary fees charged, espe- cially on non-federally funded activi- ties. (8) Adequacy of the contractual agreement for the service (e.g., descrip- tion of the service, estimate of time re- quired, rate of compensation, and ter- mination provisions). (c) In addition to the factors in para- graph (b) of this section, to be allow- able, retainer fees must be supported by evidence of bona fide services avail- able or rendered. § 75.459 Professional service costs. § 75.460 Proposal costs. (a) Costs of professional and consult- ant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non- Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contin- gent upon recovery of the costs from the Federal Government. In addition, legal and related raphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contin- gent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 75.435. (b) In determining the allowability of costs in a particular case, no single fac- tor or any special combination of fac- tors is necessarily determinative. How- ever, the following factors are relevant: (1) The nature and scope of the serv- ice rendered in relation to the service required. (2) The necessity of contracting for the service, considering the non-Fed- eral entity’s capability in the par- ticular area. (3) The past pattern of such costs, particularly in the years prior to Fed- eral awards. (4) The impact of Federal awards on the non-Federal entity’s business (i.e., what new problems have arisen). (5) Whether the proportion of Federal work to the non-Federal entity’s total business is such as to influence the Proposal costs are the costs of pre- paring bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the devel- opment of data necessary to support the non-Federal entity’s bids or pro- posal e- paring bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the devel- opment of data necessary to support the non-Federal entity’s bids or pro- posals. Proposal costs of the current accounting period of both successful and unsuccessful bids and proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities of the non-Federal entity. No proposal costs of past accounting periods will be allocable to the current period. § 75.461 Publication and printing costs. (a) Publication costs for electronic and print media, including distribu- tion, promotion, and general handling are allowable. If these costs are not identifiable with a particular cost ob- jective, they should be allocated as in- direct costs to all benefiting activities of the non-Federal entity. (b) Page charges for professional journal publications are allowable where: (1) The publications report work sup- ported by the Federal Government; and (2) The charges are levied impartially on all items published by the journal, whether or not under a Federal award. 327 § 75.462 45 CFR Subtitle A (10–1–24 Edition) (3) The non-Federal entity may and (2) The charges are levied impartially on all items published by the journal, whether or not under a Federal award. 327 § 75.462 45 CFR Subtitle A (10–1–24 Edition) (3) The non-Federal entity may charge the Federal award before close- out for the costs of publication or shar- ing of research results if the costs are not incurred during the period of per- formance of the Federal award. (c) The non-Federal entity may charge the Federal award before close- out for the costs of publication as pre- scribed in paragraphs (a) or (b) of this section or sharing of research results if the costs are not incurred during the period of performance of the Federal award. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.462 Rearrangement and reconver- sion costs. (a) Costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alter- ations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the HHS awarding agency or pass-through enti- ty. (b) Costs incurred in the restoration or rehabilitation of the non-Federal en- tity’s facilities t lowable as a direct cost with the prior approval of the HHS awarding agency or pass-through enti- ty. (b) Costs incurred in the restoration or rehabilitation of the non-Federal en- tity’s facilities to approximately the same condition existing immediately prior to commencement of Federal awards, less costs related to normal wear and tear, are allowable. § 75.463 Recruiting costs. (a) Subject to paragraphs (b) and (c) of this section, and provided that the size of the staff recruited and main- tained is in keeping with workload re- quirements, costs of ‘‘help wanted’’ ad- vertising, operating costs of an em- ployment office necessary to secure and maintain an adequate staff, costs of operating an aptitude and edu- cational testing program, travel costs of employees while engaged in recruit- ing personnel, travel costs of appli- cants for interviews for prospective employment, and relocation costs in- curred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to the non-Federal entity’s standard recruitment program. Where the non- Federal entity uses employment agen- cies, costs not in excess of standard commercial rates for suc costs are incurred pursuant to the non-Federal entity’s standard recruitment program. Where the non- Federal entity uses employment agen- cies, costs not in excess of standard commercial rates for such services are allowable. (b) Special emoluments, fringe bene- fits, and salary allowances incurred to attract professional personnel that do not meet the test of reasonableness or do not conform with the established practices of the non-Federal entity, are unallowable. (c) Where relocation costs incurred incident to recruitment of a new em- ployee have been funded in whole or in part to a Federal award, and the newly hired employee resigns for reasons within the employee’s control within 12 months after hire, the non-Federal en- tity will be required to refund or credit the Federal share of such relocation costs to the Federal Government. See also § 75.464. (d) Short-term, travel visa costs (as opposed to longer-term, immigration visas) are generally allowable expenses that may be proposed as a direct cost. Since short-term visas are issued for a specific period and purpose, they can be clearly identified as directly connected to work performed on a Federal award. For these costs to b d as a direct cost. Since short-term visas are issued for a specific period and purpose, they can be clearly identified as directly connected to work performed on a Federal award. For these costs to be directly charged to a Federal award, they must: (1) Be critical and necessary for the conduct of the project; (2) Be allowable under the applicable cost principles; (3) Be consistent with the non-Fed- eral entity’s cost accounting practices and non-Federal entity policy; and (4) Meet the definition of ‘‘direct cost’’ as described in the applicable cost principles. § 75.464 Relocation costs of employees. (a) Relocation costs are costs inci- dent to the permanent change of duty assignment (for an indefinite period or for a stated period of not less than 12 months) of an existing employee or upon recruitment of a new employee. Relocation costs are allowable, subject to the limitations described in para- graphs (b), (c), and (d) of this section, provided that: (1) The move is for the benefit of the employer. (2) Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. 328 Dept. of Health and Human Services § 75.465 (3) The r of the employer. (2) Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. 328 Dept. of Health and Human Services § 75.465 (3) The reimbursement does not ex- ceed the employee’s actual (or reason- ably estimated) expenses. (b) Allowable relocation costs for current employees are limited to the following: (1) The costs of transportation of the employee, members of his or her imme- diate family and his household, and personal effects to the new location. (2) The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transi- tion period, up to maximum period of 30 calendar days. (3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the employee’s former home. These costs, together with those described in (4), are limited to 8 per cent of the sales price of the employee’s former home. (4) The continuing costs of ownership (for up to six months) of the vacant former home after the settlement or lease date of the employee’s new per- manent home, such as maintenance of buildings and grounds (exclusive costs of ownership (for up to six months) of the vacant former home after the settlement or lease date of the employee’s new per- manent home, such as maintenance of buildings and grounds (exclusive of fix- ing-up expenses), utilities, taxes, and property insurance. (5) Other necessary and reasonable expenses normally incident to reloca- tion, such as the costs of canceling an unexpired lease, transportation of per- sonal property, and purchasing insur- ance against loss of or damages to per- sonal property. The cost of canceling an unexpired lease is limited to three times the monthly rental. (c) Allowable relocation costs for new employees are limited to those de- scribed in paragraphs (b)(1) and (2) of this section. When relocation costs in- curred incident to the recruitment of new employees have been charged to a Federal award and the employee re- signs for reasons within the employee’s control within 12 months after hire, the non-Federal entity must refund or credit the Federal Government for its share of the cost. However, the costs of travel to an overseas location must be considered travel costs in accordance with § 75.474, and not § 75.464, for the purpose of this paragr Government for its share of the cost. However, the costs of travel to an overseas location must be considered travel costs in accordance with § 75.474, and not § 75.464, for the purpose of this paragraph if dependents are not permitted at the location for any reason and the costs do not include costs of transporting household goods. (d) The following costs related to re- location are unallowable: (1) Fees and other costs associated with acquiring a new home. (2) A loss on the sale of a former home. (3) Continuing mortgage principal and interest payments on a home being sold. (4) Income taxes paid by an employee related to reimbursed relocation costs. § 75.465 Rental costs of real property and equipment. (a) Subject to the limitations de- scribed in paragraphs (b) and (c) of this section, rental costs are allowable to the extent that the rates are reason- able in light of such factors as: Rental costs of comparable property, if any; market conditions in the area; alter- natives available; and the type, life ex- pectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to de- termine if circumstances have changed and other options are e; and the type, life ex- pectancy, condition, and value of the property leased. Rental arrangements should be reviewed periodically to de- termine if circumstances have changed and other options are available. (b) Rental costs under ‘‘sale and lease back’’ arrangements are allowable only up to the amount that would be al- lowed had the non-Federal entity con- tinued to own the property. This amount would include expenses such as depreciation, maintenance, taxes, and insurance. (c) Rental costs under ‘‘less-than- arm’s-length’’ leases are allowable only up to the amount as explained in para- graph (b) of this section. For this pur- pose, a less-than-arm’s-length lease is one under which one party to the lease agreement is able to control or sub- stantially influence the actions of the other. Such leases include, but are not limited to those between: (1) Divisions of the non-Federal enti- ty; (2) The non-Federal entity under common control through common offi- cers, directors, or members; and (3) The non-Federal entity and a di- rector, trustee, officer, or key em- ployee of the non-Federal entity or an immediate family member, either di- rectly or through corporations, trusts, or s s; and (3) The non-Federal entity and a di- rector, trustee, officer, or key em- ployee of the non-Federal entity or an immediate family member, either di- rectly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. For exam- ple, the non-Federal entity may estab- lish a separate corporation for the sole 329 § 75.466 45 CFR Subtitle A (10–1–24 Edition) purpose of owning property and leasing it back to the non-Federal entity. (4) Family members include one party with any of the following rela- tionships to another party: (i) Spouse, and parents thereof; (ii) Children, and spouses thereof; (iii) Parents, and spouses thereof; (iv) Siblings, and spouses thereof; (v) Grandparents and grandchildren, and spouses thereof; (vi) Domestic partner and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and (vii) Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship. (5) Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in para- graph (b) of t uivalent of a family relationship. (5) Rental costs under leases which are required to be treated as capital leases under GAAP are allowable only up to the amount (as explained in para- graph (b) of this section) that would be allowed had the non-Federal entity purchased the property on the date the lease agreement was executed. The pro- visions of GAAP must be used to deter- mine whether a lease is a capital lease. Interest costs related to capital leases are allowable to the extent they meet the criteria in § 75.449. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the non- Federal entity purchased the property. (6) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity, to include commercial or residential real estate, for purposes such as the home office workspace is unallowable. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.466 Scholarships and student aid costs. (a) Costs of scholarships, fellowships, and other programs of student aid at IHEs are allowable only when the pur- pose of the Federal award is to provide training to selected s and student aid costs. (a) Costs of scholarships, fellowships, and other programs of student aid at IHEs are allowable only when the pur- pose of the Federal award is to provide training to selected participants and the charge is approved by the HHS awarding agency. However, tuition re- mission and other forms of compensa- tion paid as, or in lieu of, wages to stu- dents performing necessary work are allowable provided that: (1) The individual is conducting ac- tivities necessary to the Federal award; (2) Tuition remission and other sup- port are provided in accordance with established policy of the IHE and con- sistently provided in a like manner to students in return for similar activities conducted under Federal awards as well as other activities; and (3) During the academic period, the student is enrolled in an advanced de- gree program at a non-Federal entity or affiliated institution and the activi- ties of the student in relation to the Federal award are related to the degree program; (4) The tuition or other payments are reasonable compensation for the work performed and are conditioned explic- itly upon the performance of necessary work; and (5) It is the IHE’s practice program; (4) The tuition or other payments are reasonable compensation for the work performed and are conditioned explic- itly upon the performance of necessary work; and (5) It is the IHE’s practice to simi- larly compensate students under Fed- eral awards as well as other activities. (b) Charges for tuition remission and other forms of compensation paid to students as, or in lieu of, salaries and wages must be subject to the reporting requirements in § 75.430, and must be treated as direct or indirect cost in ac- cordance with the actual work being performed. Tuition remission may be charged on an average rate basis. See also § 75.431. § 75.467 Selling and marketing costs. Costs of selling and marketing any products or services of the non-Federal entity (unless allowed under § 75.421) are unallowable, except as direct costs, with prior approval by the HHS award- ing agency when necessary for the per- formance of the Federal award. § 75.468 Specialized service facilities. (a) The costs of services provided by highly complex or specialized facilities operated by the non-Federal entity, such as computing facilities, wind tun- nels, and reactors are allowable, pro- vided the charges s of services provided by highly complex or specialized facilities operated by the non-Federal entity, such as computing facilities, wind tun- nels, and reactors are allowable, pro- vided the charges for the services meet the conditions of either paragraphs (b) or (c) of this section, and, in addition, take into account any items of income or Federal financing that qualify as ap- plicable credits under § 75.406. (b) The costs of such services, when material, must be charged directly to 330 Dept. of Health and Human Services § 75.470 applicable awards based on actual usage of the services on the basis of a schedule of rates or established meth- odology that: (1) Does not discriminate between ac- tivities under Federal awards and other activities of the non-Federal entity, in- cluding usage by the non-Federal enti- ty for internal purposes, and (2) Is designed to recover only the ag- gregate costs of the services. The costs of each service must consist normally of both its direct costs and its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/ under applied costs of the previous pe- riod(s). (c) Where the co nd its allocable share of all indirect (F&A) costs. Rates must be adjusted at least biennially, and must take into consideration over/ under applied costs of the previous pe- riod(s). (c) Where the costs incurred for a service are not material, they may be allocated as indirect (F&A) costs. (d) Under some extraordinary cir- cumstances, where it is in the best in- terest of the Federal Government and the non-Federal entity to establish al- ternative costing arrangements, such arrangements may be worked out with the Federal cognizant agency for indi- rect costs. § 75.469 Student activity costs. Costs incurred for intramural activi- ties, student publications, student clubs, and other student activities, are unallowable, unless specifically pro- vided for in the Federal award. § 75.470 Taxes (including Value Added Tax). (a) For states, local governments and Indian tribes: (1) Taxes that a governmental unit is legally required to pay are allowable, except for self-assessed taxes that dis- proportionately affect Federal pro- grams or changes in tax policies that disproportionately affect Federal pro- grams. (2) Gasoline taxes, motor vehicle fees, and other taxes that are in effect user proportionately affect Federal pro- grams or changes in tax policies that disproportionately affect Federal pro- grams. (2) Gasoline taxes, motor vehicle fees, and other taxes that are in effect user fees for benefits provided to the Federal Government are allowable. (3) This provision does not restrict the authority of the HHS awarding agency to identify taxes where Federal participation is inappropriate. Where the identification of the amount of un- allowable taxes would require an inor- dinate amount of effort, the cognizant agency for indirect costs may accept a reasonable approximation thereof. (b) For nonprofit organizations and IHEs: (1) In general, taxes which the non- Federal entity is required to pay and which are paid or accrued in accord- ance with GAAP, and payments made to local governments in lieu of taxes which are commensurate with the local government services received are al- lowable, except for: (i) Taxes from which exemptions are available to the non-Federal entity di- rectly or which are available to the non-Federal entity based on an exemp- tion afforded the Federal Government and, in the latter case, when the HHS awarding agency makes available the necessary di- rectly or which are available to the non-Federal entity based on an exemp- tion afforded the Federal Government and, in the latter case, when the HHS awarding agency makes available the necessary exemption certificates, (ii) Special assessments on land which represent capital improvements, and (iii) Federal income taxes. (2) Any refund of taxes, and any pay- ment to the non-Federal entity of in- terest thereon, which were allowed as Federal award costs, will be credited either as a cost reduction or cash re- fund, as appropriate, to the Federal Government. However, any interest ac- tually paid or credited to an non-Fed- eral entity incident to a refund of tax, interest, and penalty will be paid or credited to the Federal Government only to the extent that such interest accrued over the period during which the non-Federal entity has been reim- bursed by the Federal Government for the taxes, interest, and penalties. (c) Value Added Tax (VAT) Foreign taxes charged for the purchase of goods or services that a non-Federal entity is legally required to pay in country is an allowable expense under Federal awards. Foreign tax refunds or applica- ble credits under Federal awards refer goods or services that a non-Federal entity is legally required to pay in country is an allowable expense under Federal awards. Foreign tax refunds or applica- ble credits under Federal awards refer to receipts, or reduction of expendi- tures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs. To the extent that such credits accrued or received by the non-Federal entity relate to allowable cost, these costs must be credited to the HHS awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the non-Federal entity may reduce the Federal share of 331 § 75.471 45 CFR Subtitle A (10–1–24 Edition) costs by the amount of the foreign tax reimbursement, or where Federal award has not expired, use the foreign government tax refund for approved ac- tivities under the Federal award with prior approval of the HHS awarding agency. § 75.471 Termination costs. Termination of a Federal award gen- erally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the Federal award not been termi- nated. Cost principles covering these ite n- erally gives rise to the incurrence of costs, or the need for special treatment of costs, which would not have arisen had the Federal award not been termi- nated. Cost principles covering these items are set forth in this section. They are to be used in conjunction with the other provisions of this part in termination situations. (a) The cost of items reasonably usa- ble on the non-Federal entity’s other work must not be allowable unless the non-Federal entity submits evidence that it would not retain such items at cost without sustaining a loss. In de- ciding whether such items are reason- ably usable on other work of the non- Federal entity, the HHS awarding agency should consider the non-Federal entity’s plans and orders for current and scheduled activity. Contempora- neous purchases of common items by the non-Federal entity must be re- garded as evidence that such items are reasonably usable on the non-Federal entity’s other work. Any acceptance of common items as allocable to the ter- minated portion of the Federal award must be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative require- men he ter- minated portion of the Federal award must be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative require- ments of other work. (b) If in a particular case, despite all reasonable efforts by the non-Federal entity, certain costs cannot be discon- tinued immediately after the effective date of termination, such costs are generally allowable within the limita- tions set forth in this part, except that any such costs continuing after termi- nation due to the negligent or willful failure of the non-Federal entity to dis- continue such costs must be unallow- able. (c) Loss of useful value of special tooling, machinery, and equipment is generally allowable if: (1) Such special tooling, special ma- chinery, or equipment is not reason- ably capable of use in the other work of the non-Federal entity, (2) The interest of the Federal Gov- ernment is protected by transfer of title or by other means deemed appro- priate by the HHS awarding agency (see also § 75.320(d)), and (3) The loss of useful value for any one terminated Federal award is lim- ited to that portion of the acquisition cost which bears the ro- priate by the HHS awarding agency (see also § 75.320(d)), and (3) The loss of useful value for any one terminated Federal award is lim- ited to that portion of the acquisition cost which bears the same ratio to the total acquisition cost as the termi- nated portion of the Federal award bears to the entire terminated Federal award and other Federal awards for which the special tooling, machinery, or equipment was acquired. (d) Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance of the terminated Federal award less the re- sidual value of such leases, if: (1) The amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the Federal award and such further period as may be reasonable, and (2) The non-Federal entity makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. There also may be included the cost of alterations of such leased property, provided such alterations were necessary for the performance of the Federal award, and of reasonable restoration required by the provisions of the lease. (e) Se of alterations of such leased property, provided such alterations were necessary for the performance of the Federal award, and of reasonable restoration required by the provisions of the lease. (e) Settlement expenses including the following are generally allowable: (1) Accounting, legal, clerical, and similar costs reasonably necessary for: (i) The preparation and presentation to the Federal awarding agency of set- tlement claims and supporting data with respect to the terminated portion of the Federal award, unless the termi- nation is for cause (see subpart D of this part, §§ 75.371 through 75.375); and (ii) The termination and settlement of subawards. (2) Reasonable costs for the storage, transportation, protection, and disposi- tion of property provided by the Fed- eral Government or acquired or pro- duced for the Federal award. 