Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
RES 2021-1280 - Agmt with the Salvation Army for the A Way to Work Program (October 1, 2021 to December 31, 2022)
City Clerk Office Use Only: RESOLUTION NO. 2O2/ J21J Publication Date(if ap—liica le): Agenda Date: I 2— / 2-02 1 Department: P///1 fl,il, t Submitter: Pa(llaidt5 CITY OF OMAHA LEGISLATIVE CHAMBER Omaha, Nebraska RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: WHEREAS, the City annually receives Community Development Block Grant funds under Title I of the Housing and Community Development Act of 1974, as amended, for the purpose of benefiting low- and moderate-income residents, eliminating slums and blight, and for other urgent community development needs; and, WHEREAS, the Mayor recommended various projects in the 2021 Consolidated Submission for Community Planning and Development Programs (Consolidated Plan), including the funding of The Salvation Army, a Nebraska non-profit corporation, "A Way to Work" Program (Project); and, WHEREAS, the City approved the 2021 Consolidated Plan on May 18, 2021 by Resolution No. 2021-0524, $86,758.00 was allocated to the 2021 Project; and, WHEREAS, The Salvation Army operates an excellent program providing employment, job training and case management to individuals experiencing homelessness; and, WHEREAS, it is in the best interest of the City of Omaha to enter into an agreement with The Salvation Army, to provide partial funding support for its"A Way to Work" Program as part of the City's economic development program. RESOLUTION NO. 2021— )2&D NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: THAT, the attached Agreement, as recommended by the Mayor, between the City of Omaha and The Salvation Army, a Nebraska non-profit corporation, 3612 Cuming Street, Omaha, Nebraska 68131, in the amount of $86,758.00, for partial funding of its "A Way To Work" Program for the period from October 1, 2021, through December 31, 2022, is hereby approved. Funds shall be paid from the FY 2021 Community Development Block Grant Program, Fund No. 12186, Organization No. 128072, Award No. 100864. 3159 dlh APPROVED AS TO FORM: /41/4ZoZ( A STANT CI"T ORNEY DATE Adopted: DEC 07 'ail 7-0 Attest: City Clerk Approved: A. T i N a r CDBG FUND GRANT AGREEMENT BETWEEN CITY OF OMAHA AND THE SALVATION ARMY A NON-PROFIT CORPORATION FOR PARTIAL SUPPORT OF "A WAY TO WORK" PROGRAM— A JOB TRAINING PROGRAM OCTOBER 1, 2021 THROUGH DECEMBER 31, 2022 Fiscal Year Funds 2021 TABLE OF CONTENTS SECTION 1 DEFINITIONS AND ABBREVIATIONS SECTION 2 RESPONSIBILITIES OF CONTRACTOR 2.01 Overall Project Performance 2.02 Proposed Goals 2.03 Project Budget 2.04 Term of Agreement SECTION 3 CONDITIONS FOR RECEIPT OF CITY FINANCING 3.01 Documents Required by City 3.01.1 Evidence of Leveraged/Matching Funds 3.01.2 Minority/Women Owned Business Enterprise Plan 3.01.3 Eligible Contractors 3.01.4 Funding Compliance Deadline SECTION 4 PROJECT RESPONSIBILITIES OF THE CONTRACTOR 4.01 Eligible Use of Funds 4.02 Ineligible Costs 4.03 Terms and Conditions 4.04 Breach of Agreement 4.05 Affirmative Marketing Policy SECTION 5 GENERAL ADMINISTRATION REQUIREMENTS OF CONTRACTOR 5.01 Financial Management 5.02 Documentation and Record-Keeping 5.03 Reports 5.04 Record Retention 5.05 Personnel and Participant Conditions 5.06 Match Funds 5.07 Limited English Proficiency (LEP) SECTION 6 CONTRACTOR'S COMPLIANCE WITH OTHER FEDERAL REGULATIONS 6.01 Environmental Review 6.02 Uniform Relocation Act 6.03 Federal Funding Accountability and Transparency Act 6.04 Drug Free Workplace 1 SECTION 7 RESPONSIBILITIES OF THE CITY 7.01 Performance Monitoring 7.02 Payments 7.03 Progress Payments 7.04 Technical Assistance SECTION 8 MUTUAL AGREEMENTS BETWEEN CITY AND CONTRACTOR 8.01 Release of Information Laws 8.02 Applicable Laws 8.03 Interest of the City 8.04 Independent Contractor 8.05 Captions 8.06 Merger 8.07 Modification 8.08 Assignment 8.09 Strict Compliance 8.10 Termination and Enforcement 8.11 Reversion of Assets 8.12 Indemnification 8.13 Unenforceable Provisions 8.14 Disclosure of Lobbying 8.15 Notices 8.16 Applicability SECTION 9. DEFAULT PROVISIONS 9.01 Remedies SCHEDULE OF EXHIBITS AND ATTACHMENTS - 3 - CDBG AGREEMENT ("A WAY TO WORK" PROGRAM) THIS AGREEMENT is entered into by and between the City of Omaha and The Salvation Army, a Non-profit Corporation, 3612 Cuming Street, Omaha,Nebraska 68131 based on terms, conditions and provisions as set forth below. RECITALS: WHEREAS,the City of Omaha(hereinafter referred to as"the City") is a municipal corporation located in Douglas County, Nebraska, and is organized and existing under the laws of the State of Nebraska, and is authorized and empowered to exercise all powers conferred by the State constitution, laws, Home Rule Charter of the City of Omaha, 1956, as amended, and local ordinances, including but not limited to, the power to contract; and, WHEREAS, the City of Omaha has applied for and received Community Development Block Grant (hereinafter referred to as "CDBG") Funds under Title I of the Housing and Community Development Act of 1974, as amended, authorizes the use of CDBG funds for the development of viable urban communities by providing decent housing, a suitable environment, and creating and expanding economic development opportunities, principally for the purpose of benefiting low- and moderate- income persons; and, WHEREAS, The Salvation Army, "A Way to Work" Program was included in the City's FY 2021 Consolidated Submission for Community Planning and Development Programs, as amended, (hereinafter referred to as "Consolidated Plan"), outlining priorities, programs and funding allocations for the 2021-2022 program year, approved by the City Council on May 18, 2021 by Resolution No. 2020-0524; and, -4 - WHEREAS,The Salvation Army has submitted an application that provides for partial financing of the "A Way to Work" Program for the period from October 1, 2021 through December 31, 2022 (hereafter referred to as the "Project"); and, WHEREAS, the Consolidated Plan identified that this Project meets Community Development Block Grant national objective benefiting low- and moderate-income limited clientele; and, WHEREAS,the Project is a CDBG Fund-eligible activity in that the Project qualifies as a Public Service [24 CFR 570.201(e)], serves a low- and moderate-income limited clientele and facilitates economic development by providing partial support for employment services related to jobs training and case management for individuals experiencing homelessness; and, WHEREAS, the City wishes to enter into an agreement with The Salvation Army to assist the City in utilizing such CDBG funds; and, WHEREAS, the "A Way to Work" Program is included in the FY 2021 CDBG Program and $86,758.00 was allocated to the Project; and, WHEREAS, The Salvation Army has indicated the total estimated cost to administer the Project to be $204,781, consisting of a $86,758.00 CDBG Grant Fund, $118,023 in private financing and corporate donations; and, WHEREAS, The Salvation Army is organized to engage in such activities as the board of directors may from time to time determine to be appropriate in undertaking a comprehensive and coordinated approach to providing services to homeless individuals; and, WHEREAS, it is in the best interest of the City and the residents thereof that the City enter into an Agreement with The Salvation Army to provide CDBG funding in the amount not to exceed $86,758.00 for the Project. - 5 - NOW,THEREFORE,IN CONSIDERATION OF THESE MUTUAL COVENANTS,the parties do hereby agree as follows: SECTION 1. DEFINITIONS AND ABBREVIATIONS. The following terms shall have the following meanings for all purposes in this Agreement: 1.01 "City" shall mean—the City of Omaha, a Nebraska Municipal Corporation. 1.02 "Contractor" shall mean—The Salvation Army, a non-profit corporation, 3612 Cuming Street, Omaha, Nebraska 68131 (see Exhibit"A"). 1.03 "Director" shall mean—the Planning Director of the City of Omaha. 1.04 "Recipient" shall mean—the City of Omaha. 1.05 "Subrecipient" shall mean — a public or private non-profit agency, authority or organization receiving CDBG funds to undertake eligible activities. In this Agreement, the Subrecipient is The Salvation Army. 1.06 "HUD" shall mean—the U.S. Department of Housing and Urban Development. 1.07 "CDBG Grant Funds" shall mean— that portion of the Community Development Block Grant Program funds awarded to the City, subject to and conditioned upon actual receipt of same by the City of Omaha,as may be available to grant during the 2021/2022 program year for the use specified herein in an amount not to exceed $86,758.00 payable from the CDBG Economic Development Program, Award No. 100864, Fund No. 12186 Organization No. 128072, subject to the terms,conditions and requirements of said Grant Fund Agreement. 1.07.1 "Grant"shall mean—Community Development Block Grant funds made subject to terms,conditions and provisions of this Grant Agreement. The grant amount of$86,758.00 shall be unsecured. The Salvation Army shall perform project responsibilities as outlined in Section 2.01 herein during the term of this agreement. In the event these are unencumbered funds at the expiration of term of the agreement,these funds shall be de-obligated by the City. In the event of default, gross negligence or other substantial non-compliance, the amount of the Grant shall be due and payable immediately from The Salvation Army to the City. 1.08 "A Way to Work" or "Project" shall mean— a program administered by The Salvation Army that provides employment, training and case management services to those individuals experiencing homelessness to assist them in obtaining affording permanent housing. Participants are employed by The Salvation Army for 90 days/22 hours a week. The "Project" will be located at 6101 NW Radial Highway, Omaha, Nebraska 68104. - 6 - i 1.09 "Project Completion" shall mean (1) the date all funds have been received by the Subrecipient, and allocated to the Project, (2) the date all funds have been disbursed and (3) the date all specified goals have been satisfied. 1.10 "Project Close Out" shall mean—the dates all project CDBG funds have been disbursed and City has completed HUD close out procedures (24 CFR 570.509 and 2 CFR, Part 215) (Exhibit"B"). 1.11 "Low- and Moderate-Income (LMI) Person" shall mean — a person whose annual household income does not exceed 80 percent of the median household income for the Omaha NE-IA Metropolitan Statistical Area as determined and updated by HUD. Attached as Exhibit"D" is the current Median Family Income Chart. 1.12 "Client" or"Participant" shall mean—a qualified participant making application to The Salvation Army to participate in the "A Way to Work" Program. 1.13 "Reasonable program fees" shall be permitted to be retained by the Sub-recipient and shall be exempt from this provision. SECTION 2. RESPONSIBILITIES OF CONTRACTOR. 2.01 Overall Project Performance. The Contractor shall use Grant funds for the administration of the"A Way to Work"Program and the marketing of the program to qualified low- and moderate-income participants experiencing homelessness in accordance with the proposed goals. While the primary measurement of accomplishments will be the number of eligible persons participating in the Project, performance related to the goals listed in Section 2.02 will also be considered in determining compliance with the terms of this Agreement. 2.02 Proposed Goals. During the Grant period, The Salvation Army will provide its best efforts to accomplish the following goals: 2.02.1 Provides employment training and case management to approximately 26 individuals experiencing homelessness; 2.02.1.1 Job training will include 22 hours a week for 90 days while receiving referral services, employment services, housing searches, benefit resources and other individualized identified needs. 2.02.2 A case manager positon will be hired to allow for the increased number of client services; 2.02.3 Quantify and evaluate the Program outcomes; 2.02.4 Minimum Number of Maximum Percent of Area Low/Moderate Income Median Income Permitted for Participants Low/Moderate Income Client -7 - 26 80% 2.03 Project Budget. The Contractor asserts that the funding sources and amounts listed below are committed prior to disbursement of City Grant funds. FY 2021 CDBG $ 86,758.00 Private Funds $ 118,023.00 Estimated Project Cost $ 204,781.00 2.04 Term of the Agreement. This Agreement shall be in full force and effect beginning October 1, 2021, and shall end on December 31, 2022. Eligible expenditures incurred after October 1, 2021, but prior to execution of this Agreement may be submitted for reimbursement in accordance with the terms of this Agreement. SECTION 3. CONDITIONS FOR RECEIPT OF CITY FINANCING. 3.01 Document Required by City. In no event shall the City assume any obligation to make any or all of the above-referenced funding available, nor shall the City incur any liability hereunder, unless and until the Contractor has submitted for and received the prior approval of the Director of all of the documents listed below. 3.01.1 Evidence of Leveraged/Matching Funds. Contractor shall provide written evidence that funds detailed in the Project Budget described in Section 2.03 herein have been committed or secured for this Project. 3.01.2 Minority/Women Owned Business Enterprise Plan. Contractor shall submit to the Director for his review and approval a minority and women business participation plan that discusses economic development and employment opportunities. (See Exhibit"M") These plans shall ensure that the Contractor and its subcontractors will make their best efforts to ensure that construction services,contracts and employment opportunities are affirmatively marketed to women and members of minority groups. As used in this Agreement, the term "women and members of minority groups" means a business at least fifty-one percent (51%) owned and controlled and actively managed by minority ethnic race or women members. (Municipal Code, City of Omaha,Nebraska, Sec. 10- 191(h). 3.01.3 Eligible Contractors. Contractor hereby certifies that it is not currently, and never has been, debarred or disqualified from participation in federally-funded projects. In addition, Contractor shall obtain a certificate from each contractor or subcontractor to be used on this Project to the effect that each contractor or subcontractor has not been debarred or disqualified by HUD (2 CFR, Part 215 Exhibit B and 24 CFR 570.609). The Director shall approve all contractors and subcontractors prior to being hired by the Contractor (Certification of Debarment, Exhibit G). - 8 - 3.01.4 Funding Compliance Deadline. In the event that all conditions of funding are not met on or before December 31, 2021, then this Agreement shall automatically become null and void and the City shall not be deemed to have assumed any obligation or liability hereunder. SECTION 4. PROJECT RESPONSIBILITIES OF THE CONTRACTOR. 4.01 Eligible Use of Funds. The Contractor does hereby certify, contract and agree that any and all funding obtained or made available hereunder shall be used solely and exclusively for the purposes described herein. The Contractor shall not request disbursement of funds under this Agreement until the funds are needed for payment of eligible costs. 4.01.1 Eligible uses of grant funds for the Project include, but are not limited to: 4.01.1.1 Reimbursement for wages at no less than the current minimum wage rate, paid to participants for actual work done on the job site; and, 4.01.1.2 Reimbursement for other wage-related expenses such as employer- paid social security taxes for those participants working on the job site; and, 4.01.1.3 Reimbursement, for the wages and wage-related expenses of persons providing project management services and providing case management services to participants. 4.02 Ineligible Costs. 4.02.1 The Contractor shall be responsible for payment of any Project costs that exceed those specified in this Agreement. 4.02.2 Ineligible costs for the Project include any direct payment to participants including stipends paid to Program participants for time spent in training that takes place outside of the actual hours worked at a for-profit or non-profit organization employing the participant and/or those participants whose household incomes exceed 80% of the Median Family Income as determined by HUD (Exhibit"D"). 4.03 Terms and Conditions. The Contractor shall abide by all terms and conditions of this Agreement. 4.04 Breach of Agreement. If through breach of this Agreement the Contractor fails to abide by all terms and conditions as described herein, all CDBG funds previously provided to the Contractor through fulfillment of this Agreement shall promptly be returned to the City. 4.05 Affirmative Marketing Policy. The Contractor agrees to comply with the City's Affirmative Marketing Policy, attached hereto as Exhibit"P" and incorporated herein by -9 - this reference as though fully set forth. These affirmative marketing procedures must be employed in the advertising and marketing of this Project. In marketing, the Contractor shall also conform to the nondiscrimination provisions hereinafter set forth in Section 5.05.1.2. SECTION 5. GENERAL ADMINISTRATIVE REQUIREMENTS OF CONTRACTOR. Contractor agrees to comply with the following requirements: 5.01 Financial Management. 5.01.1 Accounting Standards. The Contractor agrees to comply with 2 CFR, Part 200 and agrees to adhere to the accounting principles and procedures required therein, utilize adequate internal controls, and maintain necessary source documentation for all costs incurred. (Exhibit "B", attached hereto and incorporated herein as though fully set forth.) 5.01.2 Cost Principles. The Contractor shall comply with the requirements and the standards of 2 CFR,Part 200,"Cost Principles for the Nonprofit Organizations" (Exhibit"B"). 5.01.2.1 Any deficiencies noted in audit reports must be fully cleared by the Contractor within 30 days after receipt of audit by the Contractor. Failure of the Contractor to comply with the above audit requirements will constitute a violation of this Agreement and may result in the withholding of future payments and may constitute a default subject to default remedies referenced herein in Section 9. 5.01.3 Audits. The Contractor shall comply with all provisions and regulations of the Program and have an annual audit completed in compliance with 2 CFR, Part 200.500, attached hereto as Exhibit "B", and incorporated herein as though fully set forth. A copy of the audit shall be provided to the Director. The auditor shall determine the appropriate type of audit to be conducted; i.e., limited scope of full compliance. A single audit is not an allowable expense unless the Subrecipient expends total federal funds over $750,000.00 in each fiscal year. A limited-scope audit may be allowable provided the auditor conducts the audit in accordance with generally accepted auditing standards and the recipient expends less than $750,000.00 in each fiscal year. 5.02 Documentation and Record-Keeping. All Contractor records with respect to any matters covered in this Agreement shall be made available to the City, its designees or the federal government, at any time during normal business hours, as often as the City deems necessary, to audit, examine, and make excerpts or transcripts of all relevant data. Any contract entered into by the contractor with any subcontractors shall include this Section to ensure said access. 5.03 Reports. The Contractor shall submit to the City the following reports in accordance with 24 CFR 570.506 with the submission timelines as specified. - 10- 5.03.1 Program Reports. The Contractor shall provide reports to the Director to include activities and accomplishments, participant information and notice of any significant problems and/or delays on this Project. Reports will be submitted at the time of each pay request, or, at a minimum, within 15 days following the end of the calendar year quarter. The program reports are required until such time as all funds have been expended and the City issues the final payment to the Contractor. 5.03.2 Participant Report. For each participant in the "A Way to Work" Program and prior to any reimbursement related to that participant, the Contractor shall provide the City with the information listing in 5.03.2.1 and retain the following records for five (5) years after the expiration of this Agreement as specified in Section 2.04 of this Agreement. For this Agreement, records shall be retained until December 31, 2027. 5.03.2.1 Documentation. Contractor shall be permitted to document participation by having each participant complete participation documents, such as a program application and participation agreement, in a mutually agreeable format, provided that document includes, at a minimum, the following information: 5.03.2.1.1 Documentation showing that the activity is designed to be used exclusively by a segment of the population presumed by HUD to be L/M income persons (e.g. homeless individuals). 5.03.2.1.2 Reports generated will include: 1. All applicants listing, name, race, ethnicity, age, gender. 2. All CDBG Participants listing,name,race, ethnicity, age, gender. 5.03.2.1.3 File documentation to include application, US citizenship, income, race and ethnicity, progress through program, release of information authorization. 5.03.2.1.4 Report to include time sheets and reconciliation of payment wages. 5.03.2.1.5 Completion of City provided demographic composite form to be submitted no later than December 31st of each year. 5.03.2.1.6 Copies or all marketing, media, outreach, contracts, forms, produce for the program. 5.03.2.1.7 Accounting of case managing hours, salary and benefits during request period. 5.03.2.1.8 All invoices and receipts for any project delivery costs. 5.03.2 Performance Measurement Report. No later than 30 days after the end of the contract term or end of the activity, whichever comes first, the contractor shall provide a report to the City identifying the accomplishments of the Program, including number of participants, training activities, placements, - 11 - and other outcomes, and final demographics as provided in Exhibit E, Demographic Report, and a Financial Match Report. 5.03.4 Financial Status Reports. Contractor shall submit financial status reports (2 CFR, Part 200) (Exhibit "B") with pay requests. Documentation of the expenses for which reimbursement is being requested shall accompany all pay requests. Such documentation shall include information such as time sheets and evidence of payment. These reports shall be due, at a minimum, 15 calendar days from the end of the calendar year quarter. Attached as Exhibit "G", and incorporated herein by this reference as though fully set forth, is a sample financial status report. 5.04 Record Retention. The Contractor and its subcontractors shall maintain such records and accounts, including property, personnel and financial records, as are deemed necessary by the City to assure a proper accounting for all expenses. The Comptroller General of the United States, or any of their duly authorized representatives, or any duly authorized representatives of the City, as approved by the Director, shall have access to any books, documents, papers, records and accounts of the Contractor or its subcontractors which are directly pertinent to this Project for the purpose of making audit, examination, excerpts and transcriptions. Such records and accounts shall be retained for five(5) years after expiration of the Agreement as specified in Section 2.04 of this Agreement, or December 31, 2026. In the event the term of the Agreement would be extended, the record retention period would be extended correspondingly. 5.05 Personnel and Participant Conditions. 5.05.1 Contract Compliance Clause. 5.05.1.1 Section 10-192 of the Omaha Municipal Code, Equal Employment Opportunity Clause (Exhibit "I"). The Contractor and its subcontractors shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, age, national origin, sexual orientation, gender identity, familial or handicap status. As used herein, the word "treated" shall mean and include, without limitation, the following: recruited, whether by advertising or by other means; compensated; selected for training, including apprenticeship; promoted; upgraded; demoted; downgraded; transferred; laid off; and terminated. The Contractor and its subcontractors agree to and shall post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officers setting forth the provisions of this nondiscrimination clause. 5.05.1.2 The Contractor and its subcontractors shall, in all solicitations or advertisements for employees placed by or on behalf of the contractor, state that all qualified applicants will receive consideration for employment without regard to race, religion, - 12 - color, sex, age, sexual orientation, gender identity, national origin, familial or handicap status. 5.05.1.3 The Contractor and its subcontractors shall send to each representative of workers with which he has a collective bargaining agreement or other contract or understanding a notice advising the labor union or workers' representative of the contractor's commitments under the equal employment opportunity clause of the city and shall post copies of the notice in conspicuous places available to employees and applicants for employment. 5.05.1.4 The Contractor and its subcontractors shall furnish to the Human Rights and Relations Director all federal forms containing the information and reports required by the federal government for federal contracts under federal rules and regulations, including the information required by sections 10-192 to 10-194, inclusive,of the Omaha Municipal Code and shall permit reasonable access to his records. Records accessible to the Human Rights and Relations Director shall be those which relate to Paragraphs 5.05.1 through 5.05.1.7 of this subsection and only after reasonable notice is given the contractor. The purpose of this provision is to provide for investigation to ascertain compliance with the Program provided herein. 5.05.1.5 The Contractor and its subcontractors shall take such actions with respect to any subcontractor as the City may direct as a means of enforcing the provisions of paragraphs 5.05.1 through 5.05.1.7 herein, including penalties and sanctions for noncompliance; however, in the event the contractor becomes involved in or is threatened with litigation as the result of such directions by the City, the City will enter into such litigation as is necessary to protect the interests of the City and to effectuate the provisions of this division, and, in the case of contracts receiving federal assistance, the contractor or the City may request the United States to enter into such litigation to protect the interests of the United States. 5.05.1.6 The Contractor shall file and shall cause his subcontractors, if any, to file compliance reports with the Contractor in the same form and to the extent as required by the federal government for federal contracts under federal rules and regulations. Such compliance reports shall be filed with the City's Human Rights and Relations Director. Compliance reports filed at such times as directed shall contain information as to the employment practices, policies, programs and statistics of the Contractor and his subcontractors. 5.05.1.7 The Contractor shall include the provisions of Paragraphs 5.05.1 through 5.05.1.7 of this section, "Equal Employment Opportunity Clause," and Section 10-193 in every contract, subcontract or - 13 - purchase order so that such provisions will be binding upon each subcontractor or vendor. (Code 1980, Section 10-192; Ord. No. 35344, Section 1, 9-26-00.) 5.05.2 Employment Insurance and Bonding. The Contractor shall purchase a blanket fidelity bond covering all employees,at a minimum,in an amount equal to cash advances from the City. The Contractor shall comply with bonding and insurance requirements of 2 CFR, Part 200, Bonding and Insurance (Exhibit ''B'' ). 5.05.3 Workers' Compensation. The Contractor shall provide Workers' Compensation Insurance coverage for all employees involved in the performance in this Agreement. 5.05.4 Section 3 - Employment of Low-Income Persons (Section 3 of HUD Act of 68, as amended, 1 U.S.C. 1701u). The Contractor shall make its best efforts to comply with Section 3 (Exhibit "K"). The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3 shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. 5.05.5 Conflict of Interest. The Contractor agrees to abide by the provisions of 24 CFR 570.611 with respect to conflicts of interest, and covenants that it presently has financial interest and shall not acquire any financial interest, direct or indirect, which would conflict in any manner or degree with the performance of services required under this Agreement. The Contractor further covenants that in the performance of this Agreement no person having such a financial interest shall be employed or retained by the Contractor hereunder. These conflict of interest provisions apply to any person who is an employee, agent, consultant, officer or elected official or appointed official of the City or any designated public agencies or subrecipients which are receiving funds under the CDBG entitlement program. 5.05.6 Attestation of Citizenship. To comply with Neb. Rev. Stat. 4-108 through 4- 114,the Contractor agrees to comply with the requirements of 5.05.6 and 5.05.7 5.05.6.1 The Contractor shall include the following language in all contracts and subcontracts for the physical performance of services: "The Contractor is required and hereby agrees to use a federal immigration verification system to determine the work eligibility status of new employees physically performing services within the State of Nebraska. A federal immigration verification system means the electronic verification of the work authorization program authorized by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, 8 U.S.C. 1324a, known as the E-Verify Program,or an equivalent federal program designated by the United States Department of Homeland Security or other federal agency - 14 - [f� authorized to verify the work eligibility status of a newly hired employee. If the Contractor is an individual or sole proprietorship, the following applies: a) The Contractor must complete the United States Citizenship Attestation Form available on the Department of Administrative Services website at www.das.state.ne.us. b) If the Contractor indicates on such attestation form that he or she is a qualified alien, the Contractor agrees to provide the U.S. Citizenship and Immigration Services documentation required to verify the Contractor's lawful presence in the United States using the Systematic Alien Verification for Entitlements (SAVE) Program. c) The Contractor understands and agrees that lawful presence in the United States is required and the Contractor may be disqualified or the contract terminated if such lawful presence cannot be verified as required by Neb. Rev. Stat. 4-108." 5.05.6.2 The Contractor shall have each person applying for a benefit under this agreement execute a United States Citizenship Attestation Form For Public Benefit (Exhibit "K") verifying eligibility status for the purposes of receiving a public benefit. The Contractor shall maintain aggregate records for the duration of the contract showing: (a) the number of applicants for public benefits under this agreement,and(b)the number of applicants rejected pursuant to the lawful presence requirement set forth in the above-referenced Nebraska statutes. Further, the Contractor shall provide a summary report to the City no later than December 15th each calendar year reflecting this applicant data for such calendar year. 5.05.7 Employee Classification Act. To comply with the Nebraska Employee Classification Act, all general and subcontractors who perform construction or delivery service pursuant to this contract shall submit to the City an Affidavit For Employee Classification Act (Exhibit "L") attesting that (1) each individual performing services for such contractor is properly classified under the Nebraska Employee Classification Act, 2010 LB 563 ("the Act"), (2) such contractor has completed a federal I-9 immigration form and has such form on file for each employee performing services, (3) such contractor has complied with Neb. Rev. Stat. section 4-114 (federal immigration verification system), (4) such contractor has no reasonable basis to believe that any individual performing services for such contractor is an undocumented worker, and (5) as of the time of the contract, such contractor is not barred from contracting with the state or any political subdivision pursuant to the Act. The contractor shall follow the provisions of the Act. A violation of the Act by a contractor is grounds for rescission of the contract by the City. - 15 - 5.06 Match Funds. The Developer will provide documentation to the City showing all non- federal funds in the project. This documentation should include the following: a. source of funds (additional documentation as needed) b. amount of funds c. date funds provided d. designation (name) of funds e. purpose of funds The documentation shall be submitted to the City annually no later than January 31st of the following year. 5.07 Limited English Proficiency (LEP). It is the policy of the City to take reasonable steps to provide meaningful access to its programs and activities for persons with Limited English Proficiency (LEP) in accord with Executive Order 13166 titled "Improving Access to Services by Persons with Limited English Proficiency". The City's policy is to ensure that staff and subrecipients will communicate effectively with LEP individuals, and LEP individuals will have access to programs and information. The City is committed to complying with federal and state requirements in providing access to this program and its activities for LEP persons. SECTION 6. CONTRACTOR'S COMPLIANCE WITH OTHER FEDERAL REGULATIONS. 6.01 Environmental Review. The Contractor, if applicable, agrees to comply with the following regulations insofar as they apply to the performance of this Agreement: 6.01.1 Clean Air Act, 42, U.S.C., 1857, et seq. 6.01.2 Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq., as amended 1318 relating to inspection,monitoring entry,reports and information as well as other requirements specified in Section 114 and Section 308, and all regulations and guidelines issued thereunder. 6.01.3 Environmental Protection Agency (EPA) regulations pursuant to 40 CFR, Part 50, as amended. 6.01.4 National Environmental Policy Act of 1969. 6.01.5 HUD Environmental Review Procedures (24 CFR, Part 58). 6.01.6 Flood Disaster Protection Act of 1973 (24 U.S.C. 4106 and P.L.2234)in regard to the sale, lease or other transfer of land acquired, cleared or improved under the terms of the Agreement as it may apply to provisions of the Agreement. 6.01.7 Historic Preservation requirements set forth in the National Historic Preservation Act of 1966, as amended(16 U.S.C. 470) and the procedures set forth in 36 CFR, Part 800, Advisory Council on Historic Preservation - 16 - Procedures for Protection of Historic Properties, insofar as they apply to the performance of this Agreement. In general, this requires concurrence from the State Historic Preservation Office for all rehabilitation and demolition of historic properties that are forty-five years old or older or that are included on a Federal, State or local historic property list. 6.02 Uniform Relocation Act. The Contractor shall comply with the applicable regulations of the Uniform Relocation Act of 1970, as amended (URA) (42 U.S.C. 4601-4655), or Section 104 (d) of the Housing and Community Development Act of 1974, as amended (Section 104 (d)), which require relocation assistance be provided to resident owners, tenants, businesses and other occupants that are displaced as a result of a federally- assisted project. In the event that the Contractor or its agent displaces any tenant- occupant of the property, it shall immediately notify the City in writing of the circumstances surrounding said displacement. 6.03 Federal Funding Accountability and Transparency Act. The Developer shall comply with the applicable regulations of the Federal Funding Accountability and Transparency Act (FAFTA) (75 Fed Reg 55663 (Sept. 14, 2010) (to be codified at 2 CFR, Part 170). Developer shall complete and provide to the City (Exhibit"0"). 6.04 Drug Free Workplace. Subrecipient shall continue to provide a drug-free workplace in accordance with 41 U.S.C. 702 and shall submit a Certification of the Drug Free Workplace to the City prior to disbursement of funds. See Exhibit "Q", attached hereto and incorporated herein as though fully set forth. SECTION 7. RESPONSIBILITIES OF THE CITY. 7.01 Performance Monitoring. The City will monitor the performance standards of the Contractor as stated herein. Substandard performance as determined by the City will constitute non-compliance with this Agreement. If action to correct such substandard performance is not taken by the Contractor within a reasonable period of time after being notified by the City, contract suspension or termination procedures may be initiated. 7.02 Payments. It is expressly agreed and understood that the total amount to be paid by the City under this Agreement shall not exceed$86,758.00 in CDBG funds. The payment of these funds is subject to and conditioned upon actual receipt by the City of the same. Should adequate funding not be available to the City,the City shall notify the Contractor as soon as reasonably possible and the Agreement will be terminated. 7.02.1 Obligation for Payment. In no event shall the City become obligated to make any payments for any work performed, materials furnished, expense incurred, or any other expenditure of any kind whatsoever, unless same is expressly included in this Agreement, nor shall the City incur any liability hereunder, unless and until the Contractor has timely and fully complied with its duties and obligations hereunder. No payments shall be made for any administrative service incurred the Director deems to be: 7.02.1.1 unacceptable or substandard, or - 17 - 7.02.1.2 not in accordance with this Agreement or related contracts as approved for this Project. 7.03 Progress Payments. Progress payments and final payment, as may be authorized by the Director or his designated representative, are subject to: 7.03.1 receipt of requisite financial status reports,and participant and program reports. 7.04 Technical Assistance. The Director shall assist the Contractor in the same manner the Director provides technical assistance to other contractors to ensure compliance with this Agreement. SECTION 8. MUTUAL AGREEMENTS BETWEEN CITY AND CONTRACTOR. 8.01 Release of Information Laws. The Contractor specifically hereby states, agrees and certifies that it is familiar with the limited purpose set forth in the federal laws, rules and regulations, and in the laws of the State of Nebraska, for which personal information requested may be used and that the information received will be used solely for those limited purposes and not to harass, degrade or humiliate any person. The information released shall be used for the limited purposes stated, and the Contractor further agrees to indemnify and hold harmless the City of Omaha for any liability arising out of the improper use by the Contractor of information provided. 8.02 Applicable Laws. Parties to this Agreement shall conform to all existing and applicable City ordinances,resolutions, state laws, federal laws, and all existing and applicable rules and regulations. Nebraska law will govern the term and the performance under this Agreement. 8.03 Interest of the City. Pursuant to Section 8.05 of the Home Rule Charter, no elected official or any officer or employee of the City shall have a financial interest, direct or indirect, in any City agreement. Any violation of this section with the knowledge of the person or corporation contracting with the City shall render the Agreement voidable by the Mayor or Council. 8.04 Independent Contractor. Nothing contained in this Agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer/employee between the parties. The Contractor shall at all times remain an independent contractor with respect to the services to be performed under this Agreement. The City shall be exempt from payment of all Unemployment Compensation, FICA, retirement, life and/or medical insurance and Worker's Compensation Insurance as the Contractor is an Independent Contractor. 8.05 Captions. Captions used in this Agreement are for convenience and are not used in the construction of this Agreement. 8.06 Merger. This Agreement shall not be merged into any other oral or written agreement, lease or deed of any type. - 18 - t 8.07 Modification. This Agreement and any related documents securing the financing contain the entire agreement of the parties. No representations were made or relied upon by either party other than those that are expressly set forth herein. No agent, employee, or other representative of either party is empowered to alter any of the terms herein unless done in writing and signed by an authorized officer of the respective parties, pursuant to Section 10-142 of the Omaha Municipal Code. 8.08 Assignment. The Contractor may not assign its rights or obligations under this Agreement without the express prior written consent of the City. 8.09 Strict Compliance. All provisions of this Agreement and each and every document that shall be attached shall be strictly complied with as written, and no substitution or change shall be made upon written direction from authorized representatives of the parties. 8.10 Termination and Enforcement. This Agreement may be suspended or terminated in accordance with Appendix 11 to 2 CFR, Part 200 (B), 215.61 and 215.62 (Exhibit "H", attached hereto and incorporated herein by this reference as though fully set forth). Upon termination of this Agreement, all funds and interest in any account hereunder shall become the property of the City and shall be returned to the City. 8.11 Reversion of Assets. Upon the expiration of this Agreement,the Contractor shall transfer to the City of Omaha any CDBG funds on hand at the time of expiration and any accounts receivable attributable to the use of CDBG funds (24 CFR 570.503(b)(8)). 8.12 Indemnification. The Contractor shall indemnify and hold the City harmless from and against: (1) any and all claims arising from contracts between the Contractor and third parties made to effectuate the purposes of this Agreement, and (2) any and all claims, liabilities or damages arising from the preparation or presentation of any of the work covered by this Agreement. 8.13 Unenforceable Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be in effect to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 8.14 Disclosure of Lobbying. The Contractor shall certify and disclose, to the best of its knowledge and belief, that: 8.14.1 No federal appropriated funds have been paid or will be paid, by or on behalf of the Contractor, to any person for influencing or attempting to influence an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract,the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment or modification of any federal contract, grant, loan, or cooperative agreement. - 19 - ill 8.14.2 If any funds other than federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with this federal contract, grant, loan, or cooperative agreement, the Contractor shall complete and submit standard Form-LLL, "Disclosure Form to Report Lobbying", in accordance with its instructions. 8.14.3 The language of this certification be included in the award documents for all subawards at all tiers, (including subcontracts, subgrants, and contracts under grants, loans, and cooperative agreements) and that all subrecipients shall certify and disclose accordingly. 8.15 Notices. The City and the Contractor hereby expressly agree that for purposes of notice, including legal service or process, during the term of this Agreement, and for the period of any applicable statute of limitations thereafter, the following named individuals shall be authorized representatives of the parties: 1) City: David K. Fanslau, Planning Director City of Omaha 1819 Farnam Street, Suite 1111 Omaha,Nebraska 68183 2) Contractor: Major Greg Thompson, CEO The Salvation Army 3612 Cuming Street Omaha,Nebraska 68131 In the event the authorized representative changes during the term of this Agreement, prior written notice will be given to the respective party at the address noted above. 8.16 Applicability. This Agreement shall be binding upon the parties hereto. SECTION 9. DEFAULT PROVISIONS. 9.01 Remedies. If,through any cause,the Contractor shall fail to fulfill in a timely and proper manner any obligations under this Agreement, or violate any of the covenants, representations or agreements hereof, the City may upon written notice terminate this Agreement or such parts thereof as to this Agreement, and may require repayment of Grant, in part or in full, for any damages caused to the City by reasons of such default and termination. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated below: -20 - THE SALVATIO WITNESS: allon-profit Co 0 on_ 6t/9 b44 By: Signature S ignatura James W.McDowell Bramwell E. Higgins Tastes Secretary Name //jail te -21- ATTEST: CITY OF O ity C erk of the of Omaha Date Ma r of t City of O aha Date ACTING APPROVED AS TO • ic /v//11/Z Uzc Assistant City Attorney Date -22 - SCHEDULE OF EXHIBITS Agreement Exhibit Location Description A 1.02 Article of Incorporation, Bylaws, Corporate Resolution, Board Members B 1.10,3.01.3,4.0.1.5, 2 CFR, Part 200, Uniform Administrative Requirements 5.01.2, 5.01.1,5.03.4, 5.05.2,5.01.3,4.012.2 4.02.2. D 1.12, 4.02.2 and Median Family Income Chart 5.03.2.1.4 E 5.03.3 Demographic Report F 3.01.3 Certification of Debarment& Suspension G 5.03.4 Financial Status Report H 8.10 Termination and Enforcement—Appendix 11 to 2 CFR,Part 200(B)215.61 and 215.62 I 5.05.1.1 Equal Opportunity Clause J 5.05.4 Section 3 Clause K 5.05.6.2 Attestation Form for Public Benefit L 5.05.7 Affidavit for Employee Classification Act M 3.01.2 Minority and Women Business Plan N 5.03.2.1.4 City of Omaha Definition of Income O 6.03 Federal Funding Accountability and Transparency Act P 4.05 Affirmative Marketing Policy Q 6.04 Drug Free Workplace -23 - i 1 Exhibifi A • • • • • % AN monad maxtuilin ens sitozsiarz or ongiavillo gotelko AiRsomr AND OBIATIO.SUOH.BOMB AUWZ OF THE arm Or Oat MIMIE4 ar vilniz or. rliviniovniums • or was PURENEOs Al ACT or TIM Pnlims 'SOD* OF MB IROITSLATURE II- THE STAVE or onutin, BE IT MAIMED Si TEE orer omen, or *E CITY OF 01/41. aeotimi II That it is necessary ant. niVeailat, 'end it i0 hereby.doelered-Sioeleart,end itiPedient to create aBooking Antherthy • par the Olity.ofnin„ for Violin:voile of ellidilting unndte0 ' " and conEeitat'houtilad.CO:viitiane'existing within the My of 014tha, . • and to aid in the housing of feallies of low ineonos. Sectto 2. That pinveant to the Provislinis of Senate Pfle 4, . NO 256;''fint741*Of the ilimeticsifiroluiff State of Bebraidn, there ia.hereby created a Sensing Authority far • the Oit f *ha t ba. legally known and desigaNted ad the Massing Authority of the ;iv of Omaha to have and to poecees all of 910:- powers, rights and privilegee, and to asses all of the obligations • and:burdens proVided in the said. Senate File.No. 256. Seat Len 3. That this'Ordinance shall be in full force and effect frOa and after fifteen days after its passage. ' • ' • S 0 A 17r717, 11i PASSED: JUN 111935 • ATTEST: FORM NFP 110.30R(rev.Dec.2003) ARTICLES OF AMENDMENT RESTATED ARTICLES OF INCORPORATION General Not For Profit Corporation Act Jesse White,Secretary of State Department of Business Services Springfield,IL 62756 Telephone(217)782-1832 F i Lam. www.cyberdrivelllinois.corn OCT 8 2011 Remit payment in the form of a J E4'Yiitt check or money order payable SECRETARY OF �� to the Secretary of State. File#. , � Filing Fee:$100.00 Approveit ----submit in duplicate - Type or Print dearly In black Ink Do not write above this Una 1. Corporate name(Note 1): THE SALVATION ARMY 2. Manner of adoption of amendment: The following amendment to the Articles of Incorporation was adopted on August 8, 2011 in the manner indicated below(Check one only): (Month,Day&Year) d� By affirmative vote of a majority of the directors in office, at a meeting of the board of directors, in accordance with Section 110.15.