[Federal Register Volume 60, Number 65 (Wednesday, April 5, 1995)]
[Rules and Regulations]
[Pages 17237-17253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8175]



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DEPARTMENT OF THE INTERIOR

Office of the Secretary

43 CFR Part 12

RIN 1090-AA42


Uniform Administrative Requirements for Grants and Agreements 
With Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations

AGENCY: Office of the Secretary, Interior.

ACTION: Final rule.

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SUMMARY: This action finalizes an interim final rule the Department 
published in response to the publication by the Office of Management 
and Budget (OMB) of revised OMB Circular A-110, ``Uniform 
Administrative Requirements for Grants and Agreements With Institutions 
of Higher Education, Hospitals, and Other Non-Profit Organizations.''
    Agencies were required to adopt those standards which would be 
imposed on grantees in codified regulations within six months after 
publication in the Federal Register.
    Over 200 comments were received by OMB from Federal agencies, non-
profit organizations, professional organizations, and others in 
response to the notice published on August 27, 1992, (57 FR 39018) 
requesting comments on proposed revisions. The comments were considered 
in developing the final version. Consequently, the Department published 
an interim final rule because of the previous request for comment 
process used in the development of the Circular, the large number of 
comments already received and considered by OMB and the Federal 
agencies, and due to the limited flexibility to revise the rule 
provided by OMB.

EFFECTIVE DATE: May 5, 1995.

FOR FURTHER INFORMATION CONTACT:
Dean A. Titcomb, (Chief, Acquisition and Assistance Division), (202) 
208-6432.

SUPPLEMENTARY INFORMATION: OMB Circular A-110 (58 FR 62991) covers both 
grants made by Federal agencies and subgrants made by States to 
nongovernmental organizations.
    Following the August 26, 1994, publication in the Federal Register 
(59 FR 44040), no public comments were received by the Department.
    This final rule essentially adopts all the language in the Circular 
with two exceptions. At Section 12.904, language has been added to 
describe the procedure for handling requests for [[Page 17238]] class 
deviations and case-by-case exceptions. At Section 12.915, the 
Department is revising the provision concerning use of the metric 
system of measurement. This revision indicates that the system should 
be used to the maximum extent possible and that both metric and inch-
pound units (dual units) may be used if necessary during any 
transaction period(s).
    The reference to the small purchase threshold currently being 
$25,000 in section 12.944(e)(2) has been changed to $100,000. This 
change is based on a provision of the Federal Acquisition Streamlining 
Act of 1994.
    The Circular inadvertently misstates the applicability of the 
statute commonly known as the Byrd Anti-Lobbying Amendment, 31 U.S.C. 
1352. The statute applies to organizations which apply or bid for an 
award exceeding $100,000, not $100,000 or more. We have made this 
correction in Appendix A.
    Two other changes have been made to Appendix A because of recent 
changes brought about by the Federal Acquisition Streamlining Act of 
1994. The threshold for the requirement to include a provision for 
compliance with the Copeland ``Anti-Kickback Act'' (18 U.S.C. 874) was 
raised from $2,000 to $100,000.
    The threshold for the requirement to include the provision for 
compliance with sections 102 and 107 of the Contract Work Hours and 
Safety Standards Act (40 U.S.C. 327-333) was raised to $100,000.
    Other minor editorial changes are being made to conform with 
language in the Circular.
    The Department is amending 43 CFR part 12, by revising subpart F to 
implement these requirements.

Executive Order 12866, Paperwork Reduction Act, and Regulatory 
Flexibility Act

    This final rule was not subject to Office of Management and Budget 
review under Executive Order 12866.
    The Department has determined that this rule will not have a 
significant economic impact on a substantial number of small entities 
because it does not affect the amount of funds provided in the covered 
programs, but rather modifies and updates administrative and procedural 
requirements. This final rule does not contain a collection of 
information subject to the Paperwork Reduction Act of 1980 (44 U.S.C. 
3501 et seq.).

Environmental Effects

    The Department has determined that this rule does not constitute a 
major Federal action having a significant impact on the human 
environment under the National Environmental Policy Act of 1969.

Executive Order No. 12778

    The Department has certified to the Office of Management and Budget 
that this proposed rule meets the applicable standards provided in 
Sections 2(a) and 2(b)(2) of Executive Order 12778.

List of Subjects in 43 CFR Part 12

    Cooperative agreements, Grants administration, Grant program.

    Dated: March 15, 1995.
Bonnie R. Cohen,
Assistant Secretary-Policy, Management and Budget.

    For the reasons set forth in the preamble, Title 43, part 12 of the 
Code of Federal Regulations is amended as set forth below:

PART 12--ADMINISTRATIVE AND AUDIT REQUIREMENTS AND COST PRINCIPLES 
FOR ASSISTANCE PROGRAMS

    1. The authority citation for part 12 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 31 U.S.C. 6101 note, 7501; 41 U.S.C. 
252a, 701 et seq.; sec. 307, Pub. L. 103-332, 108 Stat. 2499; sec. 
501, Pub. L. 103-316, 108 Stat. 1723; E.O. 12549, 3 CFR, 1986 Comp., 
p. 189; E.O. 12674, 3 CFR, 1989 Comp., p. 215; E.O. 12731, 3 CFR, 
1990 Comp., p. 306; OMB Circular A-102; OMB Circular A-110; OMB 
Circular A-128; and OMB Circular A-133.

    2. Part 12 is amended by revising subpart F to read as follows:

Subpart F--Uniform Administrative Requirements for Grants and 
Agreements With Institutions of Higher Education, Hospitals, and 
Other Non-Profit Organizations

General

Sec.
12.901  Purpose.
12.902  Definitions.
12.903  Effect on other issuances.
12.904  Deviations.
12.905  Subawards.

Pre-Award Requirements

12.910  Purpose.
12.911  Pre-award policies.
12.912  Forms for applying for Federal assistance.
12.913 Debarment and suspension.
12.914 Special award conditions.
12.915 Metric system of measurement.
12.916 Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-580 
codified at 42 U.S.C. 6962).
12.917 Certifications and representations.

Post-Award Requirements

Financial and Program Management

12.920 Purpose of financial and program management.
12.921 Standards for financial management systems.
12.922 Payment.
12.923 Cost sharing or matching.
12.924 Program income.
12.925 Revision of budget and program plans.
12.926 Non-Federal audits.
12.927 Allowable costs.
12.928 Period of availability of funds.

Property Standards

12.930 Purpose of property standards.
12.931 Insurance coverage.
12.932 Real property.
12.933 Federally-owned and exempt property.
12.934 Equipment.
12.935 Supplies and other expendable property.
12.936 Intangible property.
12.937 Property trust relationship.

Procurement Standards

12.940 Purpose of procurement standards.
12.941 Recipient responsibilities.
12.942 Codes of conduct.
12.943 Competition.
12.944 Procurement procedures.
12.945 Cost and price analysis.
12.946 Procurement records.
12.947 Contract administration.
12.948 Contract provisions.

Reports and Records

12.950 Purpose of reports and records.
12.951 Monitoring and reporting program performance.
12.952 Financial reporting.
12.953 Retention and access requirements for records.

Termination and Enforcement

12.960 Purpose of termination and enforcement.
12.961 Termination.
12.962 Enforcement.

After-the-Award Requirements

12.970 Purpose.
12.971 Closeout procedures.
12.972 Subsequent adjustments and continuing responsibilities.
12.973 Collection of amounts due.

Appendix A to Subpart F--Contract Provisions

General


Sec. 12.901  Purpose.

    This subpart establishes uniform administrative requirements for 
Federal grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations.


Sec. 12.902  Definitions.

