Source: http://grants2.nih.gov/archive/grants/policy/gps/8postnew.htm
Timestamp: 2015-03-27 16:24:54
Document Index: 521302935

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PHS Grants Policy Statement: 8 POSTAWARD ADMINISTRATION
8. POSTAWARD ADMINISTRATION (PHS GPS 9505)
This section deals with a number of postaward
administrative requirements concerning changes from the
approved application or budget, the disposition of grant-related income, and the use and disposition of property.
Reporting, record retention and access, and financial
management requirements are also discussed.
CHANGES IN EXPENDITURES/ACTIVITIES
Recipients are, in general, allowed a certain degree of
latitude in making postaward programmatic changes and
budget revisions in those PHS nonconstruction discretionary
grants awarded on the basis of an approved grant budget
broken down by object class (personnel, travel, supplies,
etc.) and specifying funds for those classes that are
available to carry out the approved activities. Unless
otherwise restricted by the terms of the award,
documentation of the grant budget on the Notice of Grant
Award (NGA) and reference to the approved application
constitutes prior approval by the PHS awarding office
Grants Management Officer (GMO) for the performance of
activities and the expenditure of funds for the specific
purposes and items described in the grant application.
Except as provided below, for postaward changes, the
grantee institution is permitted to rebudget within and
between budget categories in the approved total direct cost
budget of the project to meet unanticipated requirements
or to accomplish certain programmatic changes. In using
this authority, grantees must ensure that they exercise
proper stewardship over Federal funds and that all costs
charged to the awards are allowable, allocable, and reasonable.
This section covers policies on changes in approved
PHS grant-supported activities initiated by grantees due to
changes in personnel, changes in the status or organization
of the grantee, or changes in the objectives or timeframe
of the approved project. It also includes PHS-initiated
changes other than those dealt with in "Suspension,
Termination, and Withholding." These changes are permitted
when accomplished according to the guidelines below.
Necessary changes in the beginning date of a grant-supported project should be requested before the issuance
of an award document. Any costs incurred or resulting from
obligations made before the beginning date of a budget
period under a new award or competing continuation award
and charged to that award are not allowable unless the
costs involved are included in the approved budget and, if
incurred more than 90 days prior to the effective date of
the award, the costs are approved by the PHS awarding
office as preaward costs. (See section 7, "Preaward
(Preagreement).")
Protocol or Scope
In general, the principal investigator or project director
of an approved PHS project grant may make minor changes
in methodology, approach, or other aspects of the project
objectives. However, except as provided below, the grantee
must obtain prior approval from the PHS awarding office
for changes in scope, direction, type of service delivery or
training, or other areas that constitute a significant change
from the objectives or purposes of the approved project.
Principal investigators on research grants may make
significant changes in methods or procedures that need
only be reported to the awarding office in the progress
report for the applicable period.
Examples (or tests) of changes of scope or objectives
include but are not limited to the following: transferring
the performance of substantive programmatic work by
contract or any other means; significant change in the use
of human subjects, whether first-time use or substantial
change in planned use; change in key personnel whose
expertise is critical to the approved
project; and a significant rebudgeting action, whether or
not it requires approval under rules governing budget
changes. This list is not all inclusive.
As a guideline, significant rebudgeting occurs when
the cumulative amount of transfers among direct cost
categories for the current budget period exceeds 25
percent of the total amount awarded, or $250,000,
whichever is less. When this threshold is reached, the
grantee shall consult with the GMO for a decision as to
whether the rebudgeting constitutes a change of scope.
If the GMO determines that the significant rebudgeting
constitutes a change of scope, prior approval is
Status or Absence of Program Director, Project
Director, or Principal Investigator
Whenever there is to be a significant change in the
level of participation in the approved project by the
project director, program director, or principal investigator, as named on the NGA--i.e., when the project will
continue without any active direction of that individual
during any continuous period of more than 3 months or when that individual either withdraws from the project
entirely or proposes to devote substantially less effort to
the project than was anticipated at the time of
award--the grantee should notify the PHS awarding
office as soon as such information is known but no later
than 30 days before the expected date of departure or
change in participation level. Since approval of a project
has, to some extent, been based on the participation
and/or qualifications of the named program director,
project director, or principal investigator, grantee
institutions are required to notify the PHS awarding
office of the proposed alternative plans for conducting
In some cases, where required by law or regulation
(including 45 CFR Part 92.30 and 45 CFR Part 74,
Subpart L) or by a special provision of the award, PHS
awarding office approval of these changes is required
and must be requested before the actual change in
status of the incumbent. Specific cases include the
Research grants. Prior approval is required for
replacement or significant change in responsibilities
of the approved project director or principal investigator. If the PHS awarding office imposes the
prior approval requirement on other project staff,
those persons must be so named and expressly
identified on an NGA as key project staff and
Nonresearch grants. The NGA must specifically state
a prior approval requirement for the replacement
or significant change in responsibilities of the
approved project director, principal investigator, or
any other persons expressly identified on the award
as key project staff.
State and local agency grants. This prior approval
requirement does not apply to any grants to State
and local governments unless made applicable by a
specific term or condition on the NGA.
Where prior approval is required, if the arrangements proposed by the grantee, including the qualifications of any proposed replacement, are not acceptable to PHS, the grant may be terminated. If the grantee
wishes to terminate the project because it cannot make
suitable alternate arrangements, it should notify the PHS
awarding office of its intent and PHS will forward
closeout instructions.
The legal and administrative responsibility for
administering a grant-supported project or activity may
be transferred from one legal entity to another before
the expiration date of the approved project period for
the grant being transferred. Such a change of grantee
organization may be accomplished under most PHS discretionary grants (including construction grants), but
only as indicated below.
1.	a.	The grant to be transferred must have been
terminated in accordance with 45 CFR Part 74,
Subpart M, or 45 CFR Part 92.44 and "Suspension, Termination, and Withholding" below. b.	A noncompeting continuation award that is
within an approved project period for the grant
to be transferred must have been withheld
because of the grantee's actions and in accordance with the policies in "Suspension, Termination, and Withholding." c.	The original grantee has agreed to transfer responsibility to a replacement grantee for an
active project that is to be transferred before
the expiration of the approved project period.
2.	The need for the grant-supported project or activity
that existed at the time of the award of the original
grant must continue to exist at the time of the proposed award of the replacement grant, and there
must be no significant change or reduction in the
scope or objectives of that project or activity. If the
objectives of the project are to be enlarged, there
must be no diminution of services to any group that
received services or benefits under the original
3.	The change of grantee organization must be made
in a timely manner. Any hiatus of more than 3
months between the original and the replacement
grant must be justified and documented in the
official grant file.
When these conditions have been met, funds withdrawn from the original grantee may be reawarded to
the replacement grantee, even if the appropriation from
which they came has expired.
A change of grantee organization may not take
place where it involves an award to an individual.
However, a transfer by an individual fellow to a different department or institution or a change in the fellow's
sponsor is not considered a change of grantee organization and may be allowable with the prior approval of the
PHS awarding office without regard to the conditions
above. Administrative approval will not be given for a
proposed transfer to a replacement grantee that does
not meet PHS programmatic and administrative
A change of grantee may not take place where it
will involve the transfer of a grant to or between foreign
institutions or international organizations.
A change of grantee action for a training grant or
a resource grant would normally be permitted only when all of the permanent benefits attributable to the original
grant can be transferred, including applicable equipment
and the curriculum developed under a training grant
(see "Property Management and Accountability").
When the principal investigator on a research
project transfers from one domestic institution to
another domestic institution or from a foreign institution
to a domestic institution, the project under the same
principal investigator may be supported at the new
institution for a period up to the remainder of the previously approved project period in an amount not to
exceed that previously recommended for direct costs for
the remaining period. The change may be made without
competitive review provided that the original grantee
institution agrees in writing to relinquish the project, the
new institution submits a new application form for
support of the project, the investigator plans no significant change in research objectives and level of funding
for direct costs from that proposed for the project as
originally approved, and the facilities and resources at
the new location allow for successful performance of the
project. If these conditions or other programmatic or
administrative requirements are not met, the PHS
awarding office may require a competitive review (see
section 4, "Internal Review Process").
A change of grantee organization may also be
accomplished noncompetitively in the following situations for nonresearch grants (other than training or
resource grants as indicated above):
1.	A change of the organizational entity with legal and
financial responsibility for the grant without a
change in the organizational segment actually performing the programmatic aspects of the approved
project may be made for a period of time up to the
end of the previously approved project period.
2.	Where there is insufficient time to obtain a competitive review because disruption of project activities
would either seriously jeopardize the success of the
project or endanger the physical or mental health of
the persons served by the project, a noncompeting
award may be made for a single budget period of
no more than 18 months duration, after which time
the new recipient organization must compete for
When a grant is terminated either by mutual
consent or unilaterally by the grantee, a written statement from the original grantee relinquishing its interests
and rights to the grant must be provided in accordance
with instructions from the PHS awarding office. Acceptance of a relinquishment statement by PHS does not
guarantee PHS approval of a replacement application
for the continued funding of a project.
Where PHS terminates a grant for cause, if the
grantee does not provide a relinquishment statement pending the exercise of its appeal rights (see "Grant
Appeals Procedures"), a replacement grant may only be
awarded under the circumstances described in item 2
above. If this occurs, the NGA for the replacement
grant will indicate that if the original grantee is successful in its appeal, the replacement grant may be
Eligible applicants for replacement grants under
service programs will be limited to organizations serving,
or proposing to serve, at a minimum, the same group(s)
or community population served by the original grantee.
Successor in Interest and Name Changes
As a result of legislative or other action affecting
the legal status of a grantee institution, such as a
merger, divestiture, or other corporate change, PHS may
recognize a new grantee organization as the successor in
interest to the assets involved in PHS grant-supported
activities. Such interest may be acquired incidentally to
the transfer of all the assets of the grantee or all of that
part of the assets involved in the performance of the
grant-supported activities. The new organization must
meet the grant program's eligibility requirements in
order to be recognized as the successor in interest. The
current recipient of PHS grant support is responsible
for promptly notifying the affected PHS awarding office
of the impending change. A successor-in-interest
agreement must be executed by PHS, the transferor, and
the transferee. This may be a single agreement for all
affected PHS grants. Before the execution of such an
agreement, the grantee must submit the following
documents to the PHS awarding office (1) affected, as
1.	A properly authenticated copy of the instrument by
which the transfer of assets was effected, e.g., a bill
of sale, certificate of merger, or decree of court.
2.	A certified copy of the resolution of the Board of
Trustees of the grantee organization authorizing the
3.	A properly authenticated copy of the certificate and
articles of incorporation of the transferee if such
corporation was formed for the purpose of receiving
the assets involved in the performance of the PHS
4.	An opinion of counsel for the transferor and the
transferee that the transfer was properly effected in
accordance with applicable law and the effective
5.	A new application face page for each PHS
grant showing the new name of the organization
and new principal officers, if any change occurred, and signed by the appropriate grantee
If only the grantee organization's name changes and
the rights and obligations of the grantee are not affected, the grantee shall notify the PHS awarding office of
the change and provide the following documents:
1.	A copy of the instrument which effected the name
change, authenticated by an appropriate official of
the State having jurisdiction.
2.	An opinion of counsel for the grantee that the
change of name was properly effected in accordance with applicable law.
3.	A list of all PHS grants awarded to that organization accompanied by a new application face page
for each grant showing the new name of the organization and new principal officers, if any change
Neither successor-in-interest nor name change situations will be considered as change of grantee organization situations for purposes of applying the policies and
procedures contained in that section.