(Note 2) By written consent, signed by all the directors in office, In compliance with Sections 110.15 and 108.45 (Note 3) By members at a meeting of members entitled to vote by the affirmative vote of the members having not less than the minimum number of votes necessary to adopt such amendment,as provided by this Act,the articles of incorporation or the bylaws, in accordance with Section 110.20.(Note 4) By written consent signed by members entitled to vote having not less than the minimum number of votes necessary to adopt such amendment,as provided by this Act,the articles of Incorporation,or the bylaws,in compliance with Sections 107.10 and 110.20.(Note 5) 3(a). List all provisions of the restated articles of incorporation that amend the existing articles of Incorporation. (Attach additional pages if extra space is needed.) See Exhibit A 3(b). Text of the Restated Articles of Incorporation(Note 6) (Attach additional pages if extra space is needed.) See Exhibit B C-325 EXHIBIT A ARTICLE The object for which it is formed is, to further the work of the Christian Church known as THE SALVATION ARMY, and to engage in charitable, educational, missionary, philanthropic and religious work, and more particularly chariitable,. educational, missionary,philanthropic and religious work of the character that has been and is being conducted by the branch of the Christian Church known as THE SALVATION ARMY, and to do everything, and to act and carry on every kind of operation necessary and incidental to the maintenance of such beneficial, educational, charitable,missionary,philanthropic and religious work,but that all of such work shall be conducted not for ec p tiazv profit;to receive and hold both real and personal property,of and for religious societies and associations belonging to such branch of the Christian Church known as THE SALVATION All`iN Y, and to execute trusts thereof, also from time to time to transact any business and carry on any work or operations in connection with and for the purposes of the foregoing, ut at rio time for oeciiri try profit to enter into,make, perform and carry out contracts of every kind, and for any lawful purpose; issue bonds or obligations of the corporation and secure the same by trust deed, mortgage, pledge or otherwise, if deemed best or necessary by said corporation, and to dispose of the same;take and hold, by lease, gilt,purchase, grant, devise or bequest,any property (real or personal) for the objects of said corporation, to borrow money for the purposes of the corporation, and issue bonds therefor, and to secure the same by mortgage, trust deed, or otherwise. The corporation shall and may exercise all the powers now and hereafter granted by the laws of the State of Illinois to corporations organized under the said Act. Oil the winding up, Erna/ liquidation or dissolution of this corporation, after paying or adequately providing for the debts and obligations of fir corporation, the remaining corporate assets shall be distributed to a religious corporation that is organized and operated exclusively for religious purposes and that is tax exempt under Internal Revenue Code section 50401(3), as the Board of Trustees so determines, and if such an organization is so qualified under the applicable restrictions discussed herein, that organimtiau shall be another corporate entity responsible for the work of The Salvation Army,otherwise to a religious corporation of a similar kind,purpose,and tradition that is tax exempt under Internal Revenue Code section 501(e)(3). EXHIBIT B CERTIFICATE OF RESTATEMENT OF ARTICLES OF INCORPORATION OF THE SALVATION ARMY L The name of such Corporation is THE SALVATION ARMY. The said Corporation was incorporated on May 29, 1913. The mailing address of registered office is 10 W. Algonquin Road in Des Plaines, Illinois 60016. The Registered Agent of said Corporation is Bramwell E.Higgins. 2. The object for which it is formed is,to further the work of the Christian Church Down as THE SALVATION ARMY, and to engage in charitable, educational, missionary, philanthropic and religious work, and more particularly charitable, educational,missionary,philanthropic and religious work of the character that has been and is being conducted by the branch of the Christian Church known as THE SALVATION ARMY,and to do everything,and to act and carry on every kind of operation necessary and incidental to the maintenance of such beneficial, educational, charitable, missionary, philanthropic and religious work, but that all of such work shall be conducted not for pecuniary prat;to receive and hold both real and personal property, of and for religions societies and associations belonging to such branch of the Christian Church known as THE SALVATION ARMY, and to execute trusts thereof, also from time to time to transact any business and carry on any work or operations in connection with and for the purposes of the foregoing,but at no time for„pecuniary prof to enter into,make,. perform and carry out, contracts of every kind,and for any lawful �; purpvsc., issue bonds or obligations of the corporation and secure the same by trust deed, mortgage,pledge or otherwise, if deemed best or necessary by said corporation, and to dispose of the same;take and hold,by lease,gift,purchase,grant,devise or bequest, any property (real or personal) for the objects of said corporation; to borrow money for the purposes of the corporation, and issue bonds therefor, and to secure the same by mortgage,trust deed, or otherwise. The corporation shall and may exercise all the powers now and hereafter granted by the laws of the State of Illinois to corporations organized under the said Act. Is this corporation a Condominium Association as established under the Condominium Property Act? C] Yes r No Is this corporation a Cooperative Housing Corporation as defined in Section 216 of the Internal Revenue Code of 1954? D Yes g No Is this corporation a Homeowner's Association, which administers a common- interest community as defined in subsection (c) of Section 9-102 of the Code of Civil Procedure? El Yes No On the winding up, final liquidation or dissolution of this corporation, after paying or adequately providing for the debts and obligations of the corporation, the remaining corporate assets shall be distributed to a religious corporation that is organized and operated exclusively for religious purposes and that is tax exempt under Internal Revenue Code section 501(0(3), as the Board of Trustees so dete u lines, and if such an organization is so qualified under the applicable restrictions discussed herein, that or'ganimtio t shall be another corporate entity responsible for the work of The Salvation Army, otherwise to a religious corporation of a similar kind, purpose, and tradition that is tax exempt under Internal.Revenue Code section 501(c)(4 3. The management of the aforesaid corporation shall be vested in Board of Five Trustees,who are to be elected annually. 4. The following persons are hereby selected as the Trustees to control and manage said Corporation for the first year of its corporate existence,viz: George French Territorial Secretary of The Salvation Army, No. 671 S.State Street, Chicago,Illinois; John T.Fynn 671 S. State Street, Chicago,Illinois; John C.Addie 671 S. State Street,Chicago,Illinois; Charles Miles 671 S. State Street,Chicago,Illinois; and George It Davis 671 S. State Street,Chicago,Illinois; d. The undersigned corporation has caused these articles to be signed by a duly authorized officer, who affirms, under penalties of perjury, that the facts stated herein are true. (All signatures must be in BLACK INK.) Dated October`0 — 2011 The Savation Army, an Illinois Corporation orporation (Month ey) (Year) - - - (Exact Name of Corporation) (AnyAeth ol✓I `S eafuro) Sramwetl l , I ins, Secretary (Print Name and Tdle) 5. If there are no duly authorized officers,then the persons designated under Section 101.10(b)(2)must sign below and print name and title. The undersigned affirms, under penalties of perjury, that the facts stated herein are true. Dated (Month, Day&Year) Signature Print Name and Title - — i NOTES Note 1: State the true and exact corporate name as it appears on the records of the Secretary of State, BEFORE any amendment herein reported. Note 2: Directors may adopt amendments without member approval only when the corporation has no members, or no members entitled to vote pursuant to§110.15 Note 3: Director approval may be(1)by vote at a director's meeting(either annual or special)or(2)by consent,in writing, without a meeting. Note 4: All amendments not adopted under Sec.110,15 require(1)that the board of directors adopt a resolution setting forth the proposed amendment and (2)that the members approve the•amendment. Member approval may be(1)by vote at a members meeting(either annual or special)or(2)by consent,in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding members entitled to vote on the amendment, (but if class voting applies,then also at least a 2/3 vote within each class is required). The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding votes of such members entitled to vote and not less than a majority within each when class voting applies. (Sec. 110.20) Note 5: When member approval is by written consent,all members must be given notice of the proposed amendment at least 5 days before the consent is signed.If the amendment is adopted,members who have not signed the consent must be promptly notified of the passage of the amendment. (Sec. 107.10& 110.20) Note 6: The text of the restated articles of incorporation must set forth the following: (i) The date of incorporation,the name under which the corporation was incorporated,subsequent names,if any, that the corporation adopted pursuant to amendment of its articles of incorporation,and the effective date of any such amendments; (ii) the address of the registered office and the name of the registered agent on the date of filing the restated articles of incorporation. If the registered agent and/or registered office have changed,it will be necessary to accompany this document with form NFP 105.10. . - ? ' \ ,, .„ . i ' . , • • '...,..... • . . • .-• 1 k 44Q.W4' " 041--.114)il-f, . ' • . 0 s . 1 • k . ". ..•• ?STATri.;_ .0 ILLINOIS / .?... ,•do . ., , . ,..,. , ,. •,- &v. ..4.... 41..i .ht 5. ....1-4:,...=,?j....r......."IP r:-.:•,-„,,, A.iM. ., s 4/Y4'4.k44,i,W14.:1,;:t. Department 2,,,,f ..,,,-.,-,,,.-4,,-.4.t...,..,;09.-4pgy. of State , • , ,,,,r7-t i EtN.,:*.i,'..,1_,..,,,im.,•ktp.i..,74:-.1--- - . 1-.. - . ,,...- -, ,. :, . '.- . ::•.4ti.ti.44.;:'''?i'''': . ' , ,.,4.. -:-::••••; /,':•••,-- ..,,41 . .• , •-:--.;,-;.r.7r,'g-.---;J-o.a.aial)•0 1.7 US.1.•i a if j, {PS ...yeato - -, '— • -----;—,7--"" ..:L.1'. . ...,_ :• ; To All to Whom These Presents Shall Come-Greeting: I . ;.: WHEREAS,a CERTll'ICATE,duly signed and acknowledged,having been filed in the office of the Secretary .... of State,on the . . ,gatil... N.. 5.: -..._----TI-CE SALVATION-ARM1—.-,..,...-. . „ -,.„- . . . ..„...... under and in accordance with the provisions of"AN ACT CONCERNING CORPORATIONS," approved April 0St .is, i an,and in Force July 1, 1872,a copy DE which Certificate irr hereto attached; Now,Therefore,I,HARRY WOODS,Secretary of State of the State of Illinois,by virtue of the powers and duties vested in roe by law,do hereby'certify that the said--__._....... ,...______...'_,_, is a legally organized Corporation under thelaws of thisState. . in Testimony Whereof,I hereto re t my hand and muse to t."....isfaxed the Great Seal 41 i it'l --- bone-a the City of Springfield,this.......-.__._...4v._tn ._____ • D.19'1„3 and of the foricpentreneW ..q_ of the United States the one hundred ane... _ 3 th / • ____. . • 0 • ' ORM (SEAL) WRY 3v.0QS Secretary of State. , i , .. t I ,, _ _ __ v ,, -,- . el • •I:m IfICl11t, "8A71a,.ni f 1, �abolARY PROFIT, . ,o1,1,h, } Fr,Igtedby� nu,t:l..on;t WO Co. .., fe-_.„ . . ,, t ,,,,, hilo , , . . tate 0 31 iti ir 41 t 1 9—or' i i , . ,,-„,:iiit ;gi, ,,, ' co.Qx . -..' _- COUNTY, ' t �, it:4- t"''''.` '. ,-* . ' , . • • _ e IIii lder51. 1cr�d,,- ,,. r ., ....._„�..,.m, r.— .., . . r • " GI<aQ?RG I�CH,_..JOHN�.Ixid SOHN ., ,�TUI2 :, , WI •�•r• h-§�5+5. •_:a.a.hf•`^•/�+>F1r _ ..1 w -,.�.�+' Fc...: --.yam I .....' -- ,�:+•.:vr•,+.-;.---.. Citizens of the United,bales, propose to form a Corporation under an act of the General p1ssembly i y o/the Stale of Illinois, entitled, ".11n ,del concerning Corporatioas," approved April 18th, 1872, 1 and all acts amendatory thereof, and that for the purposes of such oranizalion we hereby state as follows,to-wit. r 1 , .,..j. I,..•. "he name of such Corporation is .% t} r 4.'V. E ,„IAn : ' •L --' ..__.��,. ...SALVAT O1L_.AR1d r f ;' rri.4 ,, k ,i( ` _ t .. ,.� , , , 1.. The object for which it is formed is, to further the work of the Christian Church known as THE BII,VATYON .ARMY and to en- , t gage in charitable, educational, riiasionary, philanthropic and religious work, and more particularly charitable educational, ' missionary, philanthropic and religioue work of the character ` that has been and is being conducted by the branch of the ,m_.t-.d ingy•-, 4'hr4,'i.b i`4wr-A.,1,1_,•:! .�5"., i icet , a, ..v ...,•t�y>�,.. and to act and carry •on every kind •of bperation necessary and in- c4,3nntnl to .he nlaintqnsilee, of such beneficial, educational, charitable, missionary, philanthrbpic and roli.gious work, but thEa• all, of cuci: work shall be conducted not for pepunia.ry rof it.; to receive s,rtd hold both°ieel .tr t pereona' 'roper ,o aiid or ,'eligious societies and associations belonging to such branch ' ' the Christian Church known as THE SALVATION ARMY, and to execute trusts thereof, also from time to time to transact any business a.nd carry on any work or operations in connection with and for the - purposes of the forog.oing, but at no time for pecuniary profit; • 4 to enter into, make, g erfoi Enc-o ,Fi out en rac `a of every kind, and for any lawful purpose; issue bonds or obligations of , the corporation and secure the same by trust deed, mortgage, pledge or otherwise, if deemed best or necessary by said corporation, and to dispose of the same; take atiti hold, by lease, gift, purchase, • grant devise or bequest, any property (areal or personals for the ` . objects of said avrpoxmti.onl io barrow mo ey ftX the purposes off' the dorporat ion'; and issue bonds 'sherefor° `and to'"secure the same ,• by mortgage, tryst deed, or otherwise. , Thecorporation shall and , • - .r may,the rcise all the powers now or hereafter E•;ran red by the laws of e Sate of. Illinote to S-nrp.axatici.ns organi.zaci under the•.-be,-i---21• -g- 6— l 1 • __ _______ 1 F • • ,6. . d I 1 1 1 • 6 F , f . , 1:,'6'. 6, ' I + • 1 ' ' 1 , : ; !. The Inalogentent of the aforesaid- ,:;....ci4:p.mratio.11............._..........,......._shall be vested i "` ta Board of-.?iVq . ..T.r..1.10t..00.0intrars, :olio are to be elected. Annuall.Y.--....-____ i ''•"° .., :,'+' Truet ees ..0. 4 -4-0 r4 . i'• 4. The following persons are hereby selected as Me ' . to control and manage:said Car- .,. poration for the first year of its corporate existence, my , _ ...... , . I . ,. _„DECtROZ-EltERCE),...T.O.PritAX:igl,..,..R.§1412Etta17: qf.Thq.81•11TAI.11.9.11,_ Arrn4110 a. . 671 8* State Street, Chicago, iiiiradis; . ,. ..,..jlon....w.....pm,.....671...s._State_St.reet,,,,,..Chie.agol Illiriois.;,________,,,,,, „MAR..,C...I.DDIE.,..-671..S.....State-S t.re et. Chicago., Illirda . .,;„.....r. CHABIIIS !LIMB, 671 S. State St , Chicago;Illinois; , „ ..071ORGE.41,1M51.14,--67,1••••B.,..,St ate-StreetT-Chleago Illinole- - .• ... S. Th.olocation ia in tho,city of.........Cilig.a.g11 —.,...in the County of co ok .r . I 4 ire ft th ipstate of,011101.6 an4Iliti p. .11(427416 adrArea of its butgrtais i7ffiVII to at wro. Oil L. . ------0-attviti.A1'.7"--,'5,'-77.,_ firc.,:e.',.7.7i-?-7-•*;--ii.r4.1f,t,of....., ....1.-&1/4•=t .... ...„-,.,. - '—r-"L--""w'", .. , ,, ' — ,. -' • I a ' , ,frirra.,-...........,---,,,..— :$,..,...,... i - • .e' 4 ,...__,„- -- ' - •.. ,— .. - 11A) \, .., . ? ' ' c i T • • A • . . 6. Al" .14 6 6 e I . • '66, 6) . 4. S ° • . Wt' STATE• OF ILLINQl r ,I• ' y,�' ,1 ,i :�`" 1 ` r� 88, T 1. q� 4. ,f COUNTY OF— QM. K.,...„„.„. �, , , - wit , . :,:7,.',,.-:, .1;"1 r ,. I. ° I r!� d Notary Public iry and fa r F r q 0{SQL., ` I flux ,•��-•°' rr ._., .:_County and State aforesaid, do hereby ce?'hfy that .r. aretlazs., °,,. .,.,,.,,,y, .._,.,r.,,,da� "'�' ,!' t., y-_._ ._ ,..µ �acraaru�ltr,' appeared E t R ,,,,, , QB._.F NC, ., JQHTr T. F'Y.N2d....and....J.QHN .ADDIZ e p ° r; a>. k lrri ed 'ed t7taA t7Gey had 'ea'eaterei+ lhe. er�>� tor }tips�xairw1 owe, ±tier • ",e�".,, , therein Get forth. ti 7. . i �; C. ,, .-4 d r i . tt'n ihuss. Ierrof, I have hereunto set m t land and seal. t .,„ • a s' I z ^ �t "'�' ' R '{k the day and year•ciba a' mnream on • '''`� `r rJpii"r�"9 t i`t+"+ +�",�a.' I , L ° i ° ° - 411141 4 rt46/Gti° 1 ir • • u I t i l j , F °` s 4� ,A 1 - - , �� � n.. :, , _ ,_'. ..:',. _ i�it."._ , 1,„,+,•cY,. wz,}t4..°h9+W ti'wk�,�- 4—.-uV--- ^f ".'•'`n M • �, i k - _ ° rr . - I • `—#!' . s t { 1 J';FJ T � 1 :� •No"t:The tatioq prodtt`ee that all feta ehel1 ,, ....1:0 f ,A;" • be),aid ta r,�7we�1rtt6.thA Eta1AT'ftmadty:' zi' d Fee$Io.ua e , . . . . ‘ 7772.0 . in: p I (� , 'ii MAY%91913 '' - - dFi k' • a? i y Gy I , - Frtnee-----r•"t'b)tin,Ohlo n L..4,1 New.•fk.•i ' _ .. , 3 • r? File Number-' - 12s47 720 I, ..—e"....2'—v—2 ..— , ..f..4 gr, g . _. ----- --tr%>. (0W17,... , 4 , odl i t 4f i�C � .})aw. "➢9 k----:. ..::.i., 111 ,,,... 7 a---,- ,. Y,, .A1/1- e ' i dd . 3 ' -R1,0 6 itf i39 '�' ; T 1 .. '} / , y,Zv + : }. . 1 N_ 'x TY.. ;'L 1 tlia.: ,ri` - g.°' r� !.!7 j - .4.' '.'pyNa., C 44° } ; , a `, d ''Yb `�...1r; 8 4Gtlk; 1 1 - 4a s }a$1 ARTICLES OF MERGER OF. THE SALVATION ARMY INCORPORATED UNDER' THE LAWS OF THE STATE OF ILLINOIS HAS BEEN FILED IN THE OFFICE OF THE SECRETARY OF. STATE AS PROVIDED BY THE GENERAL NOT FOR PROFIT CORPORATION ACT OF ILLINOIS, IN FORCE JANUARY 1, A.D. 1987. - ge ...., ._, . . Gi/(.. (Fi-- fo, Give - 0i.,,,,,,,,,,, ii -4,,,e, if/A4 dith ,,,,, „, , . 0.„ . , , * ",/,-.40,1 . # . ,3.,/,,, ev ,,,,,,dd - ,, 4.4 ,/ ,,64, -, . .... .,,,,,,, ./20,,,, . . 6,7, 7,, / ..... ‘,... . . _,,,, • d • ,. .„:„., pi.,,,7. co/07a' agdaeZar d' lerth? -,,z' eri I 4 , -04 Jet fim nt U#hrreoE, £) lme , ,, ,4 ,,,z4g4,,,,Ath,y/e4/ae:e. .1,,t , , : FEBRUARY A.D./9 A8 ,ancl 'C ,auto"'�neked,,and 1?th 4 tcro0Yrr1=1" ne ':'r -e. } ' f , . NP 111.25 (Rev.Jan., 1987) JIM EDGAR - File /a 61-�/ Secretary of State J State of Illinois 'fl eaupasa rarlt5m By Submit in Duplicate f-crRt Slide ARTICLES OF MERGER, Date .C? /, em Rit payment in check or Money Order, , e?able to "Secretary o State", OR CONSOLIDATION Filing Fee$ „ DO NOT SEND CASH! under the General Not For Profit Corporation Act Clerk Filing Fee $25.00 IX 4. t. Pursuant to the provisions of"The General Not For Profit Corporation Act of 1986"the undersigned corporations hereby adopt the following Articles of Merger irO_. efkkttek (Strike inapplicable word.) 1. The names of the corporations proposing to mks. __ _ , and the State or Country of their in- corporation,are; Name of Corporation State or Country''ofIncorporation The Salvation Army , Illiriois: /277_'�0-" l The Salvation Army, Inc. Indiana . 1 The Salvation Army Kansas SEE ATTACHED RIDER A 2. The laws of the State or Country under which each corporation is incorporated consolidation. permit such merger or ' surviving 3. The name of the f X corporation is The Salvation Arru and it shall be governed by the laws of_ __ Illinois merger 4. The plan of Noric,,M.C1Xitxis as follows: (If space is insufficient, attach additional pages size 81/2 x 11) SEE ATTACHED RIDER B , merger 5. The plan of X0Reiltititifia was approved, (a)as to each corporation not organized in Illinois,in compliance with the laws of the state under which it is organized,and (b)as to each Illinois corporation, as follows: (Please indicate the manner by which the plan was approved by inserting the comparable letter in the box following each corporate name.) A. By the affirmative vote of a majority of the directors in office, at a meeting of the board of directors. 0 111.15) B. By written consent,signed by all the directors in office,In compliance with Section 108.45 of this Act,(§ 108.45& § 111.15) C, At a meeting of members by the affirmative vote of members having not less than the minimum number of votes ---•- necessary to adopt the plan, as provided by this Act, the articles of,Incorporation or the bylaws (§111.20) D. By written consent,signed by members having not less than the minimum number of votes necessary to adopt the plan,as provided by this Act,the articles of incorporation or the bylaws,In compliance with Section 107,10 of this Act, (§'107,10& §111.20) NAME OF CORPORATION MANNER The Salvation Army — ._ D r 6. (Not applicable if surviving or new corporation is•an Illinois corporation) It is agreed that,upon and after the issuance of a certificate of merger or consolidation by the Secretary of State of the State of Illinois: a, The surviving or new corporation be served with process in this State in any proceeding for the enforcement of any obligation of any domestic corporation which is party to such merger or consolidation. b. The Secretary of State of the State of Illinois shall be and hereby is irrevocably appoitrite as the agent of kilo surviving or new corporation to accept service of process in any such proceeding, c r The undersigned corporation has caused these articles to be signed by its duly authorized officers, each of whom affirm, under penalties of perjury, that the facts stated herein are true. Dated January o2 d 19 $8 The Salva __(e_n ' tea pro_ (Enact Name,ofCorporation) corporation) attested by e- - �• by ,,.-( X,Ar P� 4 ' (Signature•ofSecrrtoryarl}rsijiv„r•5,rcn•te (SianamrourPreridem•er—Yire-Pre.tidee*2nd Vice ' • Presi& James V. Dada's Robert •E: Thomson, 2nd Vice Presider. (Type vc lorlttr Maw ind T JIe! :"' ' (Type or Print Nome and Title) January , t 8 The Salvation ion A� Inc. (an Indiana not-foe Oared t'"R r ,,J ' r t r y t e-t—d New of p J f. t cot ra 3.c attested by `f • by f• J d �1 `' )u e1-•- (Signature of Secretary e'rts:rrrtrrnrgr-ren7ry) (Sirature off rrNdsrn o e..rl,t...;,, 2nd Vice Presiden- James V. Davis, Secretary Robert E. Thomson, 2nd Vice President (Type ur Print Name and Title) (Type ur Print Name and Title) Oared January ,;Z S'./9 8 B The Salvation Amy (a Kans,a W non.-st-�x_lt f1 Bart Nag CcrprrraJddm) It corptratlor attested by `_/4 t — by tl," 5 ' 14i,t Signature of Secretary n..,Mrywnhd,•vm-re,y) %•"'.' � � (Signature o/r'h+,.ka:-r.,u;....F.,v.a,,,,et7nd Vice :» • . • Presider James ��_tavis r SecretaryRo�rt E. Thomson,'2nd Vice President ITcpe or Print Name and Titer) (Type or Prise Name and Tale) —� SEE ATTACHED RIDER C £1'T' F , RIDER A TO ARTICLES OF MERGER OF THE SALVATION ARC Name of Corporation State or Country of incor oration The Salvation Army Michigan The Salvation Army Minnesota The Salvation Army Missouri The Salvation Army Wisconsin, 8354G RIDER B TO ARTICLES OF MERGER OF THE SALVATION ARMY PLAN OF MERGER This PLAN OF MERGER dated this 21st day of January, 1988 by, between -and among THE SALVATION ARMY, an 'F'hlinois not-for-profit corporation (thereinafter 'referred: to .as "The Salvation Army (Illinois) " and the "Surviving Corporation") , and THE SALVATION ARMY, INC. , an Indiana not-for-profit ' corporation (hereinafter referred to .as "The Salvation Army, Inc . (Indiana) ") , THE SALVATION ARMY, a Kansas non-stock, nonprofit _corporation (hereinafter referred to as "The Salvation Army (Kansas) ") , THE SALVATION ARMY, a Michigan nonstock, non-profit corporation (hereinafter referred to as the "The Salvation Army (Michigan) ") , THE SALVATION ARMY, a Minnesota nonprofit corporation (hereinafter referred to as "The Salvation Army (Minnesota) ") , THE SALVATION ARMY, a Missouri not-for-profit corporation (hereinafter referred to as "The Salvation Army (Missouri) ") and THE SALVATION ARMY, a . Wisconsin non-stock corporation and religious society (hereinafter referred to as "The Salvation Army (Wisconsin) ") (all of said corporations hereinafter collectively referred to as the "Terminating Corporations" ) . The transaction a - contemplated hereby is hereinafter referred to as the "Merger" and the Surviving Corporation and the Terminating Corporations are referred to collectively hereinafter as the "Merging Corporations. " The Boards of Trustees and the members of each of the Merging Corporations have approved and adopted this Plan of Merger •in the manner prescribed by the laws of the States under which each.such Merging Corporation is organized and:deem it advisable and in the .best interests of etch such •Corporation that the Terminating Corporations be merged with and into the f Surviving Corporation on the terms and conditions set• forth herein. 1. The name of the Surviving Corporation is THE SALVATION ARMY. The names of the Terminating Corporations are as follows : CORPORATION STATE OF INCORPORATION THE SALVATION ARMY, INC. Indiana THE SALVATION ARMY Wisconsin THE SALVATION ARMY Kansas THE SALVATION ARMY Missouri THE SALVATION ARMY Minnesota THE SALVATION ARMY Michigan 2 . The Merging Corporations each have one membership class comprised of voting members . Each member is entitled to one vote on all matters coming before members for a vote. The Salvation Army (Illinois) has twelve voting members, The Salvation Army, Inc. (Indiana) has ten voting members, The Salvation Army (Kansas) has nine voting members, The Salvation Army (Michigan) has ten voting members, The Salvation (ML.nnesotaj <has eight voting members, The Sai,vatio i .Array (Missouri) has nine voting members and The Salvation ,Army (Wisconsin) has eight voting members . • 3 . The•Articles of Incorporation of The Salvation Army (Illinois) , as in effect on the Effective Date, shall be and remain (until amended or repealed as provided by law) the Articles of Incorporation of the Surviving Corporation. The Articles of Incorporation of the Salvation Army (Illinois) are as follows: ARTICLE 1 The name of such Corporation is THE SALVATION ARMY, ARTICLE 2 The object for which it is formed is, to further the work of the Christian Church know as THE SALVATION ARMY, and to engage in charitable, educational , missionary, philanthropic and religious work, and more particularly charitable, educational, missionary, philanthropic and religious work of the character that has. been and is being conducted by the branch of the Christian Church know as THE SALVATION ARMY, and to do everything, and to act and carry on every kind of • operation necessary and incidental to the maintenance of such beneficial, educational, charitable, missionary, philanthropic and religious work, but that all of such work shall be conducted not for pecuniary profit; to receive and hold both real and personal property, of and for religious societies and associations belonging to such branch of the Christian Church 4. known as THE SALVATION ARMY, and to execute trusts thereof, also from time to time to transact any business and carry on any work or operations in connection with and for the purposes of the foregoing, but at no time or pecuniary profit; to enter into, make, perform and carry out, contracts of every kind, and for any lawful purpose; issue bonds or obligations of the corporation and secure the same by trust deed, mortgage, pledge or otherwise, if deemed best or necessary by said corporation, and to dispose. of the same; take and hold, by lease, gift, purchase, grant, .devise or bequest, any property (Teal or personal) for the objects of said corporation; to borrow money for the purposes of—the corporation, and issue bonds therefor, and to secure the same by mortgage, trust deed, of otherwise. The corporation shall and may exercise all the powers now or hereafter granted. by the laws of the State :of Illinois to corporations organized under the Said Act. ARTICLE 3 The management of the aforesaid Corporation shall be vested in a Board of Five Trustees, who are tp be elected annually. ARTICLE 4 - The. following persons are hereby selected as the Trustees to control and manage said Corporation for the first year of its corporate existence, viz : George French Territorial Secretary of The Salvation Army, No, 671 S. State Street, Chicago, Illinois; John T. Fynn 671 S, State Street, Chicago, Illinois ; John C. Addie 671 S. State Street, Chicago, Illinois ; Charles Miles 671 S. State Street, Chicago, Illinois ; and George H. Davis 671 S. State Street , Chicago , Illinois . ARTICLE 5 The location is in the City of Chicago in the County of Cook in the State of Illinois and the post office address of its business office is at No . 671 S . State Street in the City of Chicago. The By-laws of The Salvation Army (Illinois) , as in effect on the Effective Date,. shall be and remain (until amended or repealed as provided by law) the By-laws of the Surviving Corporation. _ 4 . The Merger shall become effective (the:"Effective Date") on February 1, 1988. 5. Upon the Effective Date, the separate existence of the Terminating Corporations shall cease and the Terminating Corporations shall be merged with and into the Surviving Corporation, and the Surviving Corporation, without further act or deed, shall thereupon and thereafter succeed to and shall possess and enjoy all the rights, privileges, powers, purposes, immunities and franchises of each of the Terminating Corporations; and all property, real , personal and mixed, and, all debts due to each of the Terminating Corporations on whatever account and all other chooses in action, and all and every other interest, of or belonging to or due the Terminating Corporations, shall be taken and deemed to be transferred to and vested in the Surviving Corporation without further act or deed; but all liabilities, debts, obligations and rights of creditors against each of the Terminating Corporations shall be preserved unimpaired, and shall thenceforth attach to the Surviving Corporation, and may be enforced against it, to the same extent as if said liabilities , debuts and obligations had been incurred or contracted by the Surviving Corporation. . 6. The trustees and officers of The Salvation Army (Illinois) immediately prior to the Effective Date shall be and continue to hold office as trustees and officers of the Surviving Corporation .from and after the Effective„,Date, until changed in accordance with applicable law and the Articles of Incorporation and the By-laws of the Surviving Corporation. 7. The members of the Terminating Corporations' immediately prior to the Effective Date shall not become members of the Surviving Corporation. The members of The :Salvation Army (Illinois) immediately prior to the Effective Date shall remain members of the Surviving- Corporation, subject, however, to the requirement that the members of the Surviving Corporation shall at all times be determined in accordance with its Articles of Incorporation and By-laws as are from time to time in effect . 8. The Surviving Corporation may be served with process in the States of Indiana, Kansas, Michigan, Minnesota, Missouri and Wisconsin in any action or special proceeding for the enforcement of any liability or obligation of the respective Terminating Corporations , and the Surviving Corporation may be sued in the States of Indiana , Kansas , Michigan, Minnesota, Missouri and Wisconsin in respect of any property transferred or conveyed' to it or the use made of such property, or any transaction in connection therewith. 9 . This Plan of Merger may be abandoned and terminated at any time prior to the Effective Date by the mutual consent of the Boards. of Trustees of the Surviving Corporation and of the 'Terminating Corporations . • IN WITNESS WHEREOF, the undersigned have executed this Plan of Merger as of the 21st day of January, 1988 . , THE SALVATION ARMY, an Illinois Not-For-Profit Corporation By: Andrew S. Miller, President By: James V. Davis 'Secretary - -a THE SALVATION ARMY,. INC. , an Indiana Not-For-Profit Corporation By: Andrew S. Miller, President By: James V. Davis, Secretary . THE SALVATION ARMY, a Kansas Non-stock., Nonprofit Corporation By: Andrew S. Miller, President By• James V. Davis , Secretary THE SALVATION ARMY, a Michigan Non-stock, Nonprofit Corporation By: Andrew S. Miller, President _a_ By: James V. Davis, Secretary THE SALVATION ARMY, a Minnesota Nonprofit Corporation BY Andrew S. Miller, President By. James V. Davis.,.i,Secretary THE SALVATION ARMY, " a Missouri Not-For-Profit Corporation By: Andrew S. Miller, President By: James V. Davis, Secretary THE . SALVATION ARMY, a Wisconsin Non-stock Corporation and Religious Society By: Andrew S. Miller, President By: James V. Davis, Secretary 8354G RIDER C TO ARTICLES OF MERGER . OF , THE SALVATION ARMY Dated: January Qr, 1988 The Salvation Army (a Michigan nonstock non-profit corporation) - attested by: N.4 + ---- i o _- by: .. (.... ' 4y A, James r. Davis, Secretary R` bert E. T omson, Second Vice President • Y 0 11I III e�.. Dated: January', 1988 The Salvation Army .{ k .'.\ Minnesota noriprof .f ;,,, corporation) ' attested by: bye ' � "� "A r :, . .--fi \IN,it-9' ° �'k 5� , Jame V. Davis,• Secretary Robert E. Thomson,. Second , Vice President- Dated: JanuaryA,S, 1988 The Salvation Army. (a . Missouri not-;tor-profit corporation) attested by: € -" by:--44. :-t,�,. Jame . Davis, Secretary Robert E. Thomson, Second- Vice President Dated: January, 1988 The Salvation Army (a Wisconsin non-stock corporation) . attested by .0.- -1- ,; .rrr�' �` b , .t,�ij:r ti�_' • } x. " �: . Jame 'T, Davis, S•ecretar�y Robert E. Thomson, Second Vice President 8354G 7W/f I �ti. \Lfi tIU 19 'Fri F 4 l - �I N! n NP 115.25 3 rm,4r �. A Cl St 7F .4$1GLR, , k. 1 oritior +7 tefkrroN wMy 0 7 e under the t + ��a.„.in, • , trti, I++ t GENERA,NOT FOR PROFIT = s,4. '`` S•'tpy s CORPORATION ACT ,".o' .�,t u}�a�'-` r �rM+Fllip4klt",. PAID fiB 0 t 198g .I,. Filing Fee $25A0 ". I' Ek' u� ' !look igatia. RETURN TO: Corporation Department Secretary of State Springfield,Illinois 62756 Telephone 217-782-6961 `-4 File di 12477201 Form B C A-5.1 V NFP-105.10 (Rev,Jan. 1995) George H.Ryan Secretary of State Department al Business Services Springfield;tL-62756..—___ _. -- t-_ �_ _ .;,-_ ,.._ ..-S1.1B11fJiT'tfAItJPLlbteiTE-`7 ,• - Telephone(217)782.3647 This space for use by STATEMENT OF Seretaiy of State Jesse Whi'e bate Secretary of State CHANGE Filed:10/8/2003 OF REGISTERED AGENT Filed:10/8/2003 Filing Fee s AND/OR REGISTERED. . Approved: gg OFFICE " Remit payment in check or money order, tt(( (( - payable to"Secretary of State," IIII1II+1II1II1IIIIII1I --- - . _ _ CP0214281 t icy 1. CORPORATE NAME: . The Salvation Army 2. STATE OR COUNTRY OF INCORPORATION: _Illinois 3, Name and address of theregistered agent and registered office as they appear on the records of the office of the Secretary of State (before change): Registered Agent Retoid Winkler Rlt Name Middle Name Last Name Wgonquin Registered Office -- Number Street Suite No,(A P.O.Box alone is not acceptable) City Zip Code County 4, Name and address of the registered ageni and registered office shalt be(after all changes herein reported); Registered Agent Donald L. Lenz First Name 10 West Algonquin Middle Name Last Name Registered Office Number Street Suite No. (A P.O..Box alone Is not acceptable) City Zip Code County 5. The address of the registered office and the address of the business office of the registered agent,as changed, will be identical. 6. The above change was authorized by: Crone box only) a. [] By resolution duly adopted by the board of directors, (Note 5) b, ,® By action of the registered agent, (Note 6) NOTE: When the registered agent changes, the signatures of both president and secretary are required. 7. (lf authorized by the board of directors, sign here, See Note 5) The undersigned corporation has caused this statement to be signed by its duly authorized officers, each of whom'atfirm$ Under penaltie§'of perjury,that tfie fadta-stated=iierein=a?etrue: - v--- ---- ° Dated 19, (Exact Name of Corporation) attested by by (Signature of Secretaryor Assistant Secretary) (Signature of Vice resident) (Type or Print Name and Title) (Type or Print Name and Title) (If change of registered office by registered agent, sign here. See Note The undersigned,under penalties of perjury,affirms that th facts 4tated herein are true. PrAild .11 19, 1 , - ere pi nat f d t -red Agent of Record) Donald L. itli eeee:ry . � NOTES ti The registered office may,but need not be the same as the principal office of the corporation, However,the registered office and the office address of the registered agent must be the same. —2:—The ergsteredoffice must Eltidea street or road`address;apost office f ox number alone is not acceptabiee. 9. A corporation cannot act as its own registered agent. 4. if the registered office is changed from one county to another,then the corporation must file with the recorder of deeds of the new county a certified copy of the articles of incorporation and a certified copy of the statement of change of registered office. Such certified copies may be obtained ONLY from the Secretary of State. 5. Any change of registered agent must be by resolution adopted by the board of directors.This statement must then be signed by the president (or vice-president)and by the secretary (or an assistant secretary). 6, The registered agent may report a change of the registered office of the corporation for which he or she is registered agent. When the agent reports such a change, this statement must be signed by the registered agent. . G�35,SG File Number 1247-720-1 -- no,- . 1,, jr, 0., _------,.„. ....„..,-----: ,,yoi ,-,..v,„ . ,, . . .,, ,t v , /--' .,i-titi-2.• 7---0--- 0..... . --7---.i „.:1,- .1re.-4 e #7,.„..„ „,.. .,, ,,, .:. .. ,,,.,....,_ ,,,,,,,, ,..,,,,..-:-.-,,,,-----, „,,,,,„: a -, WOW/7.,^t?" f / J,, � �L '� i ry� �] 4 r.. ` Yam.--,ryf/ i „s ,. „ ei vivid ,' '" x a .� '17 ",e F-9.u.z 4 4' 4 . k i r i a To all to whom these Presents Shall Come, Greeting: 9 I, Jesse White, Secretary of State of the State of Illinois, do hereby certify that THE FOREGOING AND HERETO ATTACHED IS A TRUE AND CORRECT COPY, CONSISTING OF 23 PAGES, AS TAKEN FROM THE ORIGINAL ON FILE IN THIS OFFICE FOR THE SALVATION ARMY.************ -�;.1 7t : , In Testimony Whereof hereto set f ', p my hand and cause to be affixed the Great Seal of ,v * IA the State of Illinois, this 27TH 'V, '' : ` .111. day of FEBRUARY A.D. 2007 atif i'F h I.. k,e. Q-).,.e.4....a.z.