332 Dept. of Health and Human Services § 75.474 (f) Claims under subawards, including the allocable portion of claims which are common to the Federal award and to other work of the non-Federal enti- ty, are generally allowable. An appro- priate share of the non-Federal entity’s indirect costs may be allocated to the amount of settlements with contrac- d and to other work of the non-Federal enti- ty, are generally allowable. An appro- priate share of the non-Federal entity’s indirect costs may be allocated to the amount of settlements with contrac- tors and/or subrecipients, provided that the amount allocated is otherwise con- sistent with the basic guidelines con- tained in § 75.414. The indirect costs so allocated must exclude the same and similar costs claimed directly or indi- rectly as settlement expenses. § 75.472 Training and education costs. The cost of training and education provided for employee development is allowable. § 75.473 Transportation costs. Costs incurred for freight, express, cartage, postage, and other transpor- tation services relating either to goods purchased, in process, or delivered, are allowable. When such costs can readily be identified with the items involved, they may be charged directly as trans- portation costs or added to the cost of such items. Where identification with the materials received cannot readily be made, inbound transportation cost may be charged to the appropriate in- direct (F&A) cost accounts if the non- Federal entity follows a consistent, eq- uitable procedure in this respect. ot readily be made, inbound transportation cost may be charged to the appropriate in- direct (F&A) cost accounts if the non- Federal entity follows a consistent, eq- uitable procedure in this respect. Out- bound freight, if reimbursable under the terms and conditions of the Federal award, should be treated as a direct cost. § 75.474 Travel costs. (a) General. Travel costs are the ex- penses for transportation, lodging, sub- sistence, and related items incurred by employees who are in travel status on official business of the non-Federal en- tity. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs in- curred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges con- sistent with those normally allowed in like circumstances in the non-Federal entity’s non-federally-funded activities and in accordance with non-Federal en- tity’s written travel reimbursement policies. Notwithstanding the provi- sions of § 75.444, travel costs of officials covered by that section are allowable with the prior written approval of the Federal awarding agency o l reimbursement policies. Notwithstanding the provi- sions of § 75.444, travel costs of officials covered by that section are allowable with the prior written approval of the Federal awarding agency or pass- through entity when they are specifi- cally related to the Federal award. (b) Lodging and subsistence. Costs in- curred by employees and officers for travel, including costs of lodging, other subsistence, and incidental expenses, must be considered reasonable and oth- erwise allowable only to the extent such costs do not exceed charges nor- mally allowed by the non-Federal enti- ty in its regular operations as the re- sult of the non-Federal entity’s written travel policy. In addition, if these costs are charged directly to the Federal award documentation must justify that: (1) Participation of the individual is necessary to the Federal award; and (2) The costs are reasonable and con- sistent with non-Federal entity’s es- tablished travel policy. (c)(1) Temporary dependent care costs (as dependent is defined in 26 U.S.C. 152) above and beyond regular dependent care that directly results from travel to conferences is allowable provided that: (i) The costs are a direct result of ts (as dependent is defined in 26 U.S.C. 152) above and beyond regular dependent care that directly results from travel to conferences is allowable provided that: (i) The costs are a direct result of the individual’s travel for the Federal award; (ii) The costs are consistent with the non-Federal entity’s documented trav- el policy for all entity travel; and (iii) Are only temporary during the travel period. (2) Travel costs for dependents are unallowable, except for travel of dura- tion of six months or more with prior approval of the HHS awarding agency. See also § 75.432. (d) In the absence of an acceptable, written non-Federal entity policy re- garding travel costs, the rates and amounts established under 5 U.S.C. 5701–11 (‘‘Travel and Subsistence Ex- penses: Mileage Allowance’’), or by the Administrator of General Services, or by the President (or his or her des- ignee) pursuant to any provisions of such subchapter must apply to travel under Federal awards (48 CFR 31.205– 46(a)). 333 § 75.475 45 CFR Subtitle A (10–1–24 Edition) (e) Commercial air travel. (1) Airfare costs in excess of the basic least expen- sive accommodations class offered by commercial airlines are unallowab 333 § 75.475 45 CFR Subtitle A (10–1–24 Edition) (e) Commercial air travel. (1) Airfare costs in excess of the basic least expen- sive accommodations class offered by commercial airlines are unallowable except when such ac- commodations would: unrestricted (i) Require circuitous routing; (ii) Require travel during unreason- able hours; (iii) Excessively prolong travel; (iv) Result in additional costs that would offset the transportation sav- ings; or (v) Offer accommodations not reason- ably adequate for the traveler’s med- ical needs. The non-Federal entity must justify and document these condi- tions on a case-by-case basis in order for the use of first-class or business- class airfare to be allowable in such cases. (2) Unless a pattern of avoidance is detected, the Federal Government will generally not question a non-Federal entity’s determinations that cus- tomary standard airfare or other dis- count airfare is unavailable for specific trips if the non-Federal entity can demonstrate that such airfare was not available in the specific case. (f) Air travel by other than commercial carrier. Costs of travel by non-Federal entity-owned, -leased, or -chartered aircraft include the co e that such airfare was not available in the specific case. (f) Air travel by other than commercial carrier. Costs of travel by non-Federal entity-owned, -leased, or -chartered aircraft include the cost of lease, char- (including personnel ter, operation costs), maintenance, depreciation, in- surance, and other related costs. The portion of such costs that exceeds the cost of airfare as provided for in para- graph (d) of this section, is unallow- able. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.475 Trustees. Travel and subsistence costs of trust- ees (or directors) at IHEs and nonprofit organizations are allowable. See also § 75.474. HHS SELECTED ITEMS OF COST § 75.476 Independent research and de- velopment costs. Independent research and develop- ment is research and development which is conducted by an organization, and which is not sponsored by Federal or non-Federal awards, contracts, or Independent re- other agreements. search and development shall be allo- cated its proportionate share of indi- rect costs on the same basis as the al- location of indirect costs to sponsored research and development. The cost of independent research and developme be allo- cated its proportionate share of indi- rect costs on the same basis as the al- location of indirect costs to sponsored research and development. The cost of independent research and development, including their proportionate share of indirect costs, are unallowable. § 75.477 Shared ments. responsibility pay- (a) Payments for failure to maintain minimum essential health coverage. Any payments or assessments imposed on an individual or individuals pursuant to 26 U.S.C. 5000A(b) as a result of any failure to maintain minimum essential coverage as required by 26 U.S.C. 5000A(a) with respect to any period prior to January 1, 2019, are not allow- able expenses under Federal awards from an HHS awarding agency. (b) Payments for failure to offer health coverage to employees. Any payments or assessments imposed on an employer pursuant to 26 U.S.C. 4980H as a result of the employer’s failure to offer to its full-time employees (and their depend- ents) the opportunity to enroll in min- imum essential coverage under an eli- gible employer-sponsored plan are not allowable expenses under Federal awards from an HHS awarding agency. [86 FR 2278, Jan. 12, 2021] Subpart F—Audit Requirements um essential coverage under an eli- gible employer-sponsored plan are not allowable expenses under Federal awards from an HHS awarding agency. [86 FR 2278, Jan. 12, 2021] Subpart F—Audit Requirements GENERAL § 75.500 Purpose. This part sets forth standards for ob- taining consistency and uniformity among HHS agencies for the audit of non-Federal entities expending Federal awards. AUDITS § 75.501 Audit requirements. (a) Audit required. A non-Federal enti- ty that expends $750,000 or more during the non-Federal entity’s fiscal year in Federal awards must have a single or program-specific audit conducted for that year in accordance with the provi- sions of this part. (b) Single audit. A non-Federal entity that expends $750,000 or more during 334 Dept. of Health and Human Services § 75.501 the non-Federal entity’s fiscal year in Federal awards must have a single audit conducted in accordance with § 75.514 except when it elects to have a program-specific audit conducted in ac- cordance with paragraph (c) of this sec- tion. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal pro- gram (excluding R&D) and the Federal program’s statutes, regul paragraph (c) of this sec- tion. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal pro- gram (excluding R&D) and the Federal program’s statutes, regulations, or the terms and conditions of the Federal award do not require a financial state- ment audit of the auditee, the auditee may elect to have a program-specific audit conducted in accordance with § 75.507. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in ad- vance a program-specific audit. (d) Exemption when Federal awards ex- pended are less than $750,000. A non-Fed- eral entity that expends less than $750,000 during the non-Federal entity’s fiscal year in Federal awards is exempt from Federal audit requirements for that year, except as noted in § 75.503, but records must be available for re- view or audit by appropriate officials of the Federal agency, pass-through en- tity, and Government Accountability Office (GAO). (e) Federally Funded Re § 75.503, but records must be available for re- view or audit by appropriate officials of the Federal agency, pass-through en- tity, and Government Accountability Office (GAO). (e) Federally Funded Research and De- velopment Centers (FFRDC). Manage- ment of an auditee that owns or oper- ates a FFRDC may elect to treat the FFRDC as a separate entity for pur- poses of this part. (f) Subrecipients and contractors. An auditee may simultaneously be a re- cipient, a subrecipient, and a con- tractor. Federal awards expended as a recipient or a subrecipient are subject to audit under this part. The payments received for goods or services provided as a contractor are not Federal awards. Section 75.351 sets forth the consider- ations in determining whether pay- ments constitute a Federal award or a payment for goods or services provided as a contractor. compliance responsibility for contrac- tors is only to ensure that the procure- ment, receipt, and payment for goods and services comply with Federal stat- utes, regulations, and the terms and conditions of Federal awards. Federal award compliance requirements nor- mally do not pass through to contrac- tors. However, the auditee is respon- si deral stat- utes, regulations, and the terms and conditions of Federal awards. Federal award compliance requirements nor- mally do not pass through to contrac- tors. However, the auditee is respon- sible for ensuring compliance for pro- curement transactions which are struc- tured such that the contractor is re- sponsible for program compliance or the contractor’s records must be re- viewed to determine program compli- ance. Also, when these procurement transactions relate to a major pro- gram, the scope of the audit must in- clude determining whether these trans- actions are in compliance with Federal statutes, regulations, and the terms and conditions of Federal awards. (h) For-profit subrecipient. Since this part does not apply to for-profit sub- recipients, the pass-through entity is responsible for establishing require- ments, as necessary, to ensure compli- ance by for-profit subrecipients. The agreement with the for-profit sub- recipient must describe applicable compliance requirements and the for- profit subrecipient’s compliance re- sponsibility. Methods to ensure compli- ance for Federal awards made to for- profit subrecipients may include pre- award audits, monitoring du rements and the for- profit subrecipient’s compliance re- sponsibility. Methods to ensure compli- ance for Federal awards made to for- profit subrecipients may include pre- award audits, monitoring during the agreement, and post-award audits. See also § 75.352. (i) Recipients and subrecipients that are commercial organizations (includ- ing for-profit hospitals) have two op- tions regarding audits: (1) A financial related audit (as de- fined in the Government Auditing Standards, GPO Stock #020–000–00–265– 4) of a particular award in accordance with Government Auditing Standards, in those cases where the recipient re- ceives awards under only one HHS pro- gram; or, if awards are received under multiple HHS programs, a financial re- lated audit of all HHS awards in ac- cordance with Government Auditing Standards; or (2) An audit that meets the require- ments contained in this subpart. (g) Compliance responsibility for con- tractors. In most cases, the auditee’s (j) Commercial organizations that re- ceive annual HHS awards totaling less 335 § 75.502 45 CFR Subtitle A (10–1–24 Edition) than $750,000 are exempt from require- ments for a non-Federal audit for that year, but records must b s that re- ceive annual HHS awards totaling less 335 § 75.502 45 CFR Subtitle A (10–1–24 Edition) than $750,000 are exempt from require- ments for a non-Federal audit for that year, but records must be available for review by appropriate officials of Fed- eral agencies. (k) See also § 75.216. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.502 Basis for determining Federal awards expended. (a) Determining Federal awards ex- pended. The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that re- quire the non-Federal entity to comply with Federal statutes, regulations, and the terms and conditions of Federal awards, such as: expenditure/expense transactions associated with awards in- cluding grants, cost-reimbursement contracts under the FAR, compacts with Indian Tribes, cooperative agree- ments, and direct appropriations; the disbursement of funds to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus prop- erty; the receipt or use of program in- come; the distribution to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus prop- erty; the receipt or use of program in- come; the distribution or use of food commodities; the disbursement of amounts entitling the non-Federal en- tity to an interest subsidy; and the pe- riod when insurance is in force. (b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines must be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of this section: (1) Value of new loans made or re- ceived during the audit period; plus (2) Beginning of the audit period bal- ance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus (3) Any interest subsidy, cash, or ad- ministrative cost allowance received. (c) Loan and loan guarantees (loans) at IHEs. When loans are made to students of an IHE but the IHE does not make the loans, then only the value of loans made during the audit period must be considered Federal awards expended in that audit period. The b ans are made to students of an IHE but the IHE does not make the loans, then only the value of loans made during the audit period must be considered Federal awards expended in that audit period. The balance of loans for previous audit periods is not in- cluded as Federal awards expended be- cause the lender accounts for the prior balances. (d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior years, are not considered Federal awards expended under this part when the Federal statutes, regulations, and the terms and conditions of Federal awards pertaining to such loans impose no continuing compliance require- ments other than to repay the loans. (e) Endowment funds. The cumulative balance of Federal awards for endow- ment funds that are federally re- stricted are considered Federal awards expended in each audit period in which the funds are still restricted. (f) Free rent. Free rent received by itself is not considered a Federal award expended under this part. However, free rent received as part of a Federal award to carry out a Federal program must be included in determining Fed- eral awards expended and subject to audit under t d expended under this part. However, free rent received as part of a Federal award to carry out a Federal program must be included in determining Fed- eral awards expended and subject to audit under this part. (g) Valuing non-cash assistance. Fed- eral non-cash assistance, such as free rent, food commodities, donated prop- erty, or donated surplus property, must be valued at fair market value at the time of receipt or the assessed value provided by the HHS agency. (h) Medicare. Medicare payments to a non-Federal entity for providing pa- tient care services to Medicare-eligible individuals are not considered Federal awards expended under this part. (i) Medicaid. Medicaid payments to a subrecipient for providing patient care services to Medicaid-eligible individ- uals are not considered Federal awards expended under this part unless a state requires the funds to be treated as Fed- eral awards expended because reim- bursement is on a cost-reimbursement basis. (j) Certain loans provided by the Na- tional Credit Union Administration. For purposes of this part, loans made from the National Credit Union Share Insur- ance Fund and the Central Liquidity Facility that are funded by contribu- the Na- tional Credit Union Administration. For purposes of this part, loans made from the National Credit Union Share Insur- ance Fund and the Central Liquidity Facility that are funded by contribu- tions from insured non-Federal entities are not considered Federal awards ex- pended. 