For discretionary grants other than construction
grants (2), grantees must obtain written prior approval
from the GMO of the PHS awarding office for the
following postaward changes. Other prior approvals may
be required by the NGA, specific program legislation, or
regulations. Therefore, the following list may not be all
inclusive. PHS has extended additional authorities for
recipients of certain PHS research grants (see "Prior
Approval Authorities Retained by PHS for Research
Grants"). For State and local governments and federally
recognized Indian tribes, PHS has waived the 10-percent
cumulative threshold contained in 45 CFR Part 92.30,
and only the items listed below must receive PHS prior
For those rebudgeting actions listed below, prior
approval is required whether increasing an existing
budget category or using funds for categories not in the
originally approved budget. Failure to obtain prior
approval, when required, from the appropriate PHS
awarding office may result in the disallowance of costs.
1.	Change in Scope, Principal Investigator, Grantee
Institution, Successor in Interest, or Recipient Institution Name. See "Changes in Project."
2.	Restrictions on Notice of Grant Award. Undertaking
any activities disapproved or restricted as a condition of the award.
3.	Transferring Substantive Programmatic Work. Transferring to a third party, by contracting or any other
means, the actual performance of substantive programmatic work.
4.	Carryover of Unobligated Funds From One Budget
Period to Another Within an Approved Project
5.	Extensions of the Budget/Project Period With or
Without Additional Funds.
6.	Equipment Purchase. Equipment exceeding $25,000
7.	Alternative Use of Salary Support Due to Receipt of
a Research (Career/Scientist) Development Award.
The alternative use of grant funds awarded under a
PHS grant to a nongovernmental organization for
an individual's salary that are no longer required for
that purpose as the result of the transfer of that
individual's salary to an RCDA or other RCDA-type career development award.
8.	Alterations and Renovations (A&R). Drawings and
specifications for alteration and renovation projects
over $50,000. Also, A&R costs may not exceed the
lesser of $150,000 or 25 percent of total direct costs
during any consecutive 3-year period unless a
waiver is obtained.
9.	Audiovisual Materials. The cost of acquisition or
production of audiovisual materials exceeding
$25,000 for a single audiovisual product. This is an
internal programmatic clearance which must be
obtained by the PHS awarding office. However, in
order to comply with this clearance requirement,
information will be needed from recipients.
10.	Transferring Amounts From Trainee Costs. The
transfer of amounts previously awarded for trainee
costs (stipends, tuition, and fees) to other categories
of expense. This excludes trainee travel, which PHS
does not consider to be a trainee cost.
11.	Capital Expenditures. Capital expenditures for land
or buildings. Also, real property acquired with PHS
grant funds may not be conveyed, transferred, assigned, mortgaged, leased, or in any other manner
encumbered by the grantee without the written
prior approval of the PHS awarding office or its
12.	Patient Care Costs. Patient care costs not previously
approved by PHS and/or when a grantee desires to
rebudget funds out of the patient care category. Regardless of the amount of funds involved, any
reduction in the level of patient care is considered
to be a change in project scope and requires PHS
13.	Publication and Printing. Publication and printing
costs exceeding $25,000 for a single publication
when not included in the originally approved budget. This is an internal programmatic clearance that
must be obtained by the PHS awarding office.
However, in order to comply with this clearance
requirement, information will be needed from
14.	Preaward Costs Incurred More Than 90 Days Prior to
the Effective Date of any New or Competing Continuation Award. The incurrence of costs prior to the
award of a grant imposes no obligation on the
Federal Government to make the award or increase
the amount of the approved budget.
15.	Consumer/Provider Board Participation. When not
specifically authorized by program regulations, only
the following costs are allowable with the prior approval of the PHS awarding office:
a.	Reasonable and actual out-of-pocket costs incurred solely as a result of attending a scheduled meeting, including transportation, meals,
babysitting fees, and lost wages.
b.	The reasonable costs of necessary meals furnished by the grantees to consumer or provider
board participants during scheduled board
meetings only if not reimbursed to participants
as per diem or otherwise.
16.	Need for Additional Funds. A need for the award of
additional Federal funds.
17.	Closely Related Work. When salaries and/or other
activities are being supported by two or more PHS
grant projects, grantees may charge costs to the
project for which the costs are originally approved
or to another PHS project with the prior approval
of the PHS awarding office provided all of the
a.	The projects are scientifically and technically
b.	The projects are under the direction of the
same principal investigator/project director.
c.	The projects have been funded by the same
PHS awarding office.
d.	There is no change in the scope of the individual grants involved.
e.	The relating of costs will not be detrimental to
the conduct of work approved under each individual award.
f.	The relatedness will not be used to circumvent
the terms and conditions of an individual
18.	Indemnification Against Third Parties. The Government is obligated to indemnify the organization only
to the extent expressly provided in the award.
19.	Transfer of Funds Between Construction and Nonconstruction.
20.	Program Income. For other than research grants,
the use of alternatives other than the deduction
alternative (see "General Program Income") for
disposition of program income must have PHS prior
SPECIAL PROVISIONS FOR RESEARCH GRANTS
PHS has waived approval of certain actions which
had previously required awarding office prior approval.
These expanded authorities are applicable to all PHS
research grants with the following exceptions: cooperative agreements, certain for-profit organizations (see
appendix 6), awards to individuals or foreign institutions, class deviations granted by the Office of the
Assistant Secretary for Health (OASH) for a particular
program or class of grants, and when circumstances
indicate that the expanded authority should not be
extended to a specific research grant (for example, the
designation of the recipient as "high risk"). Where
expanded authorities are applicable, only the prior
approvals listed in this section shall apply. Several of the
expanded authorities have specific deadlines for submission of reports or for timely notification to the PHS
awarding office. Grantees should be aware that any
consistent pattern of failure to adhere to those deadlines
for reporting or notification in items 1 and 3 shall be
grounds for excluding that grantee institution from these
NIH has received a class deviation from OASH and
is applying the expanded authorities only to the "R"
series of research grants with the following exceptions:
R10, Cooperative Clinical Research Grants; R18,
Research Demonstration and Dissemination Projects;
R43, Small Business Innovation Research (SBIR)
Grants, Phase I; and R44, SBIR Grants, Phase II.
Authorities Given to Grantees
When the NGA indicates that a research grant is
subject to special grants administration provisions (i.e.,
expanded authorities), the recipient may take the
following actions without PHS prior approval.
1.	Extensions Without Additional Funds. The grantee
organization may extend the final budget period of
a research project one time for a period of up to 1
year beyond the original expiration date shown on
the NGA. Such an extension may be made when no
additional funds are required to be obligated by the
awarding office, there will be no change in the
project's originally approved scope or objectives,
a.	Additional time beyond the established expiration date is required to assure adequate completion of the originally approved project.
b.	Continuity of PHS grant support is required
while a competing continuation application is
c.	The extension is necessary to permit an orderly
phaseout of a project that will not receive
The fact that funds remain at the expiration date of
the grant is not in itself sufficient justification for an
extension without additional funds. The grantee
organization must notify the PHS awarding office in
writing of the extension 10 days prior to the expiration date of the project period. Upon notification,
the PHS awarding office will issue a revised NGA
to reflect the change of expiration date. Grantees
may not extend project periods previously extended
by the PHS awarding office.
In extending the final budget period of the grant
through this process, the grantee agrees to automatically extend the applicability of all certifications required for funding of the original budget period of
the grant to the new extended period of support,
e.g., animal welfare, drug free workplace, human
subjects, misconduct in science.
2.	Preaward Costs. A grantee organization may, at its
own risk, incur obligations and expenditures to
cover costs prior to the beginning date of an award
a.	The costs incurred are considered necessary for
b.	The costs are allowable under the potential
c.	PHS written prior approval is obtained when
Such preaward costs may be incurred within 90 days
prior to the beginning date of the award without
PHS prior approval. Preaward costs incurred more
than 90 days prior to the beginning date of the
award require written PHS prior approval.
PHS expects the grantee organization to be fully
aware that preaward costs must not impair its
ability to accomplish project objectives or in any
way adversely affect the conduct of the project.
Additionally, the incurrence of costs prior to the
award of a grant imposes no obligation on PHS to
make an award.
Please note that this authority no longer requires
that the application must have been recommended
for approval by an objective review group or by a
3.	Carryover of Unobligated Balances. Except for funds
restricted on a NGA, grantee organizations are
authorized to carry over unobligated research grant
funds remaining at the end of a budget period.
The grantee organization must notify the PHS
awarding office whether it has elected to carry over
unobligated balances and the amount to be carried
over. The notification shall be provided under item
12, "Remarks," in the Financial Status Report
(FSR). A revised NGA will not be issued to reflect
the carryover. Any unobligated balance not specified for carryover on the FSR shall be available for
disposition by the PHS awarding office. Grantee
organizations are required to submit the FSR within
90 days after the expiration of a budget period.
When a grantee reports on the FSR balances of
unobligated funds in excess of 25 percent of the
total amount awarded, or $250,000, whichever is
less, the awarding office GMO shall review the
circumstances resulting in such balances to assure
that these funds are necessary to complete the
project. The GMO may request additional information from the grantee, including a revised budget,
as part of the review. The GMO may withdraw the
unobligated funds by issuing a revised NGA for the
current budget period, revise the current NGA to
authorize the grantee to spend the unobligated
funds for approved purposes, or leave the unobligated funds in the grant account in the payment
system for utilization as determined by the PHS
4.	Cost-Related Prior Approvals. The requirements for
prior Federal approval of expenditures under the
applicable cost principles are waived, with the
following two exceptions. Prior approval for capital
expenditures for land and buildings is not waived
because such capital expenditures are allowable
only when the program's legislation or regulations
so permit. Prior approval for indemnification
against liabilities to third parties and any other loss
or damage not compensated by insurance or otherwise is not waived because the Government is
obligated to indemnify the organization only to the
extent expressly provided in the award. Requirements for allowability, reasonableness, allocability,
and consistency of costs are still applicable.
5.	Use of Program Income. With the exception of non-SBIR for-profit organizations (see appendix 6),
grantee organizations may use the additional costs
alternative for the use of general program income
(see "General Program Income"), unless regulations
or the NGA specify another alternative or a combination of alternatives. Disposition of other kinds of
program income, such as royalties from copyrights
or inventions, shall be governed by the provisions in
45 CFR Part 74, Sections 74.43 through 74.47. If the
grantee uses the additive method to increase the
level of activity, the Federal Government is not
committed to funding future budget periods at this
increased level of activity. (See also "Actions Requiring Additional Federal Funds" below and
"Treatment of General Program Income Under Research Grants".)
Prior Approval Authorities Retained by PHS
for Research Grants
1.	Change of Scope or Research Objectives. The grantee
organization is required to seek approval from the
PHS awarding office when the scope or research
objectives of the project change. Actions likely to be
considered a change in scope or objectives include,
a.	Change in the specific aims approved at the
b.	Substitution of one animal model for another.
c.	Any change from the approved use of animals
or human subjects.
d.	Shifting the emphasis of the research from one
disease area to another.
e.	Applying a new technology, i.e., changing assays
from those approved to use of a different type
of assay.
f.	Transferring the performance of substantive
programmatic work to a third party by contract
g.	Change in key personnel whose expertise is
critical to the approved project.
h.	Significant rebudgeting whether or not it requires approval under rules governing budget
changes. Significant rebudgeting occurs when
the cumulative amount of transfers among
direct cost categories for the current budget
period exceeds 25 percent of the total amount
awarded, or $250,000, whichever is less. (See also the applicable discussion in "Changes in
i.	Incurrence of patient care costs not previously
approved by PHS and/or when a grantee desires to rebudget funds out of the patient care
This list is not all inclusive. In the event of uncertainty as to whether a particular change is significant enough to require prior approval, questions
should be referred to the GMO of the PHS awarding office for final determination.
2.	Change in Principal Investigator (PI). The grantee
organization is required to seek approval in writing
before a substitute is appointed to replace an
absent or departed PI. If the PI is absent from the
project for 3 months or more, a substitute must be
proposed by the grantee organization and must be
approved by the PHS awarding office. The request
for approval of a substitute PI should include a
justification for the change, the curriculum vitae of
the individual proposed, and any budgetary changes
resulting from the proposed change.	3.	Change of Grantee Organization. PHS awarding
office approval is required to transfer a grant from
one grantee organization to another. PHS awarding
office approval is also required for successor-in-interest situations. A successor in interest may
occur as a result of a merger, divestiture, or other
corporate change in which all or part of the assets
involved in the performance of the grant-supported
activity(ies) are transferred to another entity.