- ),(7-AA, Authentication t:O78801305 • Authenticate at:http://www.cyberdriveillinois.com SECRETARY OF STATE By-laws/Operating Agreement THE SALVATION ARMY (An Illinois Corporation) BY-LAWS ARTICLE 1 NAME OFIT IC'E AND OB.III Section 1. Name and Office The name of this Corporation shall be THE SALVATION ARMY, and the location of its principal office and place of business shall be as determined by its Board of Trustees. The Corporation shall have an office or offices in such other place or places in the Mate of Illinois and outside of Illinois as the Board of Trustees rrray tiom time to tune appoint, or the business of the Corporation may require; The book; of the Corporation may be kept at the principal office of the Corporation or at such other place in. the State of Illinois and outside of Illinois, :as the Board may from time to three determine: Section 2. Objects The general object and purposes of this Corporation are those stated in paragraph 2 ;of its Certificate of Incorporation, to-wit: The object for which it is formed is to further the work of the Christian Church known as °1.11E SALVATION ARMY, and to engage in charitable, educational; missionary, philanthropic and religious work, and tunic paiiticuldrly, charitable, educational, missionary, ph lanthropie and religious work of the character that has been and is being conducted by the branch of the Christian Church known as THE SALVATION ARMY, and to do everything, and to act and eat-ry on every kind of operation riccesary and incidental to the maintenance of 51.1411. beneficial, educational, charitable, missionary, philanthropic and religious work, but that all of such work shall be conducted not for pecuniary profit; to receive and hold both real and personal property of and for religious societies and associations belonging to.such branch of the Christian Church known as THE SALVATION ARMY, and to execute trusts thereof;also from time to time to transact any business and carry on any work or Operations in connection with and icr the purposes of the foregoing, but at no time far pecuniary profit; to enter into, make,perform and carry out contracts of every kind and for any lawful purpose, issue bonds or obligations of the Corporation and secure the same by trust, deed, mortgage, pledge, or otherwise, if deemed befit or necessary by said Corporation, and to dispose of the same, take and hold by lease, gift, purchase, grant, devise or bequest, any property (real or personal) for purposes of the Corporation, and issue bonds therefore, and to secure the same by mortgage, trust deed, or otherwise. The Corporation shall and may exercise all the powers now or hereafter granted by the laws of the State of Illinois to corporations organized under the general Not for Profit Corporation Act. DB1/90398652.3 ARTICLE 2 MEMBERSHIP Section 1. Membership The members of this Corporation shall be the National Commander of THE SALVATION ARMY in the United States of America, the Territorial Commander of the Central Territory of THE SALVATION ARMY in the United States of America and the Chief Secretary of the Central Territory of THE SALVATION ARMY in the United States of America. Section 2, Annuall:ectinr; An annual meeting of the members shall be held in February of each year. ARTICLE 3 BOARD OF TRUSTEES Section 1. Appointment The property and business 01 this Corporation shall be managed b a Bond of Trustees, which shall consist of no less than five (5) and no more than eleven (11) in number. The National Con r ander of THE SALVATION ARMY in the United States of America, the 'Ve ritorial Commander of the Central Territory of T'LIE SALVATION ARMY in the United States of America and the Chief Secretary of the Central Territory of THE SALVATION ARMY in the l.lnitcd States of America alutil be ex-of>•icio Trustees, and each shall serve as a Trustee far as long as he shall hold such appointment within THE SALVATION ARMY. The remaining Trustees shall be appointed by the members and shall serve for a term of one year, subject to earlier removal, resignation, death or inability to act. Any Trustee:appointed by the members may be removed by the members at any time with or without cause. The members shall appoint a successor to any 'Trustee appointed by the members Whose term of office as Trustee shalt ter-mutate by reason of the expiration of hi.s term,resignation, removal, death, or inability to act, All Trustees, including those serving ex-officio, shall be entitled to vote. Section 2. Resignation A Trustee of this Corporation may resign, at any time, by causing to be delivered to the Board of Trustees his written resignation. Section 3. Implied._Powers In addition to the powers and authority by these By-Laws expressly conferred upon them, the Board of Trustees may exercise all such powers of the Corporation and do all such lawful acts and things as are authorized by statute and by the Articles of Incorporation. DB1/90398652,3 2 Section 4. j cpress Powers Without prejudice to the general powers conferred by the last preceding clause and the.other posers conferred;by statute, by the Articles of incorporation, and by these By-Laws, the Board of Trustees shall have custody and: control cif all the temporalities and property, real and personal, belonging to the said Corporation and the revenues therefrom, and shall administer the same m aecordancc with the discipline, rules arid usages of'TEE SALVATION ARMY or the governing body thereof; but this section does not give to said Trustees any control over the policy or c.ori .hol of the religious or ccclesiast:ieal membership of THE SALVATION ARMY, or power over any of the spiritual officers of the Corporation, and shall be subject to the rule and disciplines of said Corporation laid down by the cienera.,1 of THE SAI::,VATION ARMY, or his/her successors in office-, in addition to the above powers, it is thereby expressly declared that the Board of Trustees shall have the following powers, that is to say: (a) To purchase or otherwise acquire for the Corporation any property, rights, or privileges which the Corporation is authorized to acquire, at such price or consideration, and generally on such terms and conditions as the Trustees may deem fit. (b) At their discretion, to pay for any property or rights acquired by the Corporation, either wholly or partly,in money,notes,bonds, debenture or other securities of the Corporation, (c) To create, make and issue mortgages, bonds, deeds of trust, trust agreements and negotiable or transferable instruments or securities secured by mortgage, or otherwise, and to do any other act or thing necessary to effectuate the same. (d) To determine who shall be authorized on the Corporation's behalf to sign bills,notes, receipts, acceptances, endorsements, checks,releases, contracts and documents. (e) To delegate any of the powers of the Board of Trustees in the course of the current business of the Corporation to any standing or special committee, or to any officer, or agent, or to appoint any persons to be agents of the Corporation, with such powers (including the power to sub-delegate), and upon such terms as they think fit. Section 5. liar Meetings Regular meetings of the Board of Trustees may be held without notice at such time and place as shall be from time to time determined by the Board of Trustees. Section 6. Annual Meetings The annual meeting of the Board of Trustees shall be held in or around February on such day and at such time and place as shall be designated by the Trustees. Section 7. Quorum At all meetings of the Board of Trustees, a majority of the Trustees, including either the President or the Vice President, shall be necessary and sufficient to constitute a quorum for the DB1/90398652,3 3 transaction of business, and the act of a majority of the Trustees present at any meeting at which there is a quorum shall be the act of the Board of Trustees. Section 8. SpecialMeetitt s Special Meetings of the Board of Trustees may be called by the Chairman of the Board, the President or the Secretary on two (2) days' notice. to each Trustee, either personally, by mail or by electronic. means (including e-nails). Special meetings shall be called by the Secretary in like manner on the written request of four (4) Trustees. Special meetings of the Beard of Trustees may be held at any one time or place, without notice, upon all of the members of the Board of Trustees being present, Section 9. Participation at Meetin•s by Conference Telephone One or more Trustees may participate in and act at any meeting of the Board of Trustees through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear and communicate with each other. Participation by such means shall constitute attendance and presence in person at the meeting of the person or persons so participating. Section 10. Action by Unanimous Written Consent Any action required to or which may be taken at a meeting of the Board of Trustees may be taken without a meeting if a consent or consents in writing setting forth the action so taken is signed by all the Trustees and filed with the Secretary the Corporation. ARTICLE 4 OFFICERS Section 1. Officers The officers of the Corporation shall be a Chairman of the Board, a President, a Vice President, a Secretary and a Treasurer. Section 2. Ex Officio Officers Whoever shall be the National Commander of THE SALVATION ARMY in the United States of America, the Territorial Commander of the Central Territory of THE SALVATION ARMY in the United States of America, and the Chief Secretary of THE SALVATION ARMY in the Central Territory, shall be ex-officio Chairman of the Board, President and Vice President, respectively, of this Corporation. Section 3. Elected Officers and Appointed Agents (a) The Board of Trustees shall, at its annual meeting, elect a Secretary and a Treasurer, who need not be members of the Board of Trustees. The elected Secretary and Treasurer shall serve at the pleasure of the Board of Trustees. DB1/9039865Z.3 4 (b) The Board of Trustees may elect such other officers, including Assistant Secretaries and Assistant Treasurers, and may appoint such other agents as it shall deem necessary, all of whom shall have such authority and perform such duties as may from time to time be determined by the Board of Trustees. Such other elected officers and agents shall serve at the pleasure of the Board of Trustees. Section 4. Term The officers of this Corporation, except the ex-officio officers, shall hold office for one(1) year and until their successors are chosen and qualify. Section 5. Resignation Any officer may resign at any time by giving written notice to the Board of Trustees or to the President or Secretary of the Corporation. Any such resignation shall take effect at the time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 6. Removal Any of the officers of the Corporation, other than the ex-officio officers, may be removed at any time,with or without cause,by the Board of Trustees. Section 7. Vacancies Any vacancy in any office because of death, resignation, removal, disqualification or any other cause, other than the ex-officio offices, shall be filled by the Board of Trustees at an annual or regular meeting or at a special meeting called for such purpose. ARTICLE S COMMITTEES.ES AND COUNCILS Section 1. Executive Committee (a) There may be an executive committee of two (2) Trustees, including g either the President or the. Vice President, appointed by the Board of 'Trustees, who may at stated times or on notice by either to the other, Meet. During.tle intervals between the meetings. of the Board of Trustees, they shall advise with and aid the officers of the Corporation in all Matters concerning its interests and the management of its business,and generally perform such. duties and exercise such powers as may he directed or delegated by the Board of Trustees front time to time. The Board may delegate to ;Rich committee, authority to exercise all the powers of the Board, excepting powers not permitted to be exercised by the executive eoittrnhtee pursuant to statute, (b) Vacancies in the membership of the executive committee shall be filled by the Board of Trustees at the regular meeting, or at a special meeting called for that purpose. DB1/90398652.3 5 Section 2. Councils (a) The Board of Trustees shall, by resolution, appoint the following councils, designate the membership thereof, and assign to them appropriate duties and responsibilities, in accordance with the rules and usages of THE SALVATION ARMY: TERRITORIAL FINANCE COUNCIL PROPERTY COUNCIL TERRITORIAL AUDIT COUNCIL MUSIC COUNCIL RETIREMENT COUNCIL TERRITORIAL ADVISORY COUNCIL LEGACY COUNCIL • (b) Councils may have Board authority to the extent permitted by law and delegated by the Board of Trustees or in these By-laws. Any council that is delegated Board authority shall have two or more directors, a majority of its membership shall be directors, and all council members shall serve at the pleasure of the Board of Trustees. All other councils shall be advisory. ARTICLE 6 COMPENSATION Section 1. Compensation of Trustees Trustees, as such, shall receive no stated salary for their services, but by resolution of the Board of Trustees, the expenses of attendance, if any,may be allowed for attendance at each regular or special meeting of the Board of Trustees; PROVIDED, HOWEVER, that nothing herein contained shall be construed as precluding any Trustees from serving the Corporation in any , other capacity and receiving compensation therefor. Section 2. Compensation of Officers Officers of the Corporation shall receive the same allowances and other compensation received by Commissioned Officers of THE SALVATION ARMY of their respective ranks and service, where applicable, pursuant to the discipline, rules and usages of that branch of the Christian Church known as THE SALVATION ARMY. ARTICLE 7 DUTIES OF OFFICERS Section 1. Chairman of the Board The Chairman of the Board shall preside at all meetings of the members and of the Trustees, and shall have general and active management of the business of the Corporation. He shall execute mortgages, bonds and other contracts requiring a seal, under the seal of this D61/90398652.3 6 Corporation. He shall be ex-officio a member of all standing committees and shall have the general powers and duties of supervision and management usually vested in the office of the Chairman of the Board of a Corporation. Notwithstanding the foregoing, the Chairman of the Board may delegate any or all of his duties and powers to the President for such term and under such conditions as he shall consider advisable. Section 2. President The President shall, in the absence or disability of the Chairman of the Board, perform the duties of the Chairman of the Board. Section 3. Vice President The Vice President shall, in the absence or disability of the President, perform the duties of the President. Section 4. Secretary The Secretary shall attend all meetings of the Board of Trustees and all meetings of the members and act as clerk thereof, and record all votes and the minutes of all proceedings. in a book to be kept for that purpose; and shall perform like ditties for the standing committees when required, He shall give or cause to be given all notices of meetings of the Board of Trustees or members and perform such other duties as may be prescribed by the Board of Trustees or the President, under Whose supervision he shall be. He shall have custody of the eorporate seal and shall, when required to do so, affix the seal to an instrument requiring the same,and attest the same by his signature as Secretary. Section 5. Treasurer he Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of all receipts and disbursements in books belonging to the Corporation, and shall deposit all monies and valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the President or the Board of TrusteeS, He shall disburse the funds of the Corporation as may be ordered by either the President or the Board of Trustees, taking proper vouchers for such disbursements, and shall render to the President and Trustees, at the regular meetings of the Board of Trustees, or whenever they may require it, ari account of all his transactions as Treasurer, and of the financial condition of the Corporation. He shall give to the Corporation a bond, if required by the President or the Board of Trustees, in a sum and with one,(I)or more securities satisfactory to the President or Board of Trustees, for the faithful performance of duties of his office and for the restoration to the Corporation in case of his death, resignation, retirement or removal from office, of all books, paper's, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. DB1/90398652,3 7 ARTICLE 8 SEAL-HOW IDENTlFIED Section 1. Seal The Corporation shall have a corporate seal of which the impression set opposite this section shall be identification. ARTICLE 9 FISCAL YEAR Section 1. Fiscal Year The fiscal year shall begin on the first day of October of each year. ARTICLE 10 NOTICES Section 1. Notice Whenever,under.the provisions of these By-Laws, notice is required to be given to any Trustee, it shall not be construed to mean personal notice, but such notice may be given personally, by mail, or by electronic means (including e-mail) at least two (2) days before the time fixed for such meeting to each Trustee at such address as appears on the books of the Corporation. Section 2. Waiver Any Trustee, officer or member may waive any notice to be given under these By-Laws. ARTICLE 11 AMENDMENTS Section 1. Amendments to By-Laws The Board of Trustees, at the affirmative vote of a majority of all its Trustees, including the Chairman of the Board of the Corporation, may alter ors amend these By-Laws,at any regular or special meeting of the Board of Trustees. DB1/90398652.3 8 ARTICLE 12 INDEMNIFICATION Section 1. General The.Corporation shall, to the full extent permitted by the law of the State of Illinois,indemnify any person made,or threatened to be made,.a party to any action or proceeding,whether civil or criminal, including an action by or in the right of any other corporation, employee benefit plan or other enterprise, by reason of the fact that he is or was a Trustee, officer, employee or agent of this Corporation, or who is or was serving at the request of the. Cmpa1`atiorl as a Trustee, director, officer, employee or agent of another corporation; partnership,joint venture, trust or other enterprise, against judgments, fines, amounts paid in settlement and reasonable expenses (including attorneys' fees) actually and necessarily incurred as'<a result of such action of proceeding, or any appeal therein, if such Trustee, officer, employee or agent acted in good faith and in a manner he reasonably believed to be in the best interests of the Corporation and, in criminal action;; or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful, except that no indemnification shall be made in respect of any claim, issue, or matter as to which such Trustee, officer, employee or agent shall have been adjudged to be liable:for grass negligence or willful misconduct in the performance of his duty to this Corporation,. The termination of any action, suit oi•proceeding by judgment, order, settlement, conviction, or upon;a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which be reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any ctiminai action or proceeding, that the person had reasonable cause to believe that his conduct was unlawful. Section 2. Mandatory Indemnification To the extent that a present or former Trustee, officer or employee of a Corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Section 12.1, or in defense of any claim, issue or matter therein, such person shall be indemnified against expense's (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, if that person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation. Section 3. Standard of Conduct Any indemnification under Sections 12.1 or 12.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case, upon a determination that indemnification of the present or former Trustee, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 12.1 or 12.2, as applicable. Such determination shall be made with respect to a person who is a Trustee or officer of the Corporation at the time of the determination: (a) by the majority vote of the Trustees who are not parties to such action, suit or proceeding, even though less than a quorum, (b) by a committee of such Trustees, even though less than a quorum, designated by a DB1/90398652.3 9 majority vote of such Trustees, (c) if there are no such Trustees, or if such Trustees so direct, by independent legal counsel in a written opinion, or(d) by the Members. Amended , 2017 DB1/90398652.3 1 0 errM DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE WASHINGTON, D.C. 20224 TAX EXgMPT AND GOVERNMENT ENTITIES DIVISION Date:DEC 1 3 2011 Employer Identification Number. 36-2167910 Person to Contact and ID Number: Stephen B. Farson, Esq. ID##0221498 The Salvation Army Contact Number: 10 W.Algonquin Road (202)283-8922 Des Plaines,IL 60016 Accounting Period Ending: September 30 Public Charity Status: 509(a)(1)&170(b)(1)(A)(i) Form 990/990-EZJ990-N Required: No Effective Date of Exemption: May 29, 1913 Contribution Deductibility: Yes Dear Applicant: We are pleased to inform you that upon review.of your application for tax exempt status we have determined that you are exempt from Federal income,tax under section 501(c)(3)of the Internal Revenue Code, Contributions to you are deductible under section 170 of the Code. You are also qualified to.receive tax deductible bequests„devises,transfers or gifts under section 2055,2106 or 2622 of the Code. Because this letter could help resolve any questions regarding your exempt status,you should keep it in your permanent records. Organizations exempt under section 501(cX3)of the Code are further Classified as either public charities or private foundations. We determined that you are a public charity under the Code section(s)listed In the heading of this letter. Please see enclosed Compliance Guide for 501(c)(3)Public Charities for some helpful Information about your responsibilities as an exempt organization. Sincerely, Lois G. L`etner -� Director, Exempt Organizations Enclosure: Pub. 4221-PC, Compliance Guide for 501(c)(3)Public Charities Internal Revenue Service Department of the Treasury P.O. Box 2508 Cincinnati, OH 45201 Date: February 5, 2016 Person to Contact: _ K. Gleason#0203083 Toll-Free Telephone Number: THE SALVATION ARMY 877-829-550Q TERRITORIAL HEADQUARTERS Employer Identification Number: 5550 PRAIRIE STONE PARKWAY 36-2167910 HOFFMAN ESTATES IL 60192 Form 990 Required: No Dear Sir or Madam: This is in response to your request dated January 13, 2016, regarding your tax-exempt status. We issued you a determination letter in July 2011, recognizing you as tax-exempt under Internal Revenue Code (IRC) Section 501(c)(3). Our records also indicate you're not a private foundation as defined under IRC Section 509(a) because you're described in IRC Sections 509(a)(1) and 170(b)(1)(A)(i). Donors can deduct contributions they make to you as provided in IRC Section 170. You're also qualified to receive tax deductible bequests, legacies, devises, transfers, or gifts under IRC Sections 2055, 2106, and 2522. In the heading of this letter, we indicated whether you must file an annual information return. If a return is required, you must file Form 990, 990-EZ, 990-N, or 990-PF by the 15th day of the fifth month after the end of your annual accounting period. IRC Section 6033(j) provides that, if you don't file a required annual information return or notice for three consecutive years, your exempt status will be automatically revoked on the filing due date of the third required return or notice. For tax forms, instructions, and publications, visit www.irs,gov or call 1-800-TAX-FORM (1-800-829-3676) If you have questions, call 1-877-829.5500 between 8 a.m. and 5 p.m., local time, Monday through Friday (Alaska and Hawaii follow Pacific Time). Sincerely yours, Jeffrey I. Cooper Director, Exempt Organizations Rulings and Agreements N'otc; The Salvation Army(Western Division)is under the administration of the Army's divisional headquarters in Omaha,Nebraska. The Western Division covens all Salvitiun Army operations in Nebraska,South Dakota and the western 23 of Iowa. All operations in the division share the federal identification number, of the Army's territorial headquarters in Hoffman Estates,IL(formerly Des Plaines,IL)36-2167910. Exhibit B PART 200-UNIFORM ADMINISTRA- 200.50 Generally Accepted Government Au- TIVE REQUIREMENTS, COST PRIN- diting Standards(GAGAS). 200.51 Grant agreement. CIPLES, AND AUDIT REQUIRE- 200.52 Hospital. MENTS FOR FEDERAL AWARDS 200.53 Improper payment. 200.54 Indian tribe(or "federally recognized Subpart A-Acronyms and Definitions Indian tribe"). 200.55 Institutions of Higher Education ACRONYMS (IHEs). 200.56 Indirect (facilities & administrative Sec. Sec. Acronyms. (F&A))costs. 200.0 200.57 Indirect cost rate proposal. 200.1 Definitions. 200.58 Information technology systems. 200.2 Acquisition cost. 200.59 Intangible property. 200.3 Advance payment. 200.60 Intermediate cost objective. 200.4 Allocation. 200.61 Internal controls. 200.5 Audit finding. 200.62 Internal control over compliance re- 200.6 Auditor. quirements for Federal awards. 200.7 Auditor. 200.63 Loan. 200.8 Budget. 200.64 Local government. 200.9 Central service cost allocation plan. 200.65 Major program. 200.10 Catalog of Federal Domestic Assist- 200.66 Management decision. ance(CFDA)number. 200.67 Micro-purchase. 200.11 CFDA program title. 200.68 Modified Total Direct Cost(MTDC). 200.13 Capital expenditures. 200.13 Capital assets. 200.69 Non-Federal entity. 200.14 Claim. 200.70 Nonprofit organization. 200.15 Class of Federal awards. 200.71 Obligations. 200.16 Closeout. 200.72 Office of Management and Budget 200.17 Cluster of programs. (OMB). 200.18 Cognizant agency for audit. 200.73 Oversight agency for audit. 200.19 Cognizant agency for indirect costs. 200.74 Pass-through entity. 200.20 Computing devices. 200.75 Participant support costs. 200.21 Compliance supplement. 200.76 Performance goal. 200.22 Contract. 200.77 Period of performance. 200.23 Contractor. 200.78 Personal property. 200.24 Cooperative agreement. 200.79 Personally Identifiable Information 200.25 Cooperative audit resolution. (PII). 200.26 Corrective action. • 200.80 Program income. 200.27 Cost allocation plan. 200.81 Property. 200.28 Cost objective. 200.82 Protected Personally Identifiable In- 200.29 Cost sharing or matching. formation(Protected PII). 200.30 Cross-cutting audit finding. 200.83 Project cost. 200.31 [Reserved] 200.84 Questioned cost. 200.32 Data Universal Numbering System 200.85 Real property. (DUNS)number. 200.86 Recipient. 200.33 Equipment. 200.87 Research and Development(R&D). 200.34 Expenditures. 200.88 Simplified acquisition threshold. 200.35 Federal agency. 200.89 Special purpose equipment. 200.36 Federal Audit Clearinghouse(FAC). 200.90 State. 200.37 Federal awarding agency. 200.91 Student Financial Aid(SFA). 200.38 Federal award. 200.92 Subaward. 200.39 Federal award date. 200.93 Subrecipient. 200.40 Federal financial assistance. 200.94 Supplies. 200.41 Federal interest. 200.95 Termination. 200.42 Federal program. 200.96 Third-party in-kind contributions. 200.43 Federal share. 200.97 Unliquidated obligations. 200.44 Final cost objective. 200.98 Unobligated balance. 200.45 Fixed amount awards. 200.99 Voluntary committed cost sharing. 200.46 Foreign public entity. 200.47 Foreign organization. Subpart B-General Provisions 200.48 General purpose equipment. 200.49 Generally Accepted Accounting Prin- 200.100 Purpose. ciples(GAAP). 200.101 Applicability. 81 Pt. 200 2 CFR Ch. II (1-1-21 Edition) 200.102 Exceptions. 200.312 Federally-owned and exempt prop- 200.103 Authorities. erty. 200.104 Supersession. 200.313 Equipment. 200.105 Effect on other issuances. 200.314 Supplies. 200.106 Agency implementation. 200.315 Intangible property. 200.107 OMB responsibilities. 200.316 Property trust relationship. 200.108 IrigUlrleS. PROCUREMENT STANDARDS 200.109 Review date. 200.110 Effective/applicability date. 200.317 Procurements by states. 200.111 English language. 200.318 General procurement standards. 200.112 Conflict of interest. 200.319 Competition. 200.113 Mandatory disclosures. 200.320 Methods of procurement to be fol- lowed. Subpart C-Pre-Federal Award Require- 200.321 Contracting with small and minority ments and Contents of Federal Awards businesses,women's business enterprises, and labor surplus area firms. 200.200 Purpose. 200.322 Domestic preferences for procure- 200.201 Use of grant agreements (including ments. fixed amount awards), cooperative agree- 200.323 Procurement of recovered materials. ments,and contracts. 200.324 Contract cost and price. 200.202 Program planning and design. 200.325 Federal awarding agency or pass- 200.203 Requirement to provide public no- through entity review. tice of Federal financial assistance pro- 200.326 Bonding requirements. grams. 200.327 Contract provisions. 200.204 Notices of funding opportunities. 200.205 Federal awarding agency review of PERFORMANCE AND FINANCIAL MONITORING merit of proposals. AND REPORTING 200.206 Federal awarding agency review of 200.328 Financial reporting. risk posed by applicants. 200.329 Monitoring and reporting program 200.207 Standard application requirements. performance. 200.208 Specific conditions. 200.330 Reporting on real property. 200.209 Certifications and representations. 200.210 Pre-award costs. SUBRECIPIENT MONITORING AND MANAGEMENT 200.211 Information contained in a Federal 200.331 Subrecipient and contractor deter- award. minations. 200.212 Public access to Federal award infor- 200.332 Requirements for pass-through enti- mation. ties. 200.213 Reporting a determination that a 200.333 Fixed amount subawards. non-Federal entity is not qualified for a Federal award. RECORD RETENTION AND ACCESS 200.214 Suspension and debarment. 200.334 Retention requirements for records. 200.215 Never contract with the enemy. 200.335 Requests for transfer of records. 200.216 Prohibition on certain telecommuni- 200.336 Methods for collection, trans- cations and video surveillance services or mission,and storage of information. equipment. 200.337 Access to records. Subpart D-Post Federal Award 200.338 Restrictions on public access to records. Requirements REMEDIES FOR NONCOMPLIANCE 200.300 Statutory and national policy re- quirements. 200.339 Remedies for noncompliance. 200.301 Performance measurement. 200.340 Termination. 200.302 Financial management. 200.341 Notification of termination require- 200.303 Internal controls. ment. 200.304 Bonds. 200.342 Opportunities to object, hearings, 200.305 Federal payment. and appeals. 200.306 Cost sharing or matching. 200.343 Effects of suspension and termi- 200.307 Program income. nation. 200.308 Revision of budget and program CLOSEOUT plans. 200.309 Modifications to period of perform- 200.344 Closeout. ance. POST-CLOSEOUT ADJUSTMENTS AND PROPERTY STANDARDS CONTINUING RESPONSIBILITIES 200.310 Insurance coverage. 200.345 Post-closeout adjustments and con- 200.311 Real property. tinning responsibilities. 82 OMB Guidance Pt. 200 COLLECTION OF AMOUNTS DUE 200.435 Defense and prosecution of criminal 200.346 Collection of amounts due. and civil proceedings, claims, appeals and patent infringements. Subpart E-Cost Principles 200.436 Depreciation. 200.437 Employee health and welfare costs. GENERAL PROVISIONS 200.438 Entertainment costs. 200.439 Equipment and other capital expend- 200.400 Policy guide. itures. 200.401 Application. 200.440 Exchange rates. BASIC CONSIDERATIONS 200.441 Fines, penalties, damages and other settlements. 200.402 Composition of costs. 200.442 Fund raising and investment man- 200.403 Factors affecting allowability of agement costs. costs. 200.443 Gains and losses on disposition of de- 200.404 Reasonable costs. preciable assets. 200.405 Allocable costs. 200.444 General costs of government. 200.406 Applicable credits. 200.445 Goods or services for personal use. 200.446 Idle facilities and idle capacity. 200.407 Prior written approval (prior a p- 200.447 Insurance and indemnification. proval). 200.448 Intellectual property. 200.408 Limitation on allowance of costs. 200.449 Interest. 200.409 Special considerations. 200.450 Lobbying. 200.410 Collection of unallowable,costs. 200.451 Losses on other awards or contracts. 200.411 Adjustment of previously negotiated 200.452 Maintenance and repair costs. indirect(F&A) cost rates containing un- 200.453 Materials and supplies costs, includ- allowable costs. ing costs of computing devices. DIRECT AND INDIRECT(F&A)COSTS 200.454 Memberships,subscriptions,and pro- fessional activity costs. 200.412 Classification of costs. 200.455 Organization costs. 200.413 Direct costs. 200.456 Participant support costs. 200.414 Indirect(F&A)costs. 200.457 Plant and security costs. 200.415 Required certifications. 200.458 Pre-award costs. 200.459 Professional service costs. SPECIAL CONSIDERATIONS FOR STATES,LOCAL 200.460 Proposal costs. GOVERNMENTS AND INDIAN TRIBES 200.461 Publication and printing costs. 200.416 Cost allocation plans and indirect 200.462 Rearrangement and reconversion cost proposals. costs. 200.463 Recruiting costs. 200.417 Interagency service. 200.464 Relocation costs of employees. SPECIAL CONSIDERATIONS FOR INSTITUTIONS OF 200.465 Rental costs of real property and HIGHER EDUCATION equipment. 200.466 Scholarships and student aid costs. 200.418 Costs incurred by states and local 200.467 Selling and marketing costs. governments. 200.468 Specialized service facilities. 200.419 Cost accounting standards and dis- 200.469 Student activity costs. closure statement. 200.470 Taxes(including Value Added Tax). • GENERAL200.471 Telecommunication costs and video PROVISIONS FOR SELECTED ITEMS OF surveillance costs. COST 200.472 Termination costs. 200.420 Considerations for selected items of 200.473 Training and education costs. cost. 200.474 Transportation costs. 200.421 Advertising and public relations. 200.475 Travel costs. 200.422 Advisory councils. 200.476 Trustees. 200.423 Alcoholic beverages. 200.424 Alumni/ae activities. Subpart F-Audit Requirements 200.425 Audit services. GENERAL 200.426 Bad debts. 200.427 Bonding costs. 200.500 Purpose. 200.428 Collections of improper payments. AUDITS 200.429 Commencement and convocation costs. 200.501 Audit requirements. 200.430 Compensation-personal services. 200.502 Basis for determining Federal 200.431 Compensation-fringe benefits. awards expended. 200.432 Conferences. 200.503 Relation to other audit require- 200.433 Contingency provisions. ments. 200.434 Contributions and donations. 200.504 Frequency of audits. 83 §200.0 2 CFR Ch. II (1-1-21 Edition) 200.505 Sanctions. Subpart A—Acronyms and 200.506 Audit costs. Definitions 200.507 Program-specific audits. AUDITEES ACRONYMS 200.508 Auditee responsibilities. §200.0 Acronyms. 200.509 Auditor selection. 200.510 Financial statements. ACRONYM TERM 200.511 Audit findings follow-up. CAS Cost Accounting Standards 200.512 Report submission. CFR Code of Federal Regulations FEDERAL AGENCIES CMIA Cash Management Improve- ment Act 200.513 Responsibilities. COG Councils Of Governments AUDITORS COSO Committee of Sponsoring Orga- nizations of the Treadway Commis- 200.514 Scope of audit. sion 200.515 Audit reporting. 200.516 Audit findings. 200.517 Audit documentation. EPA Environmental Protection Agen 200.518 Major program determination. cy 200.519 Criteria for Federal program risk. ERISA Employee Retirement Income 200.520 Criteria for a low-risk auditee. Security Act of 1974 (29 U.S.C. 1301- MANAGEMENT DECISIONS 1461) EUI Energy Usage Index 200.521 Management decision. F&A Facilities and Administration APPENDIX I TO PART 200—FULL TEXT OF No- FAO Federal Audit Clearinghouse TICE OF FUNDING OPPORTUNITY FAIN Federal Award Identification APPENDIX II TO PART 200—CONTRACT PROVI- Number SIONS FOR NON-FEDERAL ENTITY CON- FAPIIS Federal Awardee Perform- TRACTS UNDER FEDERAL AWARDS ance and Integrity Information Sys- APPENDIX III TO PART 200—INDIRECT (F&A) tem COSTS IDENTIFICATION AND ASSIGNMENT, FAR Federal Acquisition Regulation AND RATE DETERMINATION FOR INSTITU- TIONS OF HIGHER EDUCATION(IHEs) FFATA Federal Funding Account- APPENDIX IV TO PART 200—INDIRECT (F&A) ability and Transparency Act of 2006 COSTS IDENTIFICATION AND ASSIGNMENT, or Transparency Act—Public Law AND RATE DETERMINATION FOR NONPROFIT 109-282, as amended by section 6202(a) ORGANIZATIONS of Public Law 110-252 (31 U.S.C. 6101) APPENDIX V TO PART 200—STATE/LOCAL Gov- FICA Federal Insurance Contribu- ERNMENTWIDE CENTRAL SERVICE COST AL- tions Act LOCATION PLANS FOIA Freedom of Information Act APPENDIX VI TO PART 200—PUBLIC ASSIST- FR Federal Register ANCE COST ALLOCATION PLANS FTE Full-time equivalent APPENDIX VII TO PART 220—STATES AND GAAP Generally Accepted Account- LOCAL GOVERNMENT AND INDIAN TRIBE IN- DIRECT COST PROPOSALS ing Principles APPENDIX VIII TO PART 200—NONPROFIT OR- GAGAS Generally Accepted Govern- GANIZATIONS EXEMPTED FROM SUBPART E ment Auditing Standards OF PART 200 GAO Government Accountability Of- APPENDIX IX TO PART 200—HOSPITAL COST fice PRINCIPLES GOCO Government owned, contractor APPENDIX X TO PART 200—DATA COLLECTION operated FORM(FORM SF-SAC) GSA General Services Administration APPENDIX XI TO PART 200—COMPLIANCE SUP- IBS Institutional Base Salary PLEMENT IHE Institutions of Higher Education APPENDIX XII TO PART 200—AWARD TERM AND IRC Internal Revenue Code CONDITION FOR RECIPIENT INTEGRITY AND ISDEAA Indian Self-Determination PERFORMANCE MATTERS and Education and Assistance Act AUTHORITY:31 U.S.C.503 MTC Modified Total Cost SOURCE: 78 FR 78608, Dec. 26, 2013, unless MTDC Modified Total Direct Cost otherwise noted. NFE Non-Federal Entity 84 OMB Guidance §200.1 • OMB Office of Management and Budg- before the non-Federal entity disburses et the funds for program purposes. PII Personally Identifiable Informa- Allocation means the process of as- tion signing a cost, or a group of costs, to PMS Payment Management System one or more cost objective(s), in rea- PRHP Post-retirement Health Plans sonable proportion to the benefit pro- PTE Pass-through Entity vided or other equitable relationship. REUI Relative Energy Usage Index The process may entail assigning a SAM System for Award Management cost(s) directly to a final cost objective SFA Student Financial Aid or through one or more intermediate SNAP Supplemental Nutrition Assist- cost objectives. ance Program Assistance listings refers to the pub- SPOC Single Point of Contact licly available listing of'Federal assist- TANF Temporary Assistance for ance programs managed and adminis- Needy Families tered by the General Services Adminis- TFM Treasury Financial Manual tration,formerly known as the Catalog U.S.C. United States Code of Federal Domestic Assistance VAT Value Added Tax (CFDA). [78 FR 78608, Dec. 26, 2013, as amended at 79 Assistance listing number means a FR 75880, Dec. 19, 2014; 80 FR 43308, July 22, unique number assigned to identify a 2015;85 FR 49529,Aug.13,2020] Federal Assistance Listings, formerly known as the CFDA Number. §200.1 Definitions. Assistance listing program title means These are the definitions for terms the title that corresponds to the Fed- used in this part. Different definitions eral Assistance Listings Number, for- may be found in Federal statutes or merly known as the CFDA program regulations that apply more specifi- title. • cally to particular programs or activi- Audit finding means deficiencies ties. These definitions could be supple- which the auditor is required by mented by additional instructional in- §200.516(a) to report in the schedule of formation provided in governmentwide findings and questioned costs. standard information collections. For Auditee means any non-Federal enti- purposes of this part, the following ty that expends Federal awards which definitions apply: must be audited under subpart F of Acquisition cost means the cost of the this part. asset including the cost to ready the Auditor means an auditor who is a asset for its intended use. Acquisition public accountant or a Federal, State, cost for equipment, for example,means local government, or Indian tribe audit the net invoice price of the equipment, organization, which meets the general including the cost of any modifica- standards specified for external audi- tions, attachments,accessories, or aux- tors in generally accepted government iliary apparatus necessary to make it auditing standards (GAGAS). The term usable for the purpose for which it is auditor does not include internal audi- acquired. Acquisition costs for soft- tors of nonprofit organizations. ware includes those development costs Budget means the financial plan for capitalized in accordance with gen- the Federal award that the Federal erally accepted accounting principles awarding agency or pass-through enti- (GAAP). Ancillary charges, such as ty approves during the Federal award taxes, duty, protective in transit insur- process or in subsequent amendments ance, freight, and installation may be to the Federal award. It may include included in or excluded from the acqui- the Federal and non-Federal share or sition cost in accordance with the non- only the Federal share, as determined Federal entity's regular accounting by the Federal awarding agency or practices. pass-through entity. Advance payment means a payment Budget period means the time inter- that a Federal awarding agency or val from the start date of a funded por- pass-through entity makes by any ap- tion of an award to the end date of that propriate payment mechanism, includ- funded portion during which recipients ing a predetermined payment schedule, are authorized to expend the funds 85 §200.1 2 CFR Ch. II (1-1-21 Edition) awarded, including any funds carried (i) The payment of money in a sum forward or other revisions pursuant to certain; §200.308. (ii) The adjustment or interpretation Capital assets means: of the terms and conditions of the Fed- (1) Tangible or intangible assets used eral award;or in operations having a useful life of (iii) Other relief arising under or re- more than one year which are capital- lating to a Federal award. ized in accordance with GAAP. Capital (2) A request for payment that is not assets include: in dispute when submitted. (i) Land, buildings (facilities), equip- Class of Federal awards means a group ment, and intellectual property (in- of Federal awards either awarded under eluding software) whether acquired by a specific program or group of pro- purchase, construction, manufacture, grams or to a specific type of non-Fed exchange, or through a lease accounted eral entity or group of non-Federal en- for as financed purchase under Govern- tities to which specific provisions or ment Accounting Standards Board (GASB) standards or a finance lease exceptions may apply. under Financial Accounting Standards Closeout means the process by which Board(FASB)standards;and the Federal awarding agency or pass- (ii) Additions, improvements, modi- through entity determines that all ap- fications, replacements, rearrange- plicable administrative actions and all ments, reinstallations, renovations or required work of the Federal award alterations to capital assets that mate- have been completed and takes actions rially increase their value or useful life as described in§200.344. (not ordinary repairs and mainte- Cluster of programs means a grouping nance). of closely related programs that share (2) For purpose of this part, capital common compliance requirements. The assets do not include intangible right- types of clusters of programs are re- to-use assets (per GASB) and right-to- search and development(R&D),student use operating lease assets (per FASB). financial aid (SFA), and other clusters. For example, assets capitalized that "Other clusters" are as defined by OMB recognize a lessee's right to control the in the compliance supplement or as use of property and/or equipment for a designated by a State for Federal period of time under a lease contract. awards the State provides to its sub- See also§200.465. recipients that meet the definition of a Capital expenditures means expendi- cluster of programs. When designating tures to acquire capital assets or ex- an "other cluster," a State must iden- penditures to make additions, improve- tify the Federal awards included in the ments, modifications, replacements, cluster and advise the subrecipients of rearrangements, reinstallations, ren- compliance requirements applicable to ovations, or alterations to capital as- the cluster, consistent with §200.332(a). sets that materially increase their A cluster of programs must be consid- value or useful life. ered as one program for determining Central service cost allocation plan major programs, as described in means the documentation identifying, §200.518, and, with the exception of accumulating, and allocating or devel- R&D as described in §200.501(c), wheth- oping billing rates based on the allow- er a program-specific audit may be able costs of services provided by a elected. State or local government or Indian Cognizant agency for audit means the tribe on a centralized basis to its de- Federal agency designated to carry out partments and agencies. The costs of the responsibilities described in these services may be allocated or §200.513(a). The cognizant agency for billed to users. audit is not necessarily the same as the Claim means, depending on the con- cognizant agency for indirect costs. A text, either: list of cognizant agencies for audit can (1) A written demand or written as- be found on the Federal Audit Clear- sertion by one of the parties to a Fed- in'ghouse(FAC)website. eral award seeking as a matter of Cognizant agency for indirect costs right: means the Federal agency responsible 86 OMB Guidance §200.1 for reviewing, negotiating, and approv- (1) Is used to enter into a relation- ing cost allocation plans or indirect ship the principal purpose of which is cost proposals developed under this to transfer anything of value to carry part on behalf of all Federal agencies. out a public purpose authorized by a The cognizant agency for indirect cost law of the United States (see 31 U.S.C. is not necessarily the same as the cog- 6101(3)); and not to acquire property or nizant agency for audit. For assign- services for the Federal Government or ments of cognizant agencies see the pass-through entity's direct benefit or following: use; (1) For Institutions of Higher Edu- (2) Is distinguished from a grant in cation (IHEs): Appendix III to this that it provides for substantial involve- part,paragraph C.11. ment of the Federal awarding agency (2) For nonprofit organizations: Ap- in carrying out the activity con- pendix IV to this part, paragraph C.2.a. templated by the Federal award. (3) For State and local governments: (3)The term does not include: Appendix V to this part, paragraph F.1. (i) A cooperative research and devel- (4) For Indian tribes: Appendix VII to opment agreement as defined in 15 this part,paragraph D.1. U.S.C. 3710a;or Compliance supplement means an an- (ii)An agreement that provides only: nually updated authoritative source for (A)Direct United States Government auditors that serves to identify exist- cash a§sistance to an individual; ing important compliance require- (B)A subsidy; ments that the Federal Government (C)A loan; expects to be considered as part of an (D)A loan guarantee; or audit. Auditors use it to understand (E)Insurance. the Federal program's objectives, pro- Cooperative audit resolution means the cedures,_and compliance requirements, use of audit follow-up techniques which as well as audit objectives and sug- promote prompt corrective action by gested audit procedures for deter- improving communication, fostering mining compliance with the relevant collaboration, promoting trust, and de- Federal program. veloping an understanding between the Computing devices means machines Federal agency and the non-Federal en- used to acquire, store, analyze,process, tity. This approach is based upon: and publish data and other information (1) A strong commitment by Federal electronically, including accessories agency and non-Federal entity leader- (or "peripherals") for printing, trans- ship to program integrity; mitting and receiving, or storing elec- (2) Federal agencies strengthening tronic information. See also the defini- partnerships and working coopera- tions of supplies and information tech- tively with non-Federal entities and nology systems in this section. their auditors; and non-Federal enti- Contract means, for the purpose of ties and their auditors working coop- Federal financial assistance, a legal in- eratively with Federal agencies; strument by which a recipient or sub- (3) A focus on current conditions and recipient purchases property or serv- corrective action going forward; ices needed to carry out the project or (4) Federal agencies offering appro- program under a Federal award. For priate relief for past noncompliance additional information on subrecipient when audits show prompt corrective and contractor determinations, see action has occurred; and §200.331. See also the definition of (5) Federal agency leadership sending subaward in this section. a clear message that continued failure Contractor means an entity that re- to correct conditions identified by au- ceives a contract as defined in this sec- dits which are likely to cause improper tion. payments, fraud, waste, or abuse is un- Cooperative agreement means a legal acceptable and will result in sanctions. instrument of financial assistance be- Corrective action means action taken tween a Federal awarding agency and a by the auditee that: recipient or a pass-through entity and (1) Corrects identified deficiencies; a subrecipient that, consistent with 31 (2) Produces recommended improve- U.S.C.6302-6305: ments; or 87 §200.1 2 CFR Ch. II (1-1-21 Edition) (3) Demonstrates that audit findings sets, computing devices, general purpose are either invalid or do not warrant equipment, information technology sys- auditee action. tems, special purpose equipment, and sup- Cost allocation plan means central plies in this section. service cost allocation plan or public Expenditures means charges made by assistance cost allocation plan. a non-Federal entity to a project or Cost objective means a program, func- program for which a Federal award was tion, activity, award, organizational received. subdivision, contract, or work unit for (1) The charges may be reported on a which cost data are desired and for cash or accrual basis, as long as the which provision is made to accumulate methodology is disclosed and is con- and measure the cost of processes, sistently applied. products, jobs, capital projects, etc. A (2) For reports prepared on a cash cost objective may be a major function basis, expenditures are the sum of: of the non-Federal entity, a particular (i) Cash disbursements for direct service or project, a Federal award, or charges for property and services; an indirect (Facilities & Administra- (ii) The amount of indirect expense tive (F&A)) cost activity, as described (ii) The amount of indirect expense charged; in subpart E of this part. See also the (iii) The value of third-party in-kind definitions of final cost objective and in- contributions applied; and termediate cost objective in this section. (iv)The amount of cash advance pay- Cost sharing or matching means the ments and sub- portion of project costs not paid by payments made to recipients. Federal funds or contributions (unless ac- otherwise (3)authorized by Federal stat- For reports prepared on an crual basis, expenditures are the sum ute). See also§200.306. of: Cross-cutting audit finding means an (i) Cash disbursements for direct audit finding where the same under- charges for property and services; lying condition or issue affects all Fed- eral awards (including Federal awards (ii) The amount of indirect expense of more than one Federal awarding incurred; agency or pass-through entity). (iii) The value of third-party in-kind Disallowed costs means those charges contributions applied;and to a Federal award that the Federal (iv) The net increase or decrease in awarding agency or pass-through enti- the amounts owed by the non-Federal ty determines to be unallowable, in ac- entity for: cordance with the applicable Federal (A) Goods and other property re- statutes, regulations, or the terms and ceived; conditions of the Federal award. (B) Services performed by employees, Discretionary award means an award contractors, subrecipients, and other in which the Federal awarding agency, payees; and in keeping with specific statutory au- (C) Programs for which no current thority that enables the agency to ex- services or performance are required ercise judgment ("discretion"), selects such as annuities, insurance claims, or the recipient and/or the amount of Fed- other benefit payments. eral funding awarded through a corn- Federal agency means an "agency" as petitive process or based on merit of defined at 5 U.S.C. 551(1) and further proposals. A discretionary award may clarified by 5 U.S.C. 552(f). be selected on a non-competitive basis, Federal Audit Clearinghouse (FAC) as appropriate. means the clearinghouse designated by Equipment means tangible personal OMB as the repository of record where property (including information tech- non-Federal entities are required to nology systems) having a useful life of transmit the information required by more than one year and a per-unit ac- subpart F of this part. quisition cost which equals or exceeds Federal award has the meaning, de- the lesser of the