45934 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

OFFICE OF MANAGEMENT AND

BUDGET

Governmentwide Grants Management

Requirements

AGENCY: Office of Management and

Budget.

ACTION: Final Revision of OMB Circulars

A–21, A–87, A–102, A–110 and A–122

and Interim Final Revision of OMB

Circular A–110.

SUMMARY: The Office of Management

and Budget (OMB) is issuing final

revisions to five OMB circulars and, in

addition, OMB is issuing interim final

amendments to one of these circulars to

reflect the Single Audit Act

Amendments of 1996. The five Circulars

are A–21 (‘‘Cost Principles for

Educational Institutions’’), A–87 (‘‘Cost

Principles for State and Local

Governments’’), A–102 (‘‘Grants and

Cooperative Agreements with State and

Local Governments’’), A–110 (‘‘Uniform

Administrative Requirements for Grants

and Agreements with Institutions of

Higher Education, Hospitals, and Other

Non-Profit Organizations’’), and A–122

(‘‘Cost Principles for Non-Profit

Organizations’’). The purpose of these

revisions is to provide a conditional

exemption from OMB’s grants

management requirements and a

conditional class deviation from the

agencies’ Grants Management Common

Rule for certain Federal grant programs

with statutorily-authorized consolidated

planning and consolidated

administrative funding, that are

identified by a Federal agency and

approved by the head of the Executive

department or establishment.

Additionally, OMB is issuing interim

final conforming amendments to

Circular A–110 to reflect the enactment

of the Single Audit Act Amendments of

1996, the recent rescission of OMB

Circular A–128 (‘‘Audits of State and

Local Governments’’), and the

consolidation of its provisions in a

revised OMB Circular A–133, ‘‘Audits of

States, Local Governments, and NonProfit Organizations.’’

DATES: The final revisions and interim

final amendments are effective

September 29, 1997. All comments on

the interim final amendments should be

in writing and must be received by

October 28, 1997. Late comments will

be considered to the extent practicable.

ADDRESSES: Comments should be

mailed to Grants Management Audit

Docket, Office of Federal Financial

Management, Office of Management and

Budget, Room 6025 New Executive

Office Building, Washington, DC 20503.

Electronic mail (E-mail) comments may

be submitted via the Internet to

kahlowlb@a1.eop.gov. Please include

the full body of E-mail comments in the

text of the message and not as an

attachment. Please include the name,

title, organization, postal address, and

E-mail address in the text of the

message.

FOR FURTHER INFORMATION CONTACT:

Barbara F. Kahlow, Office of Financial

Federal Financial Management, Office

of Management and Budget, (202) 395–

3053. The revised OMB Circulars A–21,

A–87, A–102, A–110, and A–122 are

available electronically on the OMB

Home Page at http://

www.whitehouse.gov/WH/EOP/omb.

These revised Circulars are also

available in paper format by contacting

the OMB Publications Office at (202)

395–7332.

SUPPLEMENTARY INFORMATION: On May

14, 1997, the Office of Management and

Budget (OMB) proposed a revision (62

FR 26577) of OMB Circulars A–21,

‘‘Cost Principles for Educational

Institutions,’’ A–87, ‘‘Cost Principles for

State and Local Governments,’’ A–102,

‘‘Grants and Cooperative Agreements

with State and Local Governments,’’ A–

110, ‘‘Uniform Administrative

Requirements for Grants and

Agreements with Institutions of Higher

Education, Hospitals, and Other NonProfit Organizations,’’ and A–122, ‘‘Cost

Principles for Non-Profit

Organizations.’’ The proposal would

provide a conditional exemption from

OMB’s grants management requirements

and a conditional class deviation from

the agencies’ Grants Management

Common Rule (GMCR) for certain

Federal grant programs with statutorilyauthorized consolidated planning and

consolidated administrative funding,

that are identified by a Federal agency

and approved by the head of the

Executive department or establishment.

This exemption could be granted to

related Federal non-entitlement grant

programs which are administered by

State and local governments and which

have the following characteristics: the

related programs (1) serve a common

program purpose, (2) have specific

statutorily-authorized consolidated

planning and consolidated

administrative funding, and (3) are

administered by State agencies which

are funded mostly by non-Federal

sources. In order to promote efficiency

in the State and local program

administration of such related programs,

Federal agencies could exempt these

covered State-administered, nonentitlement grant programs from Federal

grants management requirements in

OMB Circulars A–21, A–87, A–110, and

A–122, and the GMCR. The exemptions

would be from all but the allocabilityof-costs provisions of Circulars A–21

(Section C, subpart 4), A–87

(Attachment A, subsection C.3), and A–

122 (Attachment A, subsection A.4), and

from all of the administrative

requirements provisions of Circular A–

110 and the GMCR.

A Federal agency would have the

discretion to exempt a Federal grant

program from the Federal grants

management requirements. A Federal

agency shall consult with OMB during

its consideration of whether to grant

such an exemption.