    Accrued expenditures means the charges incurred by the recipient 
during a given period requiring the provision of funds 
for: [[Page 17239]] 
    (1) goods and other tangible property received;
    (2) services performed by employees, contractors, subrecipients, 
and other payees; and,
    (3) other amounts becoming owed under programs for which no current 
services or performance is required.
    Accrued income means the sum of:
    (1) earnings during a given period from:
    (i) services performed by the recipient, and
    (ii) goods and other tangible property delivered to purchasers, and
    (2) amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    Acquisition cost of equipment means the net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such 
as the cost of installation, transportation, taxes, duty or protective 
in-transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    Advance means a payment made by Treasury check or other appropriate 
payment mechanism to a recipient upon its request either before outlays 
are made by the recipient or through the use of predetermined payment 
schedules.
    Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants and 
other agreements in the form of money or property in lieu of money, by 
the Federal Government to an eligible recipient. The term does not 
include: technical assistance, which provides services instead of 
money; other assistance in the form of loans, loan guarantees, interest 
subsidies, or insurance; direct payments of any kind to individuals; 
and, contracts which are required to be entered into and administered 
under procurement laws and regulations.
    Cash contributions means the recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout means the process by which a Federal agency determines 
that all applicable administrative actions and all required work of the 
award have been completed by the recipient and Federal awarding agency.
    Contract means a procurement contract under an award or subaward, 
and a procurement subcontract under a recipient's or subrecipient's 
contract.
    Cost sharing or matching means that portion of project or program 
costs not borne by the Federal Government.
    Date of completion means the date on which all work under an award 
is completed or the date on the award document, or any supplement or 
amendment thereto, on which Federal sponsorship ends.
    Disallowed costs means those charges to an award that the Federal 
awarding agency determines to be unallowable, in accordance with the 
applicable Federal cost principles or other terms and conditions 
contained in the award.
    Equipment means tangible nonexpendable personal property including 
exempt property charged directly to the award having a useful life of 
more than one year and an acquisition cost of $5,000 or more per unit. 
However, consistent with recipient policy, lower limits may be 
established.
    Excess property means property under the control of any Federal 
awarding agency that, as determined by the Secretary, is no longer 
required for its needs or the discharge of its responsibilities.
    Exempt property means tangible personal property acquired in whole 
or in part with Federal funds, where the Federal awarding agency has 
statutory authority to vest title in the recipient without further 
obligation to the Federal Government. An example of exempt property 
authority is contained in the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6306), for property acquired under an award to conduct 
basic or applied research by a non-profit institution of higher 
education or non-profit organization whose principal purpose is 
conducting scientific research.
    Federal funds authorized means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount may include any authorized carryover of unobligated funds from 
prior funding periods when permitted by agency regulations or agency 
implementing instructions.
    Federal share of real property, equipment, or supplies means that 
percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    Intangible property and debt instruments means, but is not limited 
to, trademarks, copyrights, patents and patent applications and such 
property as loans, notes and other debt instruments, lease agreements, 
stock and other instruments of property ownership, whether considered 
tangible or intangible.
    Obligations means the amounts of orders placed, contracts and 
grants awarded, services received and similar transactions during a 
given period that require payment by the recipient during the same or a 
future period.
    Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applied and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of: cash 
disbursements for direct charges for goods and services; the amount of 
indirect expense incurred; the value of in-kind contributions applied; 
and the net increase (or decrease) in the amounts owed by the recipient 
for goods and other property received, for services performed by 
employees, contractors, subrecipients and other payees and other 
amounts becoming owed under programs for which no current services or 
performance are required.
    Personal property means property of any kind except real property. 
It may be tangible, having physical existence, or intangible, having no 
physical existence, such as copyrights, patents, or securities.
    Prior approval means written approval by an authorized official 
evidencing prior consent.
    Program income means gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award (see exclusions in Sec. 12.924 (e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired 
under federally-funded projects, the sale of commodities or items 
fabricated under an award, license fees and royalties on patients and 
copyrights, and interest on loans made with award funds. Interest 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in Federal awarding agency regulations or the terms 
and conditions of the award, program income does not include the 
receipt of principal on loans, rebates, credits, discounts, etc., or 
interest earned on any of them.
    Project costs means all allowable costs, as set forth in the 
applicable Federal cost principles, incurred by a 
[[Page 17240]] recipient and the value of the contributions made by 
third parties in accomplishing the objectives of the award during the 
project period.
    Project period means the period established in the award document 
during which Federal sponsorship begins and ends.
    Property means, unless otherwise stated, real property, equipment, 
supplies, intangible property and debt instruments.
    Real property means land, including land improvements, structures 
and appurtenances thereto, but excludes movable machinery and 
equipment.
    Recipient means an organization receiving financial assistance 
directly from Federal awarding agencies to carry out a project or 
program. The term includes public and private institutions of higher 
education, public and private hospitals, and other quasi-public and 
private non-profit organizations such as, but not limited to, community 
action agencies, research institutes, educational associations, and 
health centers. The term may include, at the discretion of the Federal 
awarding agency, foreign or international organizations (such as 
agencies of the United Nations) which are recipients, subrecipients, or 
contractors or subcontractors of recipients or subrecipients. The term 
does not include government-owned contractor-operated facilities or 
research centers providing continued support for mission-oriented, 
large-scale programs that are government-owned or controlled, or are 
designated as federally-funded research and development centers.
    Research and development means all research activities, both basic 
and applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions.
    (1) Research is defined as a systematic study directed toward 
fuller scientific knowledge or understanding of the subject studied.
    (2) Development is the systematic use of knowledge and 
understanding gained from research directed toward the production of 
useful materials, devices, systems, or methods, including design and 
development of prototypes and processes. The term research also 
includes activities involving the training of individuals in research 
techniques where such activities utilize the same facilities as other 
research and development activities and where such activities are not 
included in the instruction function.
    Small awards means a grant or cooperative agreement not exceeding 
the small purchase threshold fixed at 41 U.S.C. 403(11) (currently 
$100,000).
    Subaward means an award of financial assistance in the form of 
money, or property in lieu of money, made under an award by a recipient 
to an eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' in this section.
    Subrecipient means the legal entity to which a subaward is made and 
which is accountable to the recipient for the use of the funds 
provided. The term may include foreign or international organizations 
(such as agencies of the United Nations) at the discretion of the 
Federal awarding agency.
    Supplies means all personal property excluding equipment, 
intangible property, and debt instruments as defined in this section, 
and inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement 
(``subject inventions''), as defined in 37 CFR part 401, ``Rights to 
Inventions Made by Nonprofit Organizations and Small Business Firms 
Under Government Grants, Contracts, and Cooperative Agreements.''
    Suspension means an action by a Federal awarding agency that 
temporarily withdraws Federal sponsorship under an award, pending 
corrective action by the recipient or pending a decision to terminate 
the award by the Federal awarding agency. Suspension of an award is a 
separate action from suspension under the Department of the Interior 
Regulations implementing E.O.'s 12549 and 12689, ``Debarment and 
Suspension.'' See subpart D of 43 CFR part 12.
    Termination means the cancellation of Federal sponsorship, in whole 
or in part, under an agreement at any time prior to the date of 
completion.
    Third party in-kind contributions means the value of noncash 
contributions provided by non-Federal third parties. Third party in-
kind contributions may be in the form of real property, equipment, 
supplies and other expendable property, and the value of goods and 
services directly benefiting and specifically identifiable to the 
project or program.
    Unliquidated obligations, for financial reports prepared on a cash 
basis, means the amount of obligations incurred by the recipient that 
have not been paid. For reports prepared on an accrued expenditure 
basis, they represent the amount of obligations incurred by the 
recipient for which an outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by 
Federal awarding agency that has not been obligated by the recipient 
and is determined by deducting the cumulative obligations from the 
cumulative funds authorized.
    Unrecovered indirect cost means the difference between the amount 
awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    Working capital advance means a procedure whereby funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.


Sec. 12.903  Effect on other issuances.

    For awards subject to this subpart, all administrative requirements 
of codified program regulations, program manuals, handbooks and other 
nonregulatory materials which are inconsistent with the requirements of 
this subpart shall be superseded, except to the extent they are 
required by statute, or authorized in accordance with the deviations 
provision in Section 12.904.


Sec. 12.904  Deviations.

    The Office of Management and Budget (OMB) may grant exceptions for 
classes of grants or recipients subject to the requirements of this 
subpart when exceptions are not prohibited by statute. However, in the 
interest of maximum uniformity, exceptions from the requirements of 
this subpart shall be permitted only in unusual circumstances. Federal 
awarding agencies may apply more restrictive requirements to a class of 
recipients when approved by OMB. All requests for class deviations 
shall be processed through the Assistant Secretary-Policy, Management, 
and Budget. Federal awarding agencies may apply less restrictive 
requirements when awarding small awards, except for those requirements 
which are statutory. Exceptions on a case-by-case basis may also be 
made by Federal awarding agencies. Bureau/office application of less 
restrictive requirements when awarding small awards, except for those 
requirements which are statutory, as well as exceptions on a case-by-
case basis, will be handled by designated officials identified in 
bureau/office procedures.


Sec. 12.905  Subawards.

    Unless sections of this subpart specifically exclude subrecipients 
from [[Page 17241]] coverage, the provisions of this subpart shall be 
applied to subrecipients performing work under awards if such 
subrecipients are institutions of higher education, hospitals, or other 
non-profit organizations. State and local government subrecipients are 
subject to the provisions of regulations implementing the grants 
management common rule, ``Uniform Administrative Requirements for 
Grants and Cooperative Agreements to State and Local Governments,'' 43 
CFR part 12.

Pre-Award Requirements


Sec. 12.910  Purpose.

    Sections 12.011 through 12.917 prescribe forms and instructions and 
other pre-award matters to be used in applying for Federal awards.


Sec. 12.911  Pre-award policies.

    (a) Use of Grants and Cooperative Agreements, and Contracts. In 
each instance, the Federal awarding agency shall decide on the 
appropriate award instrument (i.e., grant, cooperative agreement, or 
contract). The Federal Grant and Cooperative Agreement Act (31 U.S.C. 
6301-6308) governs the use of grants, cooperative agreements and 
contracts. A grant or cooperative agreement shall be used only when the 
principal purpose of a transaction is to accomplish a public purpose of 
support or stimulation authorized by Federal statute. The statutory 
criterion for choosing between grants and cooperative agreements is 
that for the latter, ``substantial involvement is expected between the 
executive agency and the State, local government, or other recipient 
when carrying out the activity contemplated in the agreement.'' 
Contracts shall be used when the principal purpose is acquisition of 
property or services for the direct benefit or use of the Federal 
Government.
    (b) Public Notice and Priority Setting. Federal awarding agencies 
shall notify the public of their funding priorities for discretionary 
grant programs, unless funding priorities are established by Federal 
statute.