336 Dept. of Health and Human Services § 75.504 § 75.503 Relation to other audit re- quirements. (a) An audit conducted in accordance with this part must be in lieu of any fi- nancial audit of Federal awards which a non-Federal entity is required to un- dergo under any other Federal statute or regulation. To the extent that such audit provides a Federal agency with the information it requires to carry out its responsibilities under Federal statute or regulation, a Federal agency must rely upon and use that informa- tion. (b) Notwithstanding paragraph (a) of this section, a Federal agency, Inspec- tors General, or GAO may conduct or arrange for additional audits which are necessary to carry out its responsibil- ities under Federal statute or regula- tion. The provisions of this part do not authorize any non-Federal entity to constrain, in any manner, such Federal agency from carrying out or arranging sibil- ities under Federal statute or regula- tion. The provisions of this part do not authorize any non-Federal entity to constrain, in any manner, such Federal agency from carrying out or arranging for such additional audits, except that the Federal agency must plan such au- dits to not be duplicative of other au- dits of Federal awards. Prior to com- mencing such an audit, the Federal agency or pass-through entity must re- view the FAC for recent audits sub- mitted by the non-Federal entity, and to the extent such audits meet a Fed- eral agency or pass-through entity’s needs, the Federal agency or pass- through entity must rely upon and use such audits. Any additional audits must be planned and performed in such a way as to build upon work performed, including the audit documentation, sampling, and testing already per- formed, by other auditors. (c) The provisions of this part do not limit the authority of Federal agencies to conduct, or arrange for the conduct of, audits and evaluations of Federal awards, nor limit the authority of any Federal agency Inspector General or other Federal official. For example, re- quirements that may be applicable under the FAR or CAS and the term tions of Federal awards, nor limit the authority of any Federal agency Inspector General or other Federal official. For example, re- quirements that may be applicable under the FAR or CAS and the terms and conditions of a cost-reimbursement contract may include additional appli- cable audits to be conducted or ar- ranged for by Federal agencies. (d) Federal agency to pay for addi- tional audits. A Federal agency that conducts or arranges for additional au- dits must, consistent with other appli- cable Federal statutes and regulations, arrange for funding the full cost of such additional audits. (e) Request for a program to be au- dited as a major program. An HHS awarding agency may request that an auditee have a particular Federal pro- gram audited as a major program in lieu of the HHS awarding agency con- ducting or arranging for the additional audits. To allow for planning, such re- quests should be made at least 180 cal- endar days prior to the end of the fiscal year to be audited. The auditee, after consultation with its auditor, should promptly respond to such a request by informing the HHS awarding agency whether the program would otherwise be audited as a major program using The auditee, after consultation with its auditor, should promptly respond to such a request by informing the HHS awarding agency whether the program would otherwise be audited as a major program using the risk-based audit approach de- scribed in § 75.518 and, if not, the esti- mated incremental cost. The HHS awarding agency must then promptly confirm to the auditee whether it wants the program audited as a major program. If the program is to be au- dited as a major program based upon this HHS awarding agency request, and the HHS awarding agency agrees to pay the full incremental costs, then the auditee must have the program au- dited as a major program. A pass- through entity may use the provisions of this paragraph for a subrecipient. § 75.504 Frequency of audits. Except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part must be performed annually. Any biennial audit must cover both years within the biennial period. (a) A state, local government, or In- dian tribe that is required by constitu- tion or statute, in effect on January 1, 1987, to undergo its audits less fre- quently than annually, is permitted to und (a) A state, local government, or In- dian tribe that is required by constitu- tion or statute, in effect on January 1, 1987, to undergo its audits less fre- quently than annually, is permitted to undergo its audits pursuant to this part biennially. This requirement must still be in effect for the biennial period. (b) Any nonprofit organization that had biennial audits for all biennial pe- riods ending between July 1, 1992, and January 1, 1995, is permitted to under- go its audits pursuant to this part bi- ennially. 337 § 75.505 § 75.505 Sanctions. In cases of continued inability or un- willingness to have an audit conducted in accordance with this part, Federal agencies and pass-through entities must take appropriate action as pro- vided in § 75.371. § 75.506 Audit costs. See § 75.425. § 75.507 Program-specific audits. (a) Program-specific audit guide avail- able. In many cases, a program-specific audit guide will be available to provide specific guidance to the auditor with respect to internal controls, compli- ance requirements, suggested audit procedures, and audit reporting re- quirements. A listing of current pro- gram-specific audit guides can be found in the compliance supp o internal controls, compli- ance requirements, suggested audit procedures, and audit reporting re- quirements. A listing of current pro- gram-specific audit guides can be found in the compliance supplement begin- ning with the 2014 supplement includ- ing HHS awarding agency contact in- formation and a Web site where a copy of the guide can be obtained. When a current program-specific audit guide is available, the auditor must follow GAGAS and the guide when performing a program-specific audit. (b) Program-specific audit guide not available. (1) When a current program- specific audit guide is not available, the auditee and auditor must have ba- sically the same responsibilities for the Federal program as they would have for an audit of a major program in a single audit. (2) The auditee must prepare the fi- nancial statement(s) for the Federal program that includes, at a minimum, a schedule of expenditures of Federal awards for the program and notes that describe the significant accounting policies used in preparing the schedule, a summary schedule of prior audit find- ings consistent with the requirements of § 75.511(b), and a corrective action plan consistent with the requirements ing policies used in preparing the schedule, a summary schedule of prior audit find- ings consistent with the requirements of § 75.511(b), and a corrective action plan consistent with the requirements of § 75.511(c). (3) The auditor must: (i) Perform an audit of the financial statement(s) for the Federal program in accordance with GAGAS; (ii) Obtain an understanding of inter- nal controls and perform tests of inter- nal controls over the Federal program consistent with the requirements of § 75.514(c) for a major program; 45 CFR Subtitle A (10–1–24 Edition) (iii) Perform procedures to determine whether the auditee has complied with Federal statutes, regulations, and the terms and conditions of Federal awards that could have a direct and material effect on the Federal program con- sistent with the requirements of § 75.514(d) for a major program; (iv) Follow up on prior audit findings, perform procedures to assess the rea- sonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with the require- ments of § 75.511, and report, as a cur- rent year audit finding, when the audi- tor concludes that the summary sched- ule of prior audit findings mat ed by the auditee in accordance with the require- ments of § 75.511, and report, as a cur- rent year audit finding, when the audi- tor concludes that the summary sched- ule of prior audit findings materially misrepresents the status of any prior audit finding; and (v) Report any audit findings con- sistent with the requirements of § 75.516. (4) The auditor’s report(s) may be in the form of either combined or sepa- rate reports and may be organized dif- ferently from the manner presented in this section. The auditor’s report(s) must state that the audit was con- ducted in accordance with this part and include the following: (i) An opinion (or disclaimer of opin- ion) as to whether the financial state- ment(s) of the Federal program is pre- sented fairly in all material respects in accordance with the stated accounting policies; (ii) A report on internal control re- lated to the Federal program, which must describe the scope of testing of internal control and the results of the tests; (iii) A report on compliance which in- cludes an opinion (or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the terms and conditions of Federal awards which could ii) A report on compliance which in- cludes an opinion (or disclaimer of opinion) as to whether the auditee complied with laws, regulations, and the terms and conditions of Federal awards which could have a direct and material effect on the Federal pro- gram; and (iv) A schedule of findings and ques- tioned costs for the Federal program that includes a summary of the audi- tor’s results relative to the Federal program in a format consistent with § 75.515(d)(1) and findings and ques- tioned costs consistent with the re- quirements of § 75.515(d)(3). 338 Dept. of Health and Human Services § 75.509 (c) Report submission for program-spe- cific audits. (1) The audit must be com- pleted and the reporting required by paragraph (c)(2) or (c)(3) of this section submitted within the earlier of 30 cal- endar days after receipt of the audi- tor’s report(s), or nine months after the end of the audit period, unless a different period is specified in a pro- gram-specific audit guide. Unless re- stricted by Federal law or regulation, the auditee must make report copies available inspection. Auditees and auditors must ensure that their respective parts of the re- porting package do not include pro- ted by Federal law or regulation, the auditee must make report copies available inspection. Auditees and auditors must ensure that their respective parts of the re- porting package do not include pro- tected personally identifiable informa- tion. public for (2) When a program-specific audit guide is available, the auditee must electronically submit to the FAC the data collection form prepared in ac- cordance with § 75.512(b), as applicable to a program-specific audit, and the re- porting required by the program-spe- cific audit guide. (3) When a program-specific audit guide is not available, the reporting package for a program-specific audit must consist of the financial state- ment(s) of the Federal program, a sum- mary schedule of prior audit findings, and a corrective action plan as de- scribed in paragraph (b)(2) of this sec- tion, and the auditor’s report(s) de- scribed in paragraph (b)(4) of this sec- tion. The data collection form prepared in accordance with § 75.512(b), as appli- cable to a program-specific audit, and one copy of this reporting package must be electronically submitted to the FAC. (d) Other sections of this part may apply. Program-specific audits are sub- je i- cable to a program-specific audit, and one copy of this reporting package must be electronically submitted to the FAC. (d) Other sections of this part may apply. Program-specific audits are sub- ject to: (1) § 75.500 through § 75.503(d); (2) § 75.504 through § 75.506; (3) § 75.508 through § 75.509; (4) § 75.511; (5) § 75.512(e) through (h); (6) § 75.513; (7) § 75.516 through § 75.517; (8) § 75.521, and (9) Other referenced provisions of this part unless contrary to the provisions of this section, a program-specific audit guide, or program statutes and regulations. AUDITEES § 75.508 Auditee responsibilities. The auditee must: (a) Procure or otherwise arrange for the audit required by this part in ac- cordance with § 75.509, and ensure it is properly performed and submitted when due in accordance with § 75.512. (b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in ac- cordance with § 75.510. (c) Promptly follow up and take cor- rective action on audit findings, in- cluding preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with § 75.511(b) and § 75.511(c), respec- tively. (d) Prov ve action on audit findings, in- cluding preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with § 75.511(b) and § 75.511(c), respec- tively. (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit required by this part. § 75.509 Auditor selection. (a) Auditor procurement. In procuring audit services, the auditee must follow the procurement standards prescribed by the Procurement Standards in §§ 75.326 through 75.335 of subpart D of this part or the FAR (48 CFR part 42), as applicable. When procuring audit services, the objective is to obtain high-quality audits. In requesting pro- posals for audit services, the objectives and scope of the audit must be made clear and the non-Federal entity must request a copy of the audit organiza- tion’s peer review report which the auditor is required to provide under GAGAS. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant expe- rience, availability of staff with profes- sional qualifications and e considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant expe- rience, availability of staff with profes- sional qualifications and technical abilities, the results of peer and exter- nal quality control reviews, and price. Whenever possible, the auditee must make positive efforts to utilize small businesses, minority-owned firms, and women’s business enterprises, in pro- curing audit services as stated in § 75.330, or the FAR (48 CFR part 42), as applicable. 339 § 75.510 45 CFR Subtitle A (10–1–24 Edition) (b) Restriction on auditor preparing in- direct cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may not also be se- lected to perform the audit required by this part when the indirect costs recov- ered by the auditee during the prior year exceeded $1 million. This restric- tion applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan and any subsequent years in which the re- sulting indirect cost agreement or cost allocation plan is used to recover costs. (c) Use of Federal auditors. Federal auditors may perform all or part plan and any subsequent years in which the re- sulting indirect cost agreement or cost allocation plan is used to recover costs. (c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they comply fully with the requirements of this part. § 75.510 Financial statements. (a) Financial statements. The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements must be for the same orga- nizational unit and fiscal year that is chosen to meet the requirements of this part. However, non-Federal entity- wide financial statements may also in- clude departments, agencies, and other organizational units that have separate audits in accordance with § 75.514(a) and prepare separate financial state- ments. (b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with § 75.502. While le of expenditures of Federal awards for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with § 75.502. While not required, the auditee may choose to provide infor- mation requested by HHS awarding agencies and pass-through entities to make the schedule easier to use. For example, when a Federal program has multiple Federal award years, the auditee may list the amount of Federal awards expended for each Federal award year separately. At a minimum, the schedule must: (1) List individual Federal programs by Federal agency. For a cluster of pro- grams, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name. For R&D, total Federal awards expended must be shown either by individual Federal award or by Federal agency and major subdivision within the Fed- eral agency. For example, the National Institutes of Health is a major subdivi- sion in the Department of Health and Human Services. (2) For Federal awards received as a subrecipient, the name of the pass- through entity and identifying number assigned by the pass-thr or subdivi- sion in the Department of Health and Human Services. (2) For Federal awards received as a subrecipient, the name of the pass- through entity and identifying number assigned by the pass-through entity must be included. (3) Provide total Federal awards ex- pended for each individual Federal pro- gram and the CFDA number or other identifying number when the CFDA in- formation is not available. For a clus- ter of programs also provide the total for the cluster. (4) Include the total amount provided to subrecipients from each Federal pro- gram. (5) For loan or loan guarantee pro- grams described in § 75.502(b), identify in the notes to the schedule the bal- ances outstanding at the end of the audit period. This is in addition to in- cluding the total Federal awards ex- pended for loan or loan guarantee pro- grams in the schedule. (6) Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the auditee elected to use the 10% de minimis cost rate as covered in § 75.414. § 75.511 Audit findings follow-up. (a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of t the 10% de minimis cost rate as covered in § 75.414. § 75.511 Audit findings follow-up. (a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this re- sponsibility, the auditee must prepare a summary schedule of prior audit find- ings. The auditee must also prepare a corrective action plan for current year audit findings. The summary schedule of prior audit findings and the correc- tive action plan must include the ref- erence numbers the auditor assigns to audit findings under § 75.516(c). Since the summary schedule may include audit findings from multiple years, it must include the fiscal year in which the finding initially occurred. The cor- rective action plan and summary schedule of prior audit findings must 340 Dept. of Health and Human Services § 75.512 include findings relating to the finan- cial statements which are required to be in accordance with GAGAS. reported (b) Summary schedule of prior audit findings. The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. The summary schedule must also include audit fi y schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. The summary schedule must also include audit find- ings reported in the prior audit’s sum- mary schedule of prior audit findings except audit findings listed as cor- rected in accordance with paragraph (b)(1) of this section, or no longer valid or not warranting further action in ac- cordance with paragraph (b)(3) of this section. (1) When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken. (2) When audit findings were not cor- rected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action taken is significantly different from corrective action pre- viously reported in a corrective action plan or in the Federal agency’s or pass- through entity’s management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant fu eral agency’s or pass- through entity’s management decision, the summary schedule must provide an explanation. (3) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position must be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of the following have occurred: (i) Two years have passed since the audit report in which the finding oc- curred was submitted to the FAC; (ii) The Federal agency or pass- through entity is not currently fol- lowing up with the auditee on the audit finding; and (iii) A management decision was not issued. (c) Corrective action plan. At the com- pletion of the audit, the auditee must prepare, in a document separate from the auditor’s findings described in § 75.516, a corrective action plan to ad- dress each audit finding included in the current year auditor’s reports. The cor- rective action plan must provide the name(s) of the contact person(s) re- sponsible for corrective action, the cor- rective action planned, and the antici- pated completion date. If the auditee does not agree with the audit findings or be ame(s) of the contact person(s) re- sponsible for corrective action, the cor- rective action planned, and the antici- pated completion date. If the auditee does not agree with the audit findings or believes corrective action is not re- quired, then the corrective action plan must include an explanation and spe- cific reasons. § 75.512 Report submission. (a) General. (1) The audit must be completed and the data collection form described in paragraph (b) of this sec- tion and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 cal- endar days after receipt of the audi- tor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. (2) Unless restricted by Federal stat- utes or regulations, the auditee must make copies available for public in- spection. Auditees and auditors must ensure that their respective parts of the reporting package do not include protected personally identifiable infor- mation. (b) Data collection. The FAC is the re- pository of record for subpart F of this part reporting packages and the da he reporting package do not include protected personally identifiable infor- mation. (b) Data collection. The FAC is the re- pository of record for subpart F of this part reporting packages and the data collection form. All Federal agencies, pass-through entities and others inter- ested in a reporting package and data collection form must obtain it by ac- cessing the FAC. (1) The auditee must submit required data elements described in appendix X to part 75, which state whether the audit was completed in accordance with this part and provides informa- tion about the auditee, its Federal pro- grams, and the results of the audit. The data must include information available from the audit required by this part that is necessary for Federal agencies to use the audit to ensure in- tegrity for Federal programs. The data elements and format must be approved by OMB, available from the FAC, and include collections of information from the reporting package described in paragraph (c) of this section. A senior level representative of the auditee (e.g., 341 § 75.513 45 CFR Subtitle A (10–1–24 Edition) state controller, director of finance, chief executive officer, or chief finan- cial officer) m on. A senior level representative of the auditee (e.g., 341 § 75.513 45 CFR Subtitle A (10–1–24 Edition) state controller, director of finance, chief executive officer, or chief finan- cial officer) must sign a statement to be included as part of the data collec- tion that says that the auditee com- plied with the requirements of this part, the data were prepared in accord- ance with this part (and the instruc- tions accompanying the form), the re- porting package does not include pro- tected personally identifiable informa- tion, the information included in its entirety is accurate and complete, and that the FAC is authorized to make the reporting package and the form pub- licly available on a Web site. (2) Exception for Indian Tribes and Tribal Organizations. An auditee that is an Indian tribe or a tribal organization (as defined in the Indian Self-Deter- mination, Education and Assistance Act (ISDEAA), 25 U.S.C. 450b(l)) may opt not to authorize the FAC to make the reporting package publicly avail- able on a Web site, by excluding the au- thorization for the FAC publication in the statement described in paragraph (b)(1) of this section. If this option is exercised, the auditee b publicly avail- able on a Web site, by excluding the au- thorization for the FAC publication in the statement described in paragraph (b)(1) of this section. If this option is exercised, the auditee becomes respon- sible for submitting the reporting package directly to any pass-through entities through which it has received a Federal award and to pass-through entities for which the summary sched- ule of prior audit findings reported the status of any findings related to Fed- eral awards that the pass-through enti- ty provided. Unless restricted by Fed- eral statute or regulation, if the auditee opts not to authorize publica- tion, it must make copies of the report- ing package available for public inspec- tion. (3) Using the information included in the reporting package described in paragraph (c) of this section, the audi- tor must complete the applicable data elements of the data collection form. The auditor must sign a statement to be included as part of the data collec- tion form that indicates, at a min- imum, the source of the information included in the form, the auditor’s re- sponsibility for the information, that the form is not a substitute for the re- porting package desc at indicates, at a min- imum, the source of the information included in the form, the auditor’s re- sponsibility for the information, that the form is not a substitute for the re- porting package described