If a Federal agency exempts a Federal

grant program from these requirements,

a State would only qualify if it adopts

its own written fiscal and administrative

requirements for expending and

accounting for all funds, which are

consistent with the provisions of OMB

Circular A–87, and extends such

requirements to all subrecipients. These

fiscal and administrative requirements

must be sufficiently specific to ensure

that: funds are used in compliance with

all applicable Federal statutory and

regulatory provisions, costs are

reasonable and necessary for operating

these programs, and funds are not to be

used for general expenses required to

carry out other responsibilities of a State

or its subrecipients. If a State does not

adopt such fiscal and administrative

requirements, then it would continue to

be subject to the Federal grants

management requirements.

Response to Comments

OMB received eight comment letters:

three from Federal agencies, one from a

local government, two from universities,

one from a non-profit organization, and

one from an interest group. Four of the

letters did not address the substance of

the proposed revisions. The letter from

the local government asked if the

proposal had any relationship to the

recent revision of OMB Circular A–133,

‘‘Audits of States, Local Governments,

and Non-Profit Organizations,’’ on June

24, 1997 (62 FR 35278); in response to

this question, these revisions are not

related to that revision of Circular A–

133. The letter from the non-profit

organization raised concerns about

certain other provisions in OMB

Circular A–122 which are unrelated to

the proposal; OMB will consider these

concerns in connection with its review

of Circular A–122. A letter from one of

the Federal agencies requested an

unrelated change to the GMCR and

OMB Circular A–110; the issue raised

will be considered during OMB’s future

review of those provisions. A letter from

another Federal agency raised concerns
Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices 45935

about OMB’s denial of certain other,

unrelated waiver requests from that

agency which would have been

applicable only to that agency’s grant

programs.

The other four letters addressed the

substance of the proposed revisions.

The interest group commenter

supported the proposed revisions and

recommended that the flexibility

afforded to State-administered programs

be extended to local-administered

programs. This recommendation for

flexibility for local-administered

programs will be considered during

OMB’s future review of the five

circulars.

The two university commenters

objected to the proposal because of its

possible effect on those subrecipients,

including subcontractors, that are

universities. Specifically, the university

commenters preferred to be subject only

to OMB Circulars A–21 and A–110 (and

not also to State grants management

requirements) because ‘‘We have found

that state government does not always

do a good job communicating to us what

the guidelines are for a given program.’’

The university commenters stated that

they are familiar with Circulars A–21

and A–110 and ‘‘have systems in place

to deal with them.’’ Finally, the Federal

agency commenter found the proposal

unclear and felt that ‘‘the funding

agency needs to have not only

accountability, but also the consistent

accountability afforded by currently

imposed Federal cost principles and

uniform administrative requirements.’’

The commenter raised a concern about

the possible inefficiency of having more

than one State grants management

system, with one for exempted grant

programs (and other State programs),

and one for the rest of the Federal grant

programs.

OMB would also be concerned if the

proposed changes increased burden on

State grantees or their subrecipients, as

the three commenters apparently

believed. However, State grants

management requirements instead of

Federal grants management

requirements currently apply to several

previously-exempted Federal programs

as well as to State-funded programs

which have no Federal funding. In 1981

and 1982, OMB waived the application

of Circulars A–21, A–87, A–102, A–110,

and A–122 for certain, selective Stateadministered programs. As a

consequence, OMB believes that the

addition of programs with shared,

statutorily-authorized consolidated

planning and consolidated

administrative funding with these

already-exempted programs would not

result in additional burden on

subrecipients and would not result in

increased inefficiency. Since OMB does

not believe that any negative effects on

grantees or subrecipients will ensue

from the proposed revisions, OMB is

finalizing them.

Accordingly, to provide such a

conditional exemption, OMB is

adopting the proposed revisions and

amending: Section A.3 of Circular A–21;

Attachment A Section A.3 of Circular

A–87; Section 2 of Circular A–102;

Subpart C of Circular A–110 (as a new

Section ll.29 instead of as Section

ll.45 as proposed); and, Attachment

A Section A of Circular A–122. The

amendments are set forth below.

Interim Final Conforming Amendments

In addition to adopting the proposed

revisions to the five circulars, OMB is

also making conforming amendments to

Circular A–110 to reflect the enactment

of the Single Audit Act Amendments of

1996 (Public Law 104–156, 110 Stat.

1396) and OMB’s rescission of Circular

A–128 (‘‘Audits of State and Local

Governments’’) and its issuance of the

June 24, 1997, revision of OMB Circular

A–133 (62 FR 35278, June 30, 1997).

The provisions of the 1996 Act and of

the revised Circular A–133 apply to

audits of fiscal years beginning after

June 30, 1996. The revised Circular A–

133 co-locates audit requirements for

States, local governments, and nonprofit organizations. As a consequence,

OMB rescinded OMB Circular A–128.

Currently, Circular A–110 refers to the

Single Audit Act of 1984 (which was

superseded by the 1996 Act), to Circular

A–128 (which was rescinded), and to

the former version of OMB Circular A–

133 (which covered only non-profit

organizations, and did not cover State

and local governments). These interim

final conforming amendments update

these references. Additional conforming

changes were made to conform with the

1996 Act and revised Circular A–133

(e.g., to reflect that, under the 1996 Act,

all non-profit hospitals are now subject

to the Act).