Sec. 12.912  Forms for applying for Federal assistance.

    (a) Federal awarding agencies shall comply with the applicable 
report clearance requirements of 5 CFR part 1320, ``Controlling 
Paperwork Burdens on the Public,'' with regard to all forms used by the 
Federal awarding agency in place of or as a supplement to the Standard 
Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by the Federal awarding agency.
    (c) For Federal programs covered by E.O. 12372, ``Intergovernmental 
Review of Federal Programs,'' the applicant shall complete the 
appropriate sections of the SF-424 (Application for Federal Assistance) 
indicating whether the application was subject to review by the State 
Single Point of Contact (SPOC). The name and address of the SPOC for a 
particular State can be obtained from the Federal awarding agency or 
the Catalog of Federal Domestic Assistance. The SPOC shall advise the 
applicant whether the program for which application is made has been 
selected by that State for review. (See also 43 CFR part 9).
    (d) Federal awarding agencies that do not use the SF-424 form will 
indicate whether the application is subject to review by the State 
under E.O. 12372.


Sec. 12.913  Debarment and suspension.

    Federal awarding agencies and recipients shall comply with the 
nonprocurement debarment and suspension common rule implementing E.O.s 
12549 and 12689, ``Debarment and Suspension,'' subpart D of 43 CFR part 
12. This common rule restricts subawards and contracts with certain 
parties that are debarred, suspended or otherwise excluded from or 
ineligible for participation in Federal assistance programs or 
activities.


Sec. 12.914  Special award conditions.

    (a) Federal awarding agencies may impose additional requirements as 
needed, if an applicant or recipient:
    (1) Has a history of poor performance;
    (2) Is not financially stable;
    (3) Has a management system that does not meet the standards 
prescribed in this part;
    (4) Has not conformed to the terms and conditions of a previous 
award; or
    (5) Is not otherwise responsible.
    (b) Additional requirements may only be imposed provided that the 
applicant or recipient is notified in writing as to:
    (1) The nature of the additional requirements;
    (2) The reason why the additional requirements are being imposed;
    (3) The nature of the corrective action needed;
    (4) The time allowed for completing the corrective actions; and
    (5) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any special conditions shall be promptly removed once the 
conditions that prompted them have been corrected.


Sec. 12.915  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce. The Act 
requires each Federal agency to establish a date or dates in 
consultation with the Secretary of Commerce when the metric system of 
measurement will be used in the agency's procurements, grants, and 
other business-related activities. Metric implementation may take 
longer where the use of the system is initially impractical or likely 
to cause significant inefficiencies in the accomplishment of federally-
funded activities. Federal awarding agencies will follow the provisions 
of E.O. 12770, ``Metric usage in Federal Government Programs.'' When 
applicable, the awarding agency shall request that measurement-
sensitive information to be included as part of the application, be 
expressed in metric units. When required by the awarding agency, for 
grants to recipients, the following term and condition will be 
incorporated into the grant:

Provision

    All progress and final reports, other reports, or
    All progress and final reports, other reports, or publications 
produced under this award shall employ the metric system of 
measurements to the maximum extent practicable. Both metric and 
inch-pound units (dual units) may be used if necessary during any 
transition period(s). However, the recipient may use non-metric 
measurements to the extent that the recipient has supporting 
documentation that the use of metric measurements is impracticable 
or is likely to cause significant inefficiencies or loss of markets 
to the recipient, such as when foreign competitors are producing 
competing products in non-metric units.

End of Provision


Sec. 12.916  Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-
580 codified at 42 U.S.C. 6962).

    Under the Act, any State agency or agency of a political 
subdivision of a State that is using appropriated Federal funds must 
comply with section 6002 of RCRA. Section 6002 of RCRA requires that 
preference be given in procurement programs to the purchase of specific 
products containing recycled materials identified in guidelines 
developed by the Environmental Protection Agency (EPA) (40 CFR parts 
247-254). Accordingly, State and local institutions of higher education 
and hospitals that receive direct Federal awards or other Federal funds 
shall give preference in their procurement programs funded with Federal 
funds to the purchase of [[Page 17242]] recycled products pursuant to 
the EPA guidelines.


Sec. 12.917  Certifications and representations.

    Unless prohibited by statute or codified regulation, each Federal 
awarding agency is authorized and encouraged to allow recipients to 
submit certifications and representations required by statute, 
executive order, or regulation on an annual basis, if the recipients 
have ongoing and continuing relationships with the agency. Annual 
certifications and representations shall be signed by responsible 
officials with the authority to ensure recipients' compliance with the 
pertinent requirements.

Post-Award Requirements

Financial and Program Management


Sec. 12.920  Purpose of financial and program management.

    Sections 12.921 through 12.928 prescribe standards for financial 
management systems, methods for making payments and rules for: 
satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.


Sec. 12.921  Standards for financial management systems.

    (a) Federal awarding agencies shall require recipients to relate 
financial data to performance data and develop unit cost information 
whenever practical.
    (b) Recipients' financial management systems shall provide for the 
following:
    (1) Accurate, current and complete disclosure of the financial 
results of each federally-sponsored project or program in accordance 
with the reporting requirements set forth in Sec. 12.952. If a Federal 
awarding agency requires reporting on an accrual basis from a recipient 
that maintains its records on other than an accrual basis, the 
recipient shall not be required to establish an accrual accounting 
system. These recipients may develop such accrual data for their 
reports on the basis of an analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to Federal awards, authorizations, obligations, 
unobligated balances, assets, outlays, income and interest.
    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients shall adequately safeguard all 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information should be related to 
performance and unit cost data.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient. To the extent that the 
provisions of the Cash Management Improvement Act (CMIA) (31 U.S.C. 
6501 note) govern, payment methods of State agencies, 
instrumentalities, and fiscal agents shall be consistent with CMIA 
Treasury-State Agreements or the CMIA default procedures codified at 31 
CFR part 205, ``Withdrawal of Cash from the Treasury for Advances under 
Federal Grant and Other Programs.''
    (6) Written procedures for determining the reasonableness, 
allocability and allowability of costs in accordance with the 
provisions of the applicable Federal cost principles and the terms and 
conditions of the award.
    (7) Accounting records, including cost accounting records, that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, the Federal awarding 
agency, at its discretion, may require adequate bonding and insurance 
if the bonding and insurance requirements of the recipient are not 
deemed adequate to protect the interest of the Federal Government.
    (d) The Federal awarding agency may require adequate fidelity bond 
coverage where the recipient lacks sufficient coverage to protect the 
Federal Government's interest.
    (e) Where bonds are required in the situations described above in 
Sec. 12.921 (c) and (d), the bonds shall be obtained from companies 
holding certificates of authority as acceptable sureties, as prescribed 
in 31 CFR part 223, ``Surety Companies Doing Business with the United 
States.''


Sec. 12.922  Payment.