in paragraph (c) of this section, and that the content of the form is limited to the collection of information prescribed by OMB. (c) Reporting package. The reporting package must include the: (1) Financial statements and sched- ule of expenditures of Federal awards discussed in § 75.510(a) and (b), respec- tively; (2) Summary schedule of prior audit findings discussed in § 75.511(b); (3) Auditor’s report(s) discussed in § 75.515; and (4) Corrective action plan discussed in § 75.511(c). (d) Submission to FAC. The auditee must electronically submit to the FAC the data collection form described in paragraph (b) of this section and the reporting package described in para- graph (c) of this section. (e) Requests for management letters issued by the auditor. In response to re- quests by a Federal agency or pass- through entity, auditees must submit a copy of any management letters issued by the auditor. (f) Report requirements. retention Auditees must keep one copy of the data collect Federal agency or pass- through entity, auditees must submit a copy of any management letters issued by the auditor. (f) Report requirements. retention Auditees must keep one copy of the data collection form described in para- graph (b) of this section and one copy of the reporting package described in paragraph (c) of this section on file for three years from the date of submis- sion to the FAC. (g) FAC responsibilities. The FAC must make available the reporting packages received in accordance with paragraph (c) of this section and § 75.507(c) to the public, except for Indian tribes exer- cising the option in (b)(2) of this sec- tion, and maintain a data base of com- pleted audits, provide appropriate in- formation to Federal agencies, and fol- low up with known auditees that have not submitted the required data collec- tion forms and reporting packages. (h) Electronic filing. Nothing in this part must preclude electronic submis- sions to the FAC in such manner as may be approved by OMB. FEDERAL AGENCIES § 75.513 Responsibilities. (a)(1) Cognizant agency for audit re- sponsibilities. A non-Federal entity ex- pending more than $50 million a year in Federal awards must have a cogni OMB. FEDERAL AGENCIES § 75.513 Responsibilities. (a)(1) Cognizant agency for audit re- sponsibilities. A non-Federal entity ex- pending more than $50 million a year in Federal awards must have a cognizant agency for audit. The designated cog- nizant agency for audit must be the Federal awarding agency that provides 342 Dept. of Health and Human Services § 75.513 the predominant amount of direct funding to a non-Federal entity unless OMB designates a specific cognizant agency for audit. (2) To provide for continuity of cog- nizance, the determination of the pre- dominant amount of direct funding must be based upon direct Federal awards expended in the non-Federal en- tity’s fiscal years ending in 2009, 2014, 2019 and every fifth year thereafter. For example, audit cognizance for peri- ods ending in 2011 through 2015 will be determined based on Federal awards expended in 2009. (3) Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency with cog- nizance for an auditee may reassign cognizance to another Federal award- ing agency that provides substantial funding and agrees to be the cognizant agency for audit. Within 30 calendar days after any rea nce for an auditee may reassign cognizance to another Federal award- ing agency that provides substantial funding and agrees to be the cognizant agency for audit. Within 30 calendar days after any reassignment, both the old and the new cognizant agency for audit must provide notice of the change to the FAC, the auditee, and, if known, the auditor. The cognizant agency for audit must: (i) Provide technical audit advice and liaison assistance to auditees and audi- tors. (ii) Obtain or conduct quality control reviews on selected audits made by non-Federal auditors, and provide the results to other interested organiza- tions. Cooperate and provide support to the Federal agency designated by OMB to lead a government-wide project to determine the quality of single audits by providing a statistically reliable es- timate of the extent that single audits conform to applicable requirements, standards, and procedures; and to make recommendations to address noted audit quality issues, including rec- ommendations for any changes to ap- plicable requirements, standards and procedures indicated by the results of the project. This government-wide audit quality project must be per- formed once ever c- ommendations for any changes to ap- plicable requirements, standards and procedures indicated by the results of the project. This government-wide audit quality project must be per- formed once every 6 years beginning in 2018 or at such other interval as deter- mined by OMB, and the results must be public. (iii) Promptly inform other affected Federal agencies and appropriate Fed- eral law enforcement officials of any direct reporting by the auditee or its auditor required by GAGAS or statutes and regulations. (iv) Advise the community of inde- pendent auditors of any noteworthy or important factual trends related to the quality of audits stemming from qual- ity control reviews. Significant prob- lems or quality issues consistently identified through quality control re- views of audit reports must be referred to appropriate state licensing agencies and professional bodies. (v) Advise the auditor, HHS awarding agencies, and, where appropriate, the auditee of any deficiencies found in the audits when the deficiencies require corrective action by the auditor. When advised of deficiencies, the auditee must work with the auditor to take corrective action. If corrective action is not ta he audits when the deficiencies require corrective action by the auditor. When advised of deficiencies, the auditee must work with the auditor to take corrective action. If corrective action is not taken, the cognizant agency for audit must notify the auditor, the auditee, and applicable HHS awarding agencies and pass-through entities of the facts and make recommendations for follow-up action. Major inadequa- cies or repetitive substandard perform- ance by auditors must be referred to appropriate state licensing agencies and professional bodies for disciplinary action. (vi) Coordinate, to the extent prac- tical, audits or reviews made by or for Federal agencies that are in addition to the audits made pursuant to this part, so that the additional audits or reviews build upon rather than dupli- cate audits performed in accordance with this part. (vii) Coordinate a management deci- sion for cross-cutting audit findings (as defined in § 75.2 Cross-cutting audit find- ing) that affect the Federal programs of more than one agency when requested by any Federal awarding agency whose awards are included in the audit find- ing of the auditee. (viii) Coordinate the audit work and reporting re ederal programs of more than one agency when requested by any Federal awarding agency whose awards are included in the audit find- ing of the auditee. (viii) Coordinate the audit work and reporting responsibilities among audi- tors to achieve the most cost-effective audit. (ix) Provide advice to auditees as to how to handle changes in fiscal years. (b) Oversight agency for audit re- sponsibilities. An auditee who does not have a designated cognizant agency for audit will be under the general over- sight of the Federal agency determined 343 § 75.513 45 CFR Subtitle A (10–1–24 Edition) in accordance with § 75.2 Oversight agen- cy for audit. A Federal agency with oversight for an auditee may reassign oversight to another Federal agency that agrees to be the oversight agency for audit. Within 30 calendar days after any reassignment, both the old and the new oversight agency for audit must provide notice of the change to the FAC, the auditee, and, if known, the auditor. The oversight agency for audit: (1) Must provide technical advice to auditees and auditors as requested. (2) May assume all or some of the re- sponsibilities normally performed by a cognizant agency for audit. (c) HHS aw for audit: (1) Must provide technical advice to auditees and auditors as requested. (2) May assume all or some of the re- sponsibilities normally performed by a cognizant agency for audit. (c) HHS awarding agency responsibil- ities. The HHS awarding agency must perform the following for the Federal awards it makes (See also the require- ments of § 75.210): (1) Ensure that audits are completed and reports are received in a timely manner and in accordance with the re- quirements of this part. (2) Provide technical advice and counsel to auditees and auditors as re- quested. (3) Follow-up on audit findings to en- sure that the recipient takes appro- priate and timely corrective action. As part of audit follow-up, the HHS award- ing agency must: (i) Issue a management decision as prescribed in § 75.521; (ii) Monitor the recipient taking ap- propriate and timely corrective action; (iii) Use cooperative audit resolution mechanisms (see § 75.2 Cooperative audit resolution) to improve Federal program outcomes through better audit resolu- tion, follow-up, and corrective action; and (iv) Develop a baseline, metrics, and targets to track, over time, the effec- tiveness of the Federal agency’s program outcomes through better audit resolu- tion, follow-up, and corrective action; and (iv) Develop a baseline, metrics, and targets to track, over time, the effec- tiveness of the Federal agency’s proc- ess to follow-up on audit findings and on the effectiveness of Single Audits in improving non-Federal entity account- ability and their use by HHS awarding agencies in making award decisions. (4) Provide OMB annual updates to the compliance supplement and work with OMB to ensure that the compli- ance supplement focuses the auditor to test the compliance requirements most likely to cause improper payments, fraud, waste, abuse or generate audit finding for which the Federal awarding agency will take sanctions. (5) Provide OMB with the name of a single audit accountable official from among the senior policy officials of the HHS awarding agency who must be: (i) Responsible for ensuring that the agency fulfills all the requirements of paragraph (c) of this section and effec- tively uses the single audit process to reduce improper payments and improve Federal program outcomes. (ii) Held accountable to improve the effectiveness of the single audit process based upon metrics as describe the single audit process to reduce improper payments and improve Federal program outcomes. (ii) Held accountable to improve the effectiveness of the single audit process based upon metrics as described in paragraph (c)(3)(iv) of this section. (iii) Responsible for designating the Federal agency’s key management sin- gle audit liaison. (6) Provide OMB with the name of a key management single audit liaison who must: (i) Serve as the Federal awarding agency’s management point of contact for the single audit process both within and outside the Federal Government. (ii) Promote interagency coordina- tion, consistency, and sharing in areas such as coordinating audit follow-up; identifying higher-risk non-Federal en- tities; providing input on single audit and follow-up policy; enhancing the utility of the FAC; and studying ways to use single audit results to improve Federal award accountability and best practices. (iii) Oversee training for the HHS awarding agency’s program manage- ment personnel related to the single audit process. (iv) Promote the HHS awarding agen- cy’s use of cooperative audit resolution mechanisms. (v) Coordinate the HHS awarding agency’s activities to ensure appro- nnel related to the single audit process. (iv) Promote the HHS awarding agen- cy’s use of cooperative audit resolution mechanisms. (v) Coordinate the HHS awarding agency’s activities to ensure appro- priate and timely follow-up and correc- tive action on audit findings. (vi) Organize the Federal cognizant agency for audit’s follow-up on cross- cutting audit findings that affect the Federal programs of more than one HHS awarding agency. (vii) Ensure the HHS awarding agen- cy provides annual updates of the com- pliance supplement to OMB. (viii) Support the HHS awarding agency’s single audit accountable offi- cial’s mission. 344 Dept. of Health and Human Services § 75.514 AUDITORS § 75.514 Scope of audit. (a) General. The audit must be con- ducted in accordance with GAGAS. The audit must cover the entire operations of the auditee, or, at the option of the auditee, such audit must include a se- ries of audits that cover departments, agencies, and other organizational units that expended or otherwise ad- ministered Federal awards during such audit period, provided that each such audit must encompass the financial statements and schedule of expendi- tures of Federal awards for each such otherwise ad- ministered Federal awards during such audit period, provided that each such audit must encompass the financial statements and schedule of expendi- tures of Federal awards for each such department, agency, and other organi- zational unit, which must be consid- ered to be a non-Federal entity. The fi- nancial statements and schedule of ex- penditures of Federal awards must be for the same audit period. (b) Financial statements. The auditor must determine whether the financial statements of the auditee are presented fairly in all material respects in ac- cordance with generally accepted ac- counting principles. The auditor must also determine whether the schedule of expenditures of Federal awards is stat- ed fairly in all material respects in re- lation to the auditee’s financial state- ments as a whole. (c) Internal control. (1) The compli- ance supplement provides guidance on internal controls over Federal pro- grams based upon the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States and the Internal Control—Inte- grated Framework, issued by the Com- mittee of Sponsoring Organizations of the Treadw ol in the Federal Government issued by the Comptroller General of the United States and the Internal Control—Inte- grated Framework, issued by the Com- mittee of Sponsoring Organizations of the Treadway Commission (COSO). (2) In addition to the requirements of GAGAS, the auditor must perform pro- cedures to obtain an understanding of internal control over Federal programs sufficient to plan the audit to support a low assessed level of control risk of noncompliance for major programs. (3) Except as provided in paragraph (c)(4) of this section, the auditor must: (i) Plan the testing of internal con- trol over compliance for major pro- grams to support a low assessed level of control risk for the assertions rel- evant to the compliance requirements for each major program; and (ii) Perform testing of internal con- trol as planned in paragraph (c)(3)(i) of this section. (4) When internal control over some or all of the compliance requirements for a major program are likely to be in- effective in preventing or detecting noncompliance, the planning and per- forming of testing described in para- graph (c)(3) of this section are not re- quired for those compliance require- ments. However, t ve in preventing or detecting noncompliance, the planning and per- forming of testing described in para- graph (c)(3) of this section are not re- quired for those compliance require- ments. However, the auditor must re- port a significant deficiency or mate- rial weakness in accordance with § 75.516, assess the related control risk at the maximum, and consider whether additional compliance tests are re- quired because of ineffective internal control. (d) Compliance. (1) In addition to the requirements of GAGAS, the auditor must determine whether the auditee has complied with Federal statutes, regulations, and the terms and condi- tions of Federal awards that may have a direct and material effect on each of its major programs. (2) The principal compliance require- ments applicable to most Federal pro- grams and the compliance require- ments of the largest Federal programs are included in the compliance supple- ment. requirements and (3) For the compliance requirements related to Federal programs contained in the compliance supplement, an audit of these compliance requirements will meet the requirements of this part. Where there have been changes to the compliance the changes are not programs contained in the compliance supplement, an audit of these compliance requirements will meet the requirements of this part. Where there have been changes to the compliance the changes are not reflected in the com- pliance supplement, the auditor must determine the current compliance re- quirements and modify the audit proce- dures accordingly. For those Federal programs not covered in the compli- ance supplement, the auditor must fol- low the compliance supplement’s guid- ance for programs not included in the supplement. (4) The compliance testing must in- clude tests of transactions and such other auditing procedures necessary to provide the auditor sufficient appro- priate audit evidence to support an opinion on compliance. 345 § 75.515 45 CFR Subtitle A (10–1–24 Edition) (e) Audit follow-up. The auditor must follow-up on prior audit findings, per- form procedures to assess the reason- ableness of the summary schedule of prior audit findings prepared by the auditee in accordance with § 75.511(b), and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepre- sents the status of any prior audi ance with § 75.511(b), and report, as a current year audit finding, when the auditor concludes that the summary schedule of prior audit findings materially misrepre- sents the status of any prior audit find- ing. The auditor must perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current year. (f) Data collection form. As required in § 75.512(b)(3), the auditor must complete and sign specified sections of the data collection form. § 75.515 Audit reporting. The auditor’s report(s) may be in the form of either combined or separate re- ports and may be organized differently from the manner presented in this sec- tion. The auditor’s report(s) must state that the audit was conducted in ac- cordance with this part and include the following: (a) An opinion (or disclaimer of opin- ion) as to whether the financial state- ments are presented fairly in all mate- rial respects in accordance with gen- erally accepted accounting principles and an opinion (or disclaimer of opin- ion) as to whether the schedule of ex- penditures of Federal awards is fairly stated in all material respects in rela- tion to the financial statements as a wh s and an opinion (or disclaimer of opin- ion) as to whether the schedule of ex- penditures of Federal awards is fairly stated in all material respects in rela- tion to the financial statements as a whole. (b) A report on internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, non- compliance with which could have a material effect on the financial state- ments. This report must describe the scope of testing of internal control and compliance and the results of the tests, and, where applicable, it will refer to the separate schedule of findings and questioned costs described in para- graph (d) of this section. (c) A report on compliance for each major program and a report on internal control over compliance. This report must describe the scope of testing of internal control over compliance, in- clude an opinion or disclaimer of opin- ion as to whether the auditee complied with Federal statutes, regulations, and the terms and conditions of Federal awards which could have a direct and material effect on each major program and refer to the separate schedule of findings and questioned costs described in paragraph (d terms and conditions of Federal awards which could have a direct and material effect on each major program and refer to the separate schedule of findings and questioned costs described in paragraph (d) of this section. (d) A schedule of findings and ques- tioned costs which must include the following three components: (1) A summary of the auditor’s re- sults, which must include: (i) The type of report the auditor issued on whether the financial state- ments audited were prepared in accord- ance with GAAP (i.e., unmodified opin- ion, qualified opinion, adverse opinion, or disclaimer of opinion); (ii) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal con- trol were disclosed by the audit of the financial statements; (iii) A statement as to whether the audit disclosed any noncompliance that is material to the financial state- ments of the auditee; (iv) Where applicable, a statement about whether significant deficiencies or material weaknesses in internal con- trol over major programs were dis- closed by the audit; (v) The type of report the auditor issued on compliance for major pro- grams (i.e., unmodified opinion, quali- fied opi knesses in internal con- trol over major programs were dis- closed by the audit; (v) The type of report the auditor issued on compliance for major pro- grams (i.e., unmodified opinion, quali- fied opinion, adverse opinion, or dis- claimer of opinion); (vi) A statement as to whether the audit disclosed any audit findings that the auditor is required to report under § 75.516(a); (vii) An identification of major pro- grams by listing each individual major program; however in the case of a clus- ter of programs only the cluster name as shown on the Schedule of Expendi- tures of Federal Awards is required; (viii) The dollar threshold used to distinguish between Type A and Type B programs, as described in § 75.518(b)(1), or (b)(3) when a recalculation of the Type A threshold is required for large loan or loan guarantees; and (ix) A statement as to whether the auditee qualified as a low-risk auditee under § 75.520. 346 Dept. of Health and Human Services § 75.516 (2) Findings relating to the financial statements which are required to be re- ported in accordance with GAGAS. (3) Findings and questioned costs for Federal awards which must include audit findings as defined in § 75.516(a). find inancial statements which are required to be re- ported in accordance with GAGAS. (3) Findings and questioned costs for Federal awards which must include audit findings as defined in § 75.516(a). findings, compliance (i) Audit findings (e.g., internal con- trol findings, questioned costs, or fraud) that relate to the same issue must be presented as a single audit finding. Where practical, audit findings should be organized by Federal agency or pass-through entity. (ii) Audit findings that relate to both the financial statements and Federal awards, as reported under paragraphs (d)(2) and (d)(3) of this section, respec- tively, must be reported in both sec- tions of the schedule. However, the re- porting in one section of the schedule may be in summary form with a ref- erence to a detailed reporting in the other section of the schedule. (e) Nothing in this part precludes combining of the audit reporting re- quired by this section with the report- ing required by § 75.512(b) when allowed by GAGAS and appendix X to part 75. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.516 Audit findings. (a) Audit findings reported. The audi- tor must report the following by GAGAS and appendix X to part 75. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] § 75.516 Audit findings. (a) Audit findings reported. The audi- tor must report the following as audit findings in a schedule of findings and questioned costs: (1) Significant deficiencies and mate- rial weaknesses in internal control over major programs and significant instances of abuse relating to major programs. The auditor’s determination of whether a deficiency in internal con- trol is a significant deficiency or mate- rial weakness for the purpose of report- ing an audit finding is in relation to a type of compliance requirement for a major program identified in the Com- pliance Supplement. (2) Material noncompliance with the provisions of Federal statutes, regula- tions, or the terms and conditions of Federal awards related to a major pro- gram. The auditor’s determination of whether a noncompliance with the pro- visions of Federal statutes, regula- tions, or the terms and conditions of Federal awards is material for the pur- pose of reporting an audit finding is in relation to a type of compliance re- quirement for a major program identi- fied in the compliance supplem conditions of Federal awards is material for the pur- pose of reporting an audit finding is in relation to a type of compliance re- quirement for a major program identi- fied in the compliance supplement. (3) Known questioned costs that are greater than $25,000 for a type of com- pliance requirement for a major pro- gram. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned (likely questioned costs), not just the questioned costs specifically identified (known questioned costs). The auditor must also report known questioned costs when likely questioned costs are greater than $25,000 for a type of com- pliance requirement for a major pro- gram. In reporting questioned costs, the auditor must include information to provide proper perspective for judg- ing the prevalence and consequences of the questioned costs. (4) Known questioned costs that are greater than $25,000 for a Federal pro- gram which is not audited as a major program. Except for audit follow-up, the auditor is not required under this part to perform audit procedu ed costs that are greater than $25,000 for a Federal pro- gram which is not audited as a major program. Except for audit follow-up, the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the auditor will normally not find ques- tioned costs for a program that is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program that is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known ques- tioned costs are greater than $25,000, then the auditor must report this as an audit finding. (5) The circumstances concerning why the auditor’s report on compliance for each major program is other than an unmodified opinion, unless such cir- cumstances are otherwise reported as audit findings in the schedule of find- ings and questioned costs for Federal awards. (6) Known or likely fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and ques- tioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which investigative wise reported as an audit finding in the schedule of findings and ques- tioned costs for Federal awards. This paragraph does not require the auditor to report publicly information which investigative or could compromise 347 § 75.517 45 CFR Subtitle A (10–1–24 Edition) legal proceedings or to make an addi- tional reporting when the auditor con- firms that the fraud was reported out- side the auditor’s reports under the di- rect reporting requirements of GAGAS. (7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with § 75.511(b) materi- ally misrepresents the status of any prior audit finding. (b) Audit finding detail and clarity. Audit findings must be presented in sufficient detail and clarity for the auditee to prepare a corrective action plan and take corrective action, and for Federal agencies and pass-through entities to arrive at a management de- cision. The following specific informa- tion must be included, as applicable, in audit findings: (1) Federal program and specific Fed- eral award identification including the CFDA title and number, Federal award identification n ic informa- tion must be included, as applicable, in audit findings: (1) Federal program and specific Fed- eral award identification including the CFDA title and number, Federal award identification number and year, name of Federal agency, and name of the ap- plicable pass-through entity. When in- formation, such as the CFDA title and number or Federal award identification number, is not available, the auditor must provide the best information available to describe the Federal award. (2) The criteria or specific require- ment upon which the audit finding is based, including the Federal statutes, regulations, or the terms and condi- tions of the Federal awards. Criteria generally identify the required or de- sired state or expectation with respect to the program or operation. Criteria provide a context for evaluating evi- dence and understanding findings. (3) The condition found, including facts that support the deficiency iden- tified in the audit finding. (4) A statement of cause that identi- fies the reason or explanation for the condition or the factors responsible for the difference between the situation that exists (condition) and the required or desired state (criteria), whic identi- fies the reason or explanation for the condition or the factors responsible for the difference between the situation that exists (condition) and the required or desired state (criteria), which may also serve as a basis for recommenda- tions for corrective action. (5) The possible asserted effect to provide sufficient information to the auditee and Federal agency, or pass- through entity in the case of a sub- recipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action. A statement of the effect or potential ef- fect should provide a clear, logical link to establish the impact or potential impact of the difference between the condition and the criteria. (6) Identification of questioned costs and how they were computed. Known questioned costs must be identified by applicable CFDA number(s) and appli- cable Federal award identification number(s). (7) Information to provide proper per- spective for judging the prevalence and consequences of the audit findings, such as whether the audit findings rep- resent an isolated instance or a sys- temic problem. Where appropriate, in- stances identified must be related to the universe and ences of the audit findings, such as whether the audit findings rep- resent an isolated instance or a sys- temic problem. Where appropriate, in- stances identified must be related to the universe and the number of cases examined and be quantified in terms of dollar value. The auditor should report whether the sampling was a statis- tically valid sample. (8) Identification of whether the audit finding was a repeat of a finding in the immediately prior audit and if so any applicable prior year audit find- ing numbers. (9) Recommendations to prevent fu- ture occurrences of the deficiency iden- tified in the audit finding. (10) Views of responsible officials of the auditee. (c) Reference numbers. Each audit finding in the schedule of findings and questioned costs must include a ref- erence number in the format meeting the requirements of the data collection form submission required by § 75.512(b) to allow for easy referencing of the audit findings during follow-up. § 75.517 Audit documentation. (a) Retention of audit documentation. The auditor must retain audit docu- mentation and reports for a minimum of three years after the date of issuance of the auditor’s report(s) to the auditee, tion. (a) Retention of audit documentation. The auditor must retain audit docu- mentation and reports for a minimum of three years after the date of issuance of the auditor’s report(s) to the auditee, unless the auditor is noti- fied in writing by the cognizant agency for audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the re- tention period. When the auditor is aware that the Federal agency, pass- 348 Dept. of Health and Human Services § 75.518 through entity, or auditee is con- testing an audit finding, the auditor must contact the parties contesting the audit finding for guidance prior to destruction of the audit documentation and reports. (b) Access to audit documentation. Audit documentation must be made available upon request to the cognizant or oversight agency for audit or its des- ignee, cognizant agency for indirect cost, a Federal agency, or GAO at the completion of the audit, as part of a quality review, to resolve audit find- ings, or to carry out oversight respon- sibilities consistent with the purposes of this part. Access to audit docu- mentation includes the right of Federal agencies to obtain copies of audit dit find- ings, or to carry out oversight respon- sibilities consistent with the purposes of this part. Access to audit docu- mentation includes the right of Federal agencies to obtain copies of audit docu- mentation, as is reasonable and nec- essary. § 75.518 Major program determination. (a) General. The auditor must use a risk-based approach to determine which Federal programs are major pro- grams. This risk-based approach must include consideration of: Current and prior audit experience, oversight by Federal agencies and pass-through en- tities, and the inherent risk of the Fed- eral this program. The process in para- graphs (b) through (h) of this section must be followed. (b) Step one. (1) The auditor must identify the larger Federal programs, which must be labeled Type A pro- grams. Type A programs are defined as Federal programs with Federal awards expended during the audit period ex- ceeding the levels outlined in the table in this paragraph (b)(1): Total Federal awards expended Type A/B threshold (i) Equal to or exceed $750,000 but less than or equal to $25 $750,000. million. (ii) Exceed $25 million but less than or equal to $100 million .... Total Federal awards expended d Type A/B threshold (i) Equal to or exceed $750,000 but less than or equal to $25 $750,000. million. (ii) Exceed $25 million but less than or equal to $100 million .... Total Federal awards expended times .03. (iii) Exceed $100 million but less than or equal to $1 billion ...... $3 million. (iv) Exceed $1 billion but less than or equal to $10 billion ......... Total Federal awards expended times .003. (v) Exceed $10 billion but less than or equal to $20 billion ........ $30 million. (vi) Exceed $20 billion ................................................................. Total Federal awards expended times .0015. (2) Federal programs not labeled Type A under paragraph (b)(1) of this section must be labeled Type B pro- grams. (3) The inclusion of large loan and loan guarantees (loans) must not result in the exclusion of other programs as Type A programs. When a Federal pro- gram providing loans exceeds four times the largest non-loan program it is considered a large loan program, and the auditor must consider this Federal program as a Type A program and ex- clude its values in determining other Type A programs. This recalculation of the Type A program is performed after removing th he auditor must consider this Federal program as a Type A program and ex- clude its values in determining other Type A programs. This recalculation of the Type A program is performed after removing the total of all large loan programs. For the purposes of this paragraph a program is only considered to be a Federal program providing loans if the value of Federal awards ex- pended for loans within the program comprises fifty percent or more of the total Federal awards expended for the program. A cluster of programs is treated as one program and the value of Federal awards expended under a loan program is determined as de- scribed in § 75.502. (4) For biennial audits permitted under § 75.504, the determination of Type A and Type B programs must be based upon the Federal awards ex- pended during the two-year period. (c) Step two. (1) The auditor must identify Type A programs which are low-risk. In making this determina- tion, the auditor must consider wheth- er the requirements in § 75.519(c), the results of audit follow-up, or any changes in personnel or systems affect- ing the program indicate significantly increased risk and preclude the pro- gram from being low risk. For a Type A p (c), the results of audit follow-up, or any changes in personnel or systems affect- ing the program indicate significantly increased risk and preclude the pro- gram from being low risk. For a Type A program to be considered low-risk, it must have been audited as a major pro- gram in at least one of the two most recent audit periods (in the most re- cent audit period in the case of a bien- nial audit), and, in the most recent audit period, the program must have not had: (i) Internal control deficiencies which were identified as material weaknesses in the auditor’s report on 349 § 75.519 45 CFR Subtitle A (10–1–24 Edition) internal control for major programs as required under § 75.515(c); (ii) A modified opinion on the pro- gram in the auditor’s report on major programs as required under § 75.515(c); or (iii) Known or likely questioned costs that exceed five percent of the total Federal awards expended for the pro- gram. (2) Notwithstanding paragraph (c)(1) of this section, OMB may approve an HHS awarding agency’s request that a Type A program may not be considered low risk for a certain recipient. For ex- ample, it may be necessary for a large Type A program to be audited as a major ve an HHS awarding agency’s request that a Type A program may not be considered low risk for a certain recipient. For ex- ample, it may be necessary for a large Type A program to be audited as a major program each year at a par- ticular recipient to allow the HHS awarding agency to comply with 31 U.S.C. 3515. The HHS awarding agency must notify the recipient and, if known, the auditor of OMB’s approval at least 180 calendar days prior to the end of the fiscal year to be audited. (d) Step three. (1) The auditor must identify Type B programs which are high-risk using professional judgment and the criteria in § 75.519. However, the auditor is not required to identify more high-risk Type B programs than at least one fourth the number of low- risk Type A programs identified as low- risk under Step 2 (paragraph (c) of this section). Except for known material weakness in internal control or compli- ance in § 75.519(b)(1), (b)(2), and (c)(1), a single criteria in risk would seldom cause a Type B program to be considered high- risk. When identifying which Type B programs to risk assess, the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B B program to be considered high- risk. When identifying which Type B programs to risk assess, the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B programs to be au- dited as major over a period of time. discussed problems as (2) The auditor is not expected to per- form risk assessments on relatively small Federal programs. Therefore, the auditor is only required to perform risk assessments on Type B programs that exceed twenty-five percent (0.25) of the Type A threshold determined in Step 1 (paragraph (b) of this section). (e) Step four. At a minimum, the auditor must audit all of the following as major programs: (1) All Type A programs not identi- fied as low risk under step two (para- graph (c)(1) of this section). (2) All Type B programs identified as high-risk under step three (paragraph (d) of this section). (3) Such additional programs as may be necessary to comply with the per- centage of coverage rule discussed in paragraph (f) of this section. This may require the auditor to audit more pro- grams as major programs than the number of Type A programs. (f) Percentage of coverage rule. If the auditee meets the criteria in (f) of this section. This may require the auditor to audit more pro- grams as major programs than the number of Type A programs. (f) Percentage of coverage rule. If the auditee meets the criteria in § 75.520, the auditor need only audit the major programs identified in Step 4 (para- graph (e)(1) and (2) of this section) and such additional Federal programs with Federal awards expended that, in ag- gregate, all major programs encompass at least 20 percent (0.20) of total Fed- eral awards expended. Otherwise, the auditor must audit the major programs identified in Step 4 (paragraphs (e)(1) and (2) of this section) and such addi- tional Federal programs with Federal awards expended that, in aggregate, all major programs encompass at least 40 percent (0.40) of total Federal awards expended. (g) Documentation of risk. The auditor must include in the audit documenta- tion the risk analysis process used in determining major programs. (h) Auditor’s judgment. When the major program determination was per- formed and documented in accordance with this subpart, the auditor’s judg- ment in applying the risk-based ap- proach to determine major programs must be presumed correct. Challenges by Fe on was per- formed and documented in accordance with this subpart, the auditor’s judg- ment in applying the risk-based ap- proach to determine major programs must be presumed correct. Challenges by Federal agencies and pass-through entities must only be for clearly im- proper use of the requirements in this part. However, Federal agencies and pass-through entities may provide auditors guidance about the risk of a particular Federal program and the auditor must consider this guidance in determining major programs in audits not yet completed. § 75.519 Criteria for Federal program risk. (a) General. The auditor’s determina- tion should be based on an overall eval- uation of the risk of noncompliance oc- curring that could be material to the 350 Dept. of Health and Human Services § 75.520 Federal program. The auditor must consider criteria, such as described in paragraphs (b), (c), and (d) of this sec- tion, to identify risk in Federal pro- grams. Also, as part of the risk anal- ysis, the auditor may wish to discuss a program with particular Federal auditee management and the Federal agency or pass-through entity. (b) Current and prior audit experience. (1) Weaknesses in internal contr auditor may wish to discuss a program with particular Federal auditee management and the Federal agency or pass-through entity. (b) Current and prior audit experience. (1) Weaknesses in internal control over Federal programs would indicate high- er risk. Consideration should be given to the control environment over Fed- eral programs and such factors as the expectation of management’s adher- ence to Federal statutes, regulations, and the terms and conditions of Fed- eral awards and the competence and experience of personnel who administer the Federal programs. (i) A Federal program administered under multiple internal control struc- tures may have higher risk. When as- sessing risk in a large single audit, the auditor must consider whether weak- nesses are isolated in a single oper- ating unit (e.g., one college campus) or pervasive throughout the entity. (ii) When significant parts of a Fed- eral program are passed through to subrecipients, a weak system for moni- toring subrecipients would indicate higher risk. (2) Prior audit findings would indi- cate higher risk, particularly when the situations identified in the audit find- ings could have a significant impact on a Federal pro would indicate higher risk. (2) Prior audit findings would indi- cate higher risk, particularly when the situations identified in the audit find- ings could have a significant impact on a Federal program or have not been corrected. (3) Federal programs not recently au- dited as major programs may be of higher risk than Federal programs re- cently audited as major programs with- out audit findings. (c) Oversight exercised by Federal agen- cies and pass-through entities. (1) Over- sight exercised by Federal agencies or pass-through entities could be used to assess risk. For example, recent moni- toring or other reviews performed by an oversight entity that disclosed no significant problems would indicate lower risk, whereas monitoring that disclosed significant problems would indicate higher risk. (2) Federal agencies, with the concur- rence of OMB, may identify Federal programs that are higher risk. OMB will provide this identification in the compliance supplement. (d) Inherent risk of the Federal pro- gram. (1) The nature of a Federal pro- gram may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts fo the Federal pro- gram. (1) The nature of a Federal pro- gram may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts for goods and services. For example, Fed- eral programs that disburse funds through third party contracts or have eligibility criteria may be of higher risk. Federal programs primarily in- volving staff payroll costs may have high risk for noncompliance with re- quirements of § 75.430, but otherwise be at low risk. (2) The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example, a new Federal program with new or interim regulations may have higher risk than an established program with time-test- ed significant changes in Federal programs, statutes, regulations, or the terms and condi- tions of Federal awards may increase risk. regulations. Also, (3) The phase of a Federal program in its life cycle at the auditee may indi- cate risk. For example, during the first and last years that an auditee partici- pates in a Federal program, the risk may be higher due to start-up or close- out of program activities and staff. (4) Type B programs with larger F ng the first and last years that an auditee partici- pates in a Federal program, the risk may be higher due to start-up or close- out of program activities and staff. (4) Type B programs with larger Fed- eral awards expended would be of high- er risk than programs with substan- tially smaller Federal awards ex- pended. § 75.520 Criteria for a low-risk auditee. An auditee that meets all of the fol- lowing conditions for each of the pre- ceding two audit periods must qualify as a low-risk auditee and be eligible for reduced audit coverage in accordance with § 75.518. (a) Single audits were performed on an annual basis in accordance with the provisions of this subpart, including submitting the data collection form and the reporting package to the FAC within the timeframe specified in § 75.512 . A non-Federal entity that has biennial audits does not qualify as a low-risk auditee. (b) The auditor’s opinion on whether the financial statements were prepared 351 § 75.521 45 CFR Subtitle A (10–1–24 Edition) in accordance with GAAP, or a basis of accounting required by state law, and the auditor’s in relation to opinion on the schedule of expenditures of Federal awards were unmodified. (c) T 1–24 Edition) in accordance with GAAP, or a basis of accounting required by state law, and the auditor’s in relation to opinion on the schedule of expenditures of Federal awards were unmodified. (c) There were no deficiencies in in- ternal control which were identified as material weaknesses under the require- ments of GAGAS. (d) The auditor did not report a sub- stantial doubt about the auditee’s abil- ity to continue as a going concern. (e) None