4.	Actions Requiring Additional Federal Funds. PHS
awarding office prior approval is required if the
grantee organization takes action that generates a
need for additional Federal funding to carry out the
5.	Retention of Research Grant Funds When a Research
Career Development Award (RCDA) is Awarded.
Funds budgeted in a PHS-supported research grant
for an individual's salary and/or fringe benefits, but
freed as a result of receiving an RCDA for that
individual, may not be used for any other purpose
without the prior approval of the PHS awarding
6.	Award Terms and Conditions. Deviations from
special terms or conditions stated on the NGA
require prior approval from the PHS awarding
office.	7.	Closely Related Work. When salaries and/or other
activities are being supported by two or more
technically related PHS grant projects under the
direction of the same Principal Investigator/Project Director and funded by the same awarding office,
grantees may charge costs to the project for which
the costs are originally approved or to another
closely related PHS project only with the prior
approval of the PHS awarding office.
8.	Audiovisuals and Publications. Approval by the
is needed for acquisition or production of audio-visual materials exceeding $25,000 for a single
audiovisual product and publication and printing
costs exceeding $25,000 for a single publication.
9.	Preaward Costs Incurred More Than 90 Days Prior to
10.	Drawings/Specifications for Alternations and Renovations Over $50,000. Costs for alterations and renovations may not exceed the lesser of $150,000 or 25
percent of total direct costs during any consecutive
3-year period unless a waiver is obtained.
11.	Indemnification Against Third Parties. Prior approval
for indemnification against liabilities to third parties
and any other loss or damage not compensated by
insurance or otherwise is not waived because the
Government is obligated to indemnify the organization only to the extent expressly provided in the
12.	Capital Expenditures for Land and Buildings. Prior
approval for capital expenditures for land and
buildings is not waived because such capital expenditures are allowable only when the program's
legislation or regulations so permit.
13.	Extensions of Budget Periods other than the extension of the final budget period of a project one time
for a period of up to 1 year beyond the original
expiration date shown on the NGA.
Under discretionary grants, all requests that require PHS awarding office prior approval must be submitted
in writing to the GMO designated on the NGA.(3) All
requests must bear the signature of an authorized
official of the business office of the grantee organization
as well as the principal investigator or program or
project director. The GMO shall be responsible for
reviewing the request with PHS program officials, as
necessary, and for informing the grantee in writing of
the final disposition of the request.
Only responses signed by the GMO are to be
considered valid. Grantees who take action on the basis
of letters by unauthorized officials do so at their own
risk. Such responses will not be considered binding by
or upon the Public Health Service.
Whenever grantees contemplate rebudgeting or
other postaward changes and are uncertain about the
allowability of types or levels of cost or an activity(ies),
particularly when such items are not mentioned in the
regulations, cost principles, or other HHS or PHS policy
documents, they are strongly encouraged to consult in
advance with the designated GMO.
Failure to obtain prior approval when required from
the appropriate PHS awarding office may result in the
disallowance of costs. Additionally, even where the
grantee has responsibility for rebudgeting actions, if it is
determined, through audit or otherwise, that the costs
do not meet the required tests of allowability, allocability, applicability, reasonableness, etc., the costs may be
Under construction grants, the grantee (owner)
must request PHS awarding office prior approval for
unsolicited modifications or changes to previously
approved construction contracts whenever--
1.	The revision results from changes in the scope or
objective of the grant-supported project, including
proposed modifications that would materially alter
the costs of the project, space utilization, or financial layout.
2.	The revision increases the amount of Federal funds
After receipt of written prior approval from the
PHS awarding office GMO, the grantee may authorize
the approved modification(s) of the construction contract. Other less substantive modifications to construction contracts may be accomplished without PHS
awarding office prior approval. However, copies of all
change orders to construction contracts must be retained as grant-related records (see "Record Retention
and Access").
PHS will not intercede in behalf of non-U.S. citizens
who may be principal investigators or project directors
or otherwise participating in a project and whose stay in
the United States may be limited by their visa status. For this reason, the grantee institution shall determine
and the application shall indicate that the individual's
visa will allow the person to remain in the country a
sufficient length of time to be productive on the project.
All recipients of PHS grant funds, whether such
funds are received directly from PHS or indirectly under
a subgrant, contract, or other assistance (for example,
student assistance under a training grant), are responsible for and must adhere to all applicable Federal
income tax regulations. Questions concerning the
applicability of such regulations to grant funds should be
directed to the Internal Revenue Service (IRS). Additional guidance for fellows and trainees is provided in
IRS Publication 520, "Tax Information for American
Scholars in the U.S. and Abroad," which may be obtained from IRS.
Recipients are accountable to PHS for certain kinds
of program income in accordance with 45 CFR Part 74,
Subpart F, and 45 CFR Part 92.25. Contracts under a
grant are subject to the terms of the contract with
regard to the income generated by the activities. Program income includes general program income (see 45
CFR Part 74.42); proceeds from the sale of assets
acquired with project funds; royalties from copyrights on
publications developed under, or patents and inventions
conceived or first actually reduced to practice under, a
grant-supported project; and interest and investment
income. These requirements are set forth in 45 CFR
Part 74, Subpart F, and in 45 CFR Part 92.25 and are
Each NGA will provide information as to the
treatment of program income for each funded project.
All general program income, as defined in 45 CFR
Part 74.42 and program income as defined in 45 CFR
Part 92.25, earned during the period of PHS grant
support shall be retained by the recipient and shall be
treated in accordance with one or a combination of the
1.	Deduction Alternative--Deducted from total allowable costs and third-party in-kind contributions for
the purpose of determining the net costs on which
the Federal share will be based. When this alternative applies, the deduction must be made from
current costs unless the terms of the NGA authorize deferral to a later period. General program
income subject to this alternative shall be reported
on lines 10c and 10q of the FSR (Long Form).
2.	Matching Alternative--Used to satisfy all or part of
a matching requirement. General program income
subject to this alternative shall be reported on lines
10g and 10q of the FSR (Long Form).
3.	Additional Costs Alternative--Used for costs that are
in addition to the allowable costs of the project for
any purposes that further the objectives of the
legislation under which the grant was made. General program income subject to this alternative shall
be reported on lines 10r and 10s, as appropriate, of
the FSR (Long Form).
Option 1 above may always be selected by recipients
and must be used if neither of the other alternatives is
specified by the PHS awarding office in regulations or
on the NGA. A subgrantee may not be permitted to use
an option not permitted by the terms of the award to
For information on treatment of program income
State and local governments and federally recognized Indian tribes, see 45 CFR Part 92.25.
Recipients of research grants, see below.
All other nonprofit grantees, see 45 CFR Part 74,
For-profit organizations, see appendix 6.
Interest earned by recipients as a result of a permissible use of general program income, e.g., where a
statute or other grant term provides for the use of
income to be deferred to a later period, shall be retained by the recipient and treated as general program
Treatment of General Program Income Under Research Grants
Recipients of certain PHS research grants have
been extended the authority to use the Additional Costs
Alternative (see "Special Provisions for Research
Grants"). Each NGA will provide information as to the
For research grants not included in the special grant
provisions (expanded authorities), general program income shall be used as follows unless specified otherwise
by the awarding office:
1.	The first $25,000 of program income is to be used
in accordance with the Additional Costs Alternative
and shall be reported on lines 10r and 10s of the
FSR (Long Form). However, this option may not be
authorized for for-profit grantees (however, see also
appendix 6), grantees designated as exceptional
organizations, or where the principal investigator
has a history of frequent, large annual unobligated
balances on previous grants or has requested
multiple extensions of the budget/project period.
2.	Amounts in excess of $25,000 are to be used in
accordance with the Deduction Alternative, unless
another alternative is specified on the NGA, and
shall be reported on lines 10c and 10q of the FSR
(Long Form).
45 CFR Part 74.134 states that the disposition
instructions of the granting agency shall be followed
when real property is no longer to be used by the
grantee or transferred to an eligible third party.
Grantees subject to the requirements in 45 CFR
Part 74.139, Disposition of Equipment, shall report
income earned from the sale of equipment on the FSR
if the grantee's project or program for which equipment
was acquired is still receiving grant support. If authorized by the awarding unit, grantees may use the income
for allowable costs of the project. This income would be
reported on lines 10c, 10r, or 10s of the FSR (Long
Form) in accordance with the PHS awarding office's
authorized disposition. There are no reporting requirements for nonprofit institutions of higher education or
nonprofit organizations whose primary purpose is the
conduct of scientific research, since they are not subject
to the requirements in 45 CFR Part 74.139.
Part 74.141, Unused Supplies, shall reflect any credit to
the grant on line 10c of the FSR (Long Form). There
are no reporting requirements for nonprofit institutions
of higher education or nonprofit organizations whose
primary purpose is the conduct of scientific research,
since they are not subject to the requirements in 45
CFR Part 74.141.
Royalties From a Copyrighted Work
Where the terms of the NGA do not specify
disposition, no reporting of income is required on the
FSR. Where the terms of the NGA govern disposition,
this kind of income shall be reported on lines 10c, 10r,
or 10s of the FSR (Long Form), in accordance with the
PHS awarding office's authorized disposition.
Royalties From Patents or Inventions
Where the terms of the NGA govern disposition,
this kind of income would be reported on lines 10c, 10r,
or 10s of the FSR in accordance with the PHS awarding
office's authorized disposition. Where the terms of the
NGA do not specify disposition, PHS awarding office
instructions for reporting this kind of income shall be
Except as provided immediately below, grantees
shall remit to the Federal Government any interest or
other investment income earned on advances of PHS
grant funds. This includes any interest or investment
income earned by subgrantees and cost-type contractors
on advances to them that are attributable to advances of
PHS grant funds to the grantee. However, States shall
not be accountable to the Federal Government for
interest or investment income earned by the State itself,
or by its subgrantees, where this income is attributable
to Federal grants.
Income After the Grant or Subgrant Support Not Otherwise Treated
Unless specified in the terms of the NGA, there are
no reporting requirements for income accrued after the
period of grant support ends.
Except as provided in 45 CFR Part 74.47(b), public
and private nonprofit institutions of higher education,
public and private nonprofit hospitals, and other private
nonprofit grantees shall maintain advances of Federal
funds in interest-bearing accounts. Except as provided
in 45 CFR Part 92.21(i), interest earned on Federal
advances deposited in such accounts shall be remitted
promptly, but at least quarterly, to the Federal agencies
that provided the funds.
Interest amounts up to $100 per recipient fiscal year
may be retained by the recipient for administrative
expenses. The $100 pertains to the total interest earned
on all Federal advances from all Federal agencies.
Where a grantee institution earns interest on advances
from two or more Federal sources, the grantee is not required to prorate the $100 retainer among its various
Federal funding source but may elect to deduct it from
whichever Federal funding source it chooses.
Unless otherwise restricted by the terms of an
award, the costs of equipment and supplies are allowable under PHS grant-supported projects and activities
under the conditions set forth in the applicable cost
principles and the policies in this document. Property
purchased, constructed, or fabricated with either PHS
grant funds or any required grantee matching is considered to be property acquired under a PHS grant-supported project if some or all of the property's
acquisition cost is a direct charge to project funds, i.e.,
a cost incurred under the total approved direct cost
budget. Most property acquired under a PHS grant-supported project is subject to 45 CFR Part 74, Subpart
O (see 45 CFR Part 74.130 for exceptions), and 45 CFR
Part 92.32.
Generally, recipients may use their own property
management policies and procedures provided they
observe the requirements in 45 CFR Part 74, Subpart O,
or 45 CFR Part 92.32, as applicable, and the following
PHS policies.