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities 
shall be consistent with Treasury-State CMIA agreements or default 
procedures codified at 31 CFR part 205.
    (b) Recipients are to be paid in advance, provided they maintain or 
demonstrate the willingness to maintain or demonstrate written 
procedures that minimize the time elapsing between the transfer of 
funds and disbursement by the recipient, and financial management 
systems that meet the standards for fund control and accountability as 
established in Sec. 12.921. Cash advances to a recipient organization 
shall be limited to the minimum amounts needed and be timed to be in 
accordance with the actual, immediate cash requirements of the 
recipient organization in carrying out the purposes of the approved 
program or project. The timing and amount of cash advances shall be as 
close as is administratively feasible to the actual disbursements by 
the recipient organization for direct program or project costs and the 
proportionate share of any allowable indirect costs.
    (c) Whenever possible, advances will be consolidated to cover 
anticipated cash needs for all awards made by the Federal awarding 
agency to the recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients shall be authorized to submit requests for advances 
and reimbursements at least monthly when electronic fund transfers are 
not used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270, ``Request for Advance or Reimbursement,'' or other forms as 
may be authorized by OMB. This form is not to be used when Treasury 
check advance payments are made to the recipient automatically through 
the use of a predetermined payment schedule or if precluded by special 
Federal awarding agency instructions for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. Federal awarding agencies 
may also use this method on any construction agreement, or if the major 
portion of the construction project is accomplished through private 
market financing or Federal loans, and the Federal assistance 
constitutes a minor portion of the project.
    (1) When the reimbursement method is used, the Federal awarding 
agency shall make payment within 30 days after receipt of the billing, 
unless the billing is improper. [[Page 17243]] 
    (2) Recipients shall be authorized to submit a request for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments 
and the Federal awarding agency has determined that reimbursement is 
not feasible because the recipient lacks sufficient working capital, 
the Federal awarding agency may provide cash on a working capital 
advance basis. Under this procedure, the Federal awarding agency shall 
advance cash to the recipient to cover its estimated disbursement needs 
for an initial period generally geared to the awardee's disbursing 
cycle. Thereafter, the Federal awarding agency shall reimburse the 
recipient for its actual cash disbursements. The working capital 
advance method of payment shall not be used for recipients unwilling or 
unable to provide timely advances to their subrecipient to meet the 
subrecipient's actual cash disbursements.
    (g) To the extent available, recipients shall disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit 
recoveries and interest earned on such funds before requesting 
additional cash payments.
    (h) Unless otherwise required by statute, Federal awarding agencies 
shall not withhold payments for proper charges made by recipients at 
any time during the project period unless paragraph (h)(1) or (h)(2) of 
this section apply:
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements; or
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States as defined in OMB Circular A-129, ``Managing Federal 
Credit Programs.'' Under such conditions, the Federal awarding agency 
may, upon reasonable notice, inform the recipient that payments shall 
not be made for obligations incurred after a specified date until the 
conditions are corrected or the indebtedness to the Federal Government 
is liquidated.
    (i) Standards governing the use of banks and other institutions as 
depositories of funds advanced under awards are as follows.
    (1) Except for situations described in paragraph (i)(2) of this 
section, Federal awarding agencies shall not require separate 
depository accounts for funds provided to a recipient or establish any 
eligibility requirements for depositories for funds provided to a 
recipient. However, recipients must be able to account for the receipt, 
obligation and expenditure of funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.
    (j) Consistent with the national goal of expanding opportunities 
for women-owned and minority-owned business enterprises, recipients are 
encouraged to use women-owned and minority-owned banks (a bank which is 
owned at least 50 percent by women or minority group members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless paragraph (k)(1), (2) or (3) apply:
    (1) The recipient receives less than $120,000 in Federal awards per 
year.
    (2) The best reasonably available interest bearing account would 
not be expected to earn interest in excess of $250 per year on Federal 
cash balances.
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) For those entities where CMIA and its implementing regulations 
do not apply, interest earned on Federal advances deposited in interest 
bearing accounts shall be remitted annually to Department of Health and 
Human Services, Payment Management System, P.O. Box 6021, Rockville, MD 
20852. Interest amounts up to $250 per year may be retained by the 
recipient for administrative expense. In keeping with Electronic Funds 
Transfer rules, (31 CFR part 206), interest should be remitted to the 
HHS Payment Management System through an electronic medium such as the 
FEDWIRE Deposit system. Recipients which do not have this capability 
should use a check. State universities and hospitals shall comply with 
CMIA, as it pertains to interest. If an entity subject to CMIA uses its 
own funds to pay pre-award costs for discretionary awards without prior 
written approval from the Federal awarding agency, it waives its right 
to recover the interest under CMIA.
    (m) Except as noted elsewhere in this subpart, only the following 
forms shall be authorized for the recipients in requesting advances and 
reimbursements. Federal agencies shall not require more than an 
original and two copies of these forms.
    (1) SF-270, Request for Advance or Reimbursement. Each Federal 
awarding agency shall adopt the SF-270 as a standard form for all 
nonconstruction programs where electronic funds transfer or 
predetermined advance methods are not used. Federal awarding agencies, 
however, have the option of using this form for construction programs 
in lieu of the SF-271, ``Outlay Report and Request for Reimbursement 
for Construction Programs.''
    (2) SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs. Each Federal awarding agency shall adopt the SF-
271 as the standard form to be used for requesting reimbursement for 
construction programs. However, a Federal awarding agency may 
substitute the SF-270 when the Federal awarding agency determines that 
it provides adequate information to meet Federal needs.


Sec. 12.923  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, 
shall be accepted as part of the recipient's cost sharing or matching 
when such contributions meet all of the following criteria:
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable cost principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are provided for in the approved budget when required by the 
Federal awarding agency.
    (7) Conform to other provisions of this subpart, as applicable.
    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching only with the prior approval of the Federal 
awarding agency.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If a Federal awarding agency authorizes recipients to donate buildings 
or land for construction/facilities acquisition projects or long-term 
use, the value of the donated property for cost sharing or matching 
shall be the lesser of paragraph (c) (1) or (2) of this section:
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation.
    (2) the current fair market value. However, when there is 
sufficient justification, the Federal awarding agency may approve the 
use of the current fair market value of the donated 
[[Page 17244]] property, even if it exceeds the certified value at the 
time of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel, consultants, and other skilled and unskilled labor may be 
counted as cost sharing or matching if the service is an integral and 
necessary part of an approved project or program. Rates for volunteer 
services shall be consistent with those paid for similar work in the 
recipient's organization. In those instances in which the required 
skills are not found in the recipient organization, rates shall be 
consistent with those paid for similar work in the labor market in 
which the recipient competes for the kind of services involved. In 
either case, paid fringe benefits that are reasonable, allowable, and 
allocable may be included in the valuation.
    (e) When an employer other than the recipient furnishes the 
services of an employee, these services shall be valued at the 
employee's regular rate of pay (plus an amount of fringe benefits that 
are reasonable, allowable, and allocable, but exclusive of overhead 
costs), provided these services are in the same skill for which the 
employee is normally paid.
    (f) Donated supplies may include such items as expendable 
equipment, office supplies, laboratory supplies or workshop and 
classroom supplies. Value assessed to donated supplies included in the 
cost sharing or matching share shall be reasonable and shall not exceed 
the fair market value of the property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings and land for which title passes to the 
recipient may differ according to the purpose of the award, if 
paragraph (g) (1) or (2) of this section apply:
    (1) If the purpose of the award is to assist the recipient to 
acquire equipment, buildings, or land, the total value of the donated 
property may be claimed as cost sharing or matching.
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the Federal 
awarding agency has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall not exceed their 
fair market value at the time of donation to the recipient as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient.
    (2) The value of donated equipment shall not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (i) The following requirements pertain to the recipient's 
supporting records for in-kind contributions from third parties.
    (1) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (2) The basis for determining the valuation for personal service, 
material, equipment, buildings and land shall be documented.


Sec. 12.924  Program income.

    (a) Federal awarding agencies shall apply the standards set forth 
in this section in requiring recipient organizations to account for 
program income related to projects financed in whole or in part with 
Federal funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period shall be retained by the 
recipient and, in accordance with Federal awarding agency regulations 
or the terms and conditions of the award, shall be used in one or more 
of the following ways:
    (1) added to funds committed to the project or program by the 
Federal awarding agency and recipient and used to further eligible 
project or program objectives;
    (2) used to finance the non-Federal share of the project or 
program; or
    (3) deducted from the total project or program allowable cost in 
determining the net allowable costs upon which the Federal share of 
costs is based.
    (c) When an agency authorizes the disposition of program income as 
described in paragraph (b)(1) or (b)(2) of this section, program income 
in excess of any limits stipulated shall be used in accordance with 
paragraph (b)(3) of this section.
    (d) If the Federal awarding agency does not specify in its 
regulations or the terms and conditions of the award how program income 
is to be used, paragraph (b)(3) of this section shall apply 
automatically to all projects or programs except research. For awards 
that support research, paragraph (b)(1) of this section shall apply 
automatically unless the awarding agency indicates in the terms and 
conditions another alternative on the award or the recipient is subject 
to special award conditions, as indicated in Sec. 12.914.
    (e) Unless Federal awarding agency regulations or the terms and 
conditions of the award provide otherwise, recipients shall have no 
obligation to the Federal Government regarding program income earned 
after the end of the project period.
    (f) If authorized by Federal awarding agency regulations or the 
terms and conditions of the award, costs incident to the generation of 
program income may be deducted from gross income to determine program 
income, provided these costs have not been charged to the award.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (See 
Secs. 12.930 through 12.937).
    (h) Unless Federal awarding agency regulations or the terms and 
conditions of the award provide otherwise, recipients shall have no 
obligation to the Federal Government with respect to program income 
earned from license fees and royalties for copyrighted material, 
patents, patent applications, trademarks, and inventions produced under 
an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply 
to inventions made under an experimental, developmental, or research 
award.