capitalization level es- pending on the context, in either para- tablished by the non-Federal entity for graph(1)or(2)of this definition: financial statement purposes, or $5,000. (1)(i)The Federal financial assistance See also the definitions of capital as- that a recipient receives directly from 88 OMB Guidance §200.1 a Federal awarding agency or indi- (ii)Cooperative agreements; rectly from a pass-through entity, as (iii)Loans; and described in§200.101;or (iv)Loan Guarantees. (ii) The cost-reimbursement contract (4) Federal financial assistance does under the Federal Acquisition Regula- not include amounts received as reim- tions that a non-Federal entity re- bursement for services rendered to in- ceives directly from a Federal award- dividuals as described in§200.502(h)and ing agency or indirectly from a pass- (i), through entity,as described in§200.101. Federal interest means, for purposes of (2) The instrument setting forth the §200.330 or when used in connection terms and conditions. The instrument with the acquisition or improvement of is the grant agreement, cooperative real property, equipment, or supplies agreement, other agreement for assist- under a Federal award, the dollar ance covered in paragraph (2) of the amount that is the product of the: definition of Federal financial assistance (1) The percentage of Federal partici- in this section, or the cost-reimburse- ment contract awarded under the Fed- pationin thetotal cost of the real eral Acquisition Regulations. property, equipment,or supplies; and (3) Federal award does not include pr(2) Current v improvements,marks orvrlue hf thet other contracts that a Federal agency the extent hecostsfacquiringboth, to m- uses to buy goods or services from a provingro tthe r ofwerenlore as contractor or a contract to operate the property included as project costs. Federal Government owned, contractor Federal program means: operated facilities(GOCOs). (4) See also definitions of Federal fi- (1) All Federal awards which are as- nancial assistance, grant agreement, signed a single Assistance Listings and cooperative agreement. Number. Federal award date means the date (2) When no Assistance Listings when the Federal award is signed by Number is assigned, all Federal awards the authorized official of the Federal from the same agency made for the awarding agency. same purpose must be combined and Federal financial assistance means considered one program. (1) Assistance that non-Federal enti- (3) Notwithstanding paragraphs (1) ties receive or administer in the form and (2) of this definition, a cluster of of: programs. The types of clusters of pro- 3 (i)Grants; grams are: (ii)Cooperative agreements; (i) Research and development (R&D); (iii) Non-cash contributions or dona- (ii)Student financial aid(SFA);and tions of property (including donated (iii) "Other clusters," as described in surplus property); the definition of cluster of programs in (iv)Direct appropriations; this section. (v)Food commodities;and Federal share means the portion of (vi) Other financial assistance (ex- the Federal award costs that are paid cept assistance listed in paragraph (2) using Federal funds. of this definition). Final cost objective means a cost ob- (2) For §200.203 and subpart F of this jective which has allocated to it both part, Federal financial assistance also in- direct and indirect costs and, in the cludes assistance that non-Federal en- non-Federal entity's accumulation sys- tities receive or administer in the form tern, is one of the final accumulation of: points, such as a particular award, in- (i)Loans; ternal project, or other direct activity (ii)Loan Guarantees; of a non-Federal entity. See also the (iii)Interest subsidies;and definitions of cost objective and inter- (iv)Insurance. mediate cost objective in this section. (3) For §200.216, Federal financial as- Financial obligations, when ref- sistance includes assistance that non- erencing a recipient's or subrecipient's Federal entities receive or administer use of funds under a Federal award, in the form of: means orders placed for property and (i)Grants; services, contracts and subawards 89 §200.1 2 CFR Ch. II (1-1-21 Edition) made,and similar transactions that re- (4) Any other entity consisting whol- quire payment. ly or partially of one or more foreign Fixed amount awards means a type of governments or foreign governmental grant or cooperative agreement under entities. which the Federal awarding agency or General purpose equipment means pass-through entity provides a specific equipment which is not limited to re- level of support without regard to ac- search, medical, scientific or other tual costs incurred under the Federal technical activities. Examples include award. This type of Federal award re- office equipment and furnishings, mod- duces some of the administrative bur- ular offices, telephone networks, infor- den and record-keeping requirements mation technology equipment and sys- for both the non-Federal entity and tems, air conditioning equipment, re- Federal awarding agency or pass- production and printing equipment, -through entity.Accountability is based and motor vehicles. See also the defini- primarily on performance and results. tions of equipment and special purpose See§§200.102(c), 200.201(b),and 200.333. equipment in this section. Foreign organization means an entity Generally accepted accounting prin- that is: ciples(GAAP) has the meaning specified (1) A public or private organization in accounting standards issued by the located in a country other than the GASB and the FASB. United States and its territories that is Generally accepted government auditing subject to the laws of the country in standards (GAGAS), also known as the which it is located, irrespective of the Yellow Book, means generally accepted citizenship of project staff or place of government auditing standards issued performance; by the Comptroller General of the (2) A private nongovernmental orga- United States, which are applicable to nization located in a country other financial audits. than the United States that solicits Grant agreement means a legal instru- and receives cash contributions from ment of financial assistance between a the general public; Federal awarding agency or pass- (3) A charitable organization located through entity and a non-Federal enti- in a country other than the United ty that, consistent with 31 U.S.C. 6302, States that is nonprofit and tax ex- 6304: empt under the laws of its country of (1) Is used to enter into a relation- domicile and operation, and his not a ship the principal purpose of which is university, college, accredited degree- to transfer anything of value to carry granting institution of education, pri- out a public purpose authorized by a vate foundation, hospital, organization law of the United States (see 31 U.S.C. engaged exclusively in research or sci- 6101(3)); and not to acquire property or entific activities, church, synagogue, services for the Federal awarding agen- mosque or other similar entities orga- cy or pass-through entity's direct ben- nized primarily for religious purposes; efit or use; or (2) Is distinguished from a coopera- (4)An organization located in a coun- tive agreement in that it does not pro- try other than the United States not vide for substantial involvement of the recognized as a foreign public entity. Federal awarding agency in carrying Foreign public entity means: out the activity contemplated by the (1) A foreign government or foreign Federal award. governmental entity; (3) Does not include an agreement (2) A public international organiza- that provides only: tion, which is an organization entitled (i) Direct United States Government to enjoy privileges, exemptions, and cash assistance to an individual; immunities as an international organi- (ii)A subsidy; zation under the International Organi- (iii)A loan; zations Immunities Act (22 U.S.C. 288- (vi)A loan guarantee; or 288f); (v)Insurance. (3) An entity owned (in whole or in Highest level owner means the entity part) or controlled by a foreign govern- that owns or controls an immediate ment;or owner of the offeror, or that owns or 90 OMB Guidance §200.1 controls one or more entities that con- ered an improper payment until the trol an immediate owner of the offeror. transaction has been completely re- No entity owns or exercises control of viewed and is confirmed to be im- the highest-level owner as defined in proper. the Federal Acquisition Regulations (v) The term "payment" in this defi- (FAR)(48 CFR 52.204-17). nition means any disbursement or Hospital means a facility licensed as transfer of Federal funds (including a a hospital under the law of any state or commitment for future payment, such a facility operated as a hospital by the as cash, securities, loans, loan guaran- United States, a state, or a subdivision tees, and insurance subsidies) to any of a state. non-Federal person, non-Federal enti- Improper payment means: ty, or Federal employee, that is made (1) Any payment that should not by a Federal agency, a Federal con- have been made or that was made in an tractor,a Federal grantee, or a govern- incorrect amount under statutory, con- mental or other organization admin- tractual, administrative, or.other le- istering a Federal program or activity. gally applicable requirements. (vi) The term "payment" includes (i) Incorrect amounts are overpay- disbursements made pursuant to prime ments or underpayments that are made contracts awarded under the Federal to eligible recipients (including inap- Acquisition Regulation and Federal propriate denials of payment or serv- awards subject to this part that are ex- ice, any payment that does not account pended by recipients. for credit for applicable discounts, pay- (2) See definition of improper pay- ments that are for an incorrect ment in OMB Circular A-123 appendix amount, and duplicate payments). An C, part I A (1) "What is an improper improper payment also includes any payment?" Questioned costs, including payment that was made to an ineli- those identified in audits, are not an gible recipient or for an ineligible good improper payment until reviewed and or service, or payments for goods or confirmed to be improper as defined in services not received (except for such OMB Circular A-123 appendix C. payments authorized by law). Indian tribe means any Indian tribe, Note 1 to paragraph(1)(i) of this defini- band, nation, or other organized group tion. Applicable discounts are only or community, including any Alaska those discounts where it is both advan- Native village or regional or village tageous and within the agency's con- corporation as defined in or established trol to claim them. pursuant to the Alaska Native Claims (ii) When an agency's review is un- Settlement Act (43 U.S.C. Chapter 33), able to discern whether a payment was which is recognized as eligible for the proper as a result of insufficient or special programs and services provided lack of documentation, this payment by the United States to Indians be- should also be considered an improper cause of their status as Indians (25 payment. When establishing docu- U.S.C. 450b(e)). See annually published mentation requirements for payments, Bureau of Indian Affairs list of Indian agencies should ensure that all docu- Entities Recognized and Eligible to Re- mentation requirements are necessary ceive Services. and should refrain from imposing addi- Institutions of Higher Education (IHEs) tional burdensome documentation re- is defined at 20 U.S.C. 1001. quirements. Indirect (facilities & administrative (iii) Interest or other fees that may (F&A)) costs means those costs incurred result from an underpayment by an for a common or joint purpose benefit- agency are not considered an improper ting more than one cost objective, and payment if the interest was paid cor- not readily assignable to the cost ob- rectly. These payments are generally jectives specifically benefitted, with- separate transactions and may be nec- out effort disproportionate to the re- essary under certain statutory, con- sults achieved. To facilitate equitable tractual, administrative, or other le- distribution of indirect expenses to the gally applicable requirements. cost objectives served, it may be nec- (iv) A "questioned cost" (as defined essary to establish a number of pools of in this section) should not be consid- indirect (F&A) costs. Indirect (F&A) 91 §200.1 2 CFR Ch. II (1-1-21 Edition) cost pools must be distributed to bene- (1) The term "direct loan" means a fitted cost objectives on bases that will disbursement of funds by the Federal produce an equitable result in consider- Government to a non-Federal borrower ation of relative benefits derived. under a contract that requires the re- Indirect cost rate proposal means the payment of such funds with or without documentation prepared by a non-Fed- interest. The term includes the pur- eral entity to substantiate its request chase of, or participation in, a loan for the establishment of an indirect made by another lender and financing cost rate as described in appendices III arrangements that defer payment for through VII and appendix IX to this more than 90 days, including the sale of part. a Federal Government asset on credit Information technology systems means terms. The term does not include the computing devices, ancillary equip- acquisition of a federally guaranteed ment, software, firmware, and similar loan in satisfaction of default claims or procedures, services (including support the price support loans of the Com- services), and related resources. See modity Credit Corporation. also the definitions of computing devices (2) The term "direct loan obligation" and equipment in this section. means a binding agreement by a Fed- Intangible property means property eral awarding agency to make a direct having no physical existence, such as loan when specified conditions are ful- trademarks, copyrights, patents and filled by the borrower. patent applications and property, such (3) The term "loan guarantee" means as loans, notes and other debt instru- any Federal Government guarantee, in- ments, lease agreements, stock and surance, or other pledge with respect other instruments of property owner- to the payment of all or a part of the ship (whether the property is tangible principal or interest on any debt obli- or intangible). gation of a non-Federal borrower to a Intermediate cost objective means a non-Federal lender, but does not in- cost objective that is used to accumu- elude the insurance of deposits, shares, late indirect costs or service center or other withdrawable accounts in fi- costs that are subsequently allocated nancial institutions. to one or more indirect cost pools or (4) The term "loan guarantee com- final cost objectives. See also the defi- mitment" means a binding agreement nitions of cost objective and final cost ob- by a Federal awarding agency to make jective in this section. a loan guarantee when specified condi- Internal controls for non-Federal enti- tions are fulfilled by the borrower, the ties means: lender, or any other party to the guar- (1) Processes designed and imple- antee agreement. mented by non-Federal entities to pro- Local government means any unit of vide reasonable assurance regarding government within a state, including a: the achievement of objectives in the (1)County; following categories: (2) Borough; (i) Effectiveness and efficiency of op- (3)Municipality; erations; (4) City; (ii) Reliability of reporting for inter- (5)Town; nal and external use; and (6)Township; (iii) Compliance with applicable laws (7)Parish; and regulations. (8) Local public authority, including (2) Federal awarding agencies are re- any public housing agency under the quired to follow internal control com- United States Housing Act of 1937; pliance requirements in OMB Circular (9) Special district; No. A-123, Management's Responsi- (10) School district; bility for Enterprise Risk Management (11)Intrastate district; and Internal Control. (12) Council of governments, whether Loan means a Federal loan or loan or not incorporated as a nonprofit cor- guarantee received or administered by poration under State law; and a non-Federal entity, except as used in (13) Any other agency or instrumen- the definition of program income in this tality of a multi-, regional, or intra- section. State or local government. 92 OMB Guidance §200.1 Major program means a Federal pro- ity the agency has no ability to exer- gram determined by the auditor to be a cise judgement ("discretion"). A non- major program in accordance with discretionary award amount could be §200.518 or a program identified as a determined specifically or by formula. major program by a Federal awarding Non-Federal entity (NFE) means a agency or pass-through entity in ac- State, local government, Indian tribe, cordance with§200.503(e). Institution of Higher Education (IHE), Management decision means the Fed- or nonprofit organization that carries eral awarding agency's or pass-through out a Federal award as a recipient or entity's written determination, pro- subrecipient. vided to the auditee, of the adequacy of Nonprofit organization means any cor- the auditee's proposed corrective ac- poration, trust, association, coopera- tions to address the findings, based on tive, or other organization, not includ- its evaluation of the audit findings and ing IHEs,that: proposed corrective actions. (1) Is operated primarily for sci- Micro-purchase means a purchase of entific, educational, service, chari- supplies or services, the aggregate table,or similar purposes in the public amount of which does not exceed the interest; micro-purchase threshold. Micro-pur- (2) Is not organized primarily for chases comprise a subset of a non-Fed- profit;and eral entity's small purchases as defined (3) Uses net proceeds to maintain, in§200.320. improve, or expand the operations of Micro-purchase threshold means the the organization. dollar amount at or below which a non- Notice of funding opportunity means a Federal entity may purchase property formal announcement of the avail- or services using micro-purchase proce- ability of Federal funding through a fi- dures (see §200.320). Generally, the nancial assistance program from a Fed- micro-purchase threshold for procure- eral awarding agency. The notice of ment activities administered under funding opportunity provides informa- Federal awards is not to exceed the tion on the award, who is eligible to amount set by the FAR at 48 CFR part apply, the evaluation criteria for selec- 2, subpart 2.1, unless a higher threshold tion of an awardee, required compo- is requested by the non-Federal entity nents of an application, and how to and approved by the cognizant agency submit the application. The notice of for indirect costs. funding opportunity is any paper or Modified Total Direct Cost (MTDC) electronic issuance that an agency uses means all direct salaries and wages, ap- to announce a funding opportunity, plicable fringe benefits, materials and whether it is called a "program an- supplies, services, travel, and up to the nouncement," "notice of funding avail- first $25,000 of each subaward (regard- ability," "broad agency announce- less of the period of performance of the ment," "research announcement," subawards under the award). MTDC ex- "solicitation," or some other term. cludes equipment, capital expendi- Office of Management and Budget tures, charges for patient care, rental (OMB) means the Executive Office of costs, tuition remission, scholarships the President, Office of Management and fellowships, participant support and Budget. costs and the portion of each subaward Oversight agency for audit means the in excess of $25,000. Other items may Federal awarding agency that provides only be excluded when necessary to the predominant amount of funding di- avoid a serious inequity in the dis- rectly (direct funding) (as listed on the tribution of indirect costs, and with schedule of expenditures of Federal the approval of the cognizant agency awards, see §200.510(b)) to a non-Fed- for indirect costs. eral entity unless OMB designates a Non-discretionary award means an specific cognizant agency for audit. award made by the Federal awarding When the direct funding represents less agency to specific recipients in accord- than 25 percent of the total Federal ex- ance with statutory, eligibility and penditures (as direct and sub-awards) compliance requirements, such that in by the non-Federal entity, then the keeping with specific statutory author- Federal agency with the predominant 93 §200.1 2 CFR Ch. II (1-1-21 Edition) amount of total funding is the des- PII and includes, for example, first and ignated cognizant agency for audit. last name, address, work telephone When there is no direct funding, the number, email address, home telephone Federal awarding agency which is the number, and general educational cre- predominant source of pass-through dentials. The definition of PII is not funding must assume the oversight re- anchored to any single category of in- sponsibilities. The duties of the over- formation or technology. Rather, it re- sight agency for audit and the process quires a case-by-case assessment of the for any reassignments are described in specific risk that an individual can be §200.513(b). identified. Non-PII can become PII Participant support costs means direct whenever additional information is costs for items such as stipends or sub- made publicly available, in any me- sistence allowances, travel allowances, dium and from any source, that, when and registration fees paid to or on be- combined with other available infor- half of participants or trainees(but not mation,could be used to identify an in- employees) in connection with con- dividual. ferences, or training projects. Program income means gross income Pass-through entity (PTE) means a earned by the non-Federal entity that non-Federal entity that provides a is directly generated by a supported ac- subaward to a subrecipient to carry out Fed- part of a Federal program. tivity or earned as a result of the eral award during the period of per- Performance goal means a target level formance except as provided in of performance expressed as a tangible, §200.307(f). (See the definition of period measurable objective, against which of performance in this section.)Program actual achievement can be compared, income includes but is not limited to including a goal expressed as a quan- income from fees for services per- titative standard, value, or rate. In formed, the use or rental or real or per- some instances (e.g., discretionary re- sonal property acquired under Federal search awards), this may be limited to awards, the sale of commodities or the requirement to submit technical items fabricated under a Federal performance reports(to be evaluated in award, license fees and royalties on accordance with agency policy). patents and copyrights, and principal Period of performance means the total and interest on loans made with Fed estimated time interval between the eral award funs. Interest earned on start of an initial Federal award and advances of Federal funds is not pro- the planned end date, which may in- clude one or more funded portions, or gram income. Except as otherwise pro- budget periods. Identification of the vided in Federal statutes, regulations, period of performance in the Federal or the terms and conditions of the Fed- award per §200.211(b)(5) does not com- eral award, program income does not mit the awarding agency to fund the include rebates, credits, discounts, and award beyond the currently approved interest earned on any of them. See budget period. also §200.407. See also 35 U.S.C. 200-212 Personal property means property "Disposition of Rights in Educational other than real property. It may be Awards" applies to inventions made tangible, having physical existence, or under Federal awards. intangible. Project cost means total allowable Personally Identifiable Information costs incurred under a Federal award (PII) means information that can be and all required cost sharing and vol- used to distinguish or trace an individ- untary committed cost sharing,includ- ual's identity, either alone or when ing third-party contributions. combined with other personal or iden- Property means real property or per- tifying information that is linked or sonal property. See also the definitions linkable to a specific individual. Some of real property and personal property in information that is considered to be this section. PII is available in public sources such Protected Personally Identifiable Infor- as telephone books, public websites, mation(Protected PII) means an individ- and university listings. This type of in- ual's first name or first initial and last formation is considered to be Public name in combination with any one or 94 OMB Guidance §200.1 more of types of information, includ- the same facilities as other research ing, but not limited to, social security and development activities and where number, passport number, credit card such activities are not included in the numbers, clearances, bank numbers, instruction function. "Research" is de- biometrics, date and place of birth, fined as a systematic study directed to- mother's maiden name, criminal, med- ward fuller scientific knowledge or un- ical and financial records, educational derstanding of the subject studied. transcripts. This does not include PII "Development" is the systematic use that is required by law to be disclosed. of knowledge and understanding gained See also the definition of Personally from research directed toward the pro- Identifiable Information (PII) in this sec- duction of useful materials, devices, tion. systems, or methods, including design Questioned cost means a cost that is and development of prototypes and questioned by the auditor because of an processes. audit finding: Simplified acquisition threshold means (1)Which resulted from a violation or the dollar amount below which a non- possible violation of a statute, regula- Federal entity may purchase property tion, or the terms and conditions of a or services using small purchase meth- Federal award, including for funds used ods (see §200.320). Non-Federal entities to match Federal funds; adopt small purchase procedures in (2) Where the costs, at the time of order to expedite the purchase of items the audit, are not supported by ade- at or below the simplified acquisition quate documentation; or threshold. The simplified acquisition (3) Where the costs incurred appear threshold for procurement activities unreasonable and do not reflect the ac- administered under Federal awards is tions a prudent person would take in set by the FAR at 48 CFR part 2, sub- the circumstances. part 2.1. The non-Federal entity is re- (4) Questioned costs are not an im- sponsible for determining an appro- proper payment until reviewed and priate simplified acquisition threshold confirmed to be improper as defined in based on internal controls, an evalua- OMB Circular A-123 appendix C. (See tion of risk, and its documented pro- also the definition of Improper payment curement procedures. However, in no in this section). circumstances can this threshold ex- Real property means land, including ceed the dollar value established in the land improvements, structures and ap- FAR(48 CFR part 2, sul7part 2.1)for the purtenances thereto, but excludes simplified acquisition threshold. Re- moveable machinery and equipment. cipients should determine if local gov- Recipient means an entity, usually ernment laws on purchasing apply. but not limited to non-Federal entities Special purpose equipment means that receives a Federal award directly equipment which is used only for re- from a Federal awarding agency. The search, medical, scientific, or other term recipient does not include sub- technical activities. Examples of spe- recipients or individuals that are bene- cial purpose equipment include micro- ficiaries of the award. scopes,x-ray machines, surgical instru- Renewal award means an award made ments, and spectrometers. See also the subsequent to an expiring Federal definitions of equipment and general award for which the start date is con- purpose equipment in this section. tiguous with, or closely follows, the State means any state of the United end of the expiring Federal award. A States, the District of Columbia, the renewal award's start date will begin a Commonwealth of Puerto Rico, U.S. distinct period of performance. Virgin Islands, Guam, American Research and Development (R&D) Samoa, the Commonwealth of the means all research activities, both Northern Mariana Islands, and any basic and applied, and all development agency or instrumentality thereof ex- activities that are performed by non- elusive of local governments. Federal entities. The term research Student Financial Aid (SFA) means also includes activities involving the Federal awards under those programs training of individuals in research of general student assistance, such as techniques where such activities utilize those authorized by Title IV of the 95 §200.2 2 CFR Ch. II (1-1-21 Edition) Higher Education Act of 1965, as Third-party in-kind contributions amended, (20 U.S.C. 1070-1099d), which means the value of non-cash contribu- are administered by the U.S. Depart- tions(i.e., property or services)that— ment of Education, and similar pro- (1) Benefit a federally-assisted grams provided by other Federal agen- project or program; and cies. It does not include Federal awards (2) Are contributed by non-Federal under programs that provide fellow- third parties, without charge, to a non- ships or similar Federal awards to stu- Federal entity under a Federal award. dents on a competitive basis, or for Unliquidated financial obligations specified studies or research. means, for financial reports prepared Subaward means an award provided on a cash basis, financial obligations by a pass-through entity to a sub- incurred by the non-Federal entity recipient for the subrecipient to carry that have not been paid (liquidated). out part of a Federal award received by For reports prepared on an accrual ex- the pass-through entity. It does not in- penditure basis, these are financial ob clude payments to a contractor or pay ligations incurred by the non Federal ments to an individual that is a bene- ficiary entity for which an expenditure has ficiary of a Federal program. A not been recorded. subaward may be provided through any Unobligated balance means the form of legal agreement, including an amount of funds under a Federal award agreement that the pass-through enti- that the non-Federal entity has not ob- ty considers a contract. ligated. The amount is computed by Subrecipient means an entity, usually subtracting the cumulative amount of but not limited to non-Federal entities, oft he non-Federall entity's expenditures unliquidated financial obligations and expenditures that receives a subaward from a pass- of funds under the Federal award from through entity to carry out part of a the cumulative amount of the funds Federal award; but does not include an that the Federal awarding agency or individual that is a beneficiary of such pass-through entity authorized the award.A subrecipient may also be a re- non-Federal entity to obligate. cipient of other Federal awards di- Voluntary committed cost sharing rectly from a Federal awarding agency. means cost sharing specifically pledged Subsidiary means an entity in which on a voluntary basis in the proposal's more than 50 percent of the entity is budget on the part of the non-Federal owned or controlled directly by a par- entity and that becomes a binding re- ent corporation or through another quirement of Federal award. See also subsidiary of a parent corporation. §200.306. Supplies means all tangible personal [85 FR 49529,Aug.13,2020] property other than those described in the definition of equipment in this sec- §200.2 Acquisition cost. tion. A computing device is a supply if Acquisition cost means the cost of the the acquisition cost is less than the asset including the cost to ready the lesser of the capitalization level estab asset for its intended use. Acquisition lished by the non-Federal entity for fi- nancial statement purposes or $5,000, costth net invoicepricefor equipment, for example, means regardless of the length of its useful includinge cost of the equipment, the any modifica- life. See also the definitions of corn- x- puting devices and equipment in this sec- tions, attachments,necessary accessories,maker it tion. iliary apparatus necessary to it Telecommunications cost means the usable for the purpose for which it is acquired. Acquisition costs for soft- cost of using communication and te- ware includes those development costs lephony technologies such as mobile capitalized in accordance with gen- phones,land lines,and internet. erally accepted accounting principles Termination means the ending of a (GAAP). Ancillary charges, such as Federal award, in whole or in part at taxes, duty, protective in transit insur- any time prior to the planned end of ance, freight, and installation may be period of performance. A lack of avail- included in or excluded from the acqui- able funds is not a termination. sition cost in accordance with the non- 96 OMB Guidance §200.13 Federal entity's regular accounting termined by the Federal awarding practices. agency or pass-through entity. §200.3 Advance payment. §200.9 Central service cost allocation Advance payment means a payment plan. that a Federal awarding agency or Central service cost allocation plan pass-through entity makes by any ap- means the documentation identifying, propriate payment mechanism, includ- accumulating, and allocating or devel- ing a predetermined payment schedule, oping billing rates based on the allow- before the non-Federal entity disburses able costs of services provided by a the funds for program purposes. state, local government, or Indian tribe §200.4 Allocation. on a centralized basis to its depart- ments and agencies. The costs of these Allocation means the process of as- services may be allocated or billed to signing a cost, or a group of costs, to users. one or more cost objective(s), in rea- sonable proportion to the benefit pro- §200.10 Catalog of Federal Domestic vided or other equitable relationship. Assistance(CFDA)number. The process may entail assigning a CFDA number means the number as- cost(s)directly to a final cost objective signed to a Federal program in the or through one or more intermediate CFDA. cost objectives. §200.5 Audit finding. §200.11 CFDA program title. Audit finding means deficiencies CFDA program title means the title of which the auditor is required by the program under which the Federal §200.516 Audit findings, paragraph (a) award was funded in the CFDA. to report in the schedule of findings §200.12 Capital assets. and questioned costs. Capital assets means tangible or in- §200.6 Auditee. tangible assets used in operations hav- Auditee means any non-Federal enti- ing a useful life of more than one year ty that expends Federal awards which which are capitalized in accordance must be audited under Subpart F— with GAAP.Capital assets include: Audit Requirements of this part. (a)Land, buildings (facilities), equip- ment, and intellectual property (in- §200.7 Auditor. cluding software) whether acquired by Auditor means an auditor who is a purchase, construction, manufacture, public accountant or a Federal, state, lease-purchase, exchange, or through local government, or Indian tribe audit capital leases;and organization, which meets the general (b) Additions, improvements, modi- standards specified for external audi- fications, replacements, rearrange- tors in generally accepted government ments, reinstallations, renovations or auditing standards (GAGAS). The term alterations to capital assets that mate- auditor does not include internal audi- rially increase their value or useful life tors of nonprofit organizations. (not ordinary repairs and mainte- [79 FR 75880,Dec.19,2014] nance). §200.8 Budget. §200.13 Capital expenditures. Budget means the financial plan for Capital expenditures means expendi- the project or program that the Fed- tures to acquire capital assets or ex- eral awarding agency or pass-through penditures to make additions, improve- entity approves during the Federal ments, modifications, replacements, award process or in subsequent amend- rearrangements, reinstallations, ren- ments to the Federal award. It may in- ovations, or alterations to capital as- clude the Federal and non-Federal sets that materially increase their share or only the Federal share, as de- value or useful life. 97 §200.14 2 CFR Ch. II (1-1-21 Edition) §200.14 Claim. determination, and, with the exception Claim means, depending on the con- of R&D as described in §200.501 Audit text, either: requirements, paragraph (c), whether a (a) A written demand or written as- program-specific audit may be elected. sertion by one of the parties to a Fed- §200.18 Cognizant agency for audit. eral award seeking as a matter of Cognizant agency for audit means the right: Federal agency designated to carry out (1) The payment of money in a sum the responsibilities described in certain; (2) The adjustment or interpretation §200.513 Responsibilities, paragraph (a). of the terms and conditions of the Fed- The cognizant agency for audit is not eral award; or necessarily the same as the cognizant agency for indirect costs. A list of cog- (3) Other relief arising under or relat- nizant agencies for audit may be found ing to a Federal award. at the FAC Web site. (b)A request for payment that is not in dispute when submitted. §200.19 Cognizant agency for indirect costs. §200.15 Class of Federal awards. Cognizant agency for indirect costs Class of Federal awards means a group means the Federal agency responsible of Federal awards either awarded under for reviewing, negotiating, and approv- a specific program or group of pro- ing cost allocation plans or indirect grams or to a specific type of non-Fed- cost proposals developed under this eral entity or group of non-Federal en- part on behalf of all Federal agencies. tities to which specific provisions or The cognizant agency for indirect cost exceptions may apply. is not necessarily the same as the cog- nizant agency for audit. For assign- §200.16 Closeout. ments of cognizant agencies see the Closeout means the process by which following: the Federal awarding agency or pass- (a) For IHEs: Appendix III to Part through entity determines that all ap- 200—Indirect (F&A) Costs Identifica- plicable administrative actions and all tion and Assignment, and Rate Deter- required work of the Federal award mination for Institutions of Higher have been completed and takes actions Education(IHEs),paragraph C.11. as described in§200.343 Closeout. (b) For nonprofit organizations: Ap- pendix IV to Part 200—Indirect (F&A) programs. Costs Identification and Assignment, Cluster of programs means a grouping and Rate Determination for Nonprofit of closely related programs that share Organizations,paragraph C.2.a. common compliance requirements. The (c) For state and local governments: types of clusters of programs are re- Appendix V to Part 200—State/Local search and development(R&D),student Governmentwide Central Service Cost financial aid (SFA), and other clusters. Allocation Plans,paragraph F.1. "Other clusters" are as defined by OMB (d)For Indian tribes: Appendix VII to in the compliance supplement or as Part 200—States and Local Govern- designated by a state for Federal ment and Indian Tribe Indirect Cost awards the state provides to its sub- Proposal,paragraph D.1. recipients that meet the definition of a [78 FR 78608, Dec. 26, 2013, as amended at 79 cluster of programs. When designating FR 75880, Dec. 19, 2014; 80 FR 54407, Sept. 10, an "other cluster," a state must iden- 2015] tify the Federal awards included in the cluster and advise the subrecipients of §200.20 Computing devices. compliance requirements applicable to Computing devices means machines the cluster, consistent with §200.331 used to acquire, store, analyze,process, Requirements for pass-through enti- and publish data and other information ties, paragraph (a). A cluster of pro- electronically, including accessories grams must be considered as one pro- (or "peripherals") for printing, trans- gram for determining major programs, mitting and receiving, or storing elec- as described in §200.518 Major program tronic information. See also §§200.94 98 OMB Guidance §200.28 Supplies and 200.58 Information tech- (ii)A subsidy; nology systems. (iii)A loan; §200.21 Compliance supplement. (v A loan guarantee; or (v))Insurance. Compliance supplement means Appen- dix XI to Part 200—Compliance Supple- §200.25 Cooperative audit resolution. ment (previously known as the Cir- Cooperative audit resolution means the cular A-133 Compliance Supplement). use of audit follow-up techniques which §200.22 Contract. promote prompt corrective action by improving communication, fostering Contract means a legal instrument by collaboration, promoting trust, and de- which a non-Federal entity purchases veloping an understanding between the property or services needed to carry Federal agency and the non-Federal en- out the project or program under a tity.This approach is based upon: Federal award. The term as used in (a) A strong commitment by Federal this part does not include a legal in- agency and non-Federal entity leader- strument, even if the non-Federal enti- ship to program integrity; ty considers it a contract, when the (b) Federal agencies strengthening substance of the transaction meets the partnerships and working coopera- definition of a Federal award or tively with non-Federal entities and subaward(see§200.92 Subaward). their auditors; and non-Federal enti- ties and their auditors working coop- §200.23 Contractor. eratively with Federal agencies; Contractor means an entity that re- (c) A focus on current conditions and ceives a contract as defined in §200.22 corrective action going forward; Contract. (d) Federal agencies offering appro- priate relief for past noncompliance §200.24 Cooperative agreement. when audits show prompt corrective Cooperative agreement means a legal action has occurred; and instrument of financial assistance be- (e) Federal agency leadership sending tween a Federal awarding agency or a clear message that continued failure pass-through entity and a non-Federal to correct conditions identified by au- entity that, consistent with 31 U.S.C. dits which are likely to cause improper 6302-6305: payments, fraud, waste, or abuse is un- (a) Is used to enter into a relation- acceptable and will result in sanctions. ship the principal purpose of which is to transfer anything of value from the §200.26 Corrective action. Federal awarding agency or pass- Corrective action means action taken through entity to the non-Federal enti- by the auditee that: ty to carry out a public purpose au- (a)Corrects identified deficiencies; thorized by a law of the United States (b) Produces recommended improve- (see 31 U.S.C. 6101(3)); and not to ac- ments;or quire property or services for the Fed- (c) Demonstrates that audit findings eral Government or pass-through enti- are either invalid or do not warrant ty's direct benefit or use; auditee action. (b) Is distinguished from a grant in §200.27 Cost allocation plan. that it provides for substantial involve- ment between the Federal awarding Cost allocation plan means central agency or pass-through entity and the service cost allocation plan or public non-Federal entity in carrying out the assistance cost allocation plan. activity contemplated by the Federal award. §200.28 Cost objective. (c)The term does not include: Cost objective means a program, func- (1) A cooperative research and devel- tion, activity, award, organizational opment agreement as defined in 15 subdivision, contract, or work unit for U.S.C.3710a;or which cost data are desired and for (2) An agreement that provides only: which provision is made to accumulate (i) Direct United States Government and measure the cost of processes, cash assistance to an individual; products, jobs, capital projects, etc. A 99 §200.29 2 CFR Ch. II (1-1-21 Edition) cost objective may be a major function methodology is disclosed and is con- of the non-Federal entity, a particular sistently applied. service or project, a Federal award, or (b) For reports prepared on a cash an indirect (Facilities & Administra- basis, expenditures are the sum of: tive (F&A)) cost activity, as described (1) Cash disbursements for direct in Subpart E—Cost Principles of this charges for property and services; Part. See also §§200.44 Final cost objec- (2) The amount of indirect expense tive and 200.60 Intermediate cost objec- (2) The amount of indirect expense charged; tive. (3) The value of third-party in-kind §200.29 Cost sharing or matching. contributions applied; and Cost sharing or matching means the (4) The amount of cash advance pay- portion of project costs not paid by ments and payments made to sub- Federal funds (unless otherwise author- recipients. ized by Federal statute). See also (c) For reports prepared on an ac- §200.306 Cost sharing or matching. crual basis, expenditures are the sum of: §200.30 Cross-cutting audit finding. (1) Cash disbursements for direct Cross-cutting audit finding means an charges for property and services; audit finding where the same under- (2) The amount of indirect expense lying condition or issue affects Federal incurred; awards of more than one Federal (3) The value of third-party in-kind awarding agency or pass-through enti- contributions applied; and ty. (4) The net increase or decrease in the amounts owed by the non-Federal §200.31 Disallowed costs. entity for: Disallowed costs means those charges (i) Goods and other property re- to a Federal award that the Federal ceived; awarding agency or pass-through enti- (ii) Services performed by employees, ty determines to be unallowable, in ac- contractors, subrecipients, and other cordance with the applicable Federal payees; and statutes, regulations, or the terms and (iii) Programs for which no current conditions of the Federal award. services or performance are required §200.32 [Reserved] such as annuities, insurance claims, or other benefit payments. §200.33 Equipment. Equipment means tangible §200.35 Federal agency. personal Federal agency means an "agency" as property (including information tech- nology systems) having a useful life of clarified by 5 U.S.C. 5551(1 more than one year and a per-unit ac- clarified by 5 U.S.C. 552(f). quisition cost which equals or exceeds §200.36 Federal Audit Clearinghouse the lesser of the capitalization level es- (FAC). tablished by the non-Federal entity for financial statement purposes, or$5,000. FAC means the clearinghouse des- See also §§200.12 Capital assets, 200.20 ignated by OMB as the repository of Computing devices, 200.48 General pur- record where non-Federal entities are pose equipment, 