of the Federal programs had audit findings from any of the fol- lowing in either of the preceding two audit periods in which they were classi- fied as Type A programs: (1) Internal control deficiencies that were identified as material weaknesses in the auditor’s report on internal con- trol for major programs as required under § 75.515(c); (2) A modified opinion on a major program in the auditor’s report on major programs as required under § 75.515(c); or (3) Known or likely questioned costs that exceeded five percent of the total Federal awards expended for a Type A program during the audit period. MANAGEMENT DECISIONS § 75.521 Management decision. for (a) General. The management deci- sion must clearly state whether or not the audit fin rds expended for a Type A program during the audit period. MANAGEMENT DECISIONS § 75.521 Management decision. for (a) General. The management deci- sion must clearly state whether or not the audit finding is sustained, the rea- sons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable follow-up should be given. Prior to issuing the manage- ment decision, the Federal agency or pass-through entity may request addi- tional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management de- cision should describe any appeal proc- ess available to the auditee. While not required, the Federal agency or pass- through entity may also issue a man- agement decision on findings relating to the financial statements which are required to be reported in accordance with GAGAS. (b) Federal agency. As provided in § 75.513(a)(3)(vii), the cognizant agency for audit must be responsible for co- ordinating a management decision for audit findings that affect ccordance with GAGAS. (b) Federal agency. As provided in § 75.513(a)(3)(vii), the cognizant agency for audit must be responsible for co- ordinating a management decision for audit findings that affect the programs of more than one Federal agency. As provided in § 75.513(c)(3), a Federal awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to non-Federal entities. (c) Pass-through entity. As provided in § 75.352(d), the pass-through entity must be responsible for issuing a man- agement decision for audit findings that relate to Federal awards it makes to subrecipients. (d) Time requirements. The HHS awarding agency or pass-through enti- ty responsible for issuing a manage- ment decision must do so within six months of acceptance of the audit re- port by the FAC. The auditee must ini- tiate and proceed with corrective ac- tion as rapidly as possible and correc- tive action should begin no later than upon receipt of the audit report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit in accordance with § 75.516(c). finding APPENDIX I TO PART 75—FULL TEXT OF NO report. (e) Reference numbers. Management decisions must include the reference numbers the auditor assigned to each audit in accordance with § 75.516(c). finding APPENDIX I TO PART 75—FULL TEXT OF NOTICE OF FUNDING OPPORTUNITY The full text of the notice of funding op- portunity is organized in sections. The re- quired format outlined in this appendix indi- cates immediately following the title of each section whether that section is required in every announcement or is an HHS awarding agency option. The format is designed so that similar types of information will appear in the same sections in announcements of different Federal funding opportunities. To- ward that end, there is text in each of the following sections to describe the types of in- formation that an HHS awarding agency would include in that section of an actual announcement. An HHS awarding agency that wishes to include information that the format does not specifically discuss may address that subject in whatever section(s) is most appropriate. For example, if an HHS awarding agency chooses to address performance goals in the announcement, it might do so in the funding opportunity description, the application con- te (s) is most appropriate. For example, if an HHS awarding agency chooses to address performance goals in the announcement, it might do so in the funding opportunity description, the application con- tent, or the reporting requirements. 352 Dept. of Health and Human Services Pt. 75, App. I Similarly, when this format calls for a type of information to be in a particular sec- tion, an HHS awarding agency wishing to ad- dress that subject in other sections may elect to repeat the information in those sec- tions or use cross references between the sec- tions (there should be hyperlinks for cross- references in any electronic versions of the announcement). For example, an HHS award- ing agency may want to include in Section A information about the types of non-Federal entities who are eligible to apply. The for- mat specifies a standard location for that in- formation in Section C.1 but that does not preclude repeating the information in Sec- tion I or creating a cross reference between Sections A and C.1, as long as a potential ap- plicant can find the information quickly and easily from the standard location. The sections of the full text of the an- nouncement are described in the foll ions A and C.1, as long as a potential ap- plicant can find the information quickly and easily from the standard location. The sections of the full text of the an- nouncement are described in the following paragraphs. A. Program Description—Required This section contains the full program de- scription of the funding opportunity. It may be as long as needed to adequately commu- nicate to potential applicants the areas in which funding may be provided. It describes the HHS awarding agency’s funding prior- ities or the technical or focus areas in which the HHS awarding agency intends to provide assistance. As appropriate, it may include any program history (e.g., whether this is a new program or a new or changed area of program emphasis). This section may com- municate indicators of successful projects (e.g., if the program encourages collaborative efforts) and may include examples of projects that have been funded previously. This section also may include other informa- tion the HHS awarding agency deems nec- essary, and must at a minimum include cita- tions for authorizing statutes and regula- tions for the funding opportunity. B. Federal Award Information—Required This section prov ding agency deems nec- essary, and must at a minimum include cita- tions for authorizing statutes and regula- tions for the funding opportunity. B. Federal Award Information—Required This section provides sufficient informa- tion to help an applicant make an informed decision about whether to submit a proposal. Relevant information could include the total amount of funding that the HHS awarding agency expects to award through the an- nouncement; the anticipated number of Fed- eral awards; the expected amounts of indi- vidual Federal awards (which may be a range); the amount of funding per Federal award, on average, experienced in previous years; and the anticipated start dates and periods of performance for new Federal awards. This section also should address whether applications for renewal or sup- plementation of existing projects are eligible to compete with applications for new Fed- eral awards. This section also must indicate the type(s) of assistance instrument (e.g., grant, cooper- ative agreement) that may be awarded if ap- plications are successful. If cooperative agreements may be awarded, this section ei- ther should describe the ‘‘substantial in- volvement’’ that the HH er- ative agreement) that may be awarded if ap- plications are successful. If cooperative agreements may be awarded, this section ei- ther should describe the ‘‘substantial in- volvement’’ that the HHS awarding agency expects to have or should reference where the potential applicant can find that infor- mation (e.g., in the funding opportunity de- scription in section A. or Federal award ad- ministration information in Section D. If procurement contracts also may be awarded, this must be stated. C. Eligibility Information This section addresses the considerations or factors that determine applicant or appli- cation eligibility. This includes the eligi- bility of particular types of applicant organi- zations, any factors affecting the eligibility of the principal investigator or project direc- tor, and any criteria that make particular projects ineligible. HHS agencies should make clear whether an applicant’s failure to meet an eligibility criterion by the time of an application deadline will result in the HHS awarding agency returning the applica- tion without review or, even though an ap- plication may be reviewed, will preclude the HHS awarding agency from making a Fed- eral awar e will result in the HHS awarding agency returning the applica- tion without review or, even though an ap- plication may be reviewed, will preclude the HHS awarding agency from making a Fed- eral award. Key elements to be addressed are: 1. Eligible Applicants—Required. Announce- ments must clearly identify the types of en- tities that are eligible to apply. If there are no restrictions on eligibility, this section may simply indicate that all potential appli- cants are eligible. If there are restrictions on eligibility, it is important to be clear about the specific types of entities that are eligi- ble, not just the types that are ineligible. For example, if the program is limited to nonprofit organizations subject to 26 U.S.C. 501(c)(3) of the tax code (26 U.S.C. 501(c)(3)), the announcement should say so. Similarly, it is better to state explicitly that Native American tribal organizations are eligible than to assume that they can unambiguously infer that from a statement that nonprofit organizations may apply. Eligibility also can be expressed by exception, (e.g., open to all types of domestic applicants other than indi- viduals). This section should refer to any portion of Sec ofit organizations may apply. Eligibility also can be expressed by exception, (e.g., open to all types of domestic applicants other than indi- viduals). This section should refer to any portion of Section D. specifying documenta- tion that must be submitted to support an eligibility determination (e.g., proof of 501(c)(3) status as determined by the Internal Revenue Service or an authorizing tribal res- olution). To the extent that any funding re- striction in Section D.6 could affect the eli- gibility of an applicant or project, the an- nouncement must either restate that restric- tion in this section or provide a cross-ref- erence to its description in Section D.6. 353 Pt. 75, App. I 45 CFR Subtitle A (10–1–24 Edition) 2. Cost Sharing or Matching—Required. An- nouncements must state whether there is re- quired cost sharing, matching, or cost par- ticipation without which an application would be ineligible (if cost sharing is not re- quired, the announcement must explicitly say so). Required cost sharing may be a cer- tain percentage or amount, or may be in the form of contributions of specified items or activities (e.g., provision of equipment). It is important that the announcem equired cost sharing may be a cer- tain percentage or amount, or may be in the form of contributions of specified items or activities (e.g., provision of equipment). It is important that the announcement be clear about any restrictions on the types of cost (e.g., in-kind contributions) that are accept- able as cost sharing. Cost sharing as an eligi- bility criterion includes requirements based in statute or regulation, as described in § 75.306. This section should refer to the ap- propriate portion(s) of section D. stating any pre-award requirements for submission of letters or other documentation to verify commitments to meet cost-sharing require- ments if a Federal award is made. 3. Other—Required, if applicable. If there are other eligibility criteria (i.e., criteria that have the effect of making an application or project ineligible for Federal awards, wheth- er referred to as ‘‘responsiveness’’ criteria, ‘‘go-no go’’ criteria, ‘‘threshold’’ criteria, or in other ways), must be clearly stated and must include a reference to the regulation of requirement that describes the restriction, as applicable. For example, if entities that have been found to be in violation of a par- ticu arly stated and must include a reference to the regulation of requirement that describes the restriction, as applicable. For example, if entities that have been found to be in violation of a par- ticular Federal statute are ineligible, it is important to say so. This section must also state any limit on the number of applica- tions an applicant may submit under the an- nouncement and make clear whether the limitation is on the submitting organization, individual investigator/program director, or both. This section should also address any eligibility criteria for beneficiaries or for program participants other than Federal award recipients. D. Application and Submission Information 1. Address to Request Application Package— Required. Potential applicants must be told how to get application forms, kits, or other materials needed to apply (if this announce- ment contains everything needed, this sec- tion need only say so). An Internet address where the materials can be accessed is ac- ceptable. However, since high-speed Internet access is not yet universally available for downloading documents, and applicants may have additional accessibility requirements, there also should be a way f table. However, since high-speed Internet access is not yet universally available for downloading documents, and applicants may have additional accessibility requirements, there also should be a way for potential ap- plicants to request paper copies of materials, such as a U.S. Postal Service mailing ad- dress, telephone or FAX number, Telephone Device for the Deaf (TDD), Text Telephone (TTY) number, and/or Federal Information Relay Service (FIRS) number. the required content of an application and the forms or formats that an applicant must use to submit it. If any requirements are stated elsewhere because they are general re- quirements that apply to multiple programs or funding opportunities, this section should refer to where those requirements may be found. This section also should include re- quired forms or formats as part of the an- nouncement or state where the applicant may obtain them. This section should specifically address content and form or format requirements for: i. Pre-applications, letters of intent, or white papers required or encouraged (see Section D.4), including any limitations on the number of pages or other formatting re- quirements similar to those for fu e-applications, letters of intent, or white papers required or encouraged (see Section D.4), including any limitations on the number of pages or other formatting re- quirements similar to those for full applica- tions. ii. The application as a whole. For all sub- missions, this would include any limitations on the number of pages, font size and type- face, margins, paper size, number of copies, and sequence or assembly requirements. If electronic submission is permitted or re- quired, this could include special require- ments for formatting or signatures. iii. Component pieces of the application (e.g., if all copies of the application must bear original signatures on the face page or the program narrative may not exceed 10 pages). This includes any pieces that may be submitted separately by third parties (e.g., references or letters confirming commit- ments from third parties that will be con- tributing a portion of any required cost shar- ing). iv. Information that successful applicants must submit after notification of intent to make a Federal award, but prior to a Federal award. This could include evidence of com- pliance with requirements relating to human subjects or informati ts must submit after notification of intent to make a Federal award, but prior to a Federal award. This could include evidence of com- pliance with requirements relating to human subjects or information needed to comply with the National Environmental Policy Act (NEPA) (42 U.S.C. 4321–4370h). 3. Unique Entity Identifier and System for Award Management (SAM)—Required. This paragraph must state clearly that each applicant (unless the applicant is an in- dividual or Federal awarding agency that is excepted from those requirements under 2 CFR 25.110(b) or (c), or has an exception ap- proved by the Federal awarding agency under 2 CFR 25.110(d)) is required to: (i) Be registered in SAM before submitting its application; (ii) provide a valid unique entity identifier in its application; and (iii) continue to maintain an active SAM registration with current information at all times during which it has an active Federal award or an application or plan under con- sideration by a Federal awarding agency. 2. Content and Form of Application Submis- sion—Required. This section must identify It also must state that the Federal award- ing agency may not make a Federal award to 354 Dept. of Health a agency. 2. Content and Form of Application Submis- sion—Required. This section must identify It also must state that the Federal award- ing agency may not make a Federal award to 354 Dept. of Health and Human Services Pt. 75, App. I an applicant until the applicant has com- plied with all applicable unique entity iden- tifier and SAM requirements and, if an appli- cant has not fully complied with the require- ments by the time the Federal awarding agency is ready to make a Federal award, the Federal awarding agency may determine that the applicant is not qualified to receive a Federal award and use that determination as a basis for making a Federal award to an- other applicant. 4. Submission Dates and Times—Required. Announcements must identify due dates and times for all submissions. This includes not only the full applications but also any pre- liminary submissions (e.g., letters of intent, white papers, or pre-applications). It also in- cludes any other submissions of information before Federal award that are separate from the full application. If the funding oppor- tunity is a general announcement that is open for a period of time with no specific due dates for applications, th fore Federal award that are separate from the full application. If the funding oppor- tunity is a general announcement that is open for a period of time with no specific due dates for applications, this section should say so. Note that the information on dates that is included in this section also must ap- pear with other overview information in a lo- cation preceding the full text of the an- nouncement (see § 75.203). Each type of submission should be des- ignated as encouraged or required and, if re- quired, any deadline date (or dates, if the Federal awarding agency plans more than one cycle of application submission, review, and Federal award under the announcement) should be specified. The announcement must state (or provide a reference to another docu- ment that states): i. Any deadline in terms of a date and local time. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. ii. What the deadline means (e.g., whether it is the date and time by which the Federal awarding agency must receive the applica- tion, the date by which the application must be postmarked, or something else) and how that depends, if at all, on t is the date and time by which the Federal awarding agency must receive the applica- tion, the date by which the application must be postmarked, or something else) and how that depends, if at all, on the submission method (e.g., mail, electronic, or personal/ courier delivery). iii. The effect of missing a deadline (e.g., whether late applications are neither re- viewed nor considered or are reviewed and considered under some circumstances). iv. How the receiving Federal office deter- mines whether an application or pre-applica- tion has been submitted before the deadline. This includes the form of acceptable proof of mailing or system-generated documentation of receipt date and time. This section also may indicate whether, when, and in what form the applicant will re- ceive an acknowledgement of receipt. This information should be displayed in ways that will be easy to understand and use. It can be difficult to extract all needed information from narrative paragraphs, even when they are well written. A tabular form for pro- viding a summary of the information may help applicants for some programs and give them what effectively could be a checklist to verify the completeness of th are well written. A tabular form for pro- viding a summary of the information may help applicants for some programs and give them what effectively could be a checklist to verify the completeness of their application package before submission. ‘‘Intergovern- 5. Intergovernmental Review—Required, if ap- plicable. If the funding opportunity is subject to Executive Order 12372, mental Review of Federal Programs,’’ the notice must say so. In alerting applicants that they must contact their state’s Single Point of Contact (SPOC) to find out about and comply with the state’s process under Executive Order 12372, it may be useful to in- form potential applicants that the names and addresses of the SPOCs are listed in the Office of Management and Budget’s Web site. www.whitehouse.gov/omb/grants/spoc.html. 6. Funding Restrictions—Required. Notices must include information on funding restric- tions in order to allow an applicant to de- velop an application and budget consistent with program requirements. Examples are whether construction is an allowable activ- ity, if there are any limitations on direct costs such as foreign travel or equipment purchases, and if there are any limits on in- dir ements. Examples are whether construction is an allowable activ- ity, if there are any limitations on direct costs such as foreign travel or equipment purchases, and if there are any limits on in- direct costs (or facilities and administrative costs). Applicants must be advised if Federal awards will not allow reimbursement of pre- Federal award costs. 