Sec. 12.925  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
Federal and non-Federal share, or only the Federal share, depending 
upon Federal awarding agency requirements. It shall be related to 
performance for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, recipients shall request prior 
approvals from Federal awarding agencies for one or more of the 
following program or budget related reasons:
    (1) Change in the scope or the objective of the project or program 
(even [[Page 17245]] if there is no associated budget revision 
requiring prior written approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (4) The need for additional Federal funding.
    (5) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa, if approval is required by 
the Federal awarding agency.
    (6) The inclusion, unless waived by the Federal awarding agency, of 
costs that require prior approval in accordance with OMB Circular A-21, 
``Cost Principles for Institutions of Higher Education,'' OMB Circular 
A-122, ``Cost Principles for Non-Profit Organizations,'' or 45 CFR part 
74, appendix E, ``Principles for Determining Costs Applicable to 
Research and Development under Grants and Contracts with Hospitals,'' 
or 48 CFR part 31, ``Contract Cost Principles and Procedures,'' as 
applicable.
    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) Unless described in the application and funded in the approved 
award, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment or general support services.
    (d) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (e) Except for requirements listed in paragraph (c)(1) and (c)(4) 
of this section, Federal awarding agencies are authorized, at their 
option, to waive cost-related and administrative prior written 
approvals required by this subpart and OMB Circulars A-21 and A-122. 
Such waivers may include authorizating recipients to do any one or more 
of the following:
    (1) Incur pre-award costs 90 calendar days prior to award or more 
than 90 calendar days with the prior approval of the Federal awarding 
agency. All pre-award costs are incurred at the recipient's risk (i.e., 
the Federal awarding agency is under no obligation to reimburse such 
costs if for any reason the recipient does not receive an award or if 
the award is less than anticipated and inadequate to cover such costs).
    (2) Initiate a one-time extension of the expiration date of the 
award of up to 12 months unless one or more of the following conditions 
apply. For one-time extensions, the recipient must notify the Federal 
awarding agency in writing, with the supporting reasons and revised 
expiration date, at least 10 days before the expiration date specified 
in the award. This one-time extension may not be exercised merely for 
the purpose of using unobligated balances. The conditions that prevent 
issuance of a one-time extension are:
    (i) the terms and conditions of award prohibit the extension;
    (ii) the extension requires additional Federal funds; or
    (iii) the extension involves any change in the approved objectives 
or scope of the project.
    (3) Carry forward unobligated balances to subsequent funding 
periods.
    (4) For awards that support research, unless the Federal awarding 
agency provides otherwise in the award or in the agency's regulations, 
the prior approval requirements described in paragraph (e)(1) through 
(3) of this section are automatically waived (i.e., recipients need not 
obtain such prior approvals) unless one of the conditions included in 
paragraph (e)(2) applies.
    (f) The Federal awarding agency may, at its option, restrict the 
transfer of funds among direct cost categories or programs, functions 
and activities for awards in which the Federal share of the project 
exceeds $100,000 and the cumulative amount of the transfer exceeds or 
is expected to exceed 10 percent of the total budget as last approved 
by the Federal awarding agency. No Federal awarding agency shall permit 
a transfer that would cause any Federal appropriation or part thereof 
to be used for purposes other than those consistent with the original 
intent of the appropriation.
    (g) No other changes to nonconstruction budgets, except for the 
changes described in paragraph (j) of this section, require prior 
approval.
    (h) For construction awards, recipients shall request prior written 
approval promptly from Federal awarding agencies for budget revisions 
whenever paragraph (h) (1), (2) or (3) of this section apply:
    (1) the revision results from changes in the scope or the objective 
of the project or program;
    (2) additional Federal funds are needed to complete the project; or
    (3) the recipient requests a revision that involves specific costs 
for which prior written approval requirements may be imposed under 
Sec. 12.927.
    (i) No other prior approval requirements for specific items will be 
imposed unless OMB approves a deviation.
    (j) When a Federal awarding agency makes an award that provides 
support for both construction and nonconstruction work, the Federal 
awarding agency may require the recipient to request prior approval 
before making any fund or budget transfers between the two types of 
work supported.
    (k) For both construction and nonconstruction awards, Federal 
awarding agencies shall require recipients to notify the Federal 
awarding agency in writing promptly whenever the amount of Federal 
authorized funds is expected to exceed the needs of the recipient for 
the project period by more than $5,000 or five percent of the Federal 
award, whichever is greater. This notification shall not be required if 
an application for additional funding is submitted for a continuation 
award.
    (l) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the 
Federal awarding agency indicates that a letter of request suffices.
    (m) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the Federal awarding agencies shall review the 
request and notify the recipient whether the budget revisions have been 
approved. If the revision is still under consideration at the end of 30 
calendar days, the Federal awarding agency shall inform the recipient 
in writing of the date when the recipient may expect the decision.


Sec. 12.926  Non-Federal audits.

    Certain recipients and subrecipients shall be subject to non-
Federal audits in accordance with the applicable directive from the 
table in this section.

------------------------------------------------------------------------
    Type of recipient                   Applicable directive            
------------------------------------------------------------------------
Institution of higher      OMB Circular A-133.                          
 education or other non-                                                
 profit organization.                                                   
State or local government  Single Audit Act 31 U.S.C. 7501-7507 and 43  
                            CFR part 12, subpart B.                     
Hospital.................  OMB Circular A-133 or audit requirements of  
                            the Federal awarding agency.                
------------------------------------------------------------------------


[[Page 17246]]

Sec. 12.927  Allowable costs.

    Federal awarding agencies shall determine allowable costs in 
accordance with the type of entity incurring the costs, using the 
appropriate directive from the table below.

------------------------------------------------------------------------
  Entity incurring costs                Applicable directive            
------------------------------------------------------------------------
State, local, or           OMB Circular A-87, Cost Principles for State 
 Federally recognized       and Local Governments.                      
 Indian Tribe.                                                          
Non-profit organization..  OMB Circular A-122, Cost Principles for Non- 
                            profit Organizations and 43 CFR 12.927(b).  
Institution of Higher      OMB Circular A-21, Cost Principles for       
 Education.                 Educational Institutions.                   
Hospital.................  45 CFR part 74, appendix E, Principles for   
                            Determining Costs Applicable to Research and
                            Development Under Grants and Contracts with 
                            Hospitals.                                  
Commercial organization    48 CFR part 31, Contract Principles and      
 or non-profit              Procedures or uniform cost accounting       
 organization listed in     standards that comply with cost principles  
 Attachment C of OMB        acceptable to the Federal agency.           
 Circular A-122.                                                        
------------------------------------------------------------------------

Sec. 12.928  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
grant only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by the Federal 
awarding agency.

Property Standards


Sec. 12.930  Purpose of property standards.

    Sections 12.931 through 12.937 set forth uniform standards 
governing management and disposition of property furnished by the 
Federal Government whose cost was charged to a project supported by a 
Federal award. Federal awarding agencies shall require recipients to 
observe these standards under awards and shall not impose additional 
requirements, unless specifically required by Federal statute. The 
recipient may use its own property management standards and procedures 
provided it observes the provisions of Secs. 12.931 through 12.937.


Sec. 12.931  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.


Sec. 12.932  Real property.

    Each Federal awarding agency shall prescribe requirements for 
recipients concerning the use and disposition of real property acquired 
in whole or in part under awards. Unless otherwise provided by statute, 
such requirements, at a minimum, shall contain the following.
    (a) Title to real property shall vest in the recipient subject to 
the condition that the recipient shall use the real property for the 
authorized purpose of the project as long as it is needed and shall not 
encumber the property without approval of the awarding agency.
    (b) The recipient shall obtain written approval by the Federal 
awarding agency for the use of real property in other federally-
sponsored projects when the recipient determines that the property is 
no longer needed for the purpose of the original project. Use in other 
projects shall be limited to those under federally-sponsored projects 
(i.e., awards) or programs that have purposes consistent with those 
authorized for support by the Department of the Interior.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient shall request 
disposition instructions from the Federal awarding agency or its 
successor. The Federal awarding agency will give one or more of the 
following disposition instructions:
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by the Federal awarding agency and pay the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project 
(after deducting actual and reasonable selling and fix-up expenses, if 
any, from the sales proceeds). When the recipient is authorized or 
required to sell the property, proper sales procedures shall be 
established that provide for competition to the extent practicable and 
result in the highest possible return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.


Sec. 12.933  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually to the Federal awarding agency an inventory listing of 
federally-owned property in their custody. Upon completion of the award 
or when the property is no longer needed, the recipient shall report 
the property to the Federal awarding agency for further utilization.
    (2) If the Federal awarding agency has no further need for the 
property, it shall be declared excess and reported to the General 
Services Administration, unless the Federal awarding agency has 
statutory authority to dispose of the property by alternative methods 
(e.g., the authority provided by the Federal Technology Transfer Act 
(15 U.S.C. 3710(I)) to donate research equipment to educational and 
non-profit organizations in accordance with E.O. 12821, ``Improving 
Mathematics and Science Education in Support of the National Education 
Goals.'') Appropriate instructions shall be issued to the recipient by 
the Federal awarding agency.
    (b) Exempt property. Exempt property. When statutory authority 
exists, the Federal awarding agency has the option to vest title to 
property acquired with Federal funds in the recipient without further 
obligation to the Federal Government and under conditions the Federal 
awarding agency considers appropriate. Such property is ``exempt 
property.'' Should a Federal awarding agency not establish conditions, 
title to exempt property upon acquisition shall vest in the recipient 
without further obligation to the Federal Government.