200.58 Information required to transmit the reporting technology systems, 200.89 Special pur- packages required by Subpart F—Audit pose equipment,and 200.94 Supplies. Requirements of this part. The mailing §200.34 Expenditures. address of the FAC is Federal Audit Clearinghouse, Bureau of the Census, Expenditures means charges made by 1201 E. 10th Street, Jeffersonville, IN a non-Federal entity to a project or 47132 and the web address is: http://har- program for which a Federal award was vester.census.gov/sac/. Any future up- received. dates to the location of the FAC may (a) The charges may be reported on a be found at the OMB Web site. cash or accrual basis, as long as the 100 OMB Guidance §200.42 §200.37 Federal awarding agency. (6) Other financial assistance (except Federal awarding agency means the assistance listed in paragraph (b) of Federal agency that provides a Federal this section). award directly to a non-Federal entity. (b) For §200.202 Requirement to pro- vide public notice of Federal financial §200.38 Federal award. assistance programs and Subpart F— Federal award has the meaning, de- Audit Requirements of this part, Fed- pending on the context, in either para- eral financial assistance also includes as- graph(a)or(b)of this section: sistance that non-Federal entities re- (a)(1) The Federal financial assist- ceive or administer in the form of: ance that a non-Federal entity receives (1)Loans; directly from a Federal awarding agen- (2)Loan Guarantees; cy or indirectly from a pass-through (3)Interest subsidies; and entity, as described in §200.101 Applica- (4)Insurance. bility; or (c) Federal financial assistance does (2) The cost-reimbursement contract not include amounts received as reim- under the Federal Acquisition Regula- bursement for services rendered to in- tions that a non-Federal entity re- dividuals as described in §200.502 Basis ceives directly from a Federal award- for determining Federal awards ex- ing agency or indirectly from a pass- through entity, as described in §200.101 pended, paragraph (h) and (i) of this Applicability. part. (b) The instrument setting forth the [78 FR 78608, Dec. 26, 2013, as amended at 80 terms and conditions. The instrument FR 54407,Sept.10,2015] is the grant agreement, cooperative agreement, other agreement for assist- §200.41 Federal interest. ance covered in paragraph(b) of§200.40 Federal interest means, for purposes of Federal financial assistance, or the §200.329 Reporting on real property or cost-reimbursement contract awarded when used in connection with the ac- under the Federal Acquisition Regula- tions. quisition or improvement of real prop- (c) Federal award does not include erty, equipment, or supplies under a Federal award, the dollar amount that other contracts that a Federal agency is the product of the: uses to buy goods or services from a contractor or a cbntract to operate (a) Federal share of total project Federal Government owned, contractor costs;and operated facilities(GOCOs). (b) Current fair market value of the (d) See also definitions of Federal fi- property, improvements, or both, to nancial assistance, grant agreement, the extent the costs of acquiring or im- and cooperative agreement. proving the property were included as §200.39 Federal award date. project costs. Federal award date means the date §200.42 Federal program. when the Federal award is signed by Federal program means: the authorized official, of the Federal (a) All Federal awards which are as- awarding agency. signed a single number in the CFDA. §200.40 Federal financial assistance. (b) When no CFDA number is as- signed, all Federal awards to non-Fed- (a) Federal financial assistance means eral entities from the same agency assistance that non-Federal entities re- made for the same ceive or administer in the form of: purpose must be (1)Grants; combined and considered one program. (2)Cooperative agreements; (c) Notwithstanding paragraphs (a) (3) Non-cash contributions or dona and (b) of this definition, a cluster of tions of property (including donated programs. The types of clusters of pro surplus property); grams are: (4)Direct appropriations; (1) Research and development (R&D); (5)Food commodities; and (2)Student financial aid(SFA);and 101 §200.43 2 CFR Ch. II (1-1-21 Edition) (3) "Other clusters," as described in governments or foreign governmental the definition of Cluster of Programs. entities. [78 FR 78608, Dec. 26, 2013, as amended at 79 §200.47 Foreign organization. FR 75880,Dec.19,2014] Foreign organization means an entity §200.43 Federal share. that is: Federal share means the portion of (a) A public or private organization the total project costs that are paid by located in a country other than the Federal funds. United States and its territories that is subject to the laws of the country in §200.44 Final cost objective. which it is located, irrespective of the citizenship of project staff or place of Final cost objective means a cost ob- performance; jective which has allocated to it both (b) A private nongovernmental orga- direct and indirect costs and, in the nization located in a country other non-Federal entity's accumulation sys- than the United States that solicits tem, is one of the final accumulation and receives cash contributions from points, such as a particular award, in- the general public; ternal project, or other direct activity (c) A charitable organization located of a non-Federal entity. See also in a country other than the United §§200.28 Cost objective and 200.60 Inter- States that is nonprofit and tax ex- mediate cost objective. empt under the laws of its country of §200.45 Fixed amount awards. domicile and operation, and is not a university, college, accredited degree- Fixed amount awards means a type of granting institution of education, pri- grant agreement under which the Fed- vate foundation, hospital, organization eral awarding agency or pass-through engaged exclusively in research or sci- entity provides a specific level of sup- entific activities, church, synagogue, port without regard to actual costs in- mosque or other similar entities orga- curred under the Federal award. This nized primarily for religious purposes; type of Federal award reduces some of or the administrative burden and record- (d) An organization located in a keeping requirements for both the non- country other than the United States Federal entity and Federal awarding not recognized as a Foreign Public En- agency or pass-through entity. Ac- tity. countability is based primarily on per- formance and results. See §§200.201 Use [78 FR 78608, Dec. 26, 2013, as amended at 79 of grant agreements (including fixed FR 75880,Dec.19,2014] amount awards), cooperative agree- §200.48 General purpose equipment. ments, and contracts, paragraph (b) and 200.332 Fixed amount subawards. General purpose equipment means equipment which is not limited to re- §200.46 Foreign public entity. search, medical, scientific or other technical activities. Examples include Foreign public entity means: office equipment and furnishings, mod- (a) A foreign government or foreign ular offices, telephone networks, infor- governmental entity; mation technology equipment and sys- (b) A public international organiza- tems, air conditioning equipment, re- tion, which is an organization entitled production and printing equipment, to enjoy privileges, exemptions, and and motor vehicles. See also Equip- immunities as an international organi- ment and Special Purpose Equipment. zation under the International Organi- zations Immunities Act (22 U.S.C. 288- §200.49 Generally Accepted Account- 288f); ing Principles(GAAP). (c) An entity owned (in whole or in GAAP has the meaning specified in part) or controlled by a foreign govern- accounting standards issued by the ment; or Government Accounting Standards (d)Any other entity consisting whol- Board (GASB) and the Financial Ac- ly or partially of one or more foreign counting Standards Board(FASB). 102 OMB Guidance §200.56 §200.50 Generally Accepted Govern- tractual, administrative, or other le- ment Auditing Standards(GAGAS). gaily applicable requirements; and GAGAS, also known as the Yellow (b) Improper payment includes any Book, means generally accepted gov- payment to an ineligible party, any ernment auditing standards issued by payment for an ineligible good or serv- the Comptroller General of the United ice, any duplicate payment, any pay- States, which are applicable to finan- ment for a good or service not received cial audits. (except for such payments where au- [78 FR 78608, Dec. 26, 2013, as amended at 79 thorized by law), any payment that FR 75880,Dec.19,2014] does not account for credit for applica- ble discounts, and any payment where §200.51 Grant agreement. insufficient or lack of documentation Grant agreement means a legal instru- prevents a reviewer from discerning ment of financial assistance between a whether a payment was proper. Federal awarding agency or pass- through entity and a non-Federal enti- §200.54 Indian tribe (or"federally rec- ty that, consistent with 31 U.S.C. 6302, ognized Indian tribe"). 6304: Indian tribe means any Indian tribe, (a) Is used to enter into a relation- band, nation, or other organized group ship the principal purpose of which is or community, including any Alaska to transfer anything of value from the Native village or regional or village Federal awarding agency or pass- corporation as defined in or established through entity to the non-Federal enti- pursuant to the Alaska Native Claims ty to carry out a public purpose au- Settlement Act (43 U.S.C. Chapter 33), thorized by a law of the United States which is recognized as eligible for the (see 31 U.S.C. 6101(3)); and not to ac- special programs and services provided quire property or services for the Fed- by the United States to Indians be- eral awarding agency or pass-through cause of their status as Indians (25 entity's direct benefit or use; (b) Is distinguished from a coopera- U.S.C. 450b(e)). See annually published tive agreement in that it does not pro- Bureau of Indian Affairs list of Indian vide for substantial involvement be- Entities Recognized and Eligible to Be- tween the Federal awarding agency or ceive Services. pass-through entity and the non-Fed §200.55 Institutions of Higher Edu- eral entity in carrying out the activity cation(IHEs). contemplated by the Federal award. (c) Does not include an agreement IHE is defined at 20 U.S.C. 1001. that provides only: (1) Direct United States Government §200.56 Indirect (facilities & adminis- cash assistance to an individual; trative(F&A))costs. (2)A subsidy; Indirect(F&A)costs means those costs (3)A loan; incurred for a common or joint purpose (4)A loan guarantee; or benefitting more than one cost objec- (5)Insurance. tive, and not readily assignable to the §200.52 Hospital. cost objectives specifically benefitted, without effort disproportionate to the Hospital means a facility licensed as results achieved. To facilitate equi- a hospital under the law of any state or table distribution of indirect expenses a facility operated as a hospital by the to the cost objectives served, it may be United States, a state, or a subdivision necessary to establish a number of of a state. pools of indirect (F&A) costs. Indirect §200.53 Improper payment. (F&A) cost pools must be distributed to (a) Improper payment means an benefitted cost objectives on bases that y pay will produce an equitable result in con- ment that should not have been made sideration of relative benefits derived. or that was made in an incorrect amount (including overpayments and [78 FR 78608, Dec. 26, 2013, as amended at 79 underpayments) under statutory, con- FR 75880,Dec.19,2014] 103 §200.57 2 CFR Ch. II (1-1-21 Edition) §200.57 Indirect cost rate proposal. (c) Compliance with applicable laws Indirect cost rate proposal means the and regulations. documentation prepared by a non-Fed- §200.62 Internal control over compli- eral entity to substantiate its request ance requirements for Federal for the establishment of an indirect awards. cost rate as described in Appendix III Internal control over compliance re- to Part 200—Indirect(F&A) Costs Iden- tification and Assignment, and Rate ro ements for Federal awards means a p Determination for Institutions of High- entity implemented by a non-Federal er Education (IHEs) through Appendix entity designed to provide reasonable VII to Part 200—States and Local Gov- assurance regarding the achievement ernment and Indian Tribe Indirect Cost of following objectives for Federal Proposals of this part, and Appendix IX awards: re- to Part 200—Hospital Cost Principles. (a) Transactions are properly corded and accounted for,in orderer to: [78 FR 78608, Dec. 26, 2013, as amended at 79 (1) Permit the preparation of reliable FR 75880,Dec.19,2014] financial statements and Federal re- ports;§200.58 Information technology sys- terns. (2) Maintain accountability over as- sets;and Information technology systems means (3) Demonstrate compliance with computing devices, ancillary equip- Federal statutes, regulations, and the ment, software, firmware, and similar terms and conditions of the Federal procedures, services (including support award; services), and related resources. See (b)Transactions are executed in corn- also §§200.20 Computing devices and pliance with: 200.33 Equipment. (1) Federal statutes, regulations, and §200.59 Intangible property. the terms and conditions of the Federal award that could have a direct and ma- Intangible property means property terial effect on a Federal program; and having no physical existence, such as (2) Any other Federal statutes and trademarks, copyrights, patents and regulations that are identified in the patent applications and property, such Compliance Supplement; and as loans, notes and other debt instru- (c) Funds, property, and other assets ments, lease agreements, stock and are safeguarded against loss from un- other instruments of property owner- authorized use or disposition. ship (whether the property is tangible or intangible). §200.63 Loan. §200.60 Intermediate cost objective. Loan means a Federal loan or loan guarantee received or administered by Intermediate cost objective means a a non-Federal entity, except as used in cost objective that is used to accumu- the definition of §200.80 Program in- late indirect costs or service center come. costs that are subsequently allocated (a) The term "direct loan" means a to one or more indirect cost pools or disbursement of funds by the Federal final cost objectives. See also §200.28 Government to a non-Federal borrower Cost objective and §200.44 Final cost under a contract that requires the re- objective. payment of such funds with or without §200.61 Internal controls. interest. The term includes the pur- chase of, or participation in, a loan Internal controls means a process, im- made by another lender and financing plemented by a non-Federal entity, de- arrangements that defer payment for signed to provide reasonable assurance more than 90 days, including the sale of regarding the achievement of objec- a Federal Government asset on credit tives in the following categories: terms. The term does not include the (a)Effectiveness and efficiency Of op- acquisition of a federally guaranteed erations; loan in satisfaction of default claims or (b) Reliability of reporting for inter- the price support loans of the Corn- nal and external use;and modity Credit Corporation. 104 OMB Guidance §200.69 (b)The term "direct loan obligation" §200.66 Management decision. means a binding agreement by a Fed- Management decision means the eval- eral awarding agency to make a direct uation by the Federal awarding agency loan when specified conditions are ful- or pass-through entity of the audit filled by the borrower. findings and corrective action plan and (c)The term "loan guarantee" means the issuance of a written decision to any Federal Government guarantee, in- the auditee as to what corrective ac- surance, or other pledge with respect tion is necessary. to the payment of all or a part of the principal or interest on any debt obli- §200.67 Micro-purchase. gation of a non-Federal borrower to a Micro-purchase means a purchase of non-Federal lender, but does not in- supplies or services using simplified ac- elude the insurance of deposits, shares, quisition procedures, the aggregate or other withdrawable accounts in fi- amount of which does not exceed the nancial institutions. micro-purchase threshold. Micro-pur- (d) The term "loan guarantee corn- chase procedures comprise a subset of a mitment" means a binding agreement non-Federal entity's small purchase by a Federal awarding agency to make procedures. The non-Federal entity a loan guarantee when specified condi- uses such procedures in order to expe- tions are fulfilled by the borrower, the dite the completion of its lowest-dollar lender, or any other party to the guar- small purchase transactions and mini- antee agreement. mize the associated administrative burden and cost. The micro-purchase §200.64 Local government. threshold is set by the Federal Acquisi- tionLocal government means any unit of Regulation at 48 CFR Subpart 2.1 (Definitions). It is $3,000 except as oth- government within a state, including a: erwise discussed in Subpart 2.1 of that (a)County; regulation, but this threshold is peri- (b)Borough; odically adjusted for inflation. (c)Municipality; (d)City; §200.68 Modified Total Direct Cost (e)Town; (MTDC). (f)Township; MTDC means all direct salaries and (g)Parish; wages, applicable fringe benefits,mate- (h) Local public authority, including rials and supplies, services, travel, and any public housing agency under the up to the first$25,000 of each subaward United States Housing Act of 1937; (regardless of the period of perform- ( )Special district; ance of the subawards under the (I)School district; award). MTDC excludes equipment, capital expenditures, charges for pa- (k)Intrastate district; tient care, rental costs, tuition remis- (1) Council of governments, whether sion, scholarships and fellowships, par- or not incorporated as a nonprofit cor- ticipant support costs and the portion poration under state law;and of each subaward in excess of $25,000. (m) Any other agency or instrumen- Other items may only be excluded tality of a multi-, regional, or intra- when necessary to avoid a serious in- state or local government. equity in the distribution of indirect costs, and with the approval of the cog- §200.65 Major program. nizant agency for indirect costs. Major program means a Federal pro- [79 FR 75880,Dec.19,2014] gram determined by the auditor to be a major program in accordance with §200.69 Non-Federal entity. §200.518 Major program determination Non-Federal entity means a state, or a program identified as a major pro- local government,Indian tribe, institu- gram by a Federal awarding agency or tion of higher education (IRE), or non- pass-through entity in accordance with profit organization that carries out a §200.503 Relation to other audit re- Federal award as a recipient or sub- quirements, paragraph(e). recipient. 105 §200.70 2 CFR Ch. II (1-1-21 Edition) §200.70 Nonprofit organization. half of participants or trainees(but not Nonprofit organization means any cor- employees) in connection with con- poration, trust, association, coopera- tive, or other organization, not includ- §200.76 Performance goal. ing IHEs,that: Performance goal means a target level (a) Is operated primarily for sci- of performance expressed as a tangible, entific, educational, service, chari- measurable objective, against which table, or similar purposes in the public actual achievement can be compared, interest; (b) Is not organized primarily for including a goal expressed as a quan- profit;and titative standard, value, or rate. In (c) Uses net proceeds to maintain, some instances (e.g., discretionary re- improve, or expand the operations of search awards), this may be limited to the organization. the requirement to submit technical performance reports(to be evaluated in §200.71 Obligations. accordance with agency policy). When used in connection with a non- §200.77 Period of performance. Federal entity's utilization of funds Period under a Federal award, obligations which the non-Federal entity of performance means the time during means orders placed for property and may incur new obligations to carry out services, contracts and subawards the work authorized under the Federal made, and similar transactions during award. The Federal awarding agency or a given period that require payment by pass-through entity must include start the non-Federal entity during the same and end dates of the period of perform- or a future period. ance in the Federal award(see§§200.210 §200.72 Office of Management and Infornation contained in a Federal Budget(OMB). award paragraph (a)(5) and 200.331 Re- OMB means the Executive Office of quirements for pass-through entities, the President, Office of Management paragraph(a)(1)(iv)). and Budget. §200.78 Personal property. §200.73 Oversight agency for audit. Personal property means property other than real property. It may be Oversight agency for audit means the tangible, having physical existence, or Federal awarding agency that provides intangible. the predominant amount of funding di- rectly to a non-Federal entity not as- §200.79 Personally Identifiable Infor- signed a cognizant agency for audit. mation(PII). When there is no direct funding, the PII means information that can be Federal awarding agency which is the used to distinguish or trace an individ- predominant source of pass-through ual's identity, either alone or when funding must assume the oversight re- combined with other personal or iden- sponsibilities. The duties of the over- tifying information that is linked or sight agency for audit and the process linkable to a specific individual. Some for any reassignments are described in information that is considered to be §200.513 Responsibilities, paragraph(b). PII is available in public sources such §200.74 Pass-through entity. as telephone books, public Web sites, and university listings. This type of in- Pass-through entity means a non-Fed- formation is considered to be Public eral entity that provides a subaward to PII and includes, for example, first and a subrecipient to carry out part of a last name, address, work telephone Federal program. number,email address, home telephone § Participant supportnumber, and general educational cre- 200.75 costs. dentials. The definition of PII is not Participant support costs means direct anchored to any single category of in- costs for items such as stipends or sub- formation or technology. Rather, it re- sistence allowances, travel allowances, quires a case-by-case assessment of the and registration fees paid to or on be- specific risk that an individual can be 106 OMB Guidance §200.87 identified. Non-PII can become PII §200.79 Personally Identifiable Informa- whenever additional information is tion(PII)). made publicly available, in any me- dium and from any source, that, when §200.83 Project cost. combined with other available infor- Project cost means total allowable mation,could be used to identify an in- costs incurred under a Federal award dividual. and all required cost sharing and vol- untary committed cost sharing,includ- §200.80 Program income. ing third-party contributions. Program income means gross income earned by the non-Federal entity that §200.84 Questioned cost. is directly generated by a supported ac- Questioned cost means a cost that is tivity or earned as a result of the Fed- questioned by the auditor because of an eral award during the period of per- audit finding: formance except as provided in§200.307 (a) Which resulted from a violation paragraph (f). (See §200.77 Period of or possible violation of a statute, regu- performance.) Program income in- lation, or the terms and conditions of a cludes but is not limited to income Federal award, including for funds used from fees for services performed, the to match Federal funds; use or rental or real or personal prop- (b) Where the costs, at the time of erty acquired under Federal awards, the audit, are not supported by ade- the sale of commodities or items fab- quate documentation;or ricated under a Federal award, license (c) Where the costs incurred appear fees and royalties on patents and copy- unreasonable and do not reflect the ac- rights, and principal and interest on tions a prudent person would take in loans made with Federal award funds. the circumstances. Interest earned on advances of Federal funds is not program income. Except as §200.85 Real property. otherwise provided in Federal statutes, Real property means land, including regulations, or the terms and condi- land improvements, structures and ap- tions of the Federal award, program in- purtenances thereto, but excludes come does not include rebates, credits, moveable machinery and equipment. discounts, and interest earned on any of them. See also§200.407 Prior written §200.86 Recipient. approval (prior approval). See also 35 Recipient means a:non-Federal entity U.S.C. 200-212 "Disposition of Rights in that receives a Federal award directly Educational Awards" applies to inven- from a Federal awarding agency to tions made under Federal awards. carry out an activity under a Federal [78 FR 78608, Dec. 26, 2013, as amended at 79 program. The term recipient does not FR 75880,Dec.19,2014] include subrecipients. See also §200.69 §200.81 Property. Non-Federal entity. Property means real property or per- §200.87 Research and Development sonal property. (R&D). R&D means all research activities, §200.82 Protected Personally Identifi- both basic and applied, and all develop- able Information(Protected PII). ment activities that are performed by Protected PII means an individual's non-Federal entities. The term re- first name or first initial and last name search also includes activities involv- in combination with any one or more ing the training of individuals in re- of types of information, including, but search techniques where such activities not limited to, social security number, utilize the same facilities as other re- passport number, credit card numbers, search and development activities and clearances, bank numbers, biometrics, where such activities are not included date and place of birth, mother's maid- in the instruction function. en name, criminal, medical and finan- "Research" is defined as a system- cial records, educational transcripts. atic study directed toward fuller sci- This does not include PII that is re- entific knowledge or understanding of quired by law to be disclosed. (See also the subject studied. "Development" is 107 §200.88 2 CFR Ch. II (1-1-21 Edition) the systematic use of knowledge and programs provided by other Federal understanding gained from research di- agencies. It does not include Federal rected toward the production of useful awards under programs that provide materials, devices, systems, or meth- fellowships or similar Federal awards ods, including design and development to students on a competitive basis, or of prototypes and processes. for specified studies or research. §200.88 Simplified acquisition thresh- §200.92 Subaward. old. Simplified acquisition threshold means Subaward means an award provided the dollar amount below which a non- by a pass through entity to a sub- Federal entity may purchase property recipient for the subrecipient to carry or services using small purchase meth- out part of a Federal award received by ods. Non-Federal entities adopt small the pass-through entity. It does not in- purchase procedures in order to expo- elude payments to a contractor or pay- dite the purchase of items costing less ments to an individual that is a bene- than the simplified acquisition thresh- ficiary of a Federal program. A old. The simplified acquisition thresh- subaward may be provided through any old is set by the Federal Acquisition form of legal agreement, including an Regulation at 48 CFR Subpart 2.1 (Defi- agreement that the pass-through enti- nitions) and in accordance with 41 ty considers a contract. U.S.C. 1908. As of the publication of this part, the simplified acquisition §200.93 Subrecipient. threshold is $150,000, but this threshold Subrecipient means a non-Federal en- is periodically adjusted for inflation. tity that receives a subaward from a (Also see definition of §200.67 Micro- pass-through entity to carry out part purchase.) of a Federal program; but does not in- §200.89 Special purpose equipment. elude an individual that is a bene ficiary of such program. A subrecipient Special purpose equipment means may also be a recipient of other Fed- equipment which is used only for re- eral awards directly from a Federal search, medical, scientific, or other awarding agency. technical activities. Examples of spe- cial purpose equipment include micro- §200.94 Supplies. scopes,x-ray machines, surgical instru- ments, and spectrometers. See also Supplies means all tangible personal §§200.33 Equipment and 200.48 General property other than those described in purpose equipment. §200.33 Equipment. A computing device is a supply if the acquisition cost is §200.90 State. less than the lesser of the capitaliza- State means any state of the United tion level established by the non-Fed- States, the District of Columbia, the eral entity for financial statement pur- Commonwealth of Puerto Rico, U.S. poses or$5,000, regardless of the length Virgin Islands, Guam, American of its useful life. See also §§200.20 Com- Samoa, the Commonwealth of the puting devices and 200.33 Equipment. Northern Mariana Islands, and any §200.95 Termination. agency or instrumentality thereof ex- clusive of local governments. Termination means the ending of a [78 FR 78608, Dec. 26, 2013, as amended at 79 Federal award, in whole or in part at FR 75880,Dec.19,2014] any time prior to the planned end of period of performance. §200.91 Student Financial Aid(SFA). SFA means Federal awards under §200.96 Third-party in-kind contribu- those programs of general student as- tions. sistance, such as those authorized by Third-party in-kind contributions Title IV of the Higher Education Act of means the value of non-cash contribu- 1965, as amended, (20 U.S.C. 1070-1099d), tions (i.e., property or services) that— which are administered by the U.S. De- (a) Benefit a federally assisted partment of Education, and similar project or program; and 108 OMB Guidance §200.100 (b) Are contributed by non-Federal It also establishes Federal policies re- third parties, without charge, to a non- lated to the delivery of this informa- Federal entity under a Federal award. tion to the public, including through the use of electronic media. It pre- §200.97 Unliquidated obligations. scribes the manner in which General Unliquidated obligations means, for fi- Services Administration (GSA), OMB, nancial reports prepared on a cash and Federal agencies that administer basis, obligations incurred by the non- Federal financial assistance programs Federal entity that have not been paid are to carry out their statutory respon- (liquidated). For reports prepared on an sibilities under the Federal Program accrual expenditure basis, these are ob- Information Act(31 U.S.C. 6101-6106). ligations incurred by the non-Federal (b) Administrative requirements. Sub- entity for which an expenditure has parts B through D of this part set forth not been recorded. the uniform administrative require- ments for grant and cooperative agree- §200.98 Unobligated balance. ments, including the requirements for Unobligated balance means the Federal awarding agency management amount of funds under a Federal award of Federal giant programs before the that the non-Federal entity has not ob- Federal award has been made, and the ligated. The amount is computed by requirements Federal awarding agen- subtracting the cumulative amount of cies may impose on non-Federal enti- the non-Federal entity's unliquidated ties in the Federal award. obligations and expenditures of funds (c) Cost principles. Subpart E of this under the Federal award from the cu- part establishes principles for deter- mulative amount of the funds that the mining the allowable costs incurred by Federal awarding agency or pass- non-Federal entities under Federal through entity authorized the non-Fed- awards. The principles are for the pur- eral entity to obligate. pose of cost determination and are not intended to identify the circumstances §200.99 Voluntary committed cost or dictate the extent of Federal Gov- sharing. ernment participation in the financing Voluntary committed cost sharing of a particular program or project. The means cost sharing specifically pledged principles are designed to provide that on a voluntary basis in the proposal's Federal awards bear their fair share of budget or the Federal award on the cost recognized under these principles part of the non-Federal entity and that except where restricted or prohibited becomes a binding requirement of Fed- by statute. eral award. (d) Single Audit Requirements and Audit Follow-up. Subpart F of this part Subpart B—General Provisions is issued pursuant to the Single Audit Act Amendments of 1996, (31 U.S.C. §200.100 Purpose. 7501-7507). It sets forth standards for (a) Purpose. (1) This part establishes obtaining consistency and uniformity uniform administrative requirements, among Federal agencies for the audit cost principles, and audit requirements of non-Federal entities expending Fed- for Federal awards to non-Federal enti- eral awards. These provisions also pro- ties, as described in §200.101. Federal vide the policies and procedures for awarding agencies must not impose ad- Federal awarding agencies and pass- ditional or inconsistent requirements, through entities when using the results except as provided in §§200.102 and of these audits. 200.211, or unless specifically required (e) Guidance on challenges and prizes. by Federal statute, regulation, or Ex- For OMB guidance to Federal awarding ecutive order. agencies on challenges and prizes, (2) This part provides the basis for a please see memo M-10-11 Guidance on systematic and periodic collection and the Use of Challenges and Prizes to uniform submission by Federal agen- Promote Open Government, issued cies of information on all Federal fi- March 8,2010, or its successor. nancial assistance programs to the Of- [78 FR 78608, Dec. 26, 2013, as amended at 85 fice of Management and Budget (OMB). FR 49536,Aug.13,2020] 109 §200.101 2 CFR Ch. II (1-1-21 Edition) §200.101 Applicability. cates a best practice or recommended (a) General applicability to Federal approach rather than a requirement agencies. (1) The requirements estab- and permits following discretion.a lished in this part apply to Federal po(2)The partrble describes what h agencies that make Federal awards to types ofns eo this apply to and types of Federal awards. The terms and non-Federal entities. These require- conditions of Federal awards(including ments are applicable to all costs re- this part) flow down to subawards to lated to Federal awards. subrecipients unless a (2) Federal awarding agencies may particular sec- (2) tion of this part or the terms and conn- apply subparts A through E of this part ditions of the Federal award specifi- to Federal agencies, for-profit entities, cally indicate otherwise. This means foreign public entities, or foreign orga- that non-Federal entities must comply nizations, except where the Federal with requirements in this part regard- awarding agency determines that the less of whether the non-Federal entity application of these subparts would be is a recipient or subrecipient of a Fed- inconsistent with the international re- eral award. Pass-through entities must sponsibilities of the United States or comply with the requirements de- the statutes or regulations of a foreign scribed in subpart D of this part, government. §§200.331 through 200.333, but not any (b) Applicability to different types of requirements in this part directed to- Federal awards. (1) Throughout this wards Federal awarding agencies un- part when the word "must" is used it less the requirements of this part or indicates a requirement. Whereas, use the terms and conditions of the Federal of the word "should" or "may" indi- award indicate otherwise. TABLE 1 TO PARAGRAPH (b) Are applicable to the following types of • Federal Awards and Fixed-Price Con- Are NOT applicable to the following The following portions of this Part tracts and Subcontracts(except as types of Federal Awards and Fixed-Price noted in paragraphs(d)and(e)of this Contracts and Subcontracts: section): Subpart A—Acronyms and Definitions —All. Subpart B—General Provisions, except —All. for §§200.111 English Language, 200.112 Conflict of Interest, 200.113 Mandatory Disclosures. §§200.111 English Language, 200.112 —Grant Agreements and cooperative —Agreements for loans, loan guaran- Conflict of Interest,200.113 Mandatory agreements. tees,interest subsidies and insurance. Disclosures. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and sub- contracts under those contracts. Subparts C-D,except for§§200.203 Re- —Grant Agreements and cooperative —Agreements for loans, loan guaran- quirement to provide public notice of agreements. tees,interest subsidies and insurance. Federal financial assistance programs, —Procurement contracts awarded by 200.303 Internal controls,200.331-333 Federal Agencies under the Federal Subrecipient Monitoring and Manage- Acquisition Regulation and sub- ment. contracts under those contracts. §200.203 Requirement to provide public —Grant Agreements and cooperative —Procurement contracts awarded by notice of Federal financial assistance agreements. Federal Agencies under the Federal programs. —Agreements for loans, loan guaran- Acquisition Regulation and sub- tees,interest subsidies and insurance. contracts under those contracts. §§200.303 Internal controls,200.331-333 —All. Subrecipient Monitoring and Manage- ment. Subpart E—Cost Principles —Grant Agreements and cooperative —Grant agreements and cooperative agreements, except those providing agreements providing foods commod- food commodities. ities. —All procurement contracts under the —Fixed amount awards. Federal Acquisition Regulations ex- —Agreements for loans, loans guaran- cept those that are not negotiated. tees,interest subsidies and insurance. —Federal awards to hospitals(see Ap- pendix IX Hospital Cost Principles). 110 OMB Guidance §200.101 TABLE 1 TO PARAGRAPH (b)—Continued Are applicable to the following types of Federal Awards and Fixed-Price Con- Are NOT applicable to the following The following portions of this Part tracts and Subcontracts(except as types of Federal Awards and Fixed-Price noted in paragraphs(d)and(e)of this Contracts and Subcontracts: section): Subpart F—Audit Requirements —Grant Agreements and cooperative —Fixed-price contracts and subcontracts agreements. awarded under the Federal Acquisition • —Contracts and subcontracts,except for Regulation. fixed price contacts and subcontracts, awarded under the Federal Acquisition Regulation. —Agreements for loans, loans guaran- tees,interest subsidies and insurance and other forms of Federal Financial Assistance as defined by the Single Audit Act Amendment of 1996. (c)Federal award of cost-reimbursement (ISDEAA), as amended, 25 U.S.0 450- contract under the FAR to a non-Federal 458ddd-2. entity. When a non-Federal entity is (e) Program applicability. Except for awarded a cost-reimbursement con- §§200.203 and 200.331 through 200.333, the tract, only subpart D, §§200.331 through requirements in subparts C,D, and E of 200.333, and subparts E and F of this this part do not apply to the following part are incorporated by reference into programs: the contract, but the requirements of (1) The block grant awards author- subparts D,E, and F are supplementary ized by the Omnibus Budget Reconcili- to the FAR and the contract. When the ation Act of 1981(including Community Cost Accounting Standards (CAS) are Services), except to the extent that applicable to the contract, they take subpart E of this part apply to sub- precedence over the requirements of recipients of Community Services this part, including subpart F of this Block Grant funds pursuant to 42 part, which are supplementary to the U.S.C. 9916(a)(1)(B); CAS requirements. In addition, costs . (2) Federal awards to local education that are made unallowable under 10 agencies under 20 U.S.C. 7702-7703b, US.C. 2324(e) and 41 U.S.C. 4304(a) as (portions of the Impact Aid program); described in the FAR 48 CFR part 31, (3) Payments under the Department subpart 31.2, and 48 CFR 31.603 are al- of Veterans Affairs' State Home Per ways unallowable. For requirements Diem Program(38 U.S.C.1741);and other than those covered in subpart D, (4) Federal awards authorized under §§200.331 through 200.333, and subparts the Child Care and Development Block E and F of this part, the terms of the Grant Act of 1990, as amended: contract and the FAR apply. Note that (i)Child Care and Development Block when a non-Federal entity is awarded a Grant(42 U.S.C.9858). FAR contract, the FAR applies, and (ii) Child Care Mandatory and Match- the terms and conditions of the con- ing Funds of the Child Care and Devel- tract shall prevail over the require- opment Fund(42 U.S.C. 9858). ments of this part. (f) Additional program applicability. (d) Governing provisions. With the ex- Except for §200.203, the guidance in ception of subpart F of this part, which subpart C of this part does not apply to is required by the Single Audit Act, in the following programs: any circumstances where the provi- (1) Entitlement Federal awards to . sions of Federal statutes or regulations carry out the following programs of the differ from the provisions of this part, Social Security Act: the provision of the Federal statutes or (i) Temporary Assistance for Needy regulations govern. This includes, for Families(title IV-A of the Social Secu- agreements with Indian tribes, the pro- rity Act,42 U.S.C. 601-619); visions of the Indian Self-Determina- (ii) Child Support Enforcement and tion and Education and Assistance Act Establishment of Paternity (title IV-D 111 §200.102 2 CFR Ch. II (1-1-21 Edition) of the Social Security Act, 42 U.S.C. (6) Entitlement awards for State Ad- 651-669b); ministrative Expenses under The Food (iii) Foster Care and Adoption Assist- and Nutrition Act of 2008 (section 16 of ance (title IV-E of the Act, 42 U.S.C. the Act,7 U.S.C.2025). 670-679c); (7) Non-discretionary Federal awards (iv) Aid to the Aged, Blind, and Dis- under the following non-entitlement abled (titles I, X, XIV, and XVI-AABD programs: of the Act,as amended); (i) Special Supplemental Nutrition (v) Medical Assistance (Medicaid) Program for Women, Infants and Chil- (title XIX of the Act, 42 U.S.C. 1396- dren (section 17 of the Child Nutrition 1396w-5) not including the State Med- Act of 1966)42 U.S.C. 1786; icaid Fraud Control program author- ized by section 1903(a)(6)(B) of the So- (ii) The Emergency Food Assistance cial Security Act (42 U.S.C. Programs (Emergency Food Assistance 1396b(a)(6)(B));and Act of 1983)7 U.S.C.7501 note;and (vi) Children's Health Insurance Pro- (iii) Commodity Supplemental Food gram (title XXI of the Act, 42 U.S.C. Program (section 5 of the Agriculture 1397aa-1397mm). and Consumer Protection Act of 1973) 7 (2) A Federal award for an experi- U.S.C. 612c note. mental, pilot, or demonstration project [85 FR 49536,Aug.13,2020] that is also supported by a Federal award listed in paragraph (f)(1) of this §200.102 Exceptions. section. (a)With the exception of subpart F of (3) Federal awards under subsection this part, OMB may allow exceptions 412(e) of the Immigration and Nation- for classes of Federal awards or non- ality Act and subsection 501(a) of the Federal entities subject to the require- Refugee Education Assistance Act of ments of this part when exceptions are 1980 (Pub. L. 96-422, 94 Stat. 1809), for not prohibited by statute. In the inter- cash assistance, medical assistance, and supplemental security income ben- est of maximum uniformity, exceptions efits to refugees and entrants and the from the requirements of this part will administrative costs of providing the be permitted as described in this sec- assistance and benefits (8 U.S.C. tion. 1522(e)). (b)Exceptions on a case-by-case basis (4) Entitlement awards under the fol- for individual non-Federal entities may lowing programs of The National be authorized by the Federal awarding School Lunch Act: agency or cognizant agency for indirect (i) National School Lunch Program costs, except where otherwise required (section 4 of the Act,42 U.S.C. 1753); by law or where OMB or other approval (ii) Commodity Assistance (section 6 is expressly required by this part. of the Act,42 U.S.C. 1755); (c)The Federal awarding agency may (iii) Special Meal Assistance (section apply adjust requirements to a class of 11 of the Act,42 U.S.C. 1759a); Federal awards or non-Federal entities (iv) Summer Food Service Program when approved by OMB, or when re- for Children (section 13 of the Act, 42 quired by Federal statutes or regula- U.S.C. 1761);and tions, except for the requirements in (v) Child and Adult Care Food Pro- subpart F of this part. A Federal gram (section 17 of the Act, 42 U.S.C. awarding agency may apply less re- 1766). strictive requirements when making (5) Entitlement awards under the fol- fixed amount awards as defined in sub- lowing programs of The Child Nutri- part A of this part, except for those re- tion Act of 1966: quirements imposed by statute or in (i) Special Milk Program(section 3 of subpart F of this part. the Act,42 U.S.C.1772); (d) Federal awarding agencies may (ii) School Breakfast Program (sec- request exceptions in support of inno- tion 4 of the Act, 42 U.S.C. 1773); and vative (iii) State Administrative Expenses program designs that apply a risk-based, data driven framework to (section 7 of the Act,42 U.S.C. 1776). 112 OMB Guidance §200.106 alleviate select compliance require- (d)A-102, "Grant Awards and Cooper- ments and hold recipients accountable ative Agreements with State and Local for good performance. See also§200.206. Governments"; [85 FR 49538,Aug.13,2020] (e) A-110, "Uniform Administrative Requirements for Awards and Other §200.103 Authorities. Agreements with Institutions of Higher Education, Hospitals, and Other Non- This part is issued under the fol- profit Organizations" (codified at 2 lowing authorities. CFR 215); (a) Subparts B through D of this part (f) A-122, "Cost Principles for Non- are authorized under 31 U.S.C. 503 (the Profit Organizations" (2 CFR part 230); Chief Financial Officers Act, Functions (g) A-133, "Audits of States, Local of the Deputy Director for Manage- Governments and Non-Profit Organiza- ment), 41 U.S.C. 1101-1131 (the Office of tions"; and Federal Procurement Policy Act), Re- (h) Those sections of A-50 related to organization Plan No. 2 of 1970, and Ex- audits performed under subpart F of ecutive Order 11541 ("Prescribing the this part. Duties of the Office of Management and Budget and the Domestic Policy [78 FR 78608, Dec. 26, 2013, as amended at 79 Council in the Executive Office of the FR 75882, Dec. 19, 2014; 85 FR 49538, Aug. 13, 2020] President"), the Single Audit Act Amendments of 1996, (31 U.S.C. 7501- §200.105 Effect on other issuances. 