The dollar threshold for determining the applicability of several of the requirements in Subpart O and 45
CFR Part 92 is based on the unit acquisition cost of an
item of equipment. As defined in 45 CFR Part 74, the
cost of an item of equipment to the recipient includes
necessary modifications, attachments, etc., that make it
usable for the purpose for which it was acquired or
fabricated. When such accessories or attachments are
acquired separately and serve to replace, enhance,
supplement, or otherwise modify the equipment's
capacity, and they individually meet the definition of
equipment (see "Glossary"), the applicable PHS prior
approval requirements must be observed for each item.
The aggregate acquisition cost of an operating piece of
equipment, however, will be used to determine the
applicable provisions of 45 CFR Part 74, Subpart O, and
45 CFR Part 92.32.
If property is fabricated from individual component
parts, each component must itself be classified as equipment if it meets the definition of equipment (see
"Glossary"). In such cases, the aggregate acquisition cost
of the resulting piece of equipment will determine the
appropriate requirements for accountability in 45 CFR
Part 74, Subpart O, and 45 CFR Part 92. For the
purposes of Subpart O and 45 CFR Part 92, the aggregate cost of the fabricated equipment will be used to
determine whether the PHS awarding office will have
the right to require transfer of title to a piece of fabricated equipment.
Recipients are required to be prudent in the
acquisition of property under a grant-supported project.
It is the recipient's responsibility to conduct a prior
review of each proposed property acquisition to ensure
that the property is needed and that the need cannot be
met with property already in the possession of the
organization. If prior approval is required for the
acquisition, the recipient must ensure that appropriate
approval is obtained in advance of the acquisition. The recipient's procurement practices must be in compliance
with 45 CFR Part 74, Subpart P; 45 CFR Part 92.36;
and "Management Systems and Procedures" herein.
Recipients of PHS grant funds other than Federal
institutions cannot be authorized to use Federal supply
sources (see Federal Property Management Regulations,
Amendment E-125, dated November 10, 1972).
Surplus property (real property, equipment, or
materials that the General Services Administration
(GSA) has determined are no longer required by any
agency of the Federal Government) is available to
eligible parties, as specified in the implementing regulations cited below, through sale (real property) or
donation (personal property). The Federal property
assistance program for real property is administered by
the Division of Health Facilities Planning, ORM/OM/
PHS pursuant to 45 CFR Part 12. The program for
donation of surplus personal property is administered by
GSA (see 41 CFR Part 101-144) through designated
State agencies. Although project funds may be used for
the shipping and handling of donated surplus property,
surplus personal property once under the control of a
recipient organization is subject to the requirements of
the governing GSA regulations rather than the requirements of 45 CFR Parts 74 and 92, since such property
is not considered to have been acquired with project
Excess Federal property is equipment and materials
with a useful life that is no longer required by the
Federal holding agency and that has been reported to
GSA for disposal. PHS does not provide excess Federal
property to recipients.
Real property may be acquired only when authorized by program legislation and when specifically
provided for in the grant award.
Real property acquired or constructed under a PHS
grant-supported project will be subject to the requirements of 45 CFR Parts 74.134, 74.710, or 92.31, as
applicable, regarding acquisition, use, transfer of title,
and disposition in addition to any program-specific or
project-specific requirements imposed by the terms of
the award. However, equipment that is part of a real
property acquisition or construction grant is subject to
the equipment management and disposition rules, rather
than the real property rules.
For disposition of property acquired on an amortized acquisition basis, the formula in 45 CFR Parts
74.142 and 92.31 does not apply in determining the
Federal share. In cases of amortized acquisition, the Federal share will be determined by multiplying the
amount of mortgage principal already repaid at time of
disposition by the average Federal participation (taken
from the FSR) plus the increase in value over the
purchase price multiplied by the average Federal
participation plus the Federal participation in the down
payment. The computation of the Federal share of the
real property acquired with long-term debt financing
must be computed for each year of grant support in
which Federal funds are used to meet all or a portion of
the down payment and/or principal on the mortgage.
In some cases, the governing statute for a PHS
grant program will contain specific requirements regarding the length of the grantee's accountability obligations
for real property, the Federal right of recovery, and
waiver provision. In such cases, those provisions of 45
CFR Parts 74 and 92 that are consistent with the statute
will still apply unless other terms of the award specify
In order to protect the Federal interest in real
property when all or a part of the acquisition cost is
borne as a direct charge to a PHS grant, grantees shall
record a Notice of Federal Interest in the appropriate
official records of the jurisdiction in which the property
is located either immediately upon purchasing the real
property, or in the case of constructed real property, at
the time construction begins. Fees charged for such an
action may be charged to the grant.
Immediately upon acquiring real property, nongovernmental grantees shall, at a minimum, provide the
same insurance coverage as provided to other property
owned by the recipient. The term "immediately upon
acquiring real property" means either when the builder
turns the facility over to the grantee institution (e.g., the
date of the final acceptance of the building) or the point
of beneficial occupancy, whichever comes first. Federally
owned property need not be insured. PHS considers
that the coverage described below constitutes minimum
prudent insurance coverage of real property acquired
with PHS grant support.
1.	A title insurance policy that shall insure the fee
interest in the real property for an amount not less
than the full appraised value as approved by the
PHS awarding office. When the Federal participation in the construction or acquisition of real
property covers only a portion of a building, title
insurance should cover the total cost of the facility
in order to prevent liens on the unsecured portion
from tying up the portion with Federal interest. The
cost of purchase of title insurance may be charged
to the grant in proportion to the amount of Federal
participation in the property. In those instances
where the grantee already owns the land, such as a
building being constructed in the middle of a
campus setting, in lieu of a title insurance policy,
the grantee may provide evidence satisfactory to the awarding office, such as a legal or title opinion, that
it has good and merchantable title free of all mortgages or other foreclosable liens to all land, rights
of way, and easements necessary for the project. In
instances where a grantee is given land by the State,
if the State recently acquired the land in a land
swap transaction, the grantee which is then given
the land should obtain title insurance. However, if
the State has owned the land for a considerable
period of time, title insurance would not be necessary,
and a copy of the State documents giving the
land to the grantee would be sufficient. Where the
grantee must buy the land upon which to build, a
legal opinion would not be sufficient, and title
insurance must be obtained in order to protect the
2.	A physical destruction insurance policy which shall
insure the full appraised value, as approved by the
PHS awarding office, of the facility from risk of
partial and total physical destruction. When the
Federal participation in the construction or acquisition of real property covers only a portion of a
building, the insurance should cover the total costs
of the facility, because any damage to the building
could make the building unusable and could thus
affect the Federal interest. Insurance charges are
allowable charges to the grant, and this charge is
usually treated as an indirect cost. It may also be
charged to the grant as a direct cost if that is the
usual policy of the institution. The insurance policy
is to be maintained for the period of time the
property is owned by the grantee, unless there is a
statutory limitation on the Government's interest
(e.g., 20 years under certain construction grant
authorities). The cost of insurance coverage after
the period of grant support may not be charged to
the grant that provided funds for the construction
or acquisition of the real property.
Within 5 days of acquiring the real property, the
grantee shall submit to the applicable PHS awarding office(s) grants management office either copies
of the insurance policies or a written statement
signed by an authorized business official certifying
that the grantee (1) purchased the required insurance policies on the Government-funded facility and
(2) will maintain the insurance coverage at the full
appraised value of the facility throughout the time
the property is owned by the grantee or throughout
the usage requirement (e.g., 20 years). If the insurance policies are submitted, the policies shall
include a requirement that the insurance company
provide copies of policy changes to the applicable
PHS awarding office(s) grants management office.
The PHS awarding office may waive one or both of
the requirements above upon a showing that the
grantee is effectively self-insured against the risks
involved. The term "effectively self-insured" means that the grantee has sufficient funds to pay for any
damage to the facility, including total replacement
if necessary, or to satisfy any liens placed against
the facility. If the grantee claims self-insurance, the
grantee must provide to the PHS awarding office
some kind of certification that it has sufficient funds
available to replace/repair the facility or satisfy a
lien. This certification should state the source of the
funds, such as the institution's endowment or other
special funds set aside specifically for this purpose.
Real property acquired with PHS grant support may
not be conveyed, transferred, assigned, mortgaged,
leased, or in any other manner encumbered by the
grantee, except as expressly authorized in writing by the
PHS awarding office or its successor organization.
In the event of any default of any description under
a mortgage on the part of a grantee, the grantee shall
immediately provide the awarding office GMO with
both telephone and written notification of the default.
Alteration and renovation of real property undertaken under grant programs that have no specific
statutory alteration and renovation or modernization
authority are allowable. See "Alteration and Renovation"
All real estate transactions funded in whole or in
part with PHS financial assistance that require the use
of real estate appraisals, including but not limited to
appraisals to determine the Federal share of real
property and appraisals to determine required insurance
levels, must be performed by appraisers certified or
licensed by the applicable State in accordance with the
requirements established by Title XI of the Financial
1989 (FIRREA) (Public Law 101-73).
Under authority of Public Law 95-224, nonprofit
institutions of higher education and nonprofit organizations whose primary purpose is the conduct of scientific
research are exempted from further obligation to the
Federal Government for equipment and supplies
acquired under a grant for support of basic or applied
scientific research, although PHS has the right to
require transfer of title to certain equipment as provided in 45 CFR Part 74.136. The exemption does not
apply to other types of institutions nor to other types of
grants, e.g., training grants, regardless of the type of
institution. All other equipment and supplies acquired
under PHS grant-supported projects and activities are
considered nonexempt.
For items of equipment having a unit acquisition
cost of $1,000 or more (for grants subject to 45 CFR
Part 74) or $5,000 or more (for grants subject to 45
CFR Part 92), PHS has the right to require transfer of the equipment, including title, to the Federal Government or to an eligible third party named by the PHS
awarding office under the conditions specified in 45
CFR Parts 74.136 and 92.32, respectively. This right
applies to all types of grantees, including Federal
institutions, under all types of grants under the stipulated conditions.
Except in instances where PHS has exercised the
right of transfer of equipment, nonexempt equipment
shall be used as indicated in 45 CFR Parts 74.137 and
92.32 or disposed of in accordance with 45 CFR Parts
74.139 or 92.32, as applicable. For "other uses" as specified in 45 CFR Part 74.137(d), PHS awarding office
prior approval must be obtained before a recipient may
make equipment available for use part time for other
purposes while it is being used in accordance with 45
CFR Part 74.137(a), (b), or (c). Income generated by
such alternate uses is program income and is subject to
45 CFR Part 74.46 if it accrues afterward (see "Program
Income").
Exempt property still subject to the right of transfer
and nonexempt property before disposition may, if
necessary, be exchanged for replacement equipment
subject to the rules in 45 CFR Part 74.138.
Policies governing acquisition of equipment by for-profit grantees are contained in appendix 6.
Title to supplies acquired under a grant or subgrant
will vest, upon acquisition, in the grantee or subgrantee,
For governmental grantees subject to 45 CFR Part 92,
exceeding $5,000 in total aggregate fair market value
upon termination or completion of the award and if the
supplies are not needed for any other federally sponsored programs or projects, the grantee or subgrantee
shall compensate the PHS awarding office for its share.
For nongovernmental grantees subject to 45 CFR Part
74, if the unused supplies exceed $1,000 in total aggregate fair market value and are not needed for any
project or program currently or previously funded by
the Federal Government, the recipient may either retain
or sell the supplies and must compensate the PHS
awarding office for its share. See 45 CFR Part 74.141(b)
for details on computing the applicable credit.
Property acquired under a PHS grant-supported
project is subject to the requirements for internal
control specified in 45 CFR Part 74, Subpart H, and 45
CFR Part 92.32. States shall use, manage, and dispose
of equipment acquired under a grant in accordance with
State laws and procedures. All other grantees must
maintain an adequate equipment management system
1.	The grantee keeps records that adequately identify
items of equipment owned or held by the grantee
and state the current location of each item.