Sec. 12.934  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
shall vest [[Page 17247]] in the recipient, subject to conditions of 
this section.
    (b) The recipient shall not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.
    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds, and shall not 
encumber the property without approval of the Federal awarding agency. 
When no longer needed for the original project or program, the 
recipient shall use the equipment in connection with its other 
federally-sponsored activities, in the following order of priority:
    (1) Activities sponsored by the Federal awarding agency, then (2) 
Activities sponsored by other Federal agencies.
    (d) During the time that equipment is used on the project or 
program for which it was acquired, the recipient shall make it 
available for use on other projects or programs if such other use will 
not interfere with the work on the project or program for which the 
equipment was originally acquired. First preference for such other use 
shall be given to other projects or programs sponsored by the Federal 
awarding agency that financed the equipment; second preference shall be 
given to projects or programs sponsored by other Federal agencies. If 
the equipment is owned by the Federal Government, use on other 
activities not sponsored by the Federal Government shall be permissible 
if authorized by the Federal awarding agency. User charges shall be 
treated as program income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to 
the approval of the Federal awarding agency.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned equipment shall include 
all of the following.
    (1) Equipment records shall be maintained accurately and shall 
include the following information.
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient or the Federal 
Government.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
equipment furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and 
sales price or the method used to determine current fair market value 
where a recipient compensates the Federal awarding agency for its 
share.
    (2) Equipment owned by the Federal Government shall be identified 
to indicate Federal ownership.
    (3) A physical inventory of equipment shall be taken and the 
results reconciled with the equipment records at least once every two 
years. Any differences between quantities determined by the physical 
inspection and those shown in the accounting records shall be 
investigated to determine the causes of the difference. The recipient 
shall, in connection with the inventory, verify the existence, current 
utilization, and continued need for the equipment.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment. Any 
loss, damage, or theft of equipment shall be investigated and fully 
documented; if the equipment was owned by the Federal Government, the 
recipient shall promptly notify the Federal awarding agency.
    (5) Adequate maintenance procedures shall be implemented to keep 
the equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall be established which provide 
for competition to the extent practicable and result in the highest 
possible return.
    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards. For equipment with a current per unit fair market value of 
$5,000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the original Federal awarding 
agency or its successor. The amount of compensation shall be computed 
by applying the percentage of Federal participation in the cost of the 
original project or program to the current fair market value of the 
equipment. If the recipient has no need for the equipment, the 
recipient shall request disposition instructions from the Federal 
awarding agency. The Federal awarding agency shall determine whether 
the equipment can be used to meet the agency's requirements. If no 
requirement exists within that agency, the availability of the 
equipment shall be reported to the General Services Administration by 
the Federal awarding agency to determine whether a requirement for the 
equipment exists in other Federal agencies. The Federal awarding agency 
shall issue instructions to the recipient no later than 120 calendar 
days after the recipient's request and the following procedures shall 
govern:
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse the Federal awarding agency an 
amount computed by applying to the sales proceeds the percentage of 
Federal participation in the cost of the original project or program. 
However, the recipient shall be permitted to deduct and retain from the 
Federal share $500 or ten percent of the proceeds, whichever is less, 
for the recipient's selling and handling expenses.
    (2) If the recipient is instructed to ship the equipment elsewhere, 
the recipient shall be reimbursed by the Federal Government by an 
amount which is computed by applying the percentage of the recipient's 
participation in the cost of the original project or program to the 
current fair market value of the equipment, plus any reasonable 
shipping or interim storage costs incurred.
    (3) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient will be reimbursed by the Federal awarding 
agency for such costs incurred in its disposition.
    (h) The Federal awarding agency may reserve the right to transfer 
the title to the Federal Government or to a third party named by the 
Federal Government when the third party is otherwise eligible under 
existing statutes. The transfer shall be subject to the following 
standards.
    (1) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (2) The Federal awarding agency shall issue disposition 
instructions within 120 calendar days after receipt of a final 
inventory. The final inventory shall list all equipment acquired with 
Federal funds and federally-owned equipment. [[Page 17248]] If the 
Federal awarding agency fails to issue disposition instructions within 
the 120-calendar-day period, the recipient shall apply the standards of 
this section, as appropriate.
    (3) When the Federal awarding agency exercises its right to take 
title, the equipment shall be subject to the provisions for federally-
owned equipment.


Sec. 12.935  Supplies and other expendable property.

    (a) Title to supplies and other expendable property shall vest in 
the recipient upon acquisition. If there is a residual inventory of 
unused supplies exceeding $5,000 in total aggregate value upon 
termination or completion of the project or program and the supplies 
are not needed for any other federally-sponsored project or program, 
the recipient shall retain the supplies for use on non-Federal 
sponsored activities or sell them, but shall, in either case, 
compensate the Federal Government for its share. The amount of 
compensation shall be computed in the same manner as for equipment.
    (b) The recipient shall not use supplies acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute as long as the 
Federal Government retains an interest in the supplies.


Sec. 12.936  Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, 
under an award. The Federal awarding agency(ies) reserves a royalty-
free, nonexclusive and irrevocable right to reproduce, publish, or 
otherwise use the work for Federal purposes, and to authorize others to 
do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including government-wide regulations issued by 
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts and Cooperative Agreements.''
    (c) Unless waived by the Federal awarding agency, the Federal 
Government has the right to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use the data for Federal purposes.
    (d) Title to intangible property and debt instruments acquired 
under an award or subaward vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized 
purpose, and the recipient shall not encumber the property without 
approval of the Federal awarding agency. When no longer needed for the 
originally authorized purpose, disposition of the intangible property 
shall occur in accordance with the provisions of Sec. 12.934(g).


Sec. 12.937  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. Agencies may 
require recipients to record liens or other appropriate notices of 
record to indicate that personal or real property has been acquired or 
improved with Federal funds and that use and disposition conditions 
apply to the property.

Procurement Standard


Sec. 12.940  Purpose of procurement standards.


    Sections 12.941 through 12.948 set forth standards for use by 
recipients in establishing procedures for the procurement of supplies 
and other expendable property, equipment, real property and other 
services with Federal funds. These standards are furnished to ensure 
that such materials and services are obtained in an effective manner 
and in compliance with the provisions of applicable Federal statutes 
and executive orders. No additional procurement standards or 
requirements shall be imposed by the Federal awarding agencies upon 
recipients, unless specifically required by Federal statute or 
executive order or approved by OMB.


Sec. 12.941  Recipient responsibilities.

    The standards contained in this section do not relieve the 
recipient of the contractual responsibilities arising under its 
contract(s). The recipient is the responsible authority, without 
recourse to the Federal awarding agency, regarding the settlement and 
satisfaction of all contractual and administrative issues arising out 
of procurements entered into in support of an award or other agreement. 
This includes disputes, claims, protests of award, source evaluation or 
other matters of a contractual nature. Matters concerning violation of 
statute are to be referred to such Federal, State or local authority as 
may have proper jurisdiction.


Sec. 12.942  Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and 
administration of contracts. No employee, officer, or agent shall 
participate in the selection, award, or administration of a contract 
supported by Federal funds if a real or apparent conflict of interest 
would be involved. Such a conflict would arise when the employee, 
officer, or agent, any member of his or her immediate family, his or 
her partner, or an organization which employs or is about to employ any 
of the parties indicated herein, has a financial or other interest in 
the firm selected for an award. The officers, employees, and agents of 
the recipient shall neither solicit nor accept gratuities, favors, or 
anything of monetary value from contractors, or parties to 
subagreements. However, recipients may set standards for situations in 
which the financial interest is not substantial or the gift is an 
unsolicited item of nominal value. The standards of conduct shall 
provide for disciplinary actions to be applied for violations of such 
standards by officers, employees, or agents of the recipient.


Sec. 12.943  Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. 
The recipient shall be alert to organizational conflicts of interest as 
well as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall be made to the bidder or offeror whose bids or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, price, quality and other factors considered. Solicitations 
shall clearly set forth all requirements that the bidder or offeror 
shall fulfill in order for the bid or offer to be evaluated by the 
recipient. Any and all bids or offers may be rejected when it is in the 
recipient's interest to do so. [[Page 17249]] 


Sec. 12.944  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide, at a minimum, that:
    (1) Recipients avoid purchasing unnecessary items.
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government; and
    (3) Solicitations for goods and services provide for all of the 
following:
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description shall not contain features which 
unduly restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical 
requirements in terms of functions to be performed or performance 
required, including the range of acceptable characteristics or minimum 
acceptable standards.
    (iv) The specific features of ``brand name or equal'' descriptions 
that bidders are required to meet when such items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment and are energy efficient.
    (b) Positive efforts shall be made by recipients to use small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards shall take all of the 
following steps to further this goal.
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises.
    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract 
is too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Department 
of Commerce's Minority Business Development Agency in the solicitation 
and utilization of small businesses, minority-owned firms and women's 
business enterprises.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but shall be 
appropriate for the particular procurement and for promoting the best 
interest of the program or project involved. The ``cost-plus-a-
percentage-of-cost'' or ``percentage of construction cost'' methods of 
contracting shall not be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration shall be 
given to such matters as contractor integrity, record of past 
performance, financial and technical resources or accessibility to 
other necessary resources. In certain circumstances, contracts with 
certain parties are restricted by agencies' implementation of E.O.s 
12549 and 12689, ``Debarment and Suspension.'' See 43 CFR part 12.
    (e) Recipients shall, on request, make available for the Federal 
awarding agency, pre-award review of procurement documents, such as 
requests for proposals or invitations for bids, independent cost 
estimates, etc., when any of the following conditions apply:
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in this part.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403 (11) (currently $100,000) and is to be 
awarded without competition or only one bid or offer is received in 
response to a solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a 
contract or increases the contract amount by more than the amount of 
the small purchase threshold.


Sec. 12.945  Cost and price analysis.

    Some form of cost or price analysis shall be made and documented in 
the procurement files in connection with every procurement action. 
Price analysis may be accomplished in various ways, including the 
comparison of price quotations submitted, market prices and similar 
indicia, together with discounts. Cost analysis is the review and 
evaluation of each element of cost to determine reasonableness, 
allocability and allowability.


Sec. 12.946  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold shall include the following at a minimum:
    (a) Basis for contractor selection;
    (b) Justification for lack of competition when competitive bids or 
offers are not obtained; and
    (c) Basis for award cost or price.


Sec. 12.947  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
documents, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.