7507), as well as The Federal Program (a) Superseding inconsistent require- Information Act (Pub. L. 95-220 and ments. For Pub. L. 98-169, as amended, codified at 31 U.S.C.6101-6106). this part, al1l1 awards subject to administrative require- 31 program manuals, handbooks (b) Subpart E of this part is author- and other non-regulatory materials ized under the Budget and Accounting that are inconsistent with the require- Act of 1921, as amended; the Budget ments of this part must be superseded and Accounting Procedures Act of 1950, upon implementation of this part by as amended (31 U.S.C. 1101-1125); the the Federal agency, except to the ex- Chief Financial Officers Act of 1990 (31 tent they are required by statute or au- U.S.C. 503-504); Reorganization Plan thorized in accordance with the provi- No. 2 of 1970; and Executive Order 11541, sions in§200.102. "Prescribing the Duties of the Office of (b)Imposition of requirements on recipi- Management and Budget and the Do- ents. Agencies may impose legally mestic Policy Council in the Executive binding requirements on recipients Office of the President." only through the notice and public (c) Subpart F of this part is author- comment process through an approved ized under the Single Audit Act agency process, including as authorized Amendments of 1996, (31 U.S.C. 7501- by this part, other statutes or regula- 7507). tions, or as incorporated into the terms [85 FR 49538,Aug.13,2020] of a Federal award. [85 FR 49538,Aug.13,2020] §200.104 Supersession. As described in §200.110, this part su- §200.106 Agency implementation. persedes the following OMB guidance The specific requirements and re- documents and regulations under title sponsibilities of Federal agencies and 2 of the Code of Federal Regulations: non-Federal entities are set forth in (a) A-21, "Cost Principles for Edu- this part. Federal agencies making cational Institutions" (2 CFR part 220); Federal awards to non-Federal entities (b) A 87, "Cost Principles for State, must implement the language in sub- Local and Indian Tribal Governments" parts C through F of this part in codi- (2 CFR part 225)and also FEDERAL REG fied regulations unless different provi- ISTER notice 51 FR 552(January 6, 1986); sions are required by Federal statute (c) A-89, "Federal Domestic Assist- or are approved by OMB. ance Program Information"; [85 FR 49538,Aug.13,2020] 113 §200.107 2 CFR Ch. II (1-1-21 Edition) §200.107 OMB responsibilities. guage. Applications must be submitted OMB will review Federal agency reg- in the English language and must be in ulations and implementation of this the terms of U.S. dollars. If the Federal part, and will provide interpretations awarding agency receives applications of policy requirements and assistance in another currency, the Federal to ensure effective and efficient imple- awarding agency will evaluate the ap- mentation. Any exceptions will be sub- plication by converting the foreign cur- ject to approval by OMB. Exceptions rency to United States currency using will only be made in particular cases the date specified for receipt of the ap- where adequate justification is pre- plication. sented. (b) Non-Federal entities may trans- §200.1OS Inquiries. late the Federal award and other docu- ments into another language. In the Inquiries concerning this part may be event of inconsistency between any directed to the Office of Federal Finan- terms and conditions of the Federal cial Management Office of Manage- award and any translation into another ment and Budget, in Washington, DC. language, the English language mean- Non-Federal entities' inquiries should ing will control. Where a significant be addressed to the Federal awarding portion of the non-Federal entity's em- agency, cognizant agency for indirect ployees who are working on the Fed- costs, cognizant or oversight agency eral award are not fluent in English, for audit, or pass-through entity as ap- the non-Federal entity must provide propriate. the Federal award in English and the §200.109 Review date. language(s) with which employees are OMB will review this part at least more familiar. every five years after December 26, §200.112 Conflict of interest. 2013. The Federal awarding agency must §200.110 Effective/applicability date. establish conflict of interest policies (a) The standards set forth in this for Federal awards. The non-Federal part that affect the administration of entity must disclose in writing any po- Federal awards issued by Federal tential conflict of interest to the Fed- awarding agencies become effective eral awarding agency or pass-through once implemented by Federal awarding entity in accordance with applicable agencies or when any future amend- Federal awarding agency policy. ment to this part becomes final. (b) Existing negotiated indirect cost §200.113 Mandatory disclosures. rates (as of the publication date of the The non-Federal entity or applicant revisions to the guidance) will remain for a Federal award must disclose, in a in place until they expire. The effective timely manner, in writing to the Fed- date of changes to indirect cost rates eral awarding agency or pass-through must be based upon the date that a newly re-negotiated rate goes into ef- entity all violations of Federal crimi- fect for a specific non-Federal entity's nal law involving fraud, bribery, or fiscal year. Therefore, for indirect cost gratuity violations potentially affect rates and cost allocation plans, the re- ing the Federal award. Non-Federal en- vised Uniform Guidance (as of the pub- tities that have received a Federal lication date for revisions to the guid- award including the term and condi- ance) become effective in generating tion outlined in appendix XII to this proposals and negotiating a new rate part are required to report certain (when the rate is re-negotiated). civil, criminal, or administrative[85 FR 49538,Aug.13,2020] pro- ceedings to SAM (currently FAPIIS). Failure to make required disclosures §200.111 English language. can result in any of the remedies de- (a) All Federal financial assistance scribed in§200.339. (See also 2 CFR part announcements and Federal award 180, 31 U.S.C.3321,and 41 U.S.C.2313.) in- formation must be in the English lan- [85 FR 49539,Aug.13,2020] 114 OMB Guidance §200.202 Subpart C—Pre-Federal Award vance, and the "milestone" or event Requirements and Contents of triggering the payment also agreed Federal Awards upon in advance, and set forth in the Federal award; SOURCE: 85 FR 49539, Aug. 13, 2020, unless (ii) On a unit price basis, for a de- otherwise noted. fined unit or units, at a defined price or prices, agreed to in advance of perform- §200.200 Purpose. ance of the Federal award and set forth Sections 200.201 through 200.216 pre- in the Federal award;or, scribe instructions and other pre-award (iii) In one payment at Federal award matters to be used by Federal awarding completion. agencies in the program planning, an- (2) A fixed amount award cannot be nouncement, application and award used in programs which require manda- processes. tory cost sharing or match. §200.201 Use of grant agreements (in- (3) The non-Federal entity must cer- eluding fixed amount awards), co- tify in writing to the Federal awarding operative agreements, and con- agency or pass-through entity at the tracts. end of the Federal award that the (a)Federal award instrument.The Fed- project or activity was completed or eral awarding agency or pass-through the level of effort was expended. If the entity must decide on the appropriate required level of activity or effort was instrument for the Federal award (i.e., not carried out,the amount of the Fed- grant agreement, cooperative agree- eral award must be adjusted. ment, or contract) in accordance with (4) Periodic reports may be estab- the Federal Grant and Cooperative lished for each Federal award. Agreement Act(31 U.S.C. 6301-08). (5) Changes in principal investigator, • (b) Fixed amount awards. In addition project leader,project partner, or scope to the options described in paragraph of effort must receive the prior written (a) of this section, Federal awarding approval of the Federal awarding agen- agencies, or pass-through entities as cy or pass-through entity. permitted in §200.333, may use fixed amount awards (see Fixed amount §200.202 Program planning and de- awards in§200.1) to which the following sign. conditions apply: The Federal awarding agency must (1) The Federal award amount is ne- design a program and create an Assist- gotiated using the cost principles (or other pricing information) as a guide. ance Listing before announcing the No- The Federal awarding agency or pass- tice of Funding Opportunity. The pro through entity may use fixed amount gram must be designed with clear goals awards if the project scope has measur and objectives that facilitate the deliv- able goals and objectives and if ade- quate cost, historical, or unit pricing with the Federal authorizing legisla- data is available to establish a fixed tion of the program. Program perform- amount award based on a reasonable ance shall be measured based on the estimate of actual cost. Payments are goals and objectives developed during based on meeting specific requirements program planning and design. See of the Federal award. Accountability is §200.301 for more information on per- based on performance and results. Ex- formance measurement. Performance cept in the case of termination before measures may differ depending on the completion of the Federal award, there type of program. The program must is no governmental review of the ac- align with the strategic goals and ob- tual costs incurred by the non-Federal jectives within the Federal awarding entity in performance of the award. agency's performance plan and should Some of the ways in which the Federal support the Federal awarding agency's award may be paid include, but are not performance measurement, manage- limited to: ment, and reporting as required by (i) In several partial payments, the Part 6 of OMB Circular A-11 (Prepara- amount of each agreed upon in ad- tion, Submission, and Execution of the 115 §200.203 2 CFR Ch. II (1-1-21 Edition) Budget). The program must also be de- performance plan and should support signed to align with the Program Man- the Federal awarding agency's per- agement Improvement Accountability formance measurement, management, Act(Pub. L. 114-264). and reporting as required by Part 6 of §200.203 Requirement to provide pub- OMB Identification. dent ficular A-o1; lic notice of Federal financial as- (2)eIr the progr Identificationas of whether the program makes Federal sistance programs. awards on a discretionary basis or the (a) The Federal awarding agency Federal awards are prescribed by Fed- must notify the public of Federal pro- eral statute, such as in the case of for- , grams in the Federal Assistance List- mula grants. ings maintained by the General Serv- (3) Projected total amount of funds ices Administration(GSA). available for the program. Estimates (1)The Federal Assistance Listings is based on previous year funding are ac- the single, authoritative, government- ceptable if current appropriations are wide comprehensive source of Federal not available at the time of the sub- financial assistance program informa- mission; tion produced by the executive branch (4) Anticipated source of available of the Federal Government. funds. The statutory authority for (2) The information that the Federal funding the program and, to the extent awarding agency must submit to GSA possible, agency, sub-agency, or, if for approval by OMB is listed in para- known, the specific program unit that graph (b) of this section. GSA must will issue the Federal awards, and asso- prescribe the format for the submission ciated funding identifier(e.g., Treasury in coordination with OMB. Account Symbol(s)); (3)The Federal awarding agency may (5) General eligibility requirements. The not award Federal financial assistance statutory, regulatory or other eligi- without assigning it to a program that bility factors or considerations that de- has been included in the Federal As- termine the applicant's qualification sistance Listings as required in this for Federal awards under the program section unless there are exigent cir- (e.g., type of non-Federal entity); and cumstances requiring otherwise, such (6) Applicability of Single Audit Re- as timing requirements imposed by quirements. Applicability of Single statute. Audit Requirements as required by (b) For each program that awards subpart F of this part. discretionary Federal awards, non-dis- cretionary Federal awards, loans, in- §200.204 Notices of funding opportuni- surance, or any other type of Federal ties. financial assistance, the Federal For discretionary grants and cooper- awarding agency must, to the extent ative agreements that are competed, practicable, create, update, and man- the Federal awarding agency must an- age Assistance Listings entries based nounce specific funding opportunities on the authorizing statute for the pro- by providing the following information gram and comply with additional guid- in a public notice: ance provided by GSA in consultation (a) Summary information in notices of with OMB to ensure consistent, accu- funding opportunities. The Federal rate information is available to pro- awarding agency must display the fol- spective applicants. Accordingly, Fed- lowing information posted on the OMB- eral awarding agencies must submit designated governmentwide website for • the following information to GSA: funding and applying for Federal finan- (1) Program Description, Purpose, cial assistance, in a location preceding Goals, and Measurement. A brief sum- the full text of the announcement: mary of the statutory or regulatory re- (1)Federal Awarding Agency Name; quirements of the program and its in- (2)Funding Opportunity Title; tended outcome. Where appropriate, (3) Announcement Type (whether the the Program Description, Purpose, funding opportunity is the initial an- Goals, and Measurement should align nouncement of this funding oppor- with the strategic goals and objectives tunity or a modification of a pre- within the Federal awarding agency's viously announced opportunity); 116 OMB Guidance §200.206 (4) Funding Opportunity Number (re- (7) Applicable`terms and conditions quired, if applicable). If the Federal for resulting awards, including any ex- awarding agency has assigned or will ceptions from these standard terms. assign a number to the funding oppor- tunity announcement, this number §200.2.05 Federal awarding agency re- must be provided; view of merit of proposals. (5)Assistance Listings Number(s); For discretionary Federal awards, (6) Key Dates. Key dates include due unless prohibited by Federal statute, dates for applications or Executive the Federal awarding agency must de- Order 12372 submissions, as well as for sign and execute a merit review process any letters of intent or pre-applica- for applications, with the objective of tions. For any announcement issued selecting recipients most likely to be before a program's application mate- successful in delivering results based rials are available, key dates also in- on the program objectives outlined in elude the date on which those mate- section §200.202. A merit review is an rials will be released; and any other ad- objective process of evaluating Federal ditional information, as deemed appli- award applications in accordance with cable by the relevant Federal awarding written standards set forth by the Fed- agency. eral awarding agency. This process (b) Availability period. The Federal must be described or incorporated by awarding agency must generally make reference in the applicable funding op- all funding opportunities available for portunity(see appendix I to this part.). application for at least 60 calendar See also§200.204. The Federal awarding days. The Federal awarding agency agency must also periodically review may make a determination to have a its merit review process. less than 60 calendar day availability period but no funding opportunity §200.206 Federal awarding agency re- should be available for less than 30 cal- view of risk posed by applicants. endar days unless exigent cir- (a) Review of OMB-designated reposi- cumstances require as determined by tories of governmentwide data. (1) Prior the Federal awarding agency head or to making a Federal award, the Fed- delegate. eral awarding agency is required by the (c) Full text of funding opportunities. Improper Payments Elimination and The Federal awarding agency must in- Recovery Improvement Act of 2012, 31 elude the following information in the U.S.C. 3321 note, and 41 U.S.C. 2313 to full text of each funding opportunity. review information available through For specific instructions on the con- any OMB-designated repositories of tent required in this section, refer to governmentwide eligibility qualifica- appendix I to this part. tion or financial integrity information (1) Full programmatic description of as appropriate. See also suspension and the funding opportunity. debarment requirements at 2 CFR part (2) Federal award information, in- 180 as well as individual Federal agency eluding sufficient information to help suspension and debarment regulations an applicant make an informed deci- in title 2 of the Code of Federal Regula- sion about whether to submit an appli- tions. cation.(See also§200.414(c)(4)). (2) In accordance 41 U.S.C. 2313, the (3) Specific eligibility information, Federal awarding agency is required to including any factors or priorities that review the non-public segment of the affect an applicant's or its applica- OMB-designated integrity and perform- tion's eligibility for selection. ance system accessible through SAM (4) Application Preparation and Sub- (currently the Federal Awardee Per- mission Information, including the ap- formance and Integrity Information plicable submission dates and time. System (FAPIIS)) prior to making a (5) Application Review Information Federal award where the Federal share including the criteria and process to be is expected to exceed the simplified ac- used to evaluate applications. See also quisition threshold, defined in 41 U.S.C. §§200.205 and 200.206. 134, over the period of performance. As (6) Federal Award Administration In- required by Public Law 112-239, Na- formation. See also§200.211. tional Defense Authorization Act for 117 §200.207 2 CFR Ch. II (1-1-21 Edition) Fiscal Year 2013, prior to making a terms and conditions of previous Fed- Federal award, the Federal awarding eral awards, and if applicable, the ex- agency must consider all of the infor- tent to which any previously awarded mation available through FAPIIS with amounts will be expended prior to fu- regard to the applicant and any imme- ture awards; diate highest level owner, predecessor (iv) Audit reports and findings. Re- (i.e.; a non-Federal entity that is re- ports and findings from audits per- placed by a successor), or subsidiary, formed under subpart F of this part or identified for that applicant in FAPIIS, the reports and findings of any other if applicable. At a minimum, the infor- available audits; and mation in the system for a prior Fed- (v) Ability to effectively implement re- eral award recipient must demonstrate quirements. The applicant's ability to a satisfactory record of executing pro- effectively implement statutory, regu- grams or activities under Federal latory, or other requirements imposed grants, cooperative agreements, or pro- on non-Federal entities. curement awards; and integrity and (c) Risk-based requirements adjustment. business ethics. The Federal awarding The Federal awarding agency may ad- agency may make a Federal award to a just requirements when a risk-evalua- recipient who does not fully meet these tion indicates that it may be merited standards, if it is determined that the either pre-award or post-award. information is not relevant to the cur- (d) Suspension and debarment compli- rent Federal award under consideration ance. (1) The Federal awarding agency or there are specific conditions that can appropriately mitigate the effects must comply with the guidelinesnd debar- of the non-Federal entity's risk in ac- governmentwide suspension andmustcordance with§200.208. ment in 2 CFR part 180, and re- (b) Risk evaluation. (1) The Federal quire non-Federal entities to comply awarding agency must. have i plac a with these provisions. These provisions framework for evaluating the risks restrict Federal awards, subawards and posed by applicants before they receive contracts with certain parties that are awards. This evaluation may eeba , suspendedor otherwise ex- Federalincorporate results of the evaluation of eluded tion in Federaa eededd from s ineligible for participa. the applicant's eligibility or the qual- ity l programs or activities. of its application. If the Federal §200.207 Standard application re- awarding agency determines that a quirements. Federal award will be made, special (a) Paperwork clearances. The Federal conditions that correspond to the de- gree of risk assessed may be applied to awarding agency may only use applica the Federal award. Criteria to be evalu tion information collections approved Reduc- ated must be described in the an- tion OMB under the Paperwork nouncement of funding opportunity de tion Act of 1tio995 and OMB's rt 1320 scribed in§200.204. menting regulations in 5 CFR part 1320 (2)In evaluating risks posed by appli- and in alignment with OMB-approved, cants, the Federal awarding agency governmentwide data elements avail- may use a risk-based approach and able from the OMB-designated stand- may consider any items such as the fol- ards lead. Consistent with these re lowing: quirements, OMB will authorize addi- (i) Financial stability. Financial sta- bility; • a limited basis. (ii) Management systems and stand- (b) Information collection. If applica- ards. Quality of management systems ble, the Federal awarding agency may and ability to meet the management inform applicants and recipients that standards prescribed in this part; they do not need to provide certain in- (iii) History of performance. The appli- formation otherwise required by the cant's record in managing Federal relevant information collection. awards, if it is a prior recipient of Fed- §200.208 Specific conditions. eral awards, including timeliness of compliance with applicable reporting (a) Federal awarding agencies are re- requirements, conformance to the sponsible for ensuring that specific 118 OMB Guidance §200.211 Federal award conditions are con- tions that prompted them have been sistent with the program design re- satisfied. fleeted in §200.202 and include clear performance expectations of recipients §200.209 Certifications and represen- as required in§200.301. tations. (b) The Federal awarding agency or Unless prohibited by the U.S. Con- pass-through entity may adjust spe- stitution, Federal statutes or regula- cific Federal award conditions as need- tions, each Federal awarding agency or ed, in accordance with this section, pass-through entity is authorized to re- based on an analysis of the following quire the non-Federal entity to submit factors: certifications and representations re- (1) Based on the criteria set forth in quired by Federal statutes, or regula- §200.206; tions on an annual basis. Submission (2) The applicant or recipient's his- may be required more frequently if the tory of compliance with the general or non-Federal entity fails to meet a re- specific terms and conditions of a Fed- quirement of a Federal award. eral award; (3) The applicant or recipient's abil- §200.210 Pre-award costs. ity to meet expected performance goals For requirements on costs incurred as described in§200.211; or by the applicant prior to the start date (4) A responsibility determination of of the period of an applicant or recipient. performance of the Federal award,see§200.458. (c) Additional Federal award condi- tions may include items such as the §200.211 Information contained in a following: Federal award. (1)Requiring payments as reimburse- A Federal award must include the ments rather than advance payments; following information: (2) Withholding authority to proceed to the next phase until receipt of evi- (a) Federal award performance goals. dence of acceptable performance within Performance goals, indicators, targets, a given performance period; and baseline data must be included in (3) Requiring additional, more de- the Federal award, where applicable. tailed financial reports; The Federal awarding agency must (4) Requiring additional project mon- also specify how performance will be itoring; assessed in the terms and conditions of (5) Requiring the non-Federal entity the Federal award, including the tim- to obtain technical or management as- ing and scope of expected performance. sistance;or See §§200.202 and 200.301 for more infor- (6) Establishing additional prior ap- mation on Federal award performance provals. goals. (d) If the Federal awarding agency or (b) General Federal award information. pass-through entity is imposing addi- The Federal awarding agency must in- tional requirements, they must notify clude the following general Federal the applicant or non-Federal entity as award information in each Federal to: award: (1) The nature of the additional re- (1) Recipient name (which must quirements; match the name associated with its (2) The reason why the additional re- unique entity identifier as defined at 2 quirements are being imposed; CFR 25.315); (3)The nature of the action needed to (2) Recipient's unique entity identi- remove the additional requirement, if fier; applicable; (3) Unique Federal Award Identifica- (4) The time allowed for completing tion Number(FAIN); the actions if applicable;and (4) Federal Award Date (see Federal (5) The method for requesting recon- award date in§200.201); sideration of the additional require- (5) Period of Performance Start and ments imposed. End Date; (e)Any additional requirements must (6) Budget Period Start and End be promptly removed once the condi- Date; 119 §200.212 2 CFR Ch. II (1-1-21 Edition) (7) Amount of Federal Funds Obli- (v) Termination provisions. Federal gated by this action; awarding agencies must make recipi- (8) Total Amount of Federal Funds ents aware, in a clear and unambiguous Obligated; manner, of the termination provisions (9) Total Approved Cost Sharing or in §200.340, including the applicable Matching,where applicable; termination provisions in the Federal (10) Total Amount of the Federal awarding agency's regulations or in Award including approved Cost Sharing each Federal award. or Matching; (2) The Federal award must incor- (11) Budget Approved by the Federal porate, by reference, all general terms Awarding Agency; and conditions of the award, which (11) Federal award description, (to must be maintained on the agency's comply with statutory requirements website. (e.g., FFATA)); (3) If a non-Federal entity requests a (12) Name of Federal awarding agen- copy of the full text of the general cy and contact information for award- terms and conditions, the Federal ing official, awarding agency must provide it. (13) Assistance Listings Number and (4) Wherever the general terms and Title; conditions are publicly available, the (14) Identification of whether the Federal awarding agency must main- tain an archive of previous versions of the general terms and conditions, with (15) Indirect cost rate for the Federal effective dates, for use by the non-Fed- award(including if the de minimis rate eral entity, auditors, or others. is charged per§200.414). (d) Federal awarding agency, program, (c) General terms and conditions. (1) or Federal award specific terms and con- Federal awarding agencies must incor- ditions. The Federal awarding agency porate the following general terms and must include with each Federal award conditions either in the Federal award any terms and conditions necessary to or by reference, as applicable: communicate requirements that are in (i)Administrative requirements. Admin- addition to the requirements outlined istrative requirements implemented by in the Federal awarding agency's gen- the Federal awarding agency as speci- eral terms and conditions. See also fied in this part. §200.208. Whenever practicable, these (ii)National policy requirements. These specific terms and conditions also include statutory, executive order, should be shared on the agency's other Presidential directive, or regu- website and in notices of funding op- latory requirements that apply by spe- portunities (as outlined in §200.204) in cific reference and are not program- addition to being included in a Federal specific. See §200.300 Statutory and na- award. See also§200.207. tional policy requirements. (e) Federal awarding agency require- (iii) Recipient integrity and perform- ments. Any other information required ance matters. If the total Federal share by the Federal awarding agency. of the Federal award may include more than $500,000 over the period of per- §200.212 Public access to Federal formance, the Federal awarding agency award information. must include the term and condition (a) In accordance with statutory re- available in appendix XII of this part. quirements for Federal spending trans- See also§200.113. parency (e.g., FFATA), except as noted (iv) Future budget periods. If it is an- in this section, for applicable Federal ticipated that the period of perform- awards the Federal awarding agency ance will include multiple budget peri- must announce all Federal awards pub- ods, the Federal awarding agency must licly and publish the required informa- indicate that subsequent budget peri- tion on a publicly available OMB-des- ods are subject to the availability of ignated governmentwide website. funds, program authority, satisfactory (b)All information posted in the des- performance, and compliance with the ignated integrity and performance sys- terms and conditions of the Federal tern accessible through SAM (currently award. FAPIIS) on or after April 15, 2011 will 120 OMB Guidance §200.213 be publicly available after a waiting (c) If a Federal awarding agency re- period of 14 calendar days, except for: ports a determination that a non-Fed- (1)Past performance reviews required eral entity is not qualified for a Fed- by Federal Government contractors in eral award, as described in paragraph accordance with the Federal Acquisi- (a) of this section, the Federal award- tion Regulation (FAR) 48 CFR part 42, ing agency also must notify the non- subpart 42.15; Federal entity that— (2) Information that was entered (1) The determination was made and prior to April 15,2011; or reported to the designated integrity (3) Information that is withdrawn and performance system accessible during the 14-calendar day waiting pe- through SAM, and include with the no- riod by the Federal Government offi- tification an explanation of the basis cial. for the determination; (c) Nothing in this section may be (2) The information will be kept in construed as requiring the publication the system for a period of five years ofinformation otherwise exempt under from the date of the determination, as the Freedom of Information Act (5 required by section 872 of Public Law U.S.0 552), or controlled unclassified 110-417, as amended (41 U.S.C. 2313), information pursuant to Executive then archived; Order 13556. (3) Each Federal awarding agency that considers making a Federal award §200.213 Reporting a determination to the non-Federal entity during that that a non-Federal entity is not five year period must consider that in- qualified for a Federal award. formation in judging whether the non- (a)If a Federal awarding agency does Federal entity is qualified to receive not make a Federal award to a non- the Federal award when the total Fed- Federal entity because the official de- eral share of the Federal award is ex- termines that the non-Federal entity pected to include an amount of Federal does not meet either or both of the funding in excess of the simplified ac- minimum qualification standards as quisition threshold over the period of described in §200.206(a)(2), the Federal performance; awarding agency must report that de- (4) The non-Federal entity may go to termination to the designated integ- the awardee integrity and performance rity and performance system accessible portal accessible through SAM (cur- through SAM (currently FAPIIS), only rently the Contractor Performance As- if all of the following apply: sessment Reporting System (CPARS)) (1) The only basis for the determina- and comment on any information the tion described in this paragraph (a) is system contains about the non-Federal the non-Federal entity's prior record of entity itself;and executing programs or activities under (5) Federal awarding agencies will Federal awards or its record of integ- consider that non-Federal entity's rity and business ethics,as described in comments in determining whether the §200.206(a)(2) (i.e., the entity was deter- non-Federal entity is qualified for a fu- mined to be qualified based on all fac- ture Federal award. tors other than those two standards); (d) If a Federal awarding agency en- and ters information into the designated (2) The total Federal share of the integrity and performance system ac- Federal award that otherwise would be cessible through SAM about a deter- made to the non-Federal entity is ex- mination that a non-Federal entity is pected to exceed the simplified acquisi- not qualified for a Federal award and tion threshold over the period of per- subsequently: formance. (1) Learns that any of that informa- (b) The Federal awarding agency is tion is erroneous, the Federal awarding not required to report a determination agency must correct the information in that a non-Federal entity is not quali- the system within three business days; fied for a Federal award if they make and the Federal award to the non-Federal (2) Obtains an update to that infor- entity and include specific award terms mation that could be helpful to other and conditions, as described in§200.208. Federal awarding agencies, the Federal 121 §200.214 2 CFR Ch. II (1-1-21 Edition) awarding agency is strongly encour- §200.216 Prohibition on certain tele- aged to amend the information in the communications and video surveil- system to incorporate the update in a lance services or equipment. timely way. (a) Recipients and subrecipients are (e) Federal awarding agencies must prohibited from obligating or expend- not post any information that will be ing loan or grant funds to: made publicly available in the non- (1)Procure or obtain; public segment of designated integrity (2)Extend or renew a contract to pro- and performance system that is cov- cure or obtain;or ered by a disclosure exemption under (3) Enter into a contract (or extend the Freedom of Information Act. If the or renew a contract) to procure or ob recipient asserts within seven calendar tain equipment, services, or systems days to the Federal awarding agency that uses covered telecommunications that posted the information that some equipment or services as a substantial or all of the information made publicly or essential component of any system, available is covered by a disclosure ex- or as critical technology as part of any system. As described in Public Law emption,under the Freedom of Infor- 115-232, section 889, covered tele- mation Act, the Federal awarding communications equipment is tele- agency that posted the information communications equipment produced must remove the posting within seven by Huawei Technologies Company or calendar days of receiving the asser- ZTE Corporation (or any subsidiary or tion. Prior to reposting the releasable affiliate of such entities). information, the Federal awarding (i) For the purpose of public safety, agency must resolve the issue in ac- security of government facilities, phys- cordance with the agency's Freedom of ical security surveillance of critical in- Information Act procedures. frastructure, and other national secu- rity purposes, video surveillance and §200.214 Suspension and debarment. telecommunications equipment pro- Non-Federal entities are subject to duced by Hytera Communications Cor- the non-procurement debarment and poration, Hangzhou Hikvision Digital suspension regulations implementing Technology Company, or Dahua Tech- Executive Orders 12549 and 12689, 2 CFR nology Company (or any subsidiary or affiliate of such entities). part 180. The regulations in 2 CFR part (ii)Telecommunications or video sur- 180 restrict awards, subawards, and veillance services provided by such en- contracts with certain parties that are tities or using such equipment. debarred, suspended, or otherwise ex- (iii) Telecommunications or video eluded from or ineligible for participa- surveillance equipment or services pro- tion in Federal assistance programs or duced or provided by an entity that the activities. Secretary of Defense, in consultation with the Director of the National Intel- §200.215 Never contract with the ligence or the Director of the Federal enemy. Bureau of Investigation, reasonably be- Federal awarding agencies and re- lieves to be an entity owned or con- cipients are subject to the regulations trolled by, or otherwise connected to, implementing Never Contract with the the government of a covered foreign Enemy in 2 CFR part 183. The regula- country. tions in 2 CFR part 183 affect covered (b) In implementing the prohibition contracts, grants and cooperative under Public Law 115 232, section 889, agreements that are expected to exceed subsection (f), paragraph (1), heads of $50,000 within the period of perform- executive agencies administering loan, ance, are performed outside the United grant, or subsidy programs shall States and its territories, and are in prioritize available funding and tech- support of a contingency operation in nical support to assist affected busi- which members of the Armed Forces as reasonably s institutions and organizations as is r necessary for those af- are actively engaged in hostilities. fected entities to transition from cov- ered communications equipment and 122 OMB Guidance §200.301 services, to procure replacement equip- information. Where appropriate, the ment and services, and to ensure that Federal award may include specific communications service to users and program goals, indicators, targets, customers is sustained. baseline data, data collection, or ex- (c) See Public Law 115-232, section 889 petted outcomes (such as outputs, or for additional information. services performance or public impacts (d)See also§200.471. of any of these) with an expected timeline for accomplishment. Where Subpart D—Post Federal Award applicable, this should also include any Requirements performance measures or independent sources of data that may be used to SOURCE: 85 FR 49543, Aug. 13, 2020, unless measure progress. The Federal award- otherwise noted. ing agency will determine how per- formance progress is measured, which §200.300 Statutory and national policy may differ by program. Performance requirements. measurement progress must be both (a) The Federal awarding agency measured and reported. See §200.329 for must manage and administer the Fed- more information on monitoring pro- eral award in a manner so as to ensure 'gram performance. The Federal award- that Federal funding is expended and ing agency may include program-spe- associated programs are implemented cific requirements, as applicable. These iin full accordance with the U.S. Con- requirements must be aligned, to the stitution, Federal Law, and public pot- extent permitted by law, with the Fed- icy requirements: Including, but not limited to, those oral awarding agency strategic goals, protecting free strategic objectives or performance speech, religious liberty, public wel- goals that are relevant to the program. fare, the environment, and prohibiting that r Seeeealso OMB Circular to the program. ircullaa r A-11, Prepara- discrimination. The Federal awarding tion, Submission, and Execution of the agency must communicate to the non- Budget Part 6. Federal entity all relevant public pol- (b) The Federal awarding agency icy requirements, including those in general appropriations provisions, and should provide recipients with clear incorporate them either directly or by performance goals, indicators, targets, reference in the terms and conditions and baseline data as described in of the Federal award. §200.211. Performance reporting fre- (b) The non-Federal entity is respon- quency and content should be estab- sible for complying with all require- lished to not only allow the Federal ments of the Federal award. For all awarding agency to understand the re- Federal awards,this includes the provi- cipient progress but also to facilitate sions of FFATA, which includes re- identification of promising practices quirements on executive compensation, among recipients and build the evi- and also requirements implementing dence upon which the Federal awarding the Act for the non-Federal entity at 2 agency's program and performance de- CFR parts 25 and 170. See also statu- cisions are made. See §200.328 for more tory requirements for whistleblower information on reporting program per- protections at 10 U.S.C. 2409, 41 U.S.C. formance. 4712, and 10 U.S.C. 2324, 41 U.S.C. 4304 (c) This provision is designed to oper- and 4310. ate in tandem with evidence-related statutes(e.g.;The Foundations for Evi- §200.301 Performance measurement. dence-Based Policymaking Act of 2018, (a) The Federal awarding agency which emphasizes collaboration and co- must measure the recipient's perform- ordination to advance data and evi- ance to show achievement of program deuce-building functions in the Federal goals and objectives, share lessons government). The Federal awarding learned, improve program outcomes, agency should also specify any require- and foster adoption of promising prac- ments of award recipients' participa- tices. Program goals and objectives tion in a federally funded evaluation, should be derived from program plan- and any evaluation activities required ping and design. See §200.202 for more to be conducted by the Federal award. 