2.	At least once every 2 years, the grantee physically
inventories the equipment to verify that the items
covered by the records exist and are either usable
and needed or listed as surplus. A statistical sampling basis is acceptable.
3.	The grantee keeps the equipment in good condition
and has appropriate safeguards to prevent loss,
damage, and theft. Equipment shall be adequately
4.	Equipment acquired under PHS grants is also
subject to the equipment management requirements
in 45 CFR Parts 74.140 and 92.32(d), with the
following exemptions:
a.	Equipment acquired under a Federal statute
that permits title to equipment to vest in the
recipient without further obligation to the
Federal Government. However, the Federal
Government retains the right to require the
transfer of equipment, including title, having a
unit acquisition cost of $1,000 or more (for
grants subject to 45 CFR Part 74) or $5,000 or
more (for grants subject to 45 CFR Part 92) to
the Federal Government or an eligible non-Federal party.
b.	Equipment for which only depreciation or use
allowances are charged.
c.	Equipment donated entirely as a third-party, in-kind contribution.
d.	Equipment acquired primarily for sale or rental
rather than for use.
A recipient's failure to establish a control system as
required by 45 CFR Part 74.140(c) constitutes a material violation of the terms of the award. Therefore, the
rights mentioned below are in addition to any other
rights that PHS has in the event of a violation of grant
terms (see particularly 45 CFR Parts 74.7 and 74.113
and "Financial Management and Non-Federal Audits"
and "Suspension, Termination, and Withholding").
If nonexempt equipment with a unit acquisition cost
of $1,000 or more is damaged beyond repair, lost, or
stolen before disposition under 45 CFR Part 74.139, the
recipient may be accountable to PHS as described
If, at the time of the loss, theft, or damage, the
recipient does not have a control system in effect as
required by 45 CFR Part 74.140(c) and the damage,
loss, or theft was not due to an act of God (unless PHS
waives this position), the following applies:
1.	If the equipment is replaced, the rules on replacement equipment (45 CFR Part 74.138) will apply
except that the market value of the original equipment at the time it was damaged, lost, or stolen is
used instead of the amount received for trade-in or
2.	If the equipment is not replaced, an amount equal
to the Federal share of the original equipment times
the fair market value will be due PHS.
If the damage, loss, or theft occurs despite the fact
that the recipient has the required control system in
effect, or the damage, loss, or theft is due to an act of
God, there will be no obligation to PHS for the equipment unless the recipient received compensation for the
damage, loss, or theft from insurance, a reserve under
a self-insurance program, or some other source. If the
recipient is compensated and replaces the equipment, 45
CFR Part 74.138 applies to the replacement equipment.
If the recipient is compensated but does not replace the
equipment, 45 CFR Part 74.139(b) applies as though the
recipient had sold the equipment. The amount received
for trade-in or sale is considered the lesser value of the
amount of compensation or the market value of the
equipment at the time it was damaged, lost, or stolen.
Any amount due PHS upon the disposition of real
property or equipment may either be in the form of a
check made payable to PHS or, at the option of the
PHS awarding office, may be applied to allowable costs
of the project. This option may only be exercised where
the original project for which the property was acquired
is still receiving grant support from the same PHS
Governmental grantees must not use equipment acquired with grant funds to provide services for a fee to
compete unfairly with private companies that provide
equivalent services unless specifically permitted or
contemplated by Federal statute.
Under certain circumstances, federally owned
tangible personal property used under PHS contracts
may be made available to grantees under a revocable
license agreement. This allows for the transfer of such
property to the grantee when it is no longer needed
The revocable license agreement between PHS and
the grantee would provide for the transfer of the equipment for the period of the grant support under the
1.	Title to the property remains with the Federal
2.	The Federal Government reserves the right to
require the property to be returned to the Federal
Government should it be determined to be in the
3.	The use to which the grantee puts the property
4.	The property is controlled and maintained in
accordance with the requirements of 48 CFR Part
Since the revocable license provides for the transfer
of federally owned property, it may also be used to
transfer property from a for-profit grantee (where title
to property vests with the Federal Government) to a
nonprofit grantee.
PHS awarding offices and recipients of PHS grants
shall be governed by governmentwide regulations issued
by the Department of Commerce at 37 CFR Part 401
for patents and inventions arising out of activities
assisted by a PHS grant. In accordance with 37 CFR
401.1(b), no scholarship, fellowship, training grant, or
other funding agreement made by PHS primarily to an
awardee for educational purposes will contain any
provision giving PHS any rights to inventions made by
the awardee. The full text of the standard patents rights
clause contained in 37 CFR 401.14 is contained in
It is the policy of PHS to make available to the
public the results and accomplishments of the activities
that it funds. Therefore, it is incumbent upon project
directors, program directors, and principal investigators
to make results and accomplishments of their activities
available to the public. PHS prior approval is not
required for publishing the results of an activity under
a grant. Recipients shall place an acknowledgment of
PHS grant support and a disclaimer, as appropriate, on
any publication written or published with such support
and, if feasible, on any publication reporting the results
of or describing a grant-supported activity. An acknowledgment shall be to the effect that "This publication was
made possible by grant number ___________ from . . ."
or "The project described was supported by grant
number _______ from. . ." and "Its contents are solely
the responsibility of the authors and do not necessarily
represent the official views of the (name of awarding
agency)."
In the event that the recipient wishes to join with
PHS in a simultaneous news release announcing the
results of a project, the action should be coordinated
with the PHS awarding office.
Three reprints of publications resulting from work
performed under a PHS grant-supported project or
activity must be submitted to the PHS awarding office.
Except as otherwise provided in the terms and
conditions of the award, the recipient is free to arrange
for copyright without approval when publications, data, (4)
or other copyrightable works are developed under or in
the course of work under a PHS grant-supported
project or activity.
Any such copyrighted or copyrightable works,
including materials developed by fellows or trainees
under awards whose primary purpose is to further the
education or training of such individuals, shall be
subject to a royalty-free, nonexclusive, and irrevocable
license to the Government to reproduce, publish, or
otherwise use them and to authorize others to do so for
Federal Government purposes. Whenever any work
subject to this copyright policy may be developed in the
course of a grant (or with grant support) by a contractor
or subcontractor under a grant, the written agreement
(contract) must require the contractor to comply with
these requirements and can in no way diminish the
Government's right in that work. Recipients may
arrange for publication of initial reports of original
research, supported in whole or in part by PHS grant
funds, in primary scientific journals and copyright by the
journal unless the journal's copyright policy would
preclude individuals from making or having made by any
means available to them without regard to the copyright
of the journal and without royalty, a single copy of any
such article for their own use. (See 45 CFR Part 74,
Subparts F and O, 45 CFR Part 92.25, and the terms of
the award regarding the PHS rights in copyrightable
material and the disposition of royalties and other
income earned from a copyrighted work.)
Applicant organizations are expected to have
certain systems, policies, and procedures in place for
managing their own funds, equipment, and personnel
before receiving PHS grant support. Demonstration of
the applicant's management capabilities may be one of
the evaluative criteria used in the review process (see
section 4, "Internal Review Process"). PHS will allow
recipients to use their established organizational policies, consistently applied regardless of the source of
funds, provided that, at a minimum, they meet the
standards and requirements set forth in 45 CFR Part 74;
45 CFR Part 92, Subpart C; and those below.
FINANCIAL MANAGEMENT AND NON-FEDERAL AUDITS
Recipients are required to meet the standards and
requirements for financial management systems and
non-Federal audits set forth or referenced in 45 CFR
Part 74, Subpart H, and in 45 CFR Part 92.20, as
If the PHS awarding office determines either by
means of a preaward financial evaluation or through
postaward monitoring that a grantee's financial management systems do not meet these standards, award terms
more restrictive than those prescribed in 45 CFR Parts
74 and 92 may be imposed (see 45 CFR Parts 74.7 and
92.12). In these cases, the grantee will be notified in
writing by the PHS awarding office as to why the special
terms were imposed and what corrective action is
needed. These requirements pertain to both PHS grant
funds and funds representing non-Federal matching or
cost participation required as a term of the award.
Anyone who becomes aware of the existence or
apparent existence of fraud, abuse, and waste of PHS
financial assistance funds is encouraged to report this to
the HHS Inspector General's Office in writing or on the
Inspector General's Hotline. The toll free number is 1-800-368-5779. All telephone calls will be handled confidentially. Written complaints should be addressed to
Inspector General, HHS, Room 5250, 200 Independence
Avenue SW, Washington, DC 20201.
A State shall follow the same policies and procedures it uses for procurements from its non-Federal
funds. All other grantees must follow the requirements
in 45 CFR Part 74, Subpart P, or 45 CFR Part 92,
sections 41 through 48, as applicable. Consortium
arrangements are not procurements and are not subject
to these standards. However, they are subject to the
rules below on contracting for substantive programmatic
work and on written agreements.
Charges for equipment purchased must be made
against the grant budget period active on the date of
order even though the equipment is not actually received until a succeeding grant budget period. If for any
reason equipment that has been ordered in good faith
will not be received until after a project has terminated,
or will be received too late in the project for effective use, all reasonable effort must be made to cancel the
order or to charge the equipment to other funds.
Grant recipients must assure that their procurement
procedures include a property management/identification capability to avoid the purchase of unnecessary or
duplicative items (see 45 CFR Parts 74.161 and 92.36).
Contracts for Substantive Programmatic Work
Grantees may contract for the performance of
substantive programmatic work (see "Glossary") under
discretionary grants only with PHS prior approval.
Contracting for substantive programmatic work includes
the establishment of consortium agreements whereby a
research project is carried out by the grantee and one
or more cooperating institutions that are separate legal
entities independent of the grantee.
The grantee, as the direct and primary recipient of
PHS grant funds, must perform a substantive role in
carrying out project activities and not merely serve as a
conduit for an award to another party or to provide
funds to an ineligible party. Although grantees must
always maintain a substantive role in a project, there
may be instances when it is beneficial to have certain
substantive activities performed by others. In these
instances, the grantee must document the reasons why
it, rather than the ultimate performer of the activity(ies),
should be the direct recipient of the PHS funds; that all
costs, including indirect costs, proposed are reasonable
and commensurate with the work to be performed; and
that a formal agreement between the parties has been
entered into. Written approval from the PHS awarding
office must be obtained prior to the transfer of the
conduct of substantive programmatic activities to a third
In situations where a grant recipient enters into a
service-type contract the term of which is not concurrent
with the budget period of the award, the costs of the
contract may be charged to the budget period in which
the contract is executed even though some of the
services will be performed in a succeeding period,
provided the PHS awarding office has been made aware
of this situation either at the time of application or
through postaward notification, the project has been
recommended for a project period extending beyond the
current year of support, and there is a legal commitment
on the part of the recipient to carry out the terms of the
contract. Costs will be allowable only to the extent that
they are for services that are provided during the period
of PHS support. In order to limit liability in the event
that continued Federal funding is not forthcoming, it is
recommended that recipients insert a clause in such
contracts of $10,000 or less stipulating that payment
beyond the expiration of the current budget period is
contingent on continued Federal funding. The procurement standards prescribed by 45 CFR Part 74, Subpart
P, and 45 CFR Part 92.36(i)(2) specify termination
provisions for contracts in excess of $10,000.
The arrangements for the conduct of activities that
are contracted out shall be formalized in a contract
(written agreement) between the recipient and the third
party. The contract must, as applicable, state the
activities to be performed, the time schedule, the grant
policies and requirements that are applicable to the
contractor (these may be incorporated by reference
where feasible), other policies and procedures to be
followed, the maximum amount of money for which the
grantee (or subgrantee) may become liable to the third
party under the agreement, and the cost principles to be
used in determining allowable costs in the case of cost-type contracts. The contract must not affect the grantee's overall responsibility for the direction of the project
and accountability to the Government. The agreement
shall, therefore, reserve sufficient rights and control to
the grantee to enable it to fulfill its role.