Sec. 12.948  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the provisions below in all contracts and 
subcontracts.
    (a) Contracts in excess of the small purchase threshold shall 
contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which a 
contractor violates or breaches the contract terms, and provide for 
such remedial actions as may be appropriate.
    (b) All contracts in excess of the small purchase threshold shall 
contain suitable provisions for termination by the recipient, including 
the manner by which termination shall be effected and the basis for 
settlement. In addition, such contracts shall describe conditions under 
which the contract may be terminated for default as well as conditions 
where the contract may be terminated because of circumstances beyond 
the control of the contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements shall provide for the recipient to follow its own 
requirements relating to bid [[Page 17250]] guarantees, performance 
bonds, and payment bonds unless the construction contract or 
subcontract exceeds $100,000. For those contracts or subcontracts 
exceeding $100,000, the Federal awarding agency may accept the bonding 
policy and requirements of the recipient, provided the Federal awarding 
agency has made a determination that the Federal Government's interest 
is adequately protected. If such a determination has not been made, the 
minimum requirements shall be as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of his bid, execute such contractual documents as may be required 
within the time specified.
    (2) A performance bond on the part of the contractor for 100 
percent of the contract price. A ``performance bond'' is one executed 
in connection with a contract to secure fulfillment of all the 
contractor's obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required in the situations described herein, 
the bonds shall be obtained from companies holding certificates of 
authority as acceptable sureties pursuant to 31 CFR part 223, ``Surety 
Companies Doing Business with the United States.''
    (d) All negotiated contracts (except those for less than the small 
purchase threshold) awarded by recipients shall include a provision to 
the effect that the recipient, the Federal awarding agency, the 
Comptroller General of the United States, or any of their duly 
authorized representatives, shall have access to any books, documents, 
papers and records of the contractor which are directly pertinent to a 
specific program for the purpose of making audits, examinations, 
excerpts and transcriptions.
    (e) All contracts, including small purchases, awarded by recipients 
and their contractors shall contain the procurement provisions of 
appendix A to this subpart, as applicable.

Reports and Records


Sec. 12.950  Purpose of reports and records.

    Sections 12.951 through 12.953 set forth the procedures for 
monitoring and reporting on the recipient's financial and program 
performance and the necessary standard reporting forms. They also set 
forth record retention requirements.


Sec. 12.951  Monitoring and reporting program performance.

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function or activity supported by the 
award. Recipients shall monitor subawards to ensure subrecipients have 
met the audit requirements as delineated in Sec. 12.926.
    (b) The Federal awarding agency shall prescribe the frequency of 
submission for performance reports. Except as provided in 
Sec. 12.951(f), performance reports will not be required more 
frequently than quarterly or less frequently than annually. Annual 
reports shall be due 90 calendar days after the grant year; quarterly 
or semi-annual reports shall be due 30 days after the reporting period. 
The Federal awarding agency may require annual reports before the 
anniversary dates of multiple year awards in lieu of these 
requirements. The final performance reports are due 90 calendar days 
after the expiration or termination of the award.
    (c) A final technical or performance report shall be required after 
completion of the project only if the awarding agency determines this 
to be appropriate.
    (d) When required, performance reports shall generally contain, for 
each award, brief information on each of the following:
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the 
investigator, or both. Whenever appropriate and the output of programs 
or projects can be readily quantified, such quantitative data should be 
related to cost data for computation of unit costs.
    (2) Reasons why established goals were not met, if appropriate.
    (3) Other pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (e) Recipients shall not be required to submit more than the 
original and two copies of performance reports.
    (f) Recipients shall immediately notify the Federal awarding agency 
of developments that have a significant impact on the award-supported 
activities. Also, notification shall be given in the case of problems, 
delays, or adverse conditions which materially impair the ability to 
meet the objectives of the award. This notification shall include a 
statement of the action taken or contemplated, and any assistance 
needed to resolve the situation.
    (g) Federal awarding agencies may make site visits, as needed.
    (h) Federal awarding agencies shall comply with clearance 
requirements of 5 CFR part 1320 when requesting performance data from 
recipients.


Sec. 12.952  Financial reporting.

    (a) The following forms or such other forms as may be approved by 
OMB are authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report.
    (i) Each Federal awarding agency will require recipients to use 
either the SF-269 or SF-269A to report the status of funds for all 
nonconstruction projects or programs. A Federal awarding agency may, 
however, have the option of not requiring the SF-269 or SF-269A when 
the SF-270, Request for Advance or Reimbursement, or SF-272, Report of 
Federal Cash Transactions, is determined to provide adequate 
information to meet its needs, except that a final SF-269 or SF-269A 
shall be required at the completion of the project when the SF-270 is 
used only for advances.
    (ii) The Federal awarding agency shall prescribe whether the report 
shall be on a cash or accrual basis. If the Federal awarding agency 
requires accrual information and the recipient's accounting records are 
not normally kept on the accrual basis, the recipient shall not be 
required to convert its accounting system, but shall develop accrual 
information through best estimates based upon an analysis of the 
documentation on hand.
    (iii) The Federal awarding agency shall determine the frequency of 
the Financial Status Report for each project or program, considering 
the size and complexity of the particular project or program. However, 
the report shall not be required more frequently than quarterly or less 
frequently than annually. A final report shall be required at the 
completion of the agreement.
    (iv) The Federal awarding agency shall require recipients to submit 
the SF-269 or SF-269A (an original and no more than two copies) no 
later than 30 days after the end of each specified reporting period for 
quarterly and semi-annual reports, and 90 calendar days for annual and 
final reports. Extensions of reporting due dates may be approved by the 
Federal awarding agency upon request by the recipient.
    (2) SF-272, Report of Federal Cash Transactions. [[Page 17251]] 
    (i) When funds are advanced to recipients, the Federal awarding 
agency shall require each recipient to submit the SF-272 and, when 
necessary, its continuation sheet, SF-272a. The Federal awarding agency 
shall use this report to monitor cash advanced to recipients and to 
obtain disbursement information for each agreement with the recipients.
    (ii) Federal awarding agencies may require forecasts of Federal 
cash requirements in the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, Federal awarding 
agencies may require recipients to report in the ``Remarks'' section 
the amount of cash advances received in excess of three days. 
Recipients shall provide short narrative explanations of actions taken 
to reduce the excess balances.
    (iv) Recipients shall be required to submit not more than the 
original and two copies of the SF-272 15 calendar days following the 
end of each quarter. The Federal awarding agencies may require a 
monthly report from those recipients receiving advances totaling $1 
million or more per year.
    (v) Federal awarding agencies may waive the requirement for 
submission of the SF-272 for any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that such advances are monitored through other forms contained 
in this section;
    (B) If, in the Federal awarding agency's opinion, the recipient's 
accounting controls are adequate to minimize excessive Federal 
advances; or
    (C) When the electronic payment mechanisms provide adequate data.
    (b) When the Federal awarding agency needs additional information 
or more frequent reports, the following shall be observed:
    (1) When additional information is needed to comply with 
legislative requirements, Federal awarding agencies shall issue 
instructions to require recipients to submit such information under the 
``Remarks'' section of the reports.
    (2) When a Federal awarding agency determines that a recipient's 
accounting system does not meet the standards in Sec. 12.921, 
additional pertinent information to further monitor awards may be 
obtained upon written notice to the recipient until such time as the 
system is brought up to standard. The Federal awarding agency, in 
obtaining this information, shall comply with report clearance 
requirements of 5 CFR part 1320.
    (3) Federal awarding agencies are encouraged to shade out any line 
item on any report if not necessary.
    (4) Federal awarding agencies may accept the identical information 
from the recipients in machine readable format or computer printouts or 
electronic outputs in lieu of prescribed formats.
    (5) Federal awarding agencies may provide computer or electronic 
outputs to recipients when such action expedites or contributes to the 
accuracy or reporting.


Sec. 12.953  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. Federal awarding agencies 
shall not impose any other record retention or access requirements upon 
recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report. The only exceptions are the following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by the Federal 
awarding agency, the 3-year retention requirement is not applicable to 
the recipient.
    (4) Indirect cost rate proposals, cost allocation plans, etc., as 
specified in Sec. 12.953(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by the Federal awarding agency.
    (d) The Federal awarding agency will request transfer of certain 
records to its custody from recipients when it determines that the 
records possess long term retention value. However, in order to avoid 
duplicate recordkeeping, a Federal awarding agency may make 
arrangements for recipients to retain any records that are continuously 
needed for joint use.
    (e) The Federal awarding agency, the Inspector General, Comptroller 
General of the United States, or any of their duly authorized 
representatives, have the right of timely and unrestricted access to 
any books, documents, papers, or other records of recipients that are 
pertinent to the awards, in order to make audits, examinations, 
excerpts, transcripts and copies of such documents. This right also 
includes timely and reasonable access to a recipient's personnel for 
the purpose of interview and discussion related to such documents. The 
rights of access in this paragraph are not limited to the required 
retention period, but shall last as long as records are retained.
    (f) Unless required by statute, no Federal awarding agency shall 
place restrictions on recipients that limit public access to the 
records of recipients that are pertinent to an award, except when the 
Federal awarding agency can demonstrate that such records shall be kept 
confidential and would have been exempted from disclosure pursuant to 
the Freedom of Information Act (5 U.S.C. 552) if the records had 
belonged to the Federal awarding agency.
    (g) Indirect cost rate proposals, cost allocation plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply to the following 
types of documents, and their supporting records: indirect cost rate 
computations or proposals, cost allocation plans, and any similar 
accounting computations of the rate at which a particular group of 
costs is chargeable (such as computer usage chargeback rates or 
composite fringe benefit rates).
    (1) If submitted for negotiation. If the recipient submits to the 
Federal awarding agency or the subrecipient submits to the recipient 
the proposal, plan, or other computation to form the basis for 
negotiation of the rate, then the 3-year retention period for its 
supporting records starts on the date of the submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the Federal awarding agency or the subrecipient 
is not required to submit to the recipient the proposal, plan, or other 
computation for negotiation purposes, then the 3-year retention period 
for the proposal, plan, or other computation and its supporting records 
starts at the end of the fiscal year (or other accounting period) 
covered by the proposal, plan, or other computation.