7. Other Submission Requirements— Required. This section must address any other submis- sion requirements not included in the other paragraphs of this section. This might in- clude the format of submission, i.e., paper or electronic, for each type of required submis- sion. Applicants should not be required to submit in more than one format and this sec- tion should indicate whether they may choose whether to submit applications in hard copy or electronically, may submit only in hard copy, or may submit only electroni- cally. This section also must indicate where ap- plications (and any pre-applications) must be submitted if sent by postal mail, electronic means, or hand-delivery. For postal mail submission, this must include the name of an office, official, individual or function (e.g., application receipt center) and a complete mail l mail, electronic means, or hand-delivery. For postal mail submission, this must include the name of an office, official, individual or function (e.g., application receipt center) and a complete mailing address. For electronic submission, this must include the URL or email address; whether a password(s) is required; whether particular software or other electronic capa- bilities are required; what to do in the event of system problems and a point of contact who will be available in the event the appli- cant experiences technical difficulties.1 1With respect to electronic methods for providing information about funding oppor- tunities or accepting applicants’ submissions of information, each HHS awarding agency is responsible for compliance with Section 508 Continued 355 Pt. 75, App. I 45 CFR Subtitle A (10–1–24 Edition) E. Application Review Information 1. Criteria—Required. This section must ad- dress the criteria that the Federal awarding agency will use to evaluate applications. This includes the merit and other review cri- teria that evaluators will use to judge appli- cations, including any statutory, regulatory, or other preferences (e.g., minority status or Native American t s includes the merit and other review cri- teria that evaluators will use to judge appli- cations, including any statutory, regulatory, or other preferences (e.g., minority status or Native American tribal preferences) that will be applied in the review process. These criteria are distinct from eligibility criteria that are addressed before an application is accepted for review and any program policy or other factors that are applied during the selection process, after the review process is completed. The intent is to make the appli- cation process transparent so applicants can make informed decisions when preparing their applications to maximize fairness of the process. The announcement should clear- ly describe all criteria, including any sub- criteria. If criteria vary in importance, the announcement should specify the relative percentages, weights, or other means used to distinguish among them. For statutory, reg- ulatory, or other preferences, the announce- ment should provide a detailed explanation of those preferences with an explicit indica- tion of their effect (e.g., whether they result in additional points being assigned). If an applicant’s proposed cost sharing will be etailed explanation of those preferences with an explicit indica- tion of their effect (e.g., whether they result in additional points being assigned). If an applicant’s proposed cost sharing will be considered in the review process (as op- posed to being an eligibility criterion de- scribed in Section C.2), the announcement must specifically address how it will be con- sidered (e.g., to assign a certain number of additional points to applicants who offer cost sharing, or to break ties among applica- tions with equivalent scores after evaluation against all other factors). If cost sharing will not be considered in the evaluation, the an- nouncement should say so, so that there is no ambiguity for potential applicants. Vague statements that cost sharing is encouraged, without clarification as to what that means, are unhelpful to applicants. It also is impor- tant that the announcement be clear about any restrictions on the types of cost (e.g., in- kind contributions) that are acceptable as cost sharing. 2. Review and Selection Process—Required. This section may vary in the level of detail provided. The announcement must list any program policy or other factors or elements, other tha as cost sharing. 2. Review and Selection Process—Required. This section may vary in the level of detail provided. The announcement must list any program policy or other factors or elements, other than merit criteria, that the selecting official may use in selecting applications for Federal award (e.g., geographical dispersion, program balance, or diversity). The HHS awarding agency may also include other ap- propriate details. For example, this section may indicate who is responsible for evalua- tion against the merit criteria (e.g., peers ex- ternal to the HHS awarding agency or HHS of the Rehabilitation Act of 1973 (29 U.S.C. 794d). awarding agency personnel) and/or who makes the final selections for Federal awards. If there is a multi-phase review proc- ess (e.g., an external panel advising internal HHS awarding agency personnel who make final recommendations to the deciding offi- cial), the announcement may describe the phases. It also may include: the number of people on an evaluation panel and how it op- erates, the way reviewers are selected, re- viewer qualifications, and the way that con- flicts of interest are avoided. With respect to electronic methods for providing inf ation panel and how it op- erates, the way reviewers are selected, re- viewer qualifications, and the way that con- flicts of interest are avoided. With respect to electronic methods for providing informa- tion about funding opportunities or accept- ing applicants’ submissions of information, each HHS awarding agency is responsible for compliance with Section 508 of the Rehabili- tation Act of 1973 (29 U.S.C. 794d). In addition, if the HHS awarding agency permits applicants to nominate suggested re- viewers of their applications or suggest those they feel may be inappropriate due to a con- flict of interest, that information should be included in this section. 3. For any Federal award under a notice of funding opportunity, if the HHS awarding agency anticipates that the total Federal share will be greater than the simplified ac- quisition threshold on any Federal award under a notice of funding opportunity may include, over the period of performance (see § 75.2 Simplified Acquisition Threshold), this section must also inform applicants: i. That the HHS awarding agency, prior to making a Federal award with a total amount of Federal share greater than the simplified acquisition thres hreshold), this section must also inform applicants: i. That the HHS awarding agency, prior to making a Federal award with a total amount of Federal share greater than the simplified acquisition threshold, is required to review and consider any information about the ap- plicant that is in the designated integrity and performance system accessible through SAM (currently FAPIIS) (see 41 U.S.C. 2313); ii. That an applicant, at its option, may re- view information in the designated integrity and performance systems accessible through SAM and comment on any information about itself that the HHS awarding agency pre- viously entered and is currently in the des- ignated integrity and performance system accessible through SAM; iii. That the HHS awarding agency will consider any comments by the applicant, in addition to the other information in the des- ignated integrity and performance system, in making a judgment about the applicant’s integrity, business ethics, and record of per- formance under Federal awards when com- pleting the review of risk posed by appli- cants as described in § 75.205. 4. Anticipated Announcement and Federal Award Dates—Optional. This section is in- tended to provi er Federal awards when com- pleting the review of risk posed by appli- cants as described in § 75.205. 4. Anticipated Announcement and Federal Award Dates—Optional. This section is in- tended to provide applicants with informa- tion they can use for planning purposes. If there is a single application deadline fol- lowed by the simultaneous review of all ap- plications, the HHS awarding agency can in- clude in this section information about the 356 Dept. of Health and Human Services Pt. 75, App. I anticipated dates for announcing or noti- fying successful and unsuccessful applicants and for having Federal awards in place. If ap- plications are received and evaluated on a ‘‘rolling’’ basis at different times during an extended period, it may be appropriate to give applicants an estimate of the time need- ed to process an application and notify the applicant of the HHS awarding agency’s deci- sion. F. Federal Award Administration Information 1. Federal Award Notices—Required. This section must address what a successful appli- cant can expect to receive following selec- tion. If the HHS awarding agency’s practice is to provide a separate notice stating that an application has been sele must address what a successful appli- cant can expect to receive following selec- tion. If the HHS awarding agency’s practice is to provide a separate notice stating that an application has been selected before it ac- tually makes the Federal award, this section would be the place to indicate that the letter is not an authorization to begin performance (to the extent that it allows charging to Fed- eral awards of pre-award costs at the non- Federal entity’s own risk). This section should indicate that the notice of Federal award signed by the grants officer (or equiv- alent) is the authorizing document, and whether it is provided through postal mail or by electronic means and to whom. It also may address the timing, form, and content of notifications to unsuccessful applicants. See also § 75.210. 2. Administrative and National Policy Re- quirements—Required. This section must iden- tify the usual administrative and national policy requirements the HHS awarding agen- cy’s Federal awards may include. Providing this information lets a potential applicant identify any requirements with which it would have difficulty complying if its appli- cation is successful. In those cases, early n s may include. Providing this information lets a potential applicant identify any requirements with which it would have difficulty complying if its appli- cation is successful. In those cases, early no- tification about the requirements allows the potential applicant to decide not to apply or to take needed actions before receiving the Federal award. The announcement need not include all of the terms and conditions of the Federal-award, but may refer to a document (with information about how to obtain it) or Internet site where applicants can see the terms and conditions. If this funding oppor- tunity will lead to Federal awards with some specific terms and conditions that differ from the HHS awarding agency’s usual (sometimes called ‘‘general’’) terms and con- ditions, this section should highlight those specific terms and conditions. Doing so will alert applicants that have received Federal awards from the HHS awarding agency pre- viously and might not otherwise expect dif- ferent terms and conditions. For the same reason, the announcement should inform po- tential applicants about special require- ments that could apply to particular Federal awards after the review of applicatio rms and conditions. For the same reason, the announcement should inform po- tential applicants about special require- ments that could apply to particular Federal awards after the review of applications and other information, based on the particular circumstances of the effort to be supported (e.g., if human subjects were to be involved or if some situations may justify special terms on intellectual property, data sharing or security requirements). 3. Reporting—Required. This section must include general information about the type (e.g., financial or performance), frequency, and means of submission (paper or elec- tronic) of post-Federal award reporting re- quirements. Highlight any special reporting requirements for Federal awards under this funding opportunity that differ (e.g., by re- port type, frequency, form/format, or cir- cumstances for use) from what the HHS awarding agency’s Federal awards usually require. HHS agencies must also describe in this section all relevant requirements such as those at 2 CFR 180.335 and 2 CFR 180.350. If the Federal share of any Federal award may include more than $500,000 over the pe- riod of performance, this section must in- form potential ap nts such as those at 2 CFR 180.335 and 2 CFR 180.350. If the Federal share of any Federal award may include more than $500,000 over the pe- riod of performance, this section must in- form potential applicants about the post award reporting requirements in Appendix XII. G. HHS Awarding Agency Contact(s)— Required The announcement must give potential ap- plicants a point(s) of contact for answering questions or helping with problems while the funding opportunity is open. The intent of this requirement is to be as helpful as pos- sible to potential applicants, so the HHS awarding agency should consider approaches such as giving: 1. Points of contact who may be reached in multiple ways (e.g., by telephone, FAX, and/ or email, as well as regular mail). 2. A fax or email address that multiple peo- ple access, so that someone will respond even if others are unexpectedly absent during critical periods. 3. Different contacts for distinct kinds of help (e.g., one for questions of programmatic content and a second for administrative questions). H. Other Information—Optional This section may include any additional information that will assist a potential ap- plicant. For example, the section m ntent and a second for administrative questions). H. Other Information—Optional This section may include any additional information that will assist a potential ap- plicant. For example, the section might: 1. Indicate whether this is a new program or a one-time initiative. 2. Mention related programs or other up- coming or ongoing HHS awarding agency funding opportunities for similar activities. 3. Include current Internet addresses for the HHS awarding agency Web sites that may be useful to an applicant in under- standing the program. 4. Alert applicants to the need to identify proprietary information and inform them about the way the HHS awarding agency will handle it. 357 Pt. 75, App. II 45 CFR Subtitle A (10–1–24 Edition) 5. Include certain routine notices to appli- cants (e.g., that the Federal Government is not obligated to make any Federal award as a result of the announcement or that only grants officers can bind the Federal Govern- ment to the expenditure of funds). [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] APPENDIX II TO PART 75—CONTRACT PROVISIONS FOR NON-FEDERAL ENTI- TY CONTRACTS UNDER FEDERAL AWARDS In addition to other provisions required 89, Dec. 19, 2014, as amended at 81 FR 3018, Jan. 20, 2016] APPENDIX II TO PART 75—CONTRACT PROVISIONS FOR NON-FEDERAL ENTI- TY CONTRACTS UNDER FEDERAL AWARDS In addition to other provisions required by the HHS agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain provi- sions covering the following, as applicable. A. Contracts for more than the simplified acquisition set at threshold currently $150,000, which is the inflation adjusted amount determined by the Civilian Agency Acquisition Council and the Defense Acquisi- tion Regulations Council (Councils) as au- thorized by 41 U.S.C. 1908, must address ad- ministrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as appropriate. B. All contracts in excess of $10,000 must address termination for cause and for con- venience by the non-Federal entity including the manner by which it will be effected and the basis for settlement. C. Equal Employment Opportunity. Except as otherwise provided under 41 CFR part 60, all contracts that meet the definition of ‘‘federally assisted construct l be effected and the basis for settlement. C. Equal Employment Opportunity. Except as otherwise provided under 41 CFR part 60, all contracts that meet the definition of ‘‘federally assisted construction contract’’ in 41 CFR part 60–1.3 must include the equal op- portunity clause provided under 41 CFR 60– 1.4(b), in accordance with Executive Order 11246, Equal Employment Opportunity (30 FR 12319, 12935, 3 CFR 1964–1965 Comp., p. 339) as amended by Executive Order 11375 amending Executive Order 11246 Relating to Equal Em- ployment Opportunity, and implementing regulations at 41 CFR part 60. D. Davis-Bacon Act, as amended (40 U.S.C. 3141–3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compli- ance with the Davis-Bacon Act (40 U.S.C. 3141–3144, and 3146–3148) as supplemented by Department of Labor regulations (29 CFR part 5). In accordance with the statute, con- tractors must be required to pay wages to la- borers and mechanics at a rate not less than the prevailing wages specified in a wage de- termination made by the Secretary of Labor. In addition, contractors must must be required to pay wages to la- borers and mechanics at a rate not less than the prevailing wages specified in a wage de- termination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-Federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a con- tract or subcontract must be conditioned upon the acceptance of the wage determina- tion. The non-Federal entity must report all suspected or reported violations to the Fed- eral awarding agency. The contracts must also include a provision for compliance with the Copeland ‘‘Anti-Kickback’’ Act (40 U.S.C. 3145), as supplemented by Department of Labor regulations (29 CFR part 3). The Act provides that each contractor or sub- recipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensa- tion to which he or she is otherwise entitled. The non-Federal entity must report all sus- pected or reported violations to the Federal awarding agency. E. Contract Work Hours ny part of the compensa- tion to which he or she is otherwise entitled. The non-Federal entity must report all sus- pected or reported violations to the Federal awarding agency. E. Contract Work Hours and Safety Stand- ards Act (40 U.S.C. 3701–3708). Where applica- ble, all contracts awarded by the non-Fed- eral entity in excess of $100,000 that involve the employment of mechanics or laborers must include a provision for compliance with 40 U.S.C. 3702 and 3704, as supplemented by Department of Labor regulations (29 CFR part 5). Under 40 U.S.C. 3702 of the Act, each contractor must be required to compute the wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in excess of the standard work week is permissible provided that the worker is com- pensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. 3704 are applicable to construction work and provide that no laborer or mechanic must be re- quired to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the pur and provide that no laborer or mechanic must be re- quired to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transpor- tation or transmission of intelligence. F. Rights to Inventions Made Under a Con- tract or Agreement. If the Federal award meets the definition of ‘‘funding agreement’’ under 37 CFR 401.2 (a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit orga- nization regarding the substitution of par- ties, assignment or performance of experi- mental, developmental, or research work under that ‘‘funding agreement,’’ the recipi- ent or subrecipient must comply with the re- quirements of 37 CFR part 401 and any imple- menting regulations issued by the awarding agency. G. Clean Air Act (42 U.S.C. 7401–7671q.) and the Federal Water Pollution Control Act (33 U.S.C. 1251–1387), as amended—Contracts and subgrants of amounts in excess of $150,000 must contain a provision that requires the non-Federal award to agree to comply with 358 Dept. on Control Act (33 U.S.C. 1251–1387), as amended—Contracts and subgrants of amounts in excess of $150,000 must contain a provision that requires the non-Federal award to agree to comply with 358 Dept. of Health and Human Services Pt. 75, App. III all applicable standards, orders or regula- tions issued pursuant to the Clean Air Act (42 U.S.C. 7401–7671q) and the Federal Water Pollution Control Act as amended (33 U.S.C. 1251–1387). Violations must be reported to the Federal awarding agency and the Regional Office of the Environmental Protection Agency (EPA). H. Debarment and Suspension (Executive Orders 12549 and 12689)—A contract award (see 2 CFR 180.220) must not be made to par- ties listed on the government-wide exclu- sions in the System for Award Management (SAM), in accordance with the OMB guide- lines at 2 CFR part 180 that implement Exec- utive Orders 12549 (3 CFR part 1986 Comp., p. 189) and 12689 (3 CFR part 1989 Comp., p. 235), ‘‘Debarment and Suspension.’’ SAM Exclu- sions contains the names of parties debarred, suspended, or otherwise excluded by agen- cies, as well as parties declared ineligible under statutory or regulatory authority other than Executive Order 12549. ontains the names of parties debarred, suspended, or otherwise excluded by agen- cies, as well as parties declared ineligible under statutory or regulatory authority other than Executive Order 12549. I. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)—Contractors that apply or bid for an award exceeding $100,000 must file the required certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay any person or organization for influencing or at- tempting to influence an officer or employee of any agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with ob- taining any Federal contract, grant or any other award covered by 31 U.S.C. 1352. Each tier must also disclose any lobbying with non-Federal funds that takes place in con- nection with obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the non-Federal award. J. See § 75.331 Procurement of recovered materials. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 19044, Apr. 4, 2016] APPENDIX III TO PART 75—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINA- TION FOR t of recovered materials. [79 FR 75889, Dec. 19, 2014, as amended at 81 FR 19044, Apr. 4, 2016] APPENDIX III TO PART 75—INDIRECT (F&A) COSTS IDENTIFICATION AND ASSIGNMENT, AND RATE DETERMINA- TION FOR INSTITUTIONS OF HIGHER EDUCATION (IHES) A. General This appendix provides criteria for identi- fying and computing indirect (or indirect (F&A)) rates at IHEs (institutions). Indirect (F&A) costs are those that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular sponsored project, an in- structional activity, or any other institu- tional activity. See subsection B.1, for a dis- cussion of the components of indirect (F&A) costs. 