123 §200.302 2 CFR Ch. II (1-1-21 Edition) §200.302 Financial management. federally-funded activities. These (a) Each state must expend and ac- records must contain information per- count for the Federal award in accord- taming to Federal awards, authoriza- ance with state laws and procedures for tions, financial obligations, unobli- expending and accounting for the gated balances, assets, expenditures, state's own funds. In addition, the income and interest and be supported state's and the other non-Federal enti- by source documentation. ty's financial management systems, in- (4) Effective control over, and ac- eluding records documenting compli- countability for, all funds, property, ance with Federal statutes, regula- and other assets. The non-Federal enti- tions, and the terms and conditions of ty must adequately safeguard all assets the Federal award, must be sufficient and assure that they are used solely for to permit the preparation of reports re- authorized purposes. See§200.303. quired by general and program-specific (5) Comparison of expenditures with terms and conditions; and the tracing budget amounts for each Federal of funds to a level of expenditures ade- award. quate to establish that such funds have (6) Written procedures to implement been used according to the Federal the requirements of§200.305. statutes, regulations, and the terms (7) Written procedures for deter- and conditions of the Federal award. mining the allowability of costs in ac- See also§200.450. cordance with subpart E of this part (b) The financial management sys- and the terms and conditions of the tern of each non-Federal entity must Federal award. provide for the following (see also §§200.334,200.335, 200.336,and 200.337): §200.303 Internal controls. (1) Identification, in its accounts, of The non-Federal entity must: all Federal awards received and ex- (a) Establish and maintain effective pended and the Federal programs under internal control over the Federal which they were received. Federal pro- award that provides reasonable assur- gram and Federal award identification ance that the non-Federal entity is must include, as applicable, the Assist- managing the Federal award in compli- ance Listings title and number, Fed- ance with Federal statutes, regula- eral award identification number and tions, and the terms and conditions of year, name of the Federal agency, and the Federal award. These internal con- name of the pass-through entity, if trols should be in compliance with any. guidance in "Standards for Internal (2) Accurate, current, and complete Control in the Federal Government" disclosure of the financial results of issued by the Comptroller General of each Federal award or program in ac- the United States or the "Internal Con- cordance with the reporting require- trol Integrated Framework", issued by ments set forth in §§200.328 and 200.329. the Committee of Sponsoring Organiza- If a Federal awarding agency requires tions of the Treadway Commission reporting on an accrual basis from a re- (COSO). cipient that maintains its records on (b) Comply with the U.S. Constitu- other than an accrual basis, the recipi- tion, Federal statutes, regulations, and ent must not be required to establish the terms and conditions of the Federal an accrual accounting system. This re- awards. cipient may develop accrual data for (c) Evaluate and monitor the non- its reports on the basis of an analysis Federal entity's compliance with stat- of the documentation on hand. Simi- utes, regulations and the terms and larly, a pass-through entity must not conditions of Federal awards. require a subrecipient to establish an (d) Take prompt action when in- accrual accounting system and must stances of noncompliance are identified allow the subrecipient to develop ac- including noncompliance identified in crual data for its reports on the basis audit findings. of an analysis of the documentation on (e)Take reasonable measures to safe- hand. guard protected personally identifiable (3) Records that identify adequately information and other information the the source and application of funds for Federal awarding agency or pass- 124 OMB Guidance §200.305 through entity designates as sensitive (1) The non-Federal entity must be or the non-Federal entity considers paid in advance, provided it maintains sensitive consistent with applicable or demonstrates the willingness to Federal, State, local, and tribal laws maintain both written procedures that regarding privacy and responsibility minimize the time elapsing between over confidentiality. the transfer of funds and disbursement §200.304 Bonds. by the non-Federal entity, and finan- cial management systems that meet. The Federal awarding agency may in- the standards for fund control and ac- clude a provision on bonding, insur- countability as established in this part. ance, or both in the following cir- Advance payments to a non-Federal en- cumstances: tity must be limited to the minimum (a) Where the Federal Government amounts needed and be timed to be in guarantees or insures the repayment of accordance with the actual, immediate money borrowed by the recipient, the cash requirements of the non-Federal Federal awarding agency, at its discre- entity in carrying out the purpose of tion, may require adequate bonding the approved program or project. The and insurance if the bonding and insur- timing and amount of advance pay- ance requirements of the non-Federal ments must be as close as is adminis- entity are not deemed adequate to pro- tratively feasible to the actual dis- tect the interest of the Federal Govern- bursements by the non-Federal entity ment. for direct program or project costs and (b)The Federal awarding agency may the proportionate share of any allow- require adequate fidelity bond coverage able indirect costs. The non-Federal where the non-Federal entity lacks suf- entity must make timely payment to ficient coverage to protect the Federal contractors in accordance with the Government's interest. contract provisions. (c) Where bonds are required in the (2) Whenever possible, advance pay- situations described above, the bonds ments must be consolidated to cover must be obtained from companies hold- anticipated cash needs for all Federal ing certificates of authority as accept- awards made by the Federal awarding able sureties, as prescribed in 31 CFR agency to the recipient. part 223. (i) Advance payment mechanisms in- clude, but are not limited to, Treasury §200.305 Federal payment. check and electronic funds transfer and (a) For states, payments are gov- must comply with applicable guidance erned by Treasury-State Cash Manage- in 31 CFR part 208. ment Improvement Act (CMIA) agree- (ii) Non-Federal entities must be au- ments and default procedures codified thorized to submit requests for advance at 31 CFR part 205 and Treasury Finan- payments and reimbursements at least cial Manual (TFM) 4A-2000, "Overall monthly when electronic fund transfers Disbursing Rules for All Federal Agen- are not used, and as often as they like cies". when electronic transfers are used, in (b) For non-Federal entities other accordance with the provisions of the than states, payments methods must Electronic Fund Transfer Act (15 minimize the time elapsing between U.S.C. 1693-1693r). the transfer of funds from the United (3) Reimbursement is the preferred States Treasury or the pass-through method when the requirements in this entity and the disbursement by the paragraph (b) cannot be met, when the non-Federal entity whether the pay- Federal awarding agency sets a specific ment is made by electronic funds condition per§200.208, or when the non- transfer, or issuance or redemption of Federal entity requests payment by re- checks, warrants, or payment by other imbursement. This method may be means. See also §200.302(b)(6). Except used on any Federal award for con- as noted elsewhere in this part, Federal struction,or if the major portion of the agencies must require recipients to use construction project is accomplished only OMB-approved, governmentwide through private market financing or information collection requests to re- Federal loans, and the Federal award quest payment. constitutes a minor portion of the 125 §200.305 2 CFR Ch. II (1-1-21 Edition) project. When the reimbursement (i) The non-Federal entity has failed method is used, the Federal awarding to comply with the project objectives, agency or pass-through entity must Federal statutes, regulations, or the make payment within 30 calendar days terms and conditions of the Federal after receipt of the billing, unless the award. Federal awarding agency or pass- (ii) The non-Federal entity is delin- through entity reasonably believes the quent in a debt to the United States as request to be improper. defined in OMB Circular A-129, "Poli- (4) If the non-Federal entity cannot cies for Federal Credit Programs and meet the criteria for advance payments Non-Tax Receivables." Under such con- and the Federal awarding agency or ditions, the Federal awarding agency pass-through entity has determined or pass-through entity may, upon rea- that reimbursement is not feasible be sonable notice, inform the non-Federal cause the non-Federal entity lacks suf- entity that payments must not be ficient working capital, the Federal made for financial obligations incurred awarding agency or pass-through enti- after a specified date until the condi- ty may provide cash on a working cap- tions are corrected or the indebtedness ital advance basis. Under this proce- to the Federal Government is liq- dure, the Federal awarding agency or uidated. pass-through entity must advance cash (iii) A payment withheld for failure payments to the non-Federal entity to to comply with Federal award condi- cover its estimated disbursement needs tions, but without suspension of the for an initial period generally geared Federal award, must be released to the to the non-Federal entity's disbursing non-Federal entity upon subsequent cycle. Thereafter, the Federal award- compliance. When a Federal award is ing agency or pass-through entity must suspended, payment adjustments will reimburse the non-Federal entity for be made in accordance with§200.343. its actual cash disbursements. Use of (iv) A payment must not be made to the working capital advance method of a non-Federal entity for amounts that are withheld by the non-Federal entity payment requires that the pass- from payment to contractors to assure through entity provide timely advance payments to any subrecipients in order paymentatory completion ofe work.non- to meet the subrecipient's actual cash Federalmust actuallye made w disbn rsthe disbursements. The working capital ad- withhel eundsntity oe contractorsacr the vance method of payment must not be withheld funds to the or to used by the pass-through entity if the escrow accounts established to assure reason for using this method is the un- satisfactory completion governing no work. willingness or inability of the pass- (7) Stadndards governing the use of through entity to provide timely ad- torbanks of advancether institutions as r Fed- vance - payments to the subrecipient to eral awardss areas fpollows. under eral are follows. meet the subrecipient's actual cash dis- (i) The Federal awarding agency and bursements. (5) To the extent available, the non- pass-through entity must not require separateedepository accounts for funds Federal entity must disburse funds provided to a non-Federal entity or es- available from program income (in- tablish any eligibility requirements for eluding repayments to a revolving depositories for funds provided to the fund), rebates, refunds, contract settle- non-Federal entity. However, the non- ments, audit recoveries, and interest Federal entity must be able to account earned on such funds before requesting for funds received, obligated, and ex- additional cash payments. pended. (6) Unless otherwise required by Fed- (ii) Advance payments of Federal eral statutes, payments for allowable funds must be deposited and main- costs by non-Federal entities must not tained in insured accounts whenever be withheld at any time during the pe- possible. riod of performance unless the condi- (8) The non-Federal entity must tions of§200.208, subpart D of this part, maintain advance payments of Federal including §200.339, or one or more of awards in interest-bearing accounts, the following applies: unless the following apply: 126 OMB Guidance §200.305 (i) The non-Federal entity receives (i) Payee Account Number (PAN), if less than$250,000 in Federal awards per the payment originated from PMS, or year. Agency information to indicate whom (ii) The best reasonably available in- to credit the funding if the payment terest-bearing account would not be ex- originated from ASAP, NSF, or an- pected to earn interest in excess of$500 other Federal agency payment system. per year on Federal cash balances. (ii) PMS document number and sub- (iii) The depository would require an account(s), if the payment originated average or minimum balance so high from PMS, or relevant account num- that it would not be feasible within the bers if the payment originated from an- expected Federal and non-Federal cash other Federal agency payment system. resources. (iii) The reason for the return (e.g., (iv)A foreign government or banking excess cash, funds not spent, interest, system prohibits or precludes interest- part interest part other,etc.) bearing accounts. (11) When returning funds or interest (9)Interest earned amounts up to$500 to PMS you must include the following per year may be retained by the non- as applicable: Federal entity for administrative ex- (i)For ACH Returns: pense. Any additional interest earned Routing Number:051036706 on Federal advance payments deposited Account number: 303000 in interest-bearing accounts must be Bank Name and Location: Credit Gate- remitted annually to the Department way—ACH Receiver St.Paul,MN of Health and Human Services Pay- ment Management System (PMS) (ii)For Fedwire Returns': through an electronic medium using ei- Routing Number:021030004 ther Automated Clearing House (ACH) Account number: 75010501 network or a Fedwire Funds Service Bank Name and Location: Federal Re- payment. serve Bank Treas NYC/Funds Trans- (i) For returning interest on Federal fer Division New York,NY awards paid through PMS, the refund "Please note that the organization should: initiating payment is likely to incur a (A) Provide an explanation stating charge from their Financial Institution that the refund is for interest; for this type of payment. (B) List the PMS Payee Account (iii)For International ACH Returns: Number(s)(PANs); Beneficiary Account: Federal Reserve (C) List the Federal award number(s) Bank of New York/ITS (FRBNY/ITS) for which the interest was earned; and Bank:Citibank N.A. (New York) (D) Make returns payable to: Depart- Swift Code: CITIUS33 ment of Health and Human Services. Account Number: 36838868 (ii) For returning interest on Federal Bank Address: 388 Greenwich Street, awards not paid through PMS, the re- New York,NY 10013 USA fund should: Payment Details (Line 70): Agency Lo- (A) Provide an explanation stating cator Code(ALC):75010501 that the refund is for interest; Name (abbreviated when possible) and (B) Include the name of the awarding ALC Agency POC agency; (C) List the Federal award number(s) (iv) For recipients that do not have for which the interest was earned; and electronic remittance capability, (D) Make returns payable to: Depart- please make check2 payable to: "The ment of Health and Human Services. Department of Health and Human (10) Funds, principal, and excess cash Services." returns must be directed to the origi- Mail Check to Treasury approved nal Federal agency payment system. lockbox: The non-Federal entity should review HHS Program Support Center, P.O. instructions from the original Federal Box 530231, Atlanta,GA 30353-0231 agency payment system. Returns 2Please allow 4-6 weeks for proc- should include the following informa- essing of a payment by check to be ap- tion: plied to the appropriate PMS account. 127 §200.306 2 CFR Ch. II (1-1-21 Edition) (v) Questions can be directed to PMS and the amount which could have been at 877-614-5533 or charged to the Federal award under the PMSSupport@psc.hhs.gov. non-Federal entity's approved nego- tiated indirect cost rate. §200.306 Cost sharing or matching. (d) Values for non-Federal entity (a) Under Federal research proposals, contributions of services and property voluntary committed cost sharing is must be established in accordance with not expected. It cannot be used as a the cost principles in subpart E of this factor during the merit review of appli- part. If a Federal awarding agency au- cations or proposals, but may be con- thorizes the non-Federal entity to do- sidered if it is both in accordance with nate buildings or land for construction/ Federal awarding agency regulations facilities acquisition projects or long- and specified in a notice of funding op- term use, the value of the donated portunity. Criteria for considering vol- property for cost sharing or matching untary committed cost sharing and must be the lesser of paragraph (d)(1) any other program policy factors that or(2) of this section. may be used to determine who may re- (1) The value of the remaining life of ceive a Federal award must be explic- the property recorded in the non-Fed- itly described in the notice of funding eral entity's accounting records at the opportunity. See also §§200.414 and time of donation. 200.204 and appendix I to this part. (2) The current fair market value. (b) For all Federal awards, any However, when there is sufficient jus- shared costs or matching funds and all tification, the Federal awarding agen- contributions, including cash and cy may approve the use of the current third-party in-kind contributions, fair market value of the donated prop- must be accepted as part of the non- erty, even if it exceeds the value de- Federal entity's cost sharing or match- scribed in paragraph (d)(1) of this sec- ing when such contributions meet all tion at the time of donation. of the following criteria: (e) Volunteer services furnished by (1) Are verifiable from the non-Fed- third-party professional and technical eral entity's records; personnel, consultants, and other (2) Are not included as contributions skilled and unskilled labor may be for any other Federal award; counted as cost sharing or matching if (3) Are necessary and reasonable for the service is an integral and necessary accomplishment of project or program part of an approved project or program. objectives; Rates for third-party volunteer serv- (4) Are allowable under subpart E of ices must be consistent with those paid this part; for similar work by the non-Federal en- (5) Are not paid by the Federal Gov- tity. In those instances in which the ernment under another Federal award, required skills are not found in the except where the Federal statute au- non-Federal entity, rates must be con- thorizing a program specifically pro- sistent with those paid for similar vides that Federal funds made avail- work in the labor market in which the able for such program can be applied to non-Federal entity competes for the matching or cost sharing requirements kind of services involved. In either of other Federal programs; case, paid fringe benefits that are rea- (6) Are provided for in the approved sonable, necessary, allocable, and oth- budget when required by the Federal erwise allowable may be included in awarding agency;and the valuation. (7) Conform to other provisions of (f) When a third-party organization this part, as applicable. furnishes the services of an employee, (c) Unrecovered indirect costs, in- these services must be valued at the eluding indirect costs on cost sharing employee's regular rate of pay plus an or matching may be included as part of amount of fringe benefits that is rea- cost sharing or matching only with the sonable, necessary, allocable, and oth- prior approval of the Federal awarding erwise allowable, and indirect costs at agency. Unrecovered indirect cost either the third-party organization's means the difference between the approved federally-negotiated indirect amount charged to the Federal award cost rate or, a rate in accordance with 128 OMB Guidance §200.307 §200.414(d) provided these services em- (42 U.S.C. 4601-4655) (Uniform Act) ex- ploy the same skill(s) for which the cept as provided in the implementing employee is normally paid. Where do- regulations at 49 CFR part 24, "Uni- nated services are treated as indirect form Relocation Assistance And Real costs, indirect cost rates will separate Property Acquisition For Federal And the value of the donated services so Federally-Assisted Programs". that reimbursement for the donated (2) The value of donated equipment services will not be made. must not exceed the fair market value (g) Donated property from third par- of equipment of the same age and con- ties may include such items as equip- dition at the time of donation. ment, office supplies, laboratory sup- (3) The value of donated space must plies, or workshop and classroom sup- not exceed the fair rental value of com- plies. Value assessed to donated prop- parable space as established by an inde- erty included in the cost sharing or pendent appraisal of comparable space matching share must not exceed the and facilities in a privately-owned fair market value of the property at building in the same locality. the time of the donation. (4) The value of loaned equipment (h) The method used for determining must not exceed its fair rental value. cost sharing or matching for third- (j) For third-party in-kind contribu- party-donated equipment, buildings tions, the fair market value of goods and land for which title passes to the and services must be documented and non-Federal entity may differ accord- to the extent feasible supported by the ing to the purpose of the Federal same methods used internally by the award, if paragraph (h)(1) or (2) of this non-Federal entity. section applies. (k) For IHEs, see also OMB memo- (1) If the purpose of the Federal randum M-01-06, dated January 5, 2001, award is to assist the non-Federal enti- Clarification of OMB A-21 Treatment ty in the acquisition of equipment, of Voluntary Uncommitted Cost Shar- buildings or land, the aggregate value ing and Tuition Remission Costs. of the donated property may be claimed as cost sharing or matching. §200.307 Program income. (2) If the purpose of the Federal (a) General. Non-Federal entities are award is to support activities that re- encouraged to earn income to defray quire the use of equipment, buildings program costs where appropriate. or land, normally only depreciation (b) Cost of generating program income. charges for equipment and buildings If authorized by Federal regulations or may be made.However, the fair market the Federal award, costs incidental to value of equipment or other capital as- the generation of program income may sets and fair rental charges for land be deducted from gross income to de- may be allowed, provided that the Fed- termine program income, provided eral awarding agency has approved the these costs have not been charged to charges. See also§200.420. the Federal award. (i) The value of donated property (c) Governmental revenues. Taxes, spe- must be determined in accordance with cial assessments, levies, fines, and the usual accounting policies of the other such revenues raised by a non- non-Federal entity, with the following Federal entity are not program income qualifications: unless the revenues are specifically (1) The value of donated land and identified in the Federal award or Fed- buildings must not exceed its fair mar- eral awarding agency regulations as ket value at the time of donation to program income. the non-Federal entity as established (d) Property. Proceeds from the sale by an independent appraiser (e.g., cer- of real property, equipment, or supplies tified real property appraiser or Gen- are not program income; such proceeds eral Services Administration rep- will be handled in accordance with the resentative) and certified by a respon- requirements of the Property Stand- sible official of the non-Federal entity ards §§200.311, 200.313, and 200.314, or as as required by the Uniform Relocation specifically identified in Federal stat- Assistance and Real Property Acquisi- utes,regulations, or the terms and con- tion Policies Act of 1970, as amended, ditions of the Federal award. 129 §200.308 2 CFR Ch. II (1-1-21 Edition) (e) Use of program income. If the Fed- come earned after the end of the period eral awarding agency does not specify of performance for the Federal award, in its regulations or the terms and con- unless the Federal awarding agency ditions of the Federal award, or give regulations or the terms and condi- prior approval for how program income tions of the Federal award provide oth- is to be used, paragraph (e)(1) of this erwise. The Federal awarding agency section must apply. For Federal awards may negotiate agreements with recipi- made to IHEs and nonprofit research ents regarding appropriate uses of in- institutions, if the Federal awarding come earned after the period of per- agency does not specify in its regula- formance as part of the grant closeout tions or the terms and conditions of process. See also§200.344. the Federal award how program income (g) License fees and royalties. Unless is to be used, paragraph (e)(2) of this the Federal statute, regulations, or section must apply. In specifying alter- terms and conditions for the Federal natives to paragraphs (e)(1) and (2) of award provide otherwise, the non-Fed- this section, the Federal awarding eral entity is not accountable to the agency may distinguish between in- Federal awarding agency with respect come earned by the recipient and in- to program income earned from license come earned by subrecipients and be- fees and royalties for copyrighted ma- tween the sources, kinds, or amounts terial, patents, patent applications, of income. When the Federal awarding trademarks, and inventions made agency authorizes the approaches in under a Federal award to which 37 CFR paragraphs(e)(2)and(3) of this section, part 401 is applicable. program income in excess of any amounts specified must also be de- §200.308 Revision of budget and pro- ducted from expenditures. gram plans. (1) Deduction. Ordinarily program in- come must be deducted from total al- (a) The approved budget for the Fed lowable costs to determine the net al- eral award summarizes the financial lowable costs. Program income must be aspects of the project or program as ap used for current costs unless the Fed- proved during the Federal award proc- eral awarding agency authorizes other- ess. It may include either the Federal wise. Program income that the non- and non-Federal share (see definition Federal entity did not anticipate at the for Federal share in §200.1) or only the time of the Federal award must be used Federal share, depending upon Federal to reduce the Federal award and non- awarding agency requirements. The Federal entity contributions rather budget and program plans include con- than to increase the funds committed siderations for performance and pro to the project. gram evaluation purposes whenever re- (2) Addition. With prior approval of quired in accordance with the terms the Federal awarding agency (except and conditions of the award. for IHEs and nonprofit research insti- (b) Recipients are required to report tutions, as described in this paragraph deviations from budget or project scope (e)) program income may be added to or objective, and request prior approv- the Federal award by the Federal agen- als from Federal awarding agencies for cy and the non-Federal entity.The pro- budget and program plan revisions, in gram income must be used for the pur- accordance with this section. poses and under the conditions of the (c) For non-construction Federal Federal award. awards, recipients must request prior (3) Cost sharing or matching. With approvals from Federal awarding agen- prior approval of the Federal awarding cies for the following program or budg- agency, program income may be used et-related reasons: to meet the cost sharing or matching (1) Change in the scope or the objec- requirement of the Federal award. The tive of the project or program (even if amount of the Federal award remains there is no associated budget revision the same. requiring prior written approval). (f) Income after the period of perform- (2) Change in a key person specified ance. There are no Federal require- in the application or the Federal ments governing the disposition of in- award. 130 OMB Guidance §200.308 (3) The disengagement from the months unless one or more of the con- project for more than three months, or ditions outlined in paragraphs (e)(2)(i) a 25 percent reduction in time devoted through (iii) of this section apply. For to the project, by the approved project one-time extensions, the recipient director or principal investigator. must notify the Federal awarding (4) The inclusion, unless waived by agency in writing with the supporting the Federal awarding agency, of costs reasons and revised period of perform- that require prior approval in accord- ance at least 10 calendar days before ance with subpart E of this part as ap- the end of the period of performance plicable. specified in the Federal award. This (5) The transfer of funds budgeted for one-time extension must not be exer- participant support costs to other cat- cised merely for the purpose of using egories of expense. (6) Unless described in the applica- unobligated balances. Extensions re- tion and funded in the approved Fed- quire explicit prior Federal awarding eral awards, the subawarding, transfer- agency approval when: ring or contracting out of any work (i) The terms and conditions of the under a Federal award, including fixed Federal award prohibit the extension. amount subawards as described in (ii) The extension requires additional §200.333. This provision does not apply Federal funds. to the acquisition of supplies, material, (iii) The extension involves any equipment or general support services. change in the approved objectives or (7) Changes in the approved cost- scope of the project. sharing or matching provided by the (3) Carry forward unobligated bal- non-Federal entity. ances to subsequent budget periods. (8) The need arises for additional (4) For Federal awards that support Federal funds to complete the project. research, unless the Federal awarding (d) No other prior approval require- agency provides otherwise in the Fed- ments for specific items may be im- eral award or in the Federal awarding posed unless an exception has been ap- agency's regulations, the prior ap- proved by OMB. See also §§200.102 and 200.407. proval requirements described in this (e) Except for requirements listed in paragraph(e)are automatically waived paragraphs (c)(1) through (8) of this (i.e., recipients need not obtain such section, the Federal awarding agency is prior approvals) unless one of the con- authorized, at its option, to waive ditions included in paragraph (e)(2) of other cost-related and administrative this section applies. prior written approvals contained in (f) The Federal awarding agency subparts D and E of this part. Such may, at its option,restrict the transfer waivers may include authorizing re- of funds among direct cost categories cipients to do any one or-more of the or programs, functions and activities following: for Federal awards in which the Fed- (1) Incur project costs 90 calendar eral share of the project exceeds the days before the Federal awarding agen- simplified acquisition threshold and cy makes the Federal award. Expenses the cumulative amount of such trans- more than 90 calendar days pre-award fers exceeds or is expected to exceed 10 require prior approval of the Federal percent of the total budget as last ap- awarding agency. All costs incurred be- proved by the Federal awarding agen- fore the Federal awarding agency cy. The Federal awarding agency can- makes the Federal award are at the re- not permit a transfer that would cause cipient's risk (i.e., the Federal award- any Federal appropriation to be used ing agency is not required to reimburse for purposes other than those con- such costs if for any reason the recipi- ent does not receive a Federal award or sistent with the appropriation. if the Federal award is less than antici- (g) All other changes to non-con- pated and inadequate to cover such struction budgets, except for the costs). See also§200.458. changes described in paragraph (c) of (2) Initiate a one-time extension of this section, do not require prior ap- the period of performance by up to 12 proval(see also§200.407). 131 §200.309 2 CFR Ch. II (1-1-21 Edition) (h) For construction Federal awards, newal award is issued, a distinct Period the recipient must request prior writ- of Performance will begin. ten approval promptly from the Fed- eral awarding agency for budget revi- PROPERTY STANDARDS sions whenever paragraph (h)(1), (2), or (3)of this section applies: §200.310 Insurance coverage. (1) The revision results from changes The non-Federal entity must, at a in the scope or the objective of the minimum, provide the equivalent in- project or program. surance coverage for real property and (2) The need arises for additional equipment acquired or improved with Federal funds to complete the project. Federal funds as provided to property (3) A revision is desired which in- owned by the non-Federal entity. Fed- volves specific costs for which prior erally-owned property need not be in- written approval requirements may be sured unless required by the terms and imposed consistent with applicable conditions of the Federal award. OMB cost principles listed in subpart E. §200.311 Real property. (4) No other prior approval require- (a) Title. Subject to the requirements ments for budget revisions may be im- and conditions set forth in this section, posed unless an exception has been ap- title to real property acquired or im- proved by OMB. proved under a Federal award will vest (5) When a Federal awarding agency upon acquisition in the non-Federal en- makes a Federal award that provides tity. support for construction and non-con- (b) Use. Except as otherwise provided struction work, the Federal awarding by Federal statutes or by the Federal agency may require the recipient to ob- awarding agency, real property will be tain prior approval from the Federal used for the originally authorized pur- awarding agency before making any pose as long as needed for that purpose, fund or budget transfers between the during which time the non-Federal en- two types of work supported. tity must not dispose of or encumber (i) When requesting approval for its title or other interests. budget revisions, the recipient must (c) Disposition. When real property is use the same format for budget infor- no longer needed for the originally au- mation that was used in the applica- thorized purpose, the non-Federal enti- tion, unless the Federal awarding agen- ty must obtain disposition instructions cy indicates a letter of request suffices. from the Federal awarding agency or (j) Within 30 calendar days from the pass-through entity. The instructions date of receipt of the request for budg- must provide for one of the following et revisions, the Federal awarding alternatives: agency must review the request and (1) Retain title after compensating notify the recipient whether the budget the Federal awarding agency. The revisions have been approved. If the re- amount paid to the Federal awarding • vision is still under consideration at agency will be computed by applying the end of 30 calendar days, the Federal the Federal awarding agency's percent- awarding agency must inform the re- age of participation in the cost of the cipient in writing of the date when the original purchase (and costs of any im- recipient may expect the decision. provements) to the fair market value of the property. However,in those situ- §200.309 Modifications to Period of ations where the non-Federal entity is Performance. disposing of real property acquired or If a Federal awarding agency or pass- improved with a Federal award and ac- through entity approves an extension, quiring replacement real property or if a recipient extends under under the same Federal award, the net §200.308(e)(2), the Period of Perform- proceeds from the disposition may be ance will be amended to end at the used as an offset to the cost of the re- completion of the extension. If a termi- placement property. nation occurs, the Period of Perform- (2) Sell the property and compensate ance will be amended to end upon the the Federal awarding agency. The effective date of termination. If a re- amount due to the Federal awarding 132 OMB Guidance §200.313 agency will be calculated by applying (c) Exempt property means property the Federal awarding agency's percent- acquired under a Federal award where age of participation in the cost of the the Federal awarding agency has cho- original purchase (and cost of any im- sen to vest title to the property to the provements) to the proceeds of the sale non-Federal entity without further re- after deduction of any actual and rea- sponsibility to the Federal Govern- sonable selling and fixing-up expenses. ment, based upon the explicit terms If the Federal award has not been and conditions of the Federal award. closed out, the net proceeds from sale The Federal awarding agency may ex- may be offset against the original cost ercise this option when statutory au- of the property. When the non-Federal thority exists. Absent statutory au- entity is directed to sell property, sales thority and specific terms and condi- procedures must be followed that pro- tions of the Federal award, title to ex- vide for competition to the extent empt property acquired under the Fed- practicable and result in the highest eral award remains with the Federal possible return. Government. (3) Transfer title to the Federal awarding agency or to a third party §200.313 Equipment. designated/approved by the Federal See also§200.439. awarding agency. The non-Federal en- (a) Title. Subject to the requirements tity is entitled to be paid an amount and conditions set forth in this section, calculated by applying the non-Federal title to equipment acquired under a entity's percentage of participation in Federal award will vest upon acquisi- the purchase of the real property (and tion in the non-Federal entity. Unless cost of any improvements) to the cur- a statute specifically authorizes the rent fair market value of the property. Federal agency to vest title in the non- Federal entity without further respon- §200.312 Federally-owned and exempt sibility to the Federal Government, property. and the Federal agency elects to do so, (a) Title to federally-owned property the title must be a conditional title. remains vested in the Federal Govern- Title must vest in the non-Federal en- ment. The non-Federal entity must tity subject to the following condi- submit annually an inventory listing of tions: federally-owned property in its custody (1) Use the equipment for the author- to the Federal awarding agency. Upon ized purposes of the project during the completion of the Federal award or period of performance, or until the when the property is no longer needed, property is no longer needed for the the non-Federal entity must report the purposes of the project. property to the Federal awarding agen- (2) Not encumber the property with- cy for further Federal agency utiliza- out approval of the Federal awarding tion. agency or pass-through entity. (b) If the Federal awarding agency (3)Use and dispose of the property in has no further need for the property, it accordance with paragraphs (b), (c), must declare the property excess and and(e)of this section. report it for disposal to the appropriate (b)General. A state must use, manage Federal disposal authority, unless the and dispose of equipment acquired Federal awarding agency has statutory under a Federal award by the state in authority to dispose of the property by accordance with state laws and proce- alternative methods (e.g., the author- dures. Other non-Federal entities must ity provided by the Federal Technology follow paragraphs (c) through (e) of Transfer Act (15 U.S.C. 3710 (i)) to do- this section. nate research equipment to edu- (c) Use. (1) Equipment must be used cational and nonprofit organizations in by the non-Federal entity in the pro- accordance with Executive Order 12999, gram or project for which it was ac- "Educational Technology: Ensuring quired as long as needed, whether or Opportunity for All Children in the not the project or program continues Next Century."). The Federal awarding to be supported by the Federal award, agency must issue appropriate instruc- and the non-Federal entity must not tions to the non-Federal entity. encumber the property without prior 133 §200.313 2 CFR Ch. II (1-1-21 Edition) approval of the Federal awarding agen- Federal award, until disposition takes cy. The Federal awarding agency may place will, as a minimum, meet the fol- require the submission of the applica- lowing requirements: ble common form for equipment. When (1) Property records must be main- no longer needed for the original pro- tained that include a description of the gram or project, the equipment may be property, a serial number or other used in other activities supported by identification number, the source of the Federal awarding agency, in the funding for the property (including the following order of priority: FAIN), who holds title, the acquisition (i) Activities under a Federal award date, and cost of the property, percent- from the Federal awarding agency age of Federal participation in the which funded the original program or project costs for the Federal award project,then under which the property was acquired, (ii) Activities under Federal awards the location, use and condition of the from other Federal awarding agencies. property, and any ultimate disposition This includes consolidated equipment data including the date of disposal and for information technology systems. sale price of the property. (2)During the time that equipment is (2) A physical inventory of the prop- used on the project or program for erty must be taken and the results rec- which it was acquired, the non-Federal onciled with the property records at entity must also make equipment least once every two years. available for use on other projects or devel- programs currently or previously sup- (3) A control system must be ported by the Federal Government, prey to ensure adequate safeguards to provided that such use will not inter- prevent loss, damage, or theft of the fere with the work on the projects or property. Any loss, damage, or theft program for which it was originally ac- quired. First preference for other use (4) Adequate maintenance procedures must be given to other programs or must be developed to keep the property projects supported by Federal awarding in good condition. agency that financed the equipment (5) If the non-Federal entity is au- and second preference must be given to thorized or required to sell the prop- programs or projects under Federal erty, proper sales procedures must be awards from other Federal awarding established to ensure the highest pos- agencies. Use for non-federally-funded sible return. programs or projects is also permis- (e) Disposition. When original or re- sible. User fees should be considered if Placement equipment acquired under a appropriate. Federal award is no longer needed for (3) Notwithstanding the encourage- the original project or program or for ment in §200.307 to earn program in- other activities currently or previously come, the non-Federal entity must not supported by a Federal awarding agen- use equipment acquired with the Fed- cy, except as otherwise provided in eral award to provide services for a fee Federal statutes, regulations, or Fed- that is less than private companies eral awarding agency disposition in- charge for equivalent services unless structions, the non-Federal entity specifically authorized by Federal stat- must request disposition instructions ute for as long as the Federal Govern- from the Federal awarding agency if ment retains an interest in the equip- required by the terms and conditions of ment. the Federal award. Disposition of the (4) When acquiring replacement equipment will be made as follows, in equipment, the non-Federal entity may accordance with Federal awarding use the equipment to be replaced as a agency disposition instructions: trade-in or sell the property and use (1)Items of equipment with a current the proceeds to offset the cost of the per unit fair market value of $5,000 or replacement property. less may be retained, sold or otherwise (d) Management requirements. Proce- disposed of with no further responsi- dures for managing equipment (includ- bility to the Federal awarding agency. ing replacement equipment), whether (2) Except as provided in §200.312(b), acquired in whole or in part under a or if the Federal awarding agency fails 134 OMB Guidance §200.315 to provide requested disposition in- §200.315 Intangible property. structions within 120 days, items of equipment with a current per-unit fair (a) Title to intangible property (see market value in excess of$5,000 may be definition for Intangible property in retained by the non-Federal entity or vests acquirednacquisitionundr a Fetderal award non-Fed- sold. The Federal awarding agency is ervests upon . The in der lentity entitled to an amount calculated by mustul entity. non-Federal entity multiplying the current market value nally use thatrizproperty for the must nott or proceeds from sale by the Federal encumber authorized purpose,property and ap- awarding agency's percentage of par- encumber the Federal awarding without c . ticipation in the cost of the original Whenl of the agency. purchase. If the equipment is sold, the unt longerd needed for the origif nally authorized purpose, disposition of Federal awarding agency may permit the intangible property must occur in the non-Federal entity to deduct and accordance with the retain from the Federal share $500 or provisions in §200.313(e). ten percent of the proceeds, whichever (b)The non-Federal entity may copy- is less, for its selling and handling ex- right any work that is subject to copy- penses. right and was developed, or for which (3) The non-Federal entity may ownership was acquired, under a Fed- transfer title to the property to the eral award.The Federal awarding agen- Federal Government or to an eligible cy reserves a royalty-free, nonexclu- third party provided that, in such sive and irrevocable right to reproduce, cases, the non-Federal entity must be publish, or otherwise use the work for entitled to compensation for its attrib- Federal purposes, and to authorize oth- utable percentage of the current fair ers to do so. market value of the property. (c) The non-Federal entity is subject (4) In cases where a non-Federal enti- to applicable regulations governing ty fails to take appropriate disposition patents and inventions, including gov- actions, the Federal awarding agency ernmentwide regulations issued by the may direct the non-Federal entity to Department of Commerce at 37 CFR take disposition actions. part 401, "Rights to Inventions Made §200.314 Supplies. by Nonprofit Organizations and Small Business Firms Under Government See also§200.453. Awards, Contracts and Cooperative (a) Title to supplies will vest in the Agreements." non-Federal entity upon acquisition. If (d) The Federal Government has the there is a residual inventory of unused right to: supplies exceeding$5,000 in total aggre- (1)Obtain,reproduce, publish, or oth- gate value upon termination or com- erwise use the data produced under a pletion of the project or program and Federal award;and the supplies are not needed for any (2)Authorize others to receive,repro- other Federal award, the non-Federal duce, publish, or otherwise use such entity must retain the supplies for use data for Federal purposes. on other activities or sell them, but (e)(1) In response to a Freedom of In- must, in either case, compensate the formation Act (FOIA) request for re- Federal Government for its share. The search data relating to published re- amount of compensation must be com- search findings produced under a Fed- puted in the same manner as for equip- eral award that were used by the Fed- ment. See§200.313(e)(2)for the calcula- eral Government in developing an tion methodology. agency action that has the force and (b) As long as the Federal Govern- effect of law, the Federal awarding ment retains an interest in the sup- agency must request, and the non-Fed- plies, the non-Federal entity must not eral entity must provide, within a rea- use supplies acquired under a Federal sonable time, the research data so that award to provide services to other or- they can be made available to the pub- ganizations for a fee that is less than lie through the procedures established private companies charge for equiva- under the FOIA. If the Federal award- lent services, unless specifically au- ing agency obtains the research data thorized by Federal statute. solely in response to a FOIA request, 135 §200.316 2 CFR Ch. II (1-1-21 Edition) the Federal awarding agency may quire the non-Federal entity to record charge the requester a reasonable fee liens or other appropriate notices of equaling the full incremental cost of record to indicate that personal or real obtaining the research data. This fee property has been acquired or improved should reflect costs incurred by the with a Federal award and that use and Federal agency and the non-Federal en- disposition conditions apply to the tity. This fee is in addition to any fees property. the Federal awarding agency may as- sess under the FOIA (5 U.S.C. Procurement Standards 552(a)(4)(A)). (2)Published research findings means §200.317 Procurements by states. when: (i)Research findings are published in When procuring property and sery a peer-reviewed scientific or technical ices under a Federal award, a State journal; or must follow the same policies and pro- (ii)A Federal agency publicly and of- cedures it uses for procurements from ficially cites the research findings in its non-Federal funds. The State will support of an agency action that has comply with §§200.321, 200.322, and the force and effect of law. "Used by 200.323 and ensure that every purchase the Federal Government in developing order or other contract includes any an agency action that has the force and clauses required by §200.327. All other effect of law" is defined as when an non-Federal entities, including sub- agency publicly and officially cites the recipients of a State, must follow the research findings in support of an agen- procurement standards in §§200.318 cy action that has the force and effect through 200.327. of law. (3)Research data means the recorded §200.318 General procurement stand- factual material commonly accepted in ards. the scientific community as necessary (a)The non-Federal entity must have to validate research findings, but not and use documented procurement pro- any of the following: Preliminary anal- cedures, consistent with State, local, yses, drafts of scientific papers, plans and tribal laws and regulations and the for future research, peer reviews, or standards of this section, for