Termination and Enforcement


Sec. 12.960  Purpose of termination and enforcement.

    Sections 12.961 and 12.962 set forth uniform suspension, 
termination and enforcement procedures. [[Page 17252]] 


Sec. 12.961  Termination.

    (a) Awards may be terminated in whole or in part only if paragraph 
(a)(1), (a)(2) or (a)(3) of this section applies.
    (1) By the Federal awarding agency, if a recipient materially fails 
to comply with the terms and conditions of an award.
    (2) By the Federal awarding agency with the consent of the 
recipient, in which case the two parties shall agree upon the 
termination conditions, including the effective date and, in the case 
of partial termination, the portion to be terminated.
    (3) By the recipient upon sending to the Federal awarding agency 
written notification setting forth the reasons for such termination, 
the effective date, and, in the case of partial termination, the 
portion to be terminated. However, if the Federal awarding agency 
determines in the case of partial termination that the reduced or 
modified portion of the grant will not accomplish the purposes for 
which the grant was made, it may terminate the grant in its entirety 
under either paragraph (a) (1) or (2) of this section.
    (b) If costs are allowed under an award, the responsibilities of 
the recipient referred to in Sec. 12.971(a), including those for 
property management as applicable, shall be considered in the 
termination of the award, and provision shall be made for continuing 
responsibilities of the recipient after termination, as appropriate.


Sec. 12.962  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of 
award, the Federal awarding agency may, in addition to imposing any of 
the special conditions outlined in Sec. 12.914, take one or more of the 
following actions, as appropriate in the circumstances.
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
Federal awarding agency.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the 
awarding agency shall provide the recipient an opportunity for hearing, 
appeal, or other administrative proceeding to which the recipient is 
entitled under any statute or regulation applicable to the action 
involved.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a 
suspension or after termination of an award are not allowable unless 
the Federal awarding agency expressly authorizes them in the notice of 
suspension or termination or subsequently. Other recipient costs during 
suspension or after termination which are necessary and not reasonably 
avoidable are allowable if paragraphs (c) (1) and (2) of this section 
apply:
    (1) The costs result from obligations which are properly incurred 
by the recipient before the effective date of suspension or 
termination, are not in anticipation of it, and in the case of a 
termination, are noncancellable.
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to 
debarment and suspension under E.O.s 12549 and 12689 and the Federal 
awarding agency implementing regulations (see 43 CFR part 12).

After-the-Award Requirements


Sec. 12.970  Purpose.

    Sections 12.971 through 12.973 contain closeout procedures and 
other procedures for subsequent disallowances and adjustments.


Sec. 12.971  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports as required by the terms and conditions of the award. The 
Federal awarding agency may approve extensions when requested by the 
recipient.
    (b) Unless the Federal awarding agency authorizes an extension, a 
recipient shall liquidate all obligations incurred under the award not 
later than 90 calendar days after the funding period or the date of 
completion as specified in the terms and conditions of the award or in 
agency implementing instructions.
    (c) The Federal awarding agency shall make prompt payments to a 
recipient for allowable reimbursable costs under the award being closed 
out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that the Federal awarding agency has advanced or paid and that is 
not authorized to be retained by the recipient for use in other 
projects. OMB Circular A-129 governs unreturned amounts that become 
delinquent debts.
    (e) When authorized by the terms and conditions of the award, the 
Federal awarding agency shall make a settlement for any upward or 
downward adjustments to the Federal share of costs after closeout 
reports are received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 12.931 through 12.937.
    (g) If a final audit has not been performed prior to the closeout 
of an award, the Federal awarding agency shall retain the right to 
recover an appropriate amount after fully considering the 
recommendations on disallowed costs resulting from the final audit.


Sec. 12.972  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of the Federal awarding agency to disallow costs and 
recover funds on the basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Sec. 12.926.
    (4) Property management requirements in Secs. 12.931 through 
12.937.
    (5) Records retention as required in Sec. 12.953.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the Federal awarding agency and the recipient, provided the 
responsibilities of the recipient referred to in Sec. 12.973(a), 
including those for property management as applicable, are considered 
and provisions made for continuing responsibilities of the recipient, 
as appropriate.


Sec. 12.973  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. If 
not paid within a reasonable period after the demand for payment, the 
Federal awarding agency may reduce the debt by paragraph (a) (1), (2) 
or (3) of this section: [[Page 17253]] 
    (1) Making an administrative offset against other requests for 
reimbursements.
    (2) Withholding advance payments otherwise due to the recipient.
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, the Federal awarding 
agency shall charge interest on an overdue debt in accordance with 4 
CFR chapter II, ``Federal Claims Collection Standards.''

Appendix A to Subpart F--Contract Provisions

    All contracts awarded by a recipient, including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts shall contain a 
provision requiring compliance with E.O. 11246, ``Equal Employment 
Opportunity,'' as amended by E.O. 11375, ``Amending Executive Order 
11246 Relating to Equal Employment Opportunity,'' and as 
supplemented by regulations at 41 CFR part 60, ``Office of Federal 
Contract Compliance Programs, Equal Employment Opportunity, 
Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subgrants in excess of $100,000 for 
construction or repair awarded by recipients and subrecipients shall 
include a provision for compliance with the Copeland ``Anti-
Kickback'' Act (18 U.S.C. 874), as supplemented by Department of 
Labor regulations (29 CFR part 3, ``Contractors and Subcontractors 
on Public Building or Public Work Financed in Whole or in Part by 
Loans or Grants from the United States''). The Act provides that 
each contractor or subrecipient shall 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 compensation to 
which he is otherwise entitled. The recipient shall report all 
suspected or reported violations to the Federal awarding agency.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction contracts 
awarded by the recipients and subrecipients of more than $2,000 
shall include a provision for compliance with the Davis-Bacon Act 
(40 U.S.C. 276a to a-7) and as supplemented by Department of Labor 
regulations (29 CFR part 5, ``Labor Standards Provisions Applicable 
to Contracts Governing Federally Financed and Assisted 
Construction''). Under this Act, contractors shall be required to 
pay wages to laborers and mechanics at a rate not less than the 
minimum wages specified in a wage determination made by the 
Secretary of Labor. In addition, contractors shall be required to 
pay wages not less than once a week. The recipient shall place a 
copy of the current prevailing wage determination issued by the 
Department of Labor in each solicitation and the award of a contract 
shall be conditioned upon the acceptance of the wage determination. 
The recipient shall report all suspected or reported violations to 
the Federal awarding agency.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in 
excess of $100,000 for construction contracts and for other 
contracts that involve the employment of mechanics or laborers shall 
include a provision for compliance with sections 102 and 107 of the 
Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
supplemented by Department of Labor regulations (29 CFR part 5). 
Under section 102 of the Act, each contractor shall 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 compensated at a 
rate of not less than 1\1/2\ times the basic rate of pay for all 
hours worked in excess of 40 hours in the work week. Section 107 of 
the Act is applicable to construction work and provides that no 
laborer or mechanic shall be required 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 transportation or transmission of 
intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements,'' and any implementing 
regulations issued by the awarding agency.
    6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--
Contracts and subgrants of amounts in excess of $100,000 shall 
contain a provision that requires the recipient to agree to comply 
with all applicable standards, orders or regulations issued pursuant 
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act as amended (33 U.S.C. 1251 et seq.). 
Violations shall be reported to the Federal awarding agency and the 
Regional Office of the Environmental Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors 
who apply or bid for an award of more than $100,000 shall 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 attempting 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 obtaining any Federal contract, grant or any other 
award covered by 31 U.S.C. 1352. Each tier shall also disclose any 
lobbying with non-Federal funds that takes place in connection with 
obtaining any Federal award. Such disclosures are forwarded from 
tier to tier up to the recipient.
    8. Debarment and Suspension (E.O.s 12549 and 12689)--No 
contracts shall be made to parties listed on the General Services 
Administration's ``Lists of Parties Excluded from Federal 
Procurement or Nonprocurement Programs'' in accordance with E.O.s 
12549 and 12689, ``Debarment and Suspension.'' This list contains 
the names of parties debarred, suspended, or otherwise excluded by 
agencies, and contractors declared ineligible under statutory or 
regulatory authority other than E.O. 12549. Contractors with awards 
that exceed the small purchase threshold shall provide the required 
certification regarding their exclusion status and that of their 
principals.

[FR Doc. 95-8175 Filed 4-4-95; 8:45 am]
BILLING CODE 4310-RF-M