1. Major Functions of an Institution Refers to instruction, organized research, other sponsored activities and other institu- tional activities as defined in this section: a. Instruction means the teaching and training activities of an institution. Except for research training as provided in sub- section b, this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a non-credit basis, and whether they are offered through r section b, this term includes all teaching and training activities, whether they are offered for credits toward a degree or certificate or on a non-credit basis, and whether they are offered through regular academic depart- ments or separate divisions, such as a sum- mer school division or an extension division. Also considered part of this major function are departmental research, and, where agreed to, university research. (1) Sponsored instruction and training means specific instructional or training activity es- tablished by grant, contract, or cooperative agreement. For purposes of the cost prin- ciples, this activity may be considered a major function even though an institution’s accounting treatment may include it in the instruction function. (2) Departmental research means research, development and scholarly activities that are not organized research and, con- sequently, are not separately budgeted and accounted for. Departmental research, for purposes of this document, is not considered as a major function, but as a part of the in- struction function of the institution. (3) Only mandatory cost sharing or cost sharing specifically committed in the project budget must be incl onsidered as a major function, but as a part of the in- struction function of the institution. (3) Only mandatory cost sharing or cost sharing specifically committed in the project budget must be included in the organized re- search base for computing the indirect (F&A) cost rate or reflected in any allocation of in- direct costs. Salary costs above statutory limits are not considered cost sharing. b. Organized research means all research and development activities of an institution that are separately budgeted and accounted for. It includes: (1) Sponsored research means all research and development activities that are spon- sored by Federal and non-Federal agencies and organizations. This term includes activi- ties involving the training of individuals in research techniques (commonly called re- search training) where such activities utilize the same facilities as other research and de- velopment activities and where such activi- ties are not included in the instruction func- tion. (2) University research means all research and development activities that are sepa- rately budgeted and accounted for by the in- stitution under an internal application of in- stitutional funds. Univer ) University research means all research and development activities that are sepa- rately budgeted and accounted for by the in- stitution under an internal application of in- stitutional funds. University research, for purposes of this document, must be com- bined with sponsored research under the function of organized research. c. Other sponsored activities means programs and projects financed by Federal and non- 359 Pt. 75, App. III 45 CFR Subtitle A (10–1–24 Edition) Federal agencies and organizations which in- volve the performance of work other than in- struction and organized research. Examples of such programs and projects are health service projects and community service pro- grams. However, when any of these activities are undertaken by the institution without outside support, they may be classified as other institutional activities. d. Other institutional activities means all ac- tivities of an institution except for instruc- tion, departmental research, organized re- search, and other sponsored activities, as de- fined in this section; indirect (F&A) cost ac- tivities identified in this Appendix para- graph B, Identification and assignment of in- direct (F&A) costs; and and other sponsored activities, as de- fined in this section; indirect (F&A) cost ac- tivities identified in this Appendix para- graph B, Identification and assignment of in- direct (F&A) costs; and specialized services facilities described in § 75.468 of this part. Examples of other institutional activities include operation of residence halls, dining halls, hospitals and clinics, student unions, intercollegiate athletics, bookstores, faculty housing, student apartments, guest houses, chapels, theaters, public museums, and other similar auxiliary enterprises. This definition also includes any other categories of activi- ties, costs of which are ‘‘unallowable’’ to Federal awards, unless otherwise indicated in an award. 2. Criteria for Distribution a. Base period. A base period for distribu- tion of indirect (F&A) costs is the period during which the costs are incurred. The base period normally should coincide with the fiscal year established by the institution, but in any event the base period should be so selected as to avoid inequities in the dis- tribution of costs. b. Need for cost groupings. The overall ob- jective of the indirect (F&A) cost allocation process is to distribut se period should be so selected as to avoid inequities in the dis- tribution of costs. b. Need for cost groupings. The overall ob- jective of the indirect (F&A) cost allocation process is to distribute the indirect (F&A) costs described in Section B, Identification and assignment of indirect (F&A) costs, to the major functions of the institution in pro- portions reasonably consistent with the na- ture and extent of their use of the institu- tion’s resources. In order to achieve this ob- jective, it may be necessary to provide for selective distribution by establishing sepa- rate groupings of cost within one or more of the indirect (F&A) cost categories referred to in subsection B.1. In general, the cost groupings established within a category should constitute, in each case, a pool of those items of expense that are considered to be of like nature in terms of their relative contribution to (or degree of remoteness from) the particular cost objectives to which distribution is appropriate. Cost groupings should be established considering the general guides provided in subsection c of this sec- tion. Each such pool or cost grouping should then be distributed individually to the re- la e. Cost groupings should be established considering the general guides provided in subsection c of this sec- tion. Each such pool or cost grouping should then be distributed individually to the re- lated cost objectives, using the distribution base or method most appropriate in light of the guidelines set forth in subsection d of this section. c. General considerations on cost groupings. The extent to which separate cost groupings and selective distribution would be appro- priate at an institution is a matter of judg- ment to be determined on a case-by-case basis. Typical situations which may warrant the establishment of two or more separate cost groupings (based on account classifica- tion or analysis) within an indirect (F&A) cost category include but are not limited to the following: (1) If certain items or categories of expense relate solely to one of the major functions of the institution or to less than all functions, such expenses should be set aside as a sepa- rate cost grouping for direct assignment or selective allocation in accordance with the guides provided in subsections b and d. (2) If any types of expense ordinarily treat- ed as general administration or depart- men g for direct assignment or selective allocation in accordance with the guides provided in subsections b and d. (2) If any types of expense ordinarily treat- ed as general administration or depart- mental administration are charged to Fed- eral awards as direct costs, expenses applica- ble to other activities of the institution when incurred for the same purposes in like circumstances must, through separate cost groupings, be excluded from the indirect (F&A) costs allocable to those Federal awards and included in the direct cost of other activities for cost allocation purposes. (3) If it is determined that certain expenses are for the support of a service unit or facil- ity whose output is susceptible of measure- ment on a workload or other quantitative basis, such expenses should be set aside as a separate cost grouping for distribution on such basis to organized research, instruc- tional, and other activities at the institution or within the department. (4) If activities provide their own pur- chasing, personnel administration, building maintenance or similar service, the distribu- tion of general administration and general expenses, or operation and maintenance ex- penses to such own pur- chasing, personnel administration, building maintenance or similar service, the distribu- tion of general administration and general expenses, or operation and maintenance ex- penses to such activities should be accom- plished through cost groupings which include only that portion of central indirect (F&A) costs (such as for overall management) which are properly allocable to such activi- ties. (5) If the institution elects to treat fringe benefits as indirect (F&A) charges, such costs should be set aside as a separate cost grouping for selective distribution to related cost objectives. (6) The number of separate cost groupings within a category should be held within practical limits, after taking into consider- ation the materiality of the amounts in- volved and the degree of precision attainable through less selective methods of distribu- tion. d. Selection of distribution method. (1) Actual conditions must be taken into account in selecting the method or base to be used in distributing individual cost 360 Dept. of Health and Human Services Pt. 75, App. III groupings. The essential consideration in se- lecting a base is that it be the one best suit- ed for assigning the distributing individual cost 360 Dept. of Health and Human Services Pt. 75, App. III groupings. The essential consideration in se- lecting a base is that it be the one best suit- ed for assigning the pool of costs to cost ob- jectives in accordance with benefits derived; with a traceable cause-and-effect relation- ship; or with logic and reason, where neither benefit nor a cause-and-effect relationship is determinable. (2) If a cost grouping can be identified di- rectly with the cost objective benefitted, it should be assigned to that cost objective. (3) If the expenses in a cost grouping are more general in nature, the distribution may be based on a cost analysis study which re- sults in an equitable distribution of the costs. Such cost analysis studies may take into consideration weighting factors, popu- lation, or space occupied if appropriate. Cost analysis studies, however, must (a) be appro- priately documented in sufficient detail for subsequent review by the cognizant agency for indirect costs, (b) distribute the costs to the related cost objectives in accordance with the relative benefits derived, (c) be sta- tistically sound, (d) be performed specifically at the institut or indirect costs, (b) distribute the costs to the related cost objectives in accordance with the relative benefits derived, (c) be sta- tistically sound, (d) be performed specifically at the institution at which the results are to be used, and (e) be reviewed periodically, but not less frequently than rate negotiations, updated if necessary, and used consistently. Any assumptions made in the study must be stated and explained. The use of cost anal- ysis studies and periodic changes in the method of cost distribution must be fully justified. (4) If a cost analysis study is not per- formed, or if the study does not result in an equitable distribution of the costs, the dis- tribution must be made in accordance with the appropriate base cited in Section B, un- less one of the following conditions is met: (a) It can be demonstrated that the use of a different base would result in a more equi- table allocation of the costs, or that a more readily available base would not increase the costs charged to Federal awards, or (b) The institution qualifies for, and elects to use, the simplified method for computing indirect (F&A) cost rates described in Sec- tion D. (5) Notwithstanding subsecti charged to Federal awards, or (b) The institution qualifies for, and elects to use, the simplified method for computing indirect (F&A) cost rates described in Sec- tion D. (5) Notwithstanding subsection (3), effec- tive July 1, 1998, a cost analysis or base other than that in Section B must not be used to distribute utility or student services costs. Instead, subsections B.4.c may be used in the recovery of utility costs. e. Order of distribution. (1) Indirect (F&A) costs are the broad cat- egories of costs discussed in Section B.1. (2) Depreciation, interest expenses, oper- ation and maintenance expenses, and general administrative and general expenses should be allocated in that order to the remaining indirect (F&A) cost categories as well as to the major functions and specialized service facilities of the institution. Other cost cat- egories may be allocated in the order deter- mined to be most appropriate by the institu- tions. When cross allocation of costs is made as provided in subsection (3), this order of al- location does not apply. (3) Normally an indirect (F&A) cost cat- egory will be considered closed once it has been allocated to other cost objectives, and costs may n subsection (3), this order of al- location does not apply. (3) Normally an indirect (F&A) cost cat- egory will be considered closed once it has been allocated to other cost objectives, and costs may not be subsequently allocated to it. However, a cross allocation of costs be- tween two or more indirect (F&A) cost cat- egories may be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appro- priate modification to the composition of the indirect (F&A) cost categories described in Section B is required. B. Identification and Assignment of Indirect (F&A) Costs 1. Definition of Facilities and Administration See § 75.414 which provides the basis for these indirect cost requirements. 2. Depreciation a. The expenses under this heading are the portion of the costs of the institution’s buildings, capital improvements to land and buildings, and equipment which are com- puted in accordance with § 75.436. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated in the following manner: (1) Depreciation on buildings used exclu- sively in the conduct of a single fun ves pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated in the following manner: (1) Depreciation on buildings used exclu- sively in the conduct of a single function, and on capital improvements and equipment used in such buildings, must be assigned to that function. (2) Depreciation on buildings used for more than one function, and on capital improve- ments and equipment used in such buildings, must be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding com- mon areas such as hallways, stairwells, and rest rooms. (3) Depreciation on buildings, capital im- provements and equipment related to space (e.g., individual rooms, laboratories) used jointly by more than one function (as deter- mined by the users of the space) must be treated as follows. The cost of each jointly used unit of space must be allocated to bene- fitting functions on the basis of: (a) The employee full-time equivalents (FTEs) or salaries and wages of those indi- vidual functions benefitting from the use of that space; or (b) Institution-wide employee FTEs or sal- aries and wages applicable to the benefitting valents (FTEs) or salaries and wages of those indi- vidual functions benefitting from the use of that space; or (b) Institution-wide employee FTEs or sal- aries and wages applicable to the benefitting major functions (see Section A.1) of the in- stitution. (4) Depreciation on certain capital im- provements to land, such as paved parking 361 Pt. 75, App. III 45 CFR Subtitle A (10–1–24 Edition) areas, fences, sidewalks, and the like, not in- cluded in the cost of buildings, must be allo- cated to user categories of students and em- ployees on a full-time equivalent basis. The amount allocated to the student category must be assigned to the instruction function of the institution. The amount allocated to the employee category must be further allo- cated to the major functions of the institu- tion in proportion to the salaries and wages of all employees applicable to those func- tions. 3. Interest Interest on debt associated with certain buildings, equipment and capital improve- ments, as defined in § 75.449, must be classi- fied as an expenditure under the category Facilities. These costs must be allocated in the same manner as the depreciation on the buildings, equipment and capital defined in § 75.449, must be classi- fied as an expenditure under the category Facilities. These costs must be allocated in the same manner as the depreciation on the buildings, equipment and capital improve- ments to which the interest relates. 4. Operation and Maintenance Expenses a. The expenses under this heading are those that have been incurred for the admin- istration, supervision, operation, mainte- nance, preservation, and protection of the in- stitution’s physical plant. They include ex- penses normally incurred for such items as janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and all other insurance relating to property; space and capital leasing; facility planning and management; and central re- ceiving. The operation and maintenance ex- pense category should also include its allo- cable share of fringe benefit costs, deprecia- tion, and interest costs. b. In the absence of the alternatives pro- vided for in ration and maintenance ex- pense category should also include its allo- cable share of fringe benefit costs, deprecia- tion, and interest costs. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be allocated in the same manner as described in subsection 2.b for depreciation. c. A utility cost adjustment of up to 1.3 percentage points may be included in the ne- gotiated indirect cost rate of the IHE for or- ganized research, per the computation alter- natives in paragraphs (c)(1) and (2) of this section: (1) Where space is devoted to a single func- tion and metering allows unambiguous meas- urement of usage related to that space, costs must be assigned to the function located in that space. (2) Where space is allocated to different functions and metering does not allow unam- biguous measurement of usage by function, costs must be allocated as follows: (i) Utilities costs should be apportioned to functions in the same manner as deprecia- tion, based on the calculated difference be- tween the site or building actual square foot- age for monitored research laboratory space (site, building, floor, or room), and a sepa- r ner as deprecia- tion, based on the calculated difference be- tween the site or building actual square foot- age for monitored research laboratory space (site, building, floor, or room), and a sepa- rate calculation prepared by the IHE using the ‘‘effective square footage’’ described in subsection (c)(2)(ii) of this section. (ii) ‘‘Effective square footage’’ allocated to research laboratory space must be calculated as the actual square footage times the rel- ative energy utilization index (REUI) posted on the OMB Web site at the time of a rate determination. A. This index is the ratio of a laboratory energy use index (lab EUI) to the cor- responding index for overall average college or university space (college EUI). tool benchmarking B. In July 2012, values for these two indices (taken respectively from the Lawrence Berkeley Laboratory ‘‘Labs for the 21st Cen- tury’’ http:// labs21benchmarking.lbl.gov/CompareData.php and the US Department of Energy ‘‘Build- ings Energy Databook’’ buildingsdatabook.eren.doe.gov/CBECS.aspx) were 310 kBtu/sq ft-yr. and 155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain currency, OMB will adjust the EUI numbers from dingsdatabook.eren.doe.gov/CBECS.aspx) were 310 kBtu/sq ft-yr. and 155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain currency, OMB will adjust the EUI numbers from time to time (no more often than annually nor less often than every 5 years), using reliable and pub- licly disclosed data. Current values of both the EUIs and the REUI will be posted on the OMB Web site. http:// and 5. General Administration and General Expenses a. The expenses under this heading are those that have been incurred for the general executive and administrative offices of edu- cational institutions and other expenses of a general character which do not relate solely to any major function of the institution; i.e., solely to (1) instruction, (2) organized re- search, (3) other sponsored activities, or (4) other institutional activities. The general administration and general expense category should also include its allocable share of fringe benefit costs, operation and mainte- nance expense, depreciation, and interest costs. Examples of general administration and general expenses include: Those expenses incurred by administrative offices that serve the entire university sy nance expense, depreciation, and interest costs. Examples of general administration and general expenses include: Those expenses incurred by administrative offices that serve the entire university system of which the in- stitution is a part; central offices of the in- the President’s or stitution Chancellor’s office, the offices for institu- tion-wide financial management, business services, budget and planning, personnel management, and safety and risk manage- ment; the office of the General Counsel; and the operations of the central administrative management information systems. General administration and general expenses must not include expenses incurred within non- such as 362 Dept. of Health and Human Services Pt. 75, App. III university-wide deans’ offices, academic de- partments, organized research units, or simi- lar organizational units. (See subsection 6.) b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- cluded in this category must be grouped first according to common major functions of the institution to which they render services or provide benefits. The aggregate expenses of each group must then be allocated to serv- iced or be grouped first according to common major functions of the institution to which they render services or provide benefits. The aggregate expenses of each group must then be allocated to serv- iced or benefitted functions on the modified total cost basis. Modified total costs consist of the same elements as those in Section C.2. When an activity included in this indirect (F&A) cost category provides a service or product to another institution or organiza- tion, an appropriate adjustment must be made to either the expenses or the basis of allocation or both, to assure a proper alloca- tion of costs. 6. Departmental Administration Expenses a. The expenses under this heading are those that have been incurred for adminis- trative and supporting services that benefit common or joint departmental activities or objectives in academic deans’ offices, aca- demic departments and divisions, and orga- nized research units. Organized research units include such units as institutes, study centers, and research centers. Departmental administration expenses are subject to the following limitations. (1) Academic deans’ offices. Salaries and operating expenses are limited to those at- tributable to adm research centers. Departmental administration expenses are subject to the following limitations. (1) Academic deans’ offices. Salaries and operating expenses are limited to those at- tributable to administrative functions. (2) Academic departments: (a) Salaries and fringe benefits attrib- utable to the administrative work (including bid and proposal preparation) of faculty (in- cluding department heads) and other profes- sional personnel conducting research and/or instruction, must be allowed at a rate of 3.6 percent of modified total direct costs. This category does not include professional busi- ness or professional administrative officers. This allowance must be added to the com- putation of the indirect (F&A) cost rate for major functions in Section C; the expenses covered by the allowance must be excluded from the departmental administration cost pool. No documentation is required to sup- port this allowance. (b) Other administrative and supporting expenses incurred within academic depart- ments are allowable provided they are treat- ed consistently in like circumstances. This would include expenses such as the salaries of secretarial and clerical staffs, the salaries of admin