Consortium arrangements must also be formalized
in a written agreement. A consortium arrangement
establishes a collaborative arrangement, not an assistance relationship, between a nongovernmental grantee
and the other consortium participants. However, the
other participants and the grantee's arrangements with
them are subject to the rules and policies in 45 CFR
Part 74 and this document that apply to subgrantees and
subgrants. A statement to this effect should be contained in the written agreement.
The following requirements are applicable to
contracting situations where PHS prior approval is
The information provided by the applicant or
recipient in its application or postaward request to
contract will form the basis for the awarding office
decision to approve or disapprove the contracting. Even
if the grant application referred to a contracting activity
but did not explicitly and clearly state a firm intention
on the part of the recipient to contract, a postaward
prior approval request must be initiated. This information must include--
1.	A description of the activities or functions involved.
2.	A justification for their performance by a third
3.	A breakdown of and justification for the estimated
costs, including the manner in which indirect costs,
if any, will be reimbursed.
4.	The type of contract expected to be awarded.
5.	The kinds of organizations or other parties solicited.
6.	The method of selection.
Contracting of activities, where prescribed in a grant
application or in a postaward request for approval
(where required) of such contracting, shall not be
approved by PHS unless the following criteria are met:
1.	The contracting will not reduce the intended role of
the grantee in having been selected as the direct
recipient of the grant.
2.	The contracting is necessary for the efficient and
effective accomplishment of grant objectives.
3.	The contracting is consistent with the intent and
purposes of the governing legislation.
4.	The contractor, if known, is considered by the
awarding office to be capable of performing the
5.	The grantee is considered by the awarding office to
be capable of managing the contracted activities.
6.	The estimated cost to PHS is reasonable in terms of
the activities to be performed under the contract.
7.	The contracting activity will not result in duplicate
or unreasonable charges for indirect costs.
If a selection has already been made, the selected
party must be identified, the reasons for selection must
be explained, and all relevant relationships known to
exist or planned between the third party and the grantee
must be fully described. Failure to disclose all relevant
information may result in the disallowance of payments
Where approval to contract was previously provided
and the activities are expected to continue without
significant change during a subsequent budget period,
the noncompeting continuation application need not
repeat this detailed information but should indicate that
the arrangements are expected to continue as previously
approved and should reflect the related budgetary
needs. Where previously approved contracted activities
are expected to change significantly, complete information concerning the proposed changes must be provided.
Approval of contracting may be deferred pending
submission of additional information by the applicant or
grantee or may be conditioned on the receipt of additional information. The applicant or recipient may, at its
option, submit the contract document as a means of
providing this information. If that option is elected, any
resulting PHS approval does not constitute a legal
endorsement of the contract document by the Federal
Government nor does such approval establish PHS as a
party to any of the contract provisions.
Contracting With Small and Minority Firms,
Women's Business Enterprises, and Labor Surplus Firms
Nongovernmental grantees must take all necessary
affirmative steps to assure that minority firms, women-owned firms, and labor surplus area firms are used
whenever possible. These affirmative steps include--
1.	Placing qualified small, minority, and women-owned
business enterprises on solicitation lists.
2.	Assuring that small, minority, and women-owned
business enterprises are solicited whenever they are
3.	Dividing total requirements, when economically
feasible, into smaller tasks or quantities to permit
maximum participation by small, minority, and
4.	Establishing delivery schedules, where the requirement permits, which encourage participation by
5.	Using the services and assistance of the Small Business Administration and the Minority Business
Development Agency of the Department of Commerce, as appropriate.
6.	Requiring the prime contractor, if subcontracts are
to be let, to take the affirmative steps listed above.
The Federal Government is not legally responsible for
accidents, illnesses, or claims arising out of any work
undertaken with the assistance of a PHS grant. The
grantee institution is expected to take necessary steps to
protect its personnel from hazardous conditions. Depending upon the particular safety hazard at issue,
grantees are expected to consult the following standards:
1.	Biosafety in Microbiological and Biomedical Laboratories, U.S. Department of Health and Human
Services, Centers for Disease Control, and the
National Institutes of Health. HHS Publication No.
(CDC) 88-8395.
2.	Recommendations for Prevention of HIV Transmission in Health-Care Settings. Morbidity and Mortality Weekly Report, August 21, 1987, Vol. 36, No. 2S.
3.	Update: Universal Precautions for Prevention of
Transmission of Human Immunodeficiency Virus,
Hepatitis B Virus, and Other Bloodborne Pathogens in Health-Care Settings. Morbidity and Mortality Weekly Report, June 24, 1988, Vol. 37, No. 24.
4.	Agent Summary Statement for Human Immunodeficiency Viruses (HIV); Included are HTLV-III,
LAV, HIV-1, and HIV-2. Morbidity and Mortality
Weekly Report, April 1, 1988, Vol. 37, No. S4.
5.	Recommendations for the Safe Handling of Parenteral Antineoplastic Drugs, NIH Publication No. 83-2621.
6.	NIH Guidelines for the Laboratory Use of Chemical
Carcinogens, NIH Publication No. 81-2385.
7.	Guidelines for Research Involving Recombinant
DNA Molecules (49 FR 46266 or latest revision)
and Administrative Practices Supplement. See section 4, "Recombinant DNA and Institutional Biosafety Committees."
8.	Procedures for the Domestic Handling and Transport
of Diagnostic Specimens and Etiologic Agents,
National Committee for Clinical Laboratory Standards, July 17, 1985, Vol. 5, No. 1.
9.	Standards issued pursuant to the National Occupational Safety and Health Act of 1970 (29 CFR Part
10.	Standards issued pursuant to the Atomic Energy
Act of 1954 (42 USC 2021).
Items 1 through 6 may be obtained from the
Division of Safety, National Institutes of Health, Building 31, Room 1C02, Bethesda, MD 20892. Item 8 may
be obtained from the National Committee for Clinical
Laboratory Standards, 771 East Lancaster Avenue,
Grantee organizations are not required to submit
documented assurance of their specific attention to the
above standards. However, where dictated by the
circumstances, grantees should be able to provide
evidence that similar health and safety standards have
been considered and, where necessary, have been put in
Recipient organizations must establish safeguards to
prevent employees, consultants, or members of governing bodies from using their positions for purposes that
are, or give the appearance of being, motivated by a
desire for private financial gain for themselves or others
such as those with whom they have family, business, or
other ties. Therefore, each institution receiving financial
support must have written policy guidelines on conflict
of interest and the avoidance thereof. These guidelines
should reflect State and local laws and must cover
financial interests, gifts, gratuities and favors, nepotism,
and other areas such as political participation and
bribery. These rules must also indicate the conditions under which outside activities, relationships, or financial
interests are proper or improper and provide for
notification of these kinds of activities, relationships, or
financial interests to a responsible and objective institution official. For the requirements of a code of conduct
applicable to procurements under grants, see the
procurement standards prescribed by 45 CFR Part 74,
Subpart P, and 45 CFR Part 92.36.
The rules of conduct must contain a provision for
prompt notification of violations to a responsible and
objective grantee official and must specify the type of
administrative action that may be taken against an
individual for violations. Administrative actions, which
would be in addition to any legal penalties, may include
oral admonishment, written reprimand, reassignment,
demotion, suspension, or separation. Suspension or
separation of a project director or program director or
other key official must be reported promptly to the
appropriate PHS awarding office (see "Changes in
A copy of the rules of conduct must be given to
each officer, employee, board member, and consultant
of the recipient organization who is working on the
grant-supported project or activity, and the rules must
be enforced to the extent permissible under State and
local law or to the extent to which the grantee determines it has legal and practical enforcement capacity.
The rules need not be formally submitted to and
approved by the PHS awarding office; however, they
must be made available for a review upon request, for
example, during a site visit.
PHS requires that grantees employ sound management practices to ensure that program objectives are
met and that project funds are properly spent. To the
extent possible, PHS places reliance on the controls and
policies established by grantees. However, in order to
fulfill their role in regard to the stewardship of Federal
funds, PHS awarding offices monitor their grants to
identify potential problems and areas where technical
assistance might be necessary. The names and telephone
numbers of the individuals responsible for monitoring
the programmatic and business management aspects of
a project or activity will be provided to the grantee at
Monitoring of a project or activity shall continue for
as long as PHS retains a residual financial interest in the
project or activity, whether or not PHS is providing
active grant support. This may include grantees that
continue to have an obligation for property acquired
under a PHS grant-supported project or activity and
owners of facilities constructed under a grant with a
statutory or regulatory requirement that the facility be
used for a specific purpose for a specified period of time. See also 45 CFR Part 74, Subparts I and J, 45
CFR Part 92.40, and "Reporting."
PHS grant programs in general have requirements
for both financial and programmatic performance
reporting. The GMO shall serve as the receipt point or
obtain assurances of receipt for performance reports,
financial status reports, and most other reports required
by the terms and conditions of the grant. However,
reports required only by payment offices and other
reports intended primarily for use by persons outside
the cognizant program and grants office need not be
sent to the GMO.
Both expenditure and progress reports are generally
submitted on an annual basis. At the discretion of the
PHS awarding office, such reports may be required at
more frequent intervals, but no more often than quarterly, unless indicated by a special provision on the NGA
according to 45 CFR Parts 74.7, 74.72(e), 92.12, 92.40,
and 92.41. The form or format of required progress
reports may vary depending on the type of grant
Other reporting requirements may include invention
reporting, reporting to the appropriate payment points
(in accordance with instructions received from the
payment office), and specialized programmatic reports.
Information on performance, expenditure, and invention
reporting is provided below.
Grantees are expected to publish and provide
information to the public on the objectives, methodology, and findings of their PHS-supported research
Programmatic Performance (Progress) Reports
45 CFR Part 74, Subpart J, and 45 CFR Part 92.40
set forth principles and procedures for reporting
program performance and allow PHS programs to
determine the frequency of such reports, within limits,
and to issue instructions for the content of such reports.
Annual progress reports must be submitted with all
applications for competing or noncompeting continuation support in accordance with the instructions accompanying the application forms, unless a different date for
submission of the annual performance report is specified
by the PHS awarding office. Some PHS programs may
require narrative and/or quantitative performance data
at more frequent intervals. Where quarterly or semi-annual reports are required, they are due 30 days after
the close of the period for which the report is being
The requirements for performance reporting under
construction grants or grants supporting both construction activities, including acquisition or modernization,
and nonconstruction activities will be specified by the
The original and two copies of a final progress
report must be submitted to the PHS awarding office
within 90 days after the expiration or termination of a
nonconstruction project or a project supporting both
construction and nonconstruction activities. The report
should be prepared according to instructions provided
by the PHS awarding office and should include, at a
minimum, a summary statement of progress toward the
achievement of the originally stated aims, a list of the
results (positive or negative) considered significant, and
a list of publications resulting from the project, with
plans, if any, for further publication. Three copies of
reprints of publications not previously submitted should
accompany the progress report.
Financial Status (Expenditure) Reports
A report of expenditures is required as documentation of the financial status of grants according to the
official accounting records of the grantee organization.
For all PHS nonconstruction grants, the FSR is used for
this purpose. The report, when required on an annual
basis, must be submitted for each budget period no later
than 90 days after the close of the budget period. The
PHS awarding office may require this report no more
frequently than quarterly, except as provided in 45 CFR
Parts 74.7, 74.72(e), and 92.12. Where quarterly or
semiannual reports are required, they are due 30 days
after the close of the period for which the report is
being submitted. The report must cover any extension in
time of the budget period authorized by the PHS
awarding office. The final FSR, which must be submitted within 90 days of the expiration or termination of a
grant unless an extension of time for submission is
allowed by the PHS awarding office, must have no
unliquidated obligations and must indicate the exact
balance of unobligated funds. Reports should be submitted to the GMO of the PHS awarding office. No more
than an original plus two copies shall be submitted.
Where an unobligated balance of Federal funds is
estimated to remain under a nonconstruction discretionary grant at the end of a budget period (as reported in
the grantee's continuation application), the GMO of the
PHS awarding office may select one of the following
1.	Subtract the estimated unobligated balance from the
Federal share of the approved budget amount proposed in the continuation award if one is to be
2.	Use the estimated unobligated balance to increase
the Federal share of funds authorized in the proposed continuation award for additional purposes requested and justified by the grantee and approved
by the PHS awarding office. (This option has been
extended to research grants subject to expanded authorities; see "Special Provisions for Research
Grants.")
3.	Withdraw the estimated unobligated balance from
the current award authority.
4.	Ignore the estimated unobligated balance when such
amount is $250 or less or there is good reason to
believe that the estimate may not be sound.
If the grantee estimates a deficit, the GMO and the
grantee should discuss administrative measures the
recipient should institute to ensure that the project does
not incur a deficit and the possibility of submission of a
request for supplemental funds.
Upon receipt of an FSR showing actual outlays and
obligations of funds, the GMO, for ongoing projects,
will compare the total of any unobligated balance shown
and the funds awarded for the current budget with the
PHS share of the approved budget for the current
If the funds available exceed the PHS share of the
approved budget for the current budget period, the
GMO may select one of the following options:
1.	Withdraw the excess funds by issuing a revised
NGA for the current budget period.
2.	In response to a written request from the grantee,
revise the current NGA to authorize the grantee to
spend the excess funds for additional approved
3.	Notify the grantee in writing that it is restricted
from using the excess funds in the current budget
period and that the excess funds will be taken into
account when the next continuation award is made.
If the funds available are more than $250 short of
the PHS share of the approved budget for the current
budget period, the GMO will either--
1.	Make an administrative supplemental award as
necessary to make the available PHS funds equal to
the PHS share of the approved budget, unless the
awarding office has information which would
indicate that the additional funds are not needed by
2.	Negotiate with the grantee a mutually satisfactory
revised budget and issue a revised NGA to make
the PHS share of the approved budget equal to the
PHS funds available.
If funds are available for obligation, the awarding
office should make a supplemental award to provide
additional funds to the grantee in accordance with item
1 immediately above. If funds are not available for
obligation or if the additional funds are not needed by
the grantee, a revised budget must be negotiated and
documented in accordance with item 2.
If the funds available are less than $250 short of the
PHS share of the approved budget, the awarding office
will normally not make any adjustment unless specifically requested by the grantee.
For both estimated and actual expenditure situations, the GMO is to select the options that will utilize
the unobligated balance in the most responsible and
expeditious manner available to promote program
objectives without creating an unjustifiably high level of
continuation costs for succeeding appropriations.
Unobligated funds remaining at the end of a project
period that will not be expended revert to the Federal
Government. If paid to the grantee, such amounts must
be returned to the Federal Government or must be
reflected by an appropriate accounting adjustment in
accordance with instructions from the GMO of the PHS
awarding office or from the payment office. Neither
withdrawal of funds awarded on the basis of the grantee's underestimate of the unobligated balance in a prior
period nor withdrawal of the unobligated balance as of
the expiration of a grant constitutes termination (see
"Suspension, Termination, and Withholding").
PHS expects recipients to maintain accurate and
timely accounting records with the proper classification
of expenditures. Through full utilization of the 90 days
available for submission of annual and final FSRs, the
grantee should be able to file accurate reports and
reduce later amendments and revisions to a minimum.
When a revised report is necessary, the following
will apply. Revised expenditure reports representing
additional claims by the grantee that were not reported
to PHS within the 90 days provided may be submitted
to the GMO of the PHS awarding office with an
explanation. This should be done as promptly as possible but no later than 1 year from the due date of the
original report, i.e., 15 months following the end of the
budget period. Any such revised report received after
that date will not be accepted and will be returned to
the grantee. Where the submission of a revised final
FSR results in additional claims by the grantee, PHS
will consider the approval of such claims subject to the
1.	The charges must represent allowable costs under
the provisions of the grant.
2.	There must have been an unobligated balance for
the given budget period that is sufficient to cover the additional claim. Such a claim may be considered regardless of whether the unobligated balance
has been moved forward to offset the award for a
subsequent budget period.
3.	Funds must be available from the applicable
In the case of the submission of a revised annual
FSR, the policy stated above governs if, as a result of
less carryover funds than anticipated, a continuation
budget period has been underfunded. When the revision
results in a balance due to PHS, the revision must be
submitted to the GMO of the PHS awarding office
whenever the overcharge is discovered, no matter how
long the lapse of time since the original due date of the
report. Whenever an adjustment is to be made, the PHS
awarding office will advise the grantee of actions to be
taken to reflect the adjustment.
All inventions made in the course of or under any
PHS research grant shall be promptly and fully reported
to the Assistant Secretary for Health, HHS, and in any
event shall be reported prior to the publication of any
description of the invention. The report must be completed in accordance with instructions provided by the
PHS awarding office. See appendix 6 for invention
reporting requirements applicable to SBIR awards.
In addition to immediate invention reporting, each
application for competing or noncompeting continuation
support of a PHS grant-supported research project must
include either a listing of all inventions made during the
preceding budget period or a certification that no inventions were made during the applicable period.
A Final Invention Statement and Certification is
required within 90 days following the expiration or
termination of support on an applicable project. All
inventions that were conceived or first actually reduced
to practice during the course of work under the project
from the original effective date of support through the
date of expiration or termination, whether or not
previously reported, shall be listed on the statement.
Each statement will require the signature of the project
director or principal investigator and an official authorized to sign on behalf of the grantee organization.
Grantees are allowed a reasonable period of time in
which to submit required financial and performance
reports (see 45 CFR Part 74, Subparts I and J, and 45
CFR Part 92.40 and 92.41). Failure to submit required
reports within the time allowed may result in suspension
or termination of an active grant, withholding of additional awards for the project, or other enforcement
actions, including withholding of payments or converting to the reimbursement method of payment (see section
5, "Payment"). Continued failure to submit required
reports may result in the imposition of special award
provisions or cause other eligible projects or activities
involving that grantee organization or the individual
responsible for the delinquency to not be funded.
If at any time the grantee provides an acceptable
explanation regarding the late submission of a report,
the PHS awarding office may waive the reporting
requirement or set a new due date. However, once a
report becomes overdue, such action will be taken by
the PHS awarding office only if the reasons for the
grantee's inability to submit the report in a timely
manner are legitimately beyond its control or if the
purposes for which the report is to be used can be
accomplished through other means. Failure to meet a
new date may result in the awarding office taking action
as described in the paragraph above.
Submission of a required report does not necessarily
fulfill the grantee's responsibility. Such reports must also
meet the content requirements in regulations or other
grant terms. Where reports need to be revised in order
to be accepted, the grantee must provide a revised
report by the due date indicated by the PHS awarding
office or immediate fund cutoff or other enforcement
actions may be taken with regard to the delinquency.
If a report required to be submitted to a payment
office becomes overdue, the payment office, following
reasonable notice to the grantee, will make no further
payments to the grantee until the overdue report is received or the delinquency is corrected by waiving the
reporting requirements or setting a new due date. Cash
withheld during the period of delinquency, if otherwise
payable, will be released when payments are resumed.
Financial and programmatic records, supporting
documents, statistical records, and all other records of
a grantee or subgrantee that are required by the terms
of a grant or subgrant or may reasonably be considered
pertinent to a grant or subgrant, must be retained for
the time period specified in 45 CFR Part 74, Subpart D,
or 45 CFR Part 92.42, as applicable. The determination
as to when the retention period begins and ends differs
for some types of grant-related records, e.g., property
records. Access to such records is also governed by the
provisions of 45 CFR Part 74, Subpart D, and 45 CFR
Part 92.42. See 45 CFR Part 74, Subpart P, and 45 CFR
Part 92.36 in regard to record retention and access
requirements for contracts under grants.
SUSPENSION, TERMINATION, AND WITHHOLDING
When a grantee has materially failed to comply with the terms and conditions of a grant, PHS may suspend
the grant, terminate the grant for cause, or take such
other remedies as may be legally available and appropriate in the circumstances. PHS prefers that deficiencies
be corrected whenever practicable. Therefore, PHS will
normally inform the grantee of the deficiency and
provide sufficient opportunity for it to be corrected.
A decision by a PHS awarding office to terminate
a grant may be made if appropriate corrective action (or
the acceptable promise of such action) is not taken
during the period of suspension or if the deficiency is so
serious as to warrant immediate termination. Immediate
termination action may also be taken if deemed to be in
the best interest of the Government. 45 CFR Part 74,
Subpart M, and 45 CFR Part 92.43 contain the policies
that pertain to suspension and termination. Termination
for cause may be appealed under the PHS and HHS
grant appeals procedure (see "Grant Appeals
Procedures").
Grants may also be terminated by the grantee or by
PHS with the consent of the grantee. If the grantee
unilaterally terminates a portion of the grant, PHS may
conclude that the remaining portion of the grant will not
accomplish the purposes for which the grant award was
made. In such cases, mutual agreement shall be sought
to reinstate all or a part of the terminated portion or
terminate the grant in whole. If neither of these agreements can be reached, PHS may initiate procedures to
terminate the grant for cause. If a grant is terminated by
PHS with the consent of the grantee, the grantee shall
not incur new obligations for the terminated grant, or
portion thereof, after the effective date of the termination. The grantee shall also cancel as many outstanding
obligations as possible. PHS shall allow full credit to the
grantee for the Federal share of the noncancelable
obligations properly incurred by the grantee prior to
Withholding of support means a decision not to
make a noncompeting continuation award within a
previously approved project period. Withholding may
occur for the following justifiable reasons:
1.	A grantee is delinquent in submitting required
2.	Adequate Federal funds are not available to support the project.
3.	A grantee fails to show satisfactory progress in
achieving the objectives of the project.
4.	A grantee fails to meet the terms of a previous
5.	A grantee's management practices fail to provide
adequate stewardship of Federal funds.
6.	Any reason which would indicate that continued
funding would not be in the best interests of the
Where a noncompeting continuation award is
denied (withheld) because the grantee failed to comply
with the terms of a previous award, such a determination may be appealed by the grantee. See also section 4,
"Public Policy Requirements, Debarment and
HHS also has in effect regulations at 45 CFR Part
76 that provide for the debarment and suspension of
individuals and institutions from eligibility to receive
grants or other forms of financial assistance or contracts
under HHS discretionary programs. (Also see Executive
Order 12549, Debarment and Suspension.)
Whenever a grant or cooperative agreement is suspended or terminated for cause, or a noncompeting
continuation award is withheld for failure to comply
with the terms of a previous award, this information will
be shared with other HHS components through the
HHS Alert System in order that special precautions may
be taken if the award of additional grants or cooperative
agreements to that organization is contemplated.
Sanctions imposed as a result of misconduct in science,
including research, research training, and related
activities funded by PHS, will also be reported to the
HHS Alert System.
An audit is a systematic review or appraisal made
to determine whether internal accounting and other
control systems provide reasonable assurance that--
1.	Financial operations are properly conducted.
2.	Financial reports are presented fairly and
3.	Applicable laws, regulations, and other grant terms
4.	Resources are managed and used in an economical
5.	Desired results and objectives are being achieved in
Any or all of these elements may be reviewed, at
the discretion of the Federal Government, during or
after PHS support of the activity. However, 45 CFR
Part 74, Subpart H, and 45 CFR Part 92.26 require
recipients to comply with OMB requirements for audits
conducted by, or at the discretion of, the recipient. The
OMB requirements explain the scope, frequency, and
other aspects of the audit. OMB Circular A-128, Audits of State and Local Governments, contains the requirements for audits of governmental grantees.