the acqui- communications with colleagues. This "recorded" material excludes physical sition of property or services required objects (e.g., laboratory samples). Re- under a Federal award or subaward. search data also do not include: The non-Federal entity's documented (i) Trade secrets, commercial infor- procurement procedures must conform mation, materials necessary to be held to the procurement standards identi- confidential by a researcher until they fied in§§200.317 through 200.327. are published, or similar information (b) Non-Federal entities must main- which is protected under law;and tain oversight to ensure that contrac- (ii) Personnel and medical informa- tors perform in accordance with the tion and similar information the dis- terms, conditions, and specifications of closure of which would constitute a their contracts or purchase orders. clearly unwarranted invasion of per- (c)(1) The non-Federal entity must sonal privacy, such as information that maintain written standards of conduct could be used to identify a particular covering conflicts of interest and gov- person in a research study. erning the actions of its employees en- §200.316 Property trust relationship. gaged in the selection, award and ad- ministration of contracts. No em- Real property, equipment, and intan- ployee, officer, or agent may partici- gible property, that are acquired or im- pate in the selection, award, or admin- proved with a Federal award must be istration of a contract supported by a held in trust by the non-Federal entity Federal award if he or she has a real or as trustee for the beneficiaries of the apparent conflict of interest. Such a project or program under which the conflict of interest would arise when property was acquired or improved. the employee, officer, or agent, any The Federal awarding agency may re- 136 OMB Guidance §200.318 member of his or her immediate fam- using strategic sourcing, shared serv- ily, his or her partner, or an organiza- ices, and other similar procurement ar- tion which employs or is about to em- rangements. ploy any of the parties indicated here- (f) The non-Federal entity is encour- in, has a financial or other interest in aged to use Federal excess and surplus or a tangible personal benefit from a property in lieu of purchasing new firm considered for a contract. The of- equipment and property whenever such ficers, employees, and agents of the use is feasible and reduces project non-Federal entity may neither solicit costs. nor accept gratuities, favors, or any- (g)The non-Federal entity is encour- thing of monetary value from contrac- aged to use value engineering clauses tors or parties to subcontracts. How- in contracts for construction projects ever, non-Federal entities may set of sufficient size to offer reasonable op- standards for situations in which the portunities for cost reductions. Value financial interest is not substantial or engineering is a systematic and cre- the gift is an unsolicited item of nomi- ative analysis of each contract item or nal value. The standards of conduct task to ensure that its essential func- must provide for disciplinary actions tion is provided at the overall lower to be applied for violations of such cost. standards by officers, employees, or (h) The non-Federal entity must agents of the non-Federal entity. award contracts only to responsible (2) If the non-Federal entity has a contractors possessing the ability to parent, affiliate, or subsidiary organi- perform successfully under the terms zation that is not a State, local govern- and conditions of a proposed procure- ment, or Indian tribe, the non-Federal ment. Consideration will be given to entity must also maintain written such matters as contractor integrity, standards of conduct covering organi- compliance with public policy, record zational conflicts of interest. Organiza- of past performance, and financial and tional conflicts of interest means that technical resources. See also§200.214. because of relationships with a parent (i) The non-Federal entity must company, affiliate, or subsidiary orga- maintain records sufficient to detail nization, the non-Federal entity is un- the history of procurement. These able or appears to be unable to be im- records will include, but are not nec- partial in conducting a procurement essarily limited to, the following: Ra- action involving a related organiza- tionale for the method of procurement, tion. selection of contract type, contractor (d) The non-Federal entity's proce- selection or rejection, and the basis for dures must avoid acquisition of unnec- the contract price. essary or duplicative items. Consider- (j)(1)The non-Federal entity may use ation should be given to consolidating a time-and-materials type contract or breaking out procurements to ob- only after a determination that no tain a more economical purchase. other contract is suitable and if the Where appropriate, an analysis will be contract includes a ceiling price that made of lease versus purchase alter- the contractor exceeds at its own risk. natives, and any other appropriate Time-and-materials type contract analysis to determine the most eco- means a contract whose cost to a non- nomical approach. Federal entity is the sum of: (e) To foster greater economy and ef- (i) The actual cost of materials; and ficiency, and in accordance with efforts (ii) Direct labor hours charged at to promote cost-effective use of shared fixed hourly rates that reflect wages, services across the Federal Govern- general and administrative expenses, ment,the non-Federal entity is encour- and profit. aged to enter into state and local inter- (2) Since this formula generates an governmental agreements or inter-en- open-ended contract price, a time-and- tity agreements where appropriate for materials contract provides no positive procurement or use of common or profit incentive to the contractor for shared goods and services. Competition cost control or labor efficiency. There- requirements will be met with applied fore, each contract must set a ceiling to documented procurement actions price that the contractor exceeds at its 137 §200.319 2 CFR Ch. II (1-1-21 Edition) own risk. Further, the non-Federal en- product to be offered and describing tity awarding such a contract must as- the performance or other relevant re- sert a high degree of oversight in order quirements of the procurement; and to obtain reasonable assurance that (7) Any arbitrary action in the pro- the contractor is using efficient meth- curement process. ods and effective cost controls. (c) The non-Federal entity must con- (k) The non-Federal entity alone duct procurements in a manner that must be responsible, in accordance prohibits the use of statutorily or ad- with good administrative practice and ministratively imposed state, local, or sound business judgment, for the set- tribal geographical preferences in the tlement of all contractual and adminis- evaluation of bids or proposals, except trative issues arising out of procure- in those cases where applicable Federal ments. These issues include, but are statutes expressly mandate or encour- not limited to, source evaluation, pro- age geographic preference. Nothing in tests, disputes, and claims. These this section preempts state licensing standards do not relieve the non-Fed- laws. When contracting for architec- eral entity of any contractual respon- tural and engineering (A/E) services, sibilities under its contracts. The Fed- geographic location may be a selection eral awarding agency will not sub- criterion provided its application stitute its judgment for that of the leaves an appropriate number of quali- non-Federal entity unless the matter is fied firms, given the nature and size of primarily a Federal concern. Viola- the project, to compete for the con- tions of law will be referred to the tract. local, state, or Federal authority hav- (d)The non-Federal entity must have ing proper jurisdiction. written procedures for procurement §200.319 Competition. transactions. These procedures must P ensure that all solicitations: (a) All procurement transactions for (1) Incorporate a clear and accurate the acquisition of property or services description of the technical require- required under a Federal award must ments for the material, product, or be conducted in a manner providing service to be procured. Such descrip- full and open competition consistent tion must not, in competitive procure- with the standards of this section and ments, contain features which unduly §200.320. restrict competition. The description (b) In order to ensure objective con- may include a statement of the quali- tractor performance and eliminate un- tative nature of the material, product fair competitive advantage, contrac- or service to be procured and, when tors that develop or draft specifica- necessary, must set forth those min- tions, requirements, statements of imum essential characteristics and work, or invitations for bids or re- standards to which it must conform if quests for proposals must be excluded it is to satisfy its intended use. De- from competing for such procurements. tailed product specifications should be Some of the situations considered to be avoided if at all possible. When it is restrictive of competition include but impractical or uneconomical to make a are not limited to: clear and accurate description of the (1) Placing unreasonable require- technical requirements, a "brand name ments on firms in order for them to or equivalent" description may be used qualify to do business; as a means to define the performance (2) Requiring unnecessary experience or other salient requirements of pro- and excessive bonding; curement. The specific features of the (3) Noncompetitive pricing practices named brand which must be met by of- between firms or between affiliated fers must be clearly stated;and companies; (2) Identify all requirements which (4) Noncompetitive contracts to con- the offerors must fulfill and all other sultants that are on retainer contracts; factors to be used in evaluating bids or (5) Organizational conflicts of inter- proposals. est; (e) The non-Federal entity must en- (6) Specifying only a "brand name" sure that all prequalified lists of per- product instead of allowing "an equal" sons, firms, or products which are used 138 OMB Guidance §200.320 in acquiring goods and services are cur- (iii) Micro-purchase thresholds. The rent and include enough qualified non-Federal entity is responsible for sources to ensure maximum open and determining and documenting an ap- free competition. Also, the non-Federal propriate micro-purchase threshold entity must not preclude potential bid- based on internal controls, an evalua- ders from qualifying during the solici- tion of risk, and its documented pro- tation period. curement procedures. The micro-pur- (f) Noncompetitive procurements can chase threshold used by the non-Fed- only be awarded in accordance with eral entity must be authorized or not §200.320(c). prohibited under State, local, or tribal laws or regulations. Non-Federal enti- §200.320 Methods of procurement to ties may establish a threshold higher be followed. than the Federal threshold established The non-Federal entity must have in the Federal Acquisition Regulations and use documented procurement pro- (FAR) in accordance with paragraphs cedures, consistent with the standards (a)(1)(iv)and(v)of this section. of this section and §§200.317, 200.318, (iv) Non-Federal entity increase to the and 200.319 for any of the following micro-purchase threshold up to $50,000. methods of procurement used for the Non-Federal entities may establish a acquisition of property or services re- threshold higher than the micro-pur- quired under a Federal award or sub- chase threshold identified in the FAR award. in accordance with the requirements of (a) Informal procurement methods. this section. The non-Federal entity When the value of the procurement for $50,000may self-certifyn a threshold up to property or services under a Federal maintain on a annual bnsis and must award does not exceed the simplified ac- e documentationee to be made quisition threshold (SAT), as defined in available to the Federal awarding §200.1, or a lower threshold established agency and auditors in accordance with in- by a non-Federal entity, formal pro- §200.334.ludea The self-certification clearon must curement methods are not required. elude a justification, clear iuppor i ng tion of the threshold, and supporting The non-Federal entity may use infor- documentation of any of the following: mal procurement methods to expedite (A) A qualification as a low-risk the completion of its transactions and auditee, in accordance with the criteria minimize the associate d administra- in§200.520 for the most recent audit; tive burden and cost. The informal (B) An annual internal institutional methods used for procurement of prop- risk assessment to identify, mitigate, erty or services at or below the SAT in- and manage financial risks;or, elude: (C) For public institutions, a higher (1) Micro-purchases—(i) Distribution. threshold consistent with State law. The acquisition of supplies or services, (v) Non-Federal entity increase to the the aggregate dollar amount of which micro-purchase threshold over $50,000. does not exceed the micro-purchase Micro-purchase thresholds higher than threshold (See the definition of micro- $50,000 must be approved by the cog- purchase in §200.1). To the maximum nizant agency for indirect costs. The extent practicable, the non-Federal en- non-federal entity must submit a re- tity should distribute micro-purchases quest with the requirements included equitably among qualified suppliers. in paragraph (a)(1)(iv) of this section. (ii)Micro-purchase awards. Micro-pur- The increased threshold is valid until chases may be awarded without solic- there is a change in status in which the iting competitive price or rate justification was approved. quotations if the non-Federal entity (2) Small purchases—(i) Small purchase considers the price to be reasonable procedures. The acquisition of property based on research, experience,purchase or services, the aggregate dollar history or other information and docu- amount of which is higher than the ments it files accordingly. Purchase micro-purchase threshold but does not cards can be used for micro-purchases exceed the simplified acquisition if procedures are documented and ap- threshold. If small purchase procedures proved by the non-Federal entity. are used, price or rate quotations must 139 §200.320 2 CFR Ch. II (1-1-21 Edition) be obtained from an adequate number (ii) If sealed bids are used, the fol- of qualified sources as determined ap- lowing requirements apply: propriate by the non-Federal entity. (A) Bids must be solicited from an (ii) Simplified acquisition thresholds. adequate number of qualified sources, The non-Federal entity is responsible providing them sufficient response for determining an appropriate sim- time prior to the date set for opening plified acquisition threshold based on the bids, for local, and tribal govern- internal controls, an evaluation of risk ments, the invitation for bids must be and its documented procurement proce- publicly advertised; dures which must not exceed the (B) The invitation for bids, which threshold established in the FAR. will include any specifications and per- When applicable, a lower simplified ac- tinent attachments, must define the quisition threshold used by the non- items or services in order for the bidder Federal entity must be authorized or to properly respond; not prohibited under State, local, or tribal laws or regulations. (C) Alld placebcs will be opened at the invita- (b) Formal procurement methods. When time and andfoprescrrbloed inl the tr tion for bids, for local and tribal the value of the procurement for prop- governments, the bids must be opened erty or services under a Federal finan- publicly; cial assistance award exceeds the SAT, or a lower threshold established by a (D)A firm fixed price contract award non-Federal entity, formal procure- will be made in writing to the lowest ment methods are required. Formal responsive and responsible bidder. procurement methods require following Where specified in bidding documents, documented procedures. Formal pro- factors such as discounts, transpor- curement methods also require public tation cost, and life cycle costs must advertising unless a non-competitive be considered in determining which bid procurement can be used in accordance is lowest. Payment discounts will only with §200.319 or paragraph (c) of this be used to determine the low bid when section. The following formal methods prior experience indicates that such of procurement are used for procure- discounts are usually taken advantage ment of property or services above the of; and simplified acquisition threshold or a (E)Any or all bids may be rejected if value below the simplified acquisition there is a sound documented reason. threshold the non-Federal entity deter- (2) Proposals. A procurement method mines to be appropriate: in which either a fixed price or cost-re- (1)Sealed bids.A procurement method imbursement type contract is awarded. in which bids are publicly solicited and Proposals are generally used when con- a firm fixed-price contract (lump sum ditions are not appropriate for the use or unit price) is awarded to the respon- of sealed bids. They are awarded in ac- sible bidder whose bid, conforming with cordance with the following require- all the material terms and conditions ments: of the invitation for bids, is the lowest (i) Requests for proposals ,must be in price. The sealed bids method is the publicized and identify all evaluation preferred method for procuring con- factors and their relative importance. struction,if the conditions. Proposals must be solicited from an (i) In order for sealed bidding to be adequate number of qualified offerors. feasible, the following conditions Any response to publicized requests for should be present: proposals must be considered to the (A) A complete, adequate, and real- maximum extent practical; istic specification or purchase descrip- (ii) The non-Federal entity must tion is available; have a written method for conducting (B) Two or more responsible bidders technical evaluations of the proposals are willing and able to compete effec- received and making selections; tively for the business;and (iii) Contracts must be awarded to (C) The procurement lends itself to a the responsible offeror whose proposal firm fixed price contract and the selec- is most advantageous to the non-Fed- tion of the successful bidder can be eral entity, with price and other fac- . made principally on the basis of price. tors considered; and 140 OMB Guidance §200.323 (iv) The non-Federal entity may use tasks or quantities to permit max- competitive proposal procedures for imum participation by small and mi- qualifications-based procurement of ar- nority businesses, and women's busi- chitectural/engineering (A/E) profes- ness enterprises; • sional services whereby offeror's quali- (4) Establishing delivery schedules, fications are evaluated and the most where the requirement permits, which qualified offeror is selected, subject to encourage participation by small and negotiation of fair and reasonable corn- minority businesses, and women's busi- pensation. The method, where price is ness enterprises; not used as a selection factor, can only (5) Using the services and assistance, be used in procurement of A/E profes- as appropriate, of such organizations as sional services. It cannot be used to the Small Business Administration and purchase other types of services though the Minority Business Development A/E firms that are a potential source to Agency of the Department of Corn- perform the proposed effort. merce;and (c) Noncompetitive procurement. There (6)Requiring the prime contractor, if are specific circumstances in which subcontracts are to be let, to take the noncompetitive procurement can be affirmative steps listed in paragraphs used. Noncompetitive procurement can (b)(1)through(5)of this section. only be awarded if one or more of the following circumstances apply: §200.322 Domestic preferences for pro- (1) The acquisition of property or curements. services, the aggregate dollar amount (a) As appropriate and to the extent of which does not exceed the micro- consistent with law, the non-Federal purchase threshold (see paragraph entity should, to the greatest extent (a)(1)of this section); practicable under a Federal award, pro- (2) The item is available only from a vide a preference for the purchase, ac- single source; (3)The public exigency or emergency materialson, or use of goods, thpreducts, od for the requirement will not permit a materials produced in the United States (including but not limited to delay resulting from publicizing a corn- iron, aluminum, steel, cement, and petitive solicitation; other manufactured re- (4) The Federal awarding agency or products). The inpass-through entity expressly author- quirements of this section must be in- all , pass-through a noncompetitive procurement in eluded in all subawards orders includingfowork response to a written request from the contracts and purchase for work non-Federal entity;or or products under this award. (5) After solicitation of a number of (b)For purposes of this section: sources, competition is determined in- Produced in the United States" adequate. meeaa ns, for iron and steel products, that all manufacturing processes, from the §200.321 Contracting with small and initial melting stage through the appli- minority businesses, women's busi- cation of coatings, occurred in the ness enterprises, and labor surplus United States. area firms. (2) "Manufactured products" means (a)The non-Federal entity must take items and construction materials corn.- all necessary affirmative steps to as- Posed in whole or in part of non-ferrous sure that minority businesses,women's metals such as aluminum; plastics and business enterprises, and labor surplus polymer-based products such as poly- area firms are used when possible. vinyl chloride pipe; aggregates such as (b)Affirmative steps must include: concrete; glass, including optical fiber; (1) Placing qualified small and mi- and lumber. nority businesses and women's business enterprises on solicitation lists; §200.323 Procurement of recovered (2) Assuring that small and minority materials. businesses, and women's business en- A non-Federal entity that is a state terprises are solicited whenever they agency or agency of a political subdivi- are potential sources; sion of a state and its contractors must (3) Dividing total requirements, when comply with section 6002 of the Solid economically feasible, into smaller Waste Disposal Act, as amended by the 141 §200.324 2 CFR Ch. II (1-1-21 Edition) Resource Conservation and Recovery (d)The cost plus a percentage of cost Act. The requirements of Section 6002 and percentage of construction cost include procuring only items des- methods of contracting must not be ignated in guidelines of the Environ- used. mental Protection Agency (EPA) at 40 CFR part 247 that contain the highest §200.325 Federal awarding agency or percentage of recovered materials prac- pass-through entity review. ticable, consistent with maintaining a (a) The non-Federal entity must satisfactory level of competition, make available, upon request of the where the purchase price of the item Federal awarding agency or pass- exceeds $10,000 or the value of the through entity, technical specifica- quantity acquired during the preceding tions on proposed procurements where fiscal year exceeded $10,000; procuring the Federal awarding agency or pass- solid waste management services in a through entity believes such review is manner that maximizes energy and re- needed to ensure that the item or serv- source recovery;and establishing an af- ice specified is the one being proposed firmative procurement . program for for acquisition. This review generally procurement of recovered materials will take place prior to the time the identified in the EPA guidelines. specification is incorporated into a so- licitation document. However, if the §200.324 Contract cost and price. non-Federal entity desires to have the (a) The non-Federal entity must per- review accomplished after a solicita- form a cost or price analysis in connec- tion with every procurement action in awarding agency or pass through enti- excess of the Simplified Acquisition ty may still review the specifications, Threshold including contract modifica- with such review usually limited to the tions. The method and degree of anal- technical aspects of the proposed pur- ysis is dependent on the facts sur- (b)chase. rounding the particular procurement make The non-Federaluponrequest,entitymuste situation, but as a starting point, the available upon for the pass- non-Federal entity must make inde- Federalawarding agency or pendent estimates before receiving bids through entity pre procurement re view, procurement documents, such as or proposals. requests for proposals or invitations (b) The non-Federal entity must ne- for:bids, or independent cost estimates, gotiate profit as a separate element of when: the price for each contract in which (1) The non-Federal entity's procure- there is no price competition and in all ment procedures or operation fails to cases where cost analysis is performed. comply with the procurement stand- To establish a fair and reasonable prof- ards in this part; it, consideration must be given to the (2) The procurement is expected to complexity of the work to be per- exceed the Simplified Acquisition formed, the risk borne by the con- Threshold and is to be awarded without tractor, the contractor's investment, competition or only one bid or offer is the amount of subcontracting, the received in response to a solicitation; quality of its record of past perform- (3) The procurement, which is ex- ance, and industry profit rates in the pected to exceed the Simplified Acqui- surrounding geographical area for sition Threshold, specifies a "brand similar work. name" product; (c)Costs or prices based on estimated (4) The proposed contract is more costs for contracts under the Federal than the Simplified Acquisition award are allowable only to the extent Threshold and is to be awarded to that costs incurred or cost estimates other than the apparent low bidder included in negotiated prices would be under a sealed bid procurement;or allowable for the non-Federal entity (5) A proposed contract modification under subpart E of this part. The non- changes the scope of a contract or in- Federal entity may reference its own creases the contract amount by more cost principles that comply with the than the Simplified Acquisition Federal cost principles. Threshold. 142 OMB Guidance §200.329 (c) The non-Federal entity is exempt contract price. A "performance bond" from the pre-procurement review in is one executed in connection with a paragraph (b)of this section if the Fed- contract to secure fulfillment of all the eral awarding agency or pass-through contractor's requirements under such entity determines that its procurement contract. systems comply with the standards of (c)A payment bond on the part of the this part. contractor for 100 percent of the con- (1) The non-Federal entity may re- tract price. A "payment bond" is one quest that its procurement system be executed in connection with a contract reviewed by the Federal awarding to assure payment as required by law agency or pass-through entity to deter- of all persons supplying labor and ma- mine whether its system meets these terial in the execution of the work pro- standards in order for its system to be vided for in the contract. certified. Generally, these reviews must occur where there is continuous §200.327 Contract provisions. high-dollar funding, and third-party The non-Federal entity's contracts contracts are awarded on a regular basis; must contain the applicable provisions (2) The non-Federal entity may self- described in appendix II to this part. certify its procurement system. Such PERFORMANCE AND FINANCIAL self-certification must not limit the MONITORING AND REPORTING Federal awarding agency's right to sur- vey the system. Under a self-certifi- §200.328 Financial reporting. cation procedure, the Federal awarding agency may rely on written assurances Unless otherwise approved by OMB, from the non-Federal entity that it is the Federal awarding agency must so- complying with these standards. The licit only the OMB-approved govern- non-Federal entity must cite specific mentwide data elements for collection policies, procedures, regulations, or of financial information (at time of standards as being in compliance with publication the Federal Financial Re- these requirements and have its system port or such future, OMB-approved, available for review. governmentwide data elements avail- able from the OMB-designated stand- §200.326 Bonding requirements. ards lead. This information must be For construction or facility improve- collected with the frequency required ment contracts or subcontracts exceed- by the terms and conditions of the Fed- ing the Simplified Acquisition Thresh- eral award, but no less frequently than old, the Federal awarding agency or annually nor more frequently than pass-through entity may accept the quarterly except in unusual cir- bonding policy and requirements of the cumstances, for example where more non-Federal entity provided that the frequent reporting is necessary for the Federal awarding agency or pass- effective monitoring of the Federal through entity has made a determina- award or could significantly affect pro- tion that the Federal interest is ade- gram outcomes, and preferably in co- quately protected. If such a determina- ordination with performance reporting. tion has not been made, the minimum The Federal awarding agency must use requirements must be as follows: OMB-approved common information (a) A bid guarantee from each bidder collections, as applicable, when pro- equivalent to five percent of the bid viding financial and performance re- price. The "bid guarantee" must con- porting information. sist of a firm commitment such as a bid bond, certified check, or other ne- §200.329 Monitoring and reporting gotiable instrument accompanying a program performance. bid as assurance that the bidder will, (a)Monitoring by the non-Federal enti- upon acceptance of the bid, execute ty. The non-Federal entity is respon- such contractual documents as may be sible for oversight of the operations of required within the time specified. the Federal award supported activities. (b)A performance bond on the part of The non-Federal entity must monitor the contractor for 100 percent of the its activities under Federal awards to 143 §200.329 2 CFR Ch. II (1-1-21 Edition) assure compliance with applicable Fed- Federal entity and/or pass-through en- eral requirements and performance ex- tity must be due no later than 90 cal- pectations are being achieved. Moni- endar days after the reporting period. toring by the non-Federal entity must Reports submitted quarterly or semi- cover each program, function or activ- annually must be due no later than 30 ity. See also§200.332. calendar days after the reporting pe- (b) Reporting program performance. riod. Alternatively, the Federal award- The Federal awarding agency must use ing agency or pass-through entity may OMB-approved common information require annual reports before the anni- collections, as applicable, when pro- versary dates of multiple year Federal viding financial and performance re- awards. The final performance report porting information. As appropriate submitted by the non-Federal entity and in accordance with above men- and/or pass-through entity must be due tioned information collections, the no later than 120 calendar days after Federal awarding agency must require the period of performance end date. A the recipient to relate financial data subrecipient must submit to the pass- and accomplishments to performance through entity, no later than 90 cal- goals and objectives of the Federal endar days after the period of perform- award. Also, in accordance with above ance end date, all final performance re- mentioned common information collec- ports as required by the terms and con- tions, and when required by the terms ditions of the Federal award. See also and conditions of the Federal award, §200.344. If a justified request is sub- recipients must provide cost informa- mitted by a non-Federal entity, the tion to demonstrate cost effective Federal agency may extend the due practices (e.g., through unit cost data). date for any performance report. In some instances (e.g., discretionary (2)As appropriate in accordance with research awards), this will be limited above mentioned performance report- to the requirement to submit technical ing, these reports will contain,for each performance reports(to be evaluated in Federal award, brief information on accordance with Federal awarding the following unless other data ele- agency policy). Reporting require- ments are approved by OMB in the ments must be clearly articulated such agency information collection request: that, where appropriate, performance (i) A comparison of actual accom- during the execution of the Federal plishments to the objectives of the award has a standard against which Federal award established for the pe- non-Federal entity performance can be riod. Where the accomplishments of measured. the Federal award can be quantified, a (c) Non-construction performance re- computation of the cost (for example, ports. The Federal awarding agency related to units of accomplishment) must use standard, governmentwide may be required if that information OMB-approved data elements for col- will be useful. Where performance lection of performance information in- trend data and analysis would be in- cluding performance progress reports, formative to the Federal awarding Research Performance Progress Re- agency program, the Federal awarding ports. agency should include this as a per- (1) The non-Federal entity must sub- formance reporting requirement. mit performance reports at the inter- (ii) The reasons why established val required by the Federal awarding goals were not met,if appropriate. agency or pass-through entity to best (iii)Additional pertinent information inform improvements in program out- including, when appropriate, analysis comes and productivity. Intervals must and explanation of cost overruns or be no less frequent than annually nor high unit costs. more frequent than quarterly except in (d) Construction performance reports. unusual circumstances, for example For the most part, onsite technical in- where more frequent reporting is nec- spections and certified percentage of essary for the effective monitoring of completion data are relied on heavily the Federal award or could signifi- by Federal awarding agencies and pass- cantly affect program outcomes. Re- through entities to monitor progress ports submitted annually by the non- under Federal awards and subawards 144 OMB Guidance §200.331 for construction. The Federal awarding SUBRECIPIENT MONITORING AND agency may require additional per- MANAGEMENT formance reports only when considered necessary. §200.331 Subrecipient and contractor (e) Significant developments. Events determinations. may occur between the scheduled per- The non-Federal entity may concur- formance reporting dates that have sig- rently receive Federal awards as a re- nificant impact upon the supported ac- cipient, a subrecipient, and a con- tivity. In such cases, the non-Federal tractor, depending on the substance of entity must inform the Federal award- its agreements with Federal awarding ing agency or pass-through entity as agencies and pass-through entities. soon as the following types of condi- Therefore, a pass-through entity must tions become known: make case-by-case determinations (1) Problems, delays, or adverse con- whether each agreement it makes for ditions which will materially impair the disbursement of Federal program the ability to meet the objective of the funds casts the party receiving the Federal award. This disclosure must in- funds in the role of a subrecipient or a elude a statement of the action taken, contractor. The Federal awarding or contemplated, and any assistance agency may supply and require recipi- needed to resolve the situation. ents to comply with additional guid- (2) Favorable developments which en- ante to support these determinations provided such guidance does not con- able meeting time schedules and objec- Met with this section. tives sooner or at less cost than antici- (a) Subrecipients. A subaward is for pated or producing more or different the purpose of carrying out a portion of beneficial results than originally a Federal award and creates a Federal planned. assistance relationship with the sub- (f) Site visits. The Federal awarding recipient. See definition for Subaward agency may make site visits as war- in §200.1 of this part. Characteristics ranted by program needs. , which support the classification of the (g) Performance report requirement non-Federal entity as a subrecipient waiver. The Federal awarding agency include when the non-Federal entity: may waive any performance report re- (1) Determines who is eligible to re- , quired by this part if not needed. ceive what Federal assistance; (2) Has its performance measured in §200.330 Reporting on real property. relation to whether objectives of a Fed- The Federal awarding agency or pass- eral program were met; through entity must require a non-Fed- (3) Has responsibility for pro- eral entity to submit reports at least grammatic decision-making; annually on the status of real property (4) Is responsible for adherence to ap- in which the Federal Government re- plicable Federal program requirements tains an interest, unless the Federal in- specified in the Federal award;and terest in the real property extends 15 (5) In accordance with its agreement, years or longer. In those instances uses the Federal funds to carry out a where the Federal interest attached is program for a public purpose specified for a period of 15 years or more, the in authorizing statute, as opposed to Federal awarding agency or pass- providing goods or services for the ben- through entity, at its option, may re efit of the pass-through entity. quire the non-Federal entity to report (b) Contractors. A contract is for the at various multi-year frequencies (e.g., purpose of obtaining goods and services every two years or every three years, for the non-Federal entity's own use and creates a procurement relationship not to exceed a five-year reporting pe- with the contractor. See the definition riod; or a Federal awarding agency or of contract in §200.1 of this part. Char- pass-through entity may require an- acteristics indicative of a procurement nual reporting for the first three years relationship between the non-Federal of a Federal award and thereafter re- entity and a contractor are when the quire reporting every five years). contractor: 145 §200.332 2 CFR Ch. II (1-1-21 Edition) (1) Provides the goods and services (vi) Subaward Budget Period Start within normal business operations; and End Date; (2) Provides similar goods or services (vii) Amount of Federal Funds Obli- to many different purchasers; gated by this action by the pass- (3) Normally operates in a competi- through entity to the subrecipient; tive environment; (viii) Total Amount of Federal Funds (4) Provides goods or services that Obligated to the subrecipient by the are ancillary to the operation of the pass-through entity including the cur- Federal program;and rent financial obligation; (5) Is not subject to compliance re- (ix) Total Amount of the Federal quirements of the Federal program as a Award committed to the subrecipient result of the agreement, though similar by the pass-through entity; requirements may apply for other rea- Federal award project description, sons. as required to be responsive to the Fed- (c) Use of judgment in making deter- eral Funding Accountability and mination. In determining whether an Transparency Act(FFATA); agreement between a pass-through en- (xi) Name of Federal awarding agen- tity and another non-Federal entity cy, pass-through entity, and contact casts the latter as a subrecipient or a information for awarding official of the contractor, the substance of the rela Pass-through entity; tionship is more important than the (xii) Assistance Listings number and form of the agreement. All of the char- Title; the pass through entity must acteristics listed above may not be identify the dollar amount made avail- present in all cases, and the pass- able under each Federal award and the through entity must use judgment in Assistance Listings Number at time of classifying each agreement as a disbursement; subaward or a procurement contract. (xiii) Identification of whether the award is R&D;and §200.332 Requirements for pass- (xiv) Indirect cost rate for the Fed- through entities. eral award(including if the de minimis All pass-through entities must: rate is charged)per§200.414. (2) All requirements imposed by the (a) Ensure that every subaward is sub- clearly identified to the subrecipient as pass-through entity on the recipient so that the Federal award is • a subaward and includes the following used in accordance with Federal stat- information at the time of the utes, regulations and the terms and subaward and if any of these data ele- conditions of the Federal award; ments change, include the changes in subsequent subaward modification. (3) Any additional requirements that When some of this information is not the pass-through entity imposes on the pass- available, the pass-through entity subrecipient in order for the must provide the best information through entity to meet its own respon- sibility to the Federal awarding agency available to describe the Federal award including identification of any required and subaward. Required information financial and performance reports; includes: (4)(i) An approved federally recog- (1)Federal award identification. nized indirect cost rate negotiated be- (i) Subrecipient name (which must tween the subrecipient and the Federal match the name associated with its Government. If no approved rate exists, unique entity identifier); the pass-through entity must deter- (ii) Subrecipient's unique entity mine the appropriate rate in collabora- identifier; tion with the subrecipient, which is ei- (iii) Federal Award Identification ther: Number(FAIN); (A) The negotiated indirect cost rate (iv) Federal Award Date(see the defi- between the pass-through entity and nition of Federal award date in§200.1 of the subrecipient;which can be based on this part) of award to the recipient by a prior negotiated rate between a dif- the Federal agency; ferent PTE and the same subrecipient. (v) Subaward Period of Performance If basing the rate on a previously nego- Start and End Date; tiated rate, the pass-through entity is 146 OMB Guidance §200.332 not required to collect information jus- achieved. Pass-through entity moni- tifying this rate, but may elect to do toring of the subrecipient must in- so; clude: (B) The de minimis indirect cost (1) Reviewing financial and perform- rate. ance reports required by the pass- (ii)The pass-through entity must not through entity. require use of a de minimis indirect (2) Following-up and ensuring that cost rate if the subrecipient has a Fed- the subrecipient takes timely and ap- erally approved rate. Subrecipients can elect to use the cost allocation method propriate action on all deficiencies per- to account for indirect costs in accord- taining to the Federal award provided to the subrecipient from the pass- ance with§200.405(d). through entity detected through au- (5) A requirement that the sub dits, on-site reviews, and written con- recipient permit the pass-through enti firmation from the subrecipient, high- ty and auditors to have access to the lighting the status of actions planned subrecipient's records and financial statements as necessary for the pass- or taken to address Single Audit find through entity to meet the require- ings related to the particular ments of this part;and subaward. (6) Appropriate terms and conditions (3)Issuing a management decision for concerning closeout of the subaward. applicable audit findings pertaining (b) Evaluate each subrecipient's risk only to the Federal award provided to of noncompliance with Federal stat- the subrecipient from the pass-through utes, regulations, and the terms and entity as required by§200.521. conditions of the subaward for purposes (4)The pass-through entity is respon- of determining the appropriate sub- sible for resolving audit findings spe- recipient monitoring described in para- cifically related to the subaward and graphs (d)and(e) of this section,which not responsible for resolving cross-cut- may include consideration of such fac- ting findings. If a subrecipient has a tors as: current Single Audit report posted in (1) The subrecipient's prior experi- the Federal Audit Clearinghouse and ence with the same or similar sub- has not otherwise been excluded from awards; receipt of Federal funding (e.g., has (2) The results of previous audits in- been debarred or suspended), the pass- eluding whether or not the sub- through entity may rely on the sub recipient receives a Single Audit in ac- recipient's cognizant audit agency or cordance with Subpart F of this part, cognizant oversight agency to perform and the extent to which the same or audit follow-up and make management similar subaward has been audited as a decisions related to cross-cutting find major program; ings in accordance with section (3) Whether the subrecipient has new §300.513(a)(3)(vii). Such reliance does personnel or new or substantially not eliminate the responsibility of the changed systems; and (4) The extent and results of Federal pass-through entity to issue subawards awarding agency monitoring (e.g., if that conform to agency and award-spe the subrecipient also receives Federal cific requirements, to manage risk awards directly from a Federal award- through ongoing subaward monitoring, ing agency). and to monitor the status of the find- (c) Consider imposing specific ings that are specifically related to the subaward conditions upon a sub- subaward. recipient if appropriate as described in (e) Depending upon the pass-through §200.208. entity's assessment of risk posed by (d) Monitor the activities of the sub- the subrecipient (as described in para- recipient as necessary to ensure that graph (b) of this section), the following the subaward is used for authorized monitoring tools may be useful for the purposes, in compliance with Federal pass-through entity to ensure proper statutes, regulations, and the terms accountability and compliance with and conditions of the subaward; and program requirements and achieve- that subaward performance goals are ment of