OMB has determined, under 5 U.S.C.

553(b)(B), that good cause exists to issue

these conforming amendments on an

interim final basis. The conforming

amendments update the references to

the applicable statute and circulars, by

replacing the superseded references

with current ones. Moreover, under the

Single Audit Act Amendments of 1996,

the provisions of the 1996 Act (which

are reflected in the revised OMB

Circular A–133) provide standards that

are effective for audits of fiscal years

beginning after June 30, 1996.

Accordingly, OMB has determined that

issuing a proposal for comment on these

conforming amendments would be

‘‘impractical, unnecessary, and contrary

to the public interest.’’

Availability of Revised Circulars

OMB has prepared updated versions

of the five circulars, as amended herein.

The revised OMB Circulars A–21, A–87,

A–102, A–110, and A–122, as amended

herein, are available electronically on

the OMB Home Page at http://

www.whitehouse.gov/WH/EOP/omb.

These revised Circulars, as amended

herein, are also available in paper

format by contacting the OMB

Publications Office at (202) 395–7332.

Joseph J. Minarik,

Acting Director.

1. OMB hereby amends Circulars A–

21, A–87, A–102, A–110, and A–122 by

adding the three paragraphs that follow,

regarding ‘‘Conditional exemptions,’’ at

the specified places in each Circular: (1)

as a new paragraph d under A.3 Purpose

and Scope, Application of Circular A–

21; (2) as a new paragraph e under

Attachment A, A.3 Purpose and Scope,

Application of Circular A–87; (3) as a

new paragraph j under Section 2, Postaward Policies of Circular A–102; (4) as

a new Section ll.29 under Subpart C,

Post-award Requirements of Circular A–

110; and, (5) as a new paragraph 7 under

Attachment A, A. Basic Considerations

of Circular A–122:

Conditional exemptions. (1) OMB

authorizes conditional exemption from

OMB administrative requirements and

cost principles circulars for certain

Federal programs with statutorilyauthorized consolidated planning and

consolidated administrative funding,

that are identified by a Federal agency

and approved by the head of the

Executive department or establishment.

A Federal agency shall consult with

OMB during its consideration of

whether to grant such an exemption.

(2) To promote efficiency in State and

local program administration, when

Federal non-entitlement programs with

common purposes have specific

statutorily-authorized consolidated

planning and consolidated

administrative funding and where most

of the State agency’s resources come

from non-Federal sources, Federal

agencies may exempt these covered

State-administered, non-entitlement

grant programs from certain OMB grants

management requirements. The

exemptions would be from all but the

allocability of costs provisions of OMB

Circulars A–87 (Attachment A,

subsection C.3), ‘‘Cost Principles for

State, Local, and Indian Tribal

Governments,’’ A–21 (Section C, subpart

4), ‘‘Cost Principles for Educational
45936 Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 / Notices

Institutions,’’ and A–122 (Attachment

A, subsection A.4), ‘‘Cost Principles for

Non-Profit Organizations,’’ and from all

of the administrative requirements

provisions of OMB Circular A–110,

‘‘Uniform Administrative Requirements

for Grants and Agreements with

Institutions of Higher Education,

Hospitals, and Other Non-Profit

Organizations,’’ and the agencies’ grants

management common rule.

(3) When a Federal agency provides

this flexibility, as a prerequisite to a

State’s exercising this option, a State

must adopt its own written fiscal and

administrative requirements for

expending and accounting for all funds,

which are consistent with the

provisions of OMB Circular A–87, and

extend such policies to all

subrecipients. These fiscal and

administrative requirements must be

sufficiently specific to ensure that:

funds are used in compliance with all

applicable Federal statutory and

regulatory provisions, costs are

reasonable and necessary for operating

these programs, and funds are not be

used for general expenses required to

carry out other responsibilities of a State

or its subrecipients.

2. OMB hereby amends paragraphs

(a), (b) and (c) of Section ll.26 of

OMB Circular A–110 to read as follows:

ll.26 Non-Federal audits.

(a) Recipients and subrecipients that

are institutions of higher education or

other non-profit organizations

(including hospitals) shall be subject to

the audit requirements contained in the

Single Audit Act Amendments of 1996

(31 U.S.C. 7501–7507) and revised OMB

Circular A–133, ‘‘Audits of States, Local

Governments, and Non-Profit

Organizations.’’

(b) State and local governments shall

be subject to the audit requirements

contained in the Single Audit Act

Amendments of 1996 (31 U.S.C. 7501–

7507) and revised OMB Circular A–133,

‘‘Audits of States, Local Governments,

and Non-Profit Organizations.’’

(c) For-profit hospitals not covered by

the audit provisions of revised OMB

Circular A–133 shall be subject to the

audit requirements of the Federal

awarding agencies.

[FR Doc. 97–22828 Filed 8–28–97; 8:45 am]

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