OMB Circular A-133, Audits of Institutions of
Higher Education and Other Nonprofit Institutions, issued
March 8, 1990, establishes the audit requirements for
institutions of higher education and other nonprofit
institutions receiving Federal awards. The main features
1.	Nonprofit institutions receiving Federal awards of--
a.	$100,000 or more a year shall have an audit
made in accordance with the Circular. However, if the awards are under one program, the
institution can have either an audit made in
accordance with the Circular or have an audit
made of the one program only. Individual
program audits must conform to the reporting
requirements set forth in the General Accounting Office publication, Government Auditing
Standards, 1988 revision.
b.	At least $25,000 but less than $100,000 a year
must have an audit made in accordance with
the Circular or the requirements of each Federal award.
c.	Less than $25,000 a year are exempt from
Federal audits but must have their records
available for review by Federal agencies.
2.	The audits shall usually be performed annually but
not less frequently than every 2 years. The audits
must be on an organizationwide basis and performed by an independent auditor in accordance
with governmental auditing standards.
3.	Audit reports must comprise at least the following
a.	Financial statements and a schedule of Federal
b.	A report on the nonprofit institution's internal
control structure and the assessment of control
c.	A report on the institution's financial compliance with laws and regulations.
4.	An audit made in accordance with OMB Circular
A-133 shall be in lieu of any financial audit required
under individual Federal awards. However, a
Federal agency shall make any additional audits
necessary to carry out its responsibilities under
Federal law or regulation. Any additional audits
shall build upon work performed by the independent auditor. Nonprofit institutions receiving at least
$25,000 a year in Federal awards are required to submit a copy of audit reports to the National
External Audit Resources, HHS Office of Audit
Services, 323 West 8th Street, Lucas Place, Room
514, Kansas City, MO 64105.
PHS encourages those grantees that procure
certified public accountant (CPA) services to carefully
assess their procurement practices and ensure that their
agreements with the CPA specify the extent of the audit
to be performed, the auditing standards to be used, and
the data to be provided in the reports. The grantee
organizations should consider the following in awarding
audit services contracts to CPA firms:
1.	Obtain competition by ensuring that at least two
CPA firms are qualified and considered in the
2.	Include all audit requirements in comprehensive
solicitations to interested firms and specify the
criteria to be used for selection of the firm.
3.	Enter into written agreements that hold both the
grantee organization and the CPA firm accountable.
4.	Consider using multiyear agreements, preferably of
a 5-year duration.
5.	Obtain advice of financial officials--qualified personnel with specialized knowledge of governmental
accounting and auditing--to assist in planning and
implementing the procurement process.
6.	Consider the benefits of using audit committees
both to help plan and to oversee the procurement
All recipients must submit copies of non-Federal
audits to the National External Audit Resources, HHS
Office of Audit Services, 323 West 8th Street, Lucas
Place, Room 514, Kansas City, MO 64105.
See section 7 for the allowability of the costs of
grantee (subgrantee)-initiated audits.
Recipients must follow a systematic method for
ensuring timely and appropriate resolution of audit
findings and recommendations, whether discovered as a
result of Government-initiated or recipient-initiated
Grantees are usually allowed 30 days from the date
of request to respond to the responsible audit resolution
official (Action Official) concerning audit findings.
Failure to submit timely responses may result in cost
disallowance or other actions by PHS or HHS. At the
completion of the audit resolution process, the grantee
will be notified of the Action Official's final decision.
The grantee may appeal this decision according to the applicable appeals procedures (see "Grant Appeals
Procedures"). Refunds owed to the Government as a
result of audit disallowances must be made in accordance with instructions issued by the Action Official or
PHS grants will be closed out as soon as possible
after expiration of a grant that will not be extended or
after termination of a grant in accordance with 45 CFR
Part 74, Subpart M, and 45 CFR Part 92.50. Closeout
includes timely submission of all required reports;
disposition of real property, equipment, and supplies;
adjustments for amounts due the grantee; and adjustments for amounts due PHS and in the hands of
grantees for any reason, including unobligated balances.
All required reports from grantees are due within 90
days of the end of grant support. The PHS awarding
office will issue instructions concerning the disposition
of unobligated balances in the hands of the grantee. For
those organizations receiving their funds through the
HHS Payment Management System (PMS), all final
reports must be submitted to PMS and to the PHS
awarding office as appropriate. It is the responsibility of
the grantee to reconcile reports submitted to PMS and
to the PHS awarding office. Closeout of a grant does
not affect the requirements for equipment accountability
or record retention nor does it affect the Federal
Government's right to conduct an audit and recover
amounts based on the results of the audit.
HHS has a policy permitting grantees to appeal
certain postaward adverse administrative decisions made
by HHS officials (see 45 CFR Part 16).
PHS has established a first-level grant appeal procedure for discretionary grants and cooperative agreements that must be exhausted before an appeal may be
filed with the HHS Appeals Board. The following
adverse determinations may be appealed under the
authority of 42 CFR Part 50, Subpart D:
1.	Termination, in whole or in part, of a grant for
failure of the grantee to carry out its approved
project in accordance with the applicable law and
the terms and conditions of such assistance or for
failure of the grantee otherwise to comply with any
law, regulation, assurance, term, or condition
applicable to the grant.
2.	Determination that an expenditure not allowable
under the grant has been charged to the grant or
that the grantee has otherwise failed to discharge its
obligation to account for grant funds.
3.	Denial of a noncompeting continuation award under
the project period system of funding where the
denial is for failure to comply with the terms of a
previous award.
4.	Determination that a grant is void.
As a first step in appealing an adverse determination, the grantee must submit a request for review to the
appropriate PHS official indicating the nature of
disagreement with the adverse determination and must
follow the procedures contained in the notification
concerning the information to be supplied. For appeals
of adverse determinations under awards made by PHS
regional offices and OASH staff offices, the requests
must be submitted to the Director, Division of Grants
and Contracts, ORM/OM/PHS, Room 17A-39, Parklawn
Building, 5600 Fishers Lane, Rockville, MD 20857. For
appeals of adverse decisions under awards made by the
PHS headquarters agencies, the requests must be
submitted to the appropriate agency head or designee.
The grantee's request for review must be postmarked no later than 30 days after the postmark of the
written notification of the adverse determination.
A written decision based on the appeals committee's or board's findings will be prepared for the
signature of the committee chairman and members. If
the review committee's decision is adverse to the
grantee or if a grantee's request for review is rejected
on jurisdictional grounds, the grantee has the option of
submitting a request to the Departmental Appeals
Board for a further review of the case by that board in
accordance with the provisions of 45 CFR Part 16. (See
also section 4, "Debt Collection.")
Disputes related to the establishment of indirect
cost rates, research patient care rates, and certain other
cost allocations used in determining amounts to be
reimbursed under PHS grants--e.g., cost allocation plans
negotiated with State or local governments; computer,
fringe benefit, and other negotiated special rates--may
be appealed in accordance with the HHS procedures
contained in 45 CFR Part 75. That regulation establishes
the first level of review by the Regional Director in each
HHS regional office. If the decision under 45 CFR Part
75 is adverse to the grantee, it may request a further
review by the Departmental Appeals Board under 45
Because the jurisdiction of the PHS Grant Appeals
Board (42 CFR Part 50, Subpart D) differs from that of
the HHS Appeals Board (45 CFR Part 16) in several
respects, two levels of appeal are not always available to
grantees. The jurisdiction of the PHS Board is limited
to discretionary project programs and to the adverse
administrative determinations stated above.
PHS POLICY RELATING TO DISTRIBUTION OF
UNIQUE RESEARCH RESOURCES PRODUCED
WITH PHS FUNDING
frequently develop unique research resources. Categories of these resources include synthetic compounds,
organisms, cell lines, viruses, cell products, and cloned
DNA as well as DNA sequences, mapping information,
crystallographic coordinates, and spectroscopic data.
Specific examples include specialized and/or genetically
defined cells, including normal and diseased human
cells; monoclonal antibodies; hybridoma cell lines;
microbial cells and products; viruses and viral products;
recombinant nucleic acid molecules; DNA probes;
nucleic acid and protein sequences; certain types of
animals such as transgenic mice; and intellectual property such as computer programs.
that it funds. Restricted availability of unique resources
upon which further studies are dependent can impede
the advancement of research and the delivery of medical
care. Therefore, when these resources are developed
with PHS funds and the associated research findings
have been published or after they have been provided to
the agencies under contract, it is important that they be
made readily available for research purposes to qualified
individuals within the scientific community. This policy
applies to grants, cooperative agreements, and contracts.
Investigators who believe that they will be unable to
implement this policy should promptly contact the
appropriate PHS Program Administrator to discuss the
circumstances, obtain information that might facilitate
compliance with the policy, and reach an understanding
in advance of the subsequent award. In order to facilitate the availability of unique or novel biological materials and resources developed with PHS funds, investigators may distribute the materials through their own
laboratory or institution or submit them, if appropriate,
to entities such as the American Type Culture Collection or other repositories. In the case of unique biological information such as DNA sequences or crystallographic coordinates, investigators are expected to submit
them to the appropriate data banks, because they
otherwise are not truly accessible to the scientific
community. When distributing unique resources, investigators are to include pertinent information on the
nature, quality, or characterization of the materials.
Investigators must exercise great care to ensure that
resources involving human cells or tissues do not
identify original donors or subjects, directly or through
identifiers such as codes linked to the donors or
The goal of some programs, e.g., the Human
Genome Program, are such that applicants for certain
projects may be required to discuss plans for the sharing
of data and materials in their applications. These plans
will undergo review by program staff and any applicable
national advisory council prior to award.
Institutions and investigators may charge the
requester, if necessary, for the reasonable cost of
production of unique biological materials and for
packaging and shipping. Such costs may include personnel, supplies, and other directly related expenses.
Investigators should note, however, that such a charge
accrues as general program income. This should not be
an impediment to the distribution of materials, but
investigators and institutions are advised that, for grants
and cooperative agreements, the income is governed by
45 CFR Parts 74 and 92 and must be reported on the
FSR. Questions regarding these policies and the treatment of income should be directed to the awarding
office GMO.
Inventions and Commercialization
Federal policy encourages the commercialization of
the products of research developed as a consequence of
Federal funding; therefore, the intent of this policy is
not to discourage, impede, or prohibit the organization
that develops unique research resources or intellectual
property from commercializing the products. Investigators may make their materials available to others with
appropriate restrictions and licensing terms as they and
their institutions deem necessary.
Institutions are reminded that some of these products may be inventions subject to the various laws and
regulations applicable to patents and need to be reported. The terms for licensing of unpatented research
products such as cell lines, monoclonal antibodies, and
other materials and products should generally be no
more restrictive than would have been the case had they
been patented, for example, only if there is full public
disclosure of the invention/discovery, availability through
a repository, and written agreement to end all fees and
constraints after 17 years. When reporting is required,
it should occur at the earliest possible time. (See Public
Law 96-517, Public Law 98-620, and 37 CFR Part
401.)
(1) In the case of awards from multiple PHS awarding offices, the
required documents should be submitted to the Grants Policy Branch,
OASH, Room 17A-45, Parklawn Building, 5600 Fishers Lane,
Rockville, MD 20857 (2) Policy regarding postaward changes to construction grants is
specified on page 8-8.
(3) For subgrants and contracts under grants, the prior approval
authority is usually the grantee. However, the grantee may not
approve any action or cost that is inconsistent with the purpose or
terms of the Federal grant. If an action by a subgrantee or contractor
will result in a change in the overall grant project or budget requiring
granting agency approval, the grantee shall obtain that approval from
PHS before giving its approval to the subgrantee or contractor.
(4) For this purpose, "data" means writings, films, sound recordings,
pictorial reproductions, drawings, designs, or other graphic representations, procedural manuals, forms, diagrams, work flow charts,
equipment descriptions, data files, data processing or computer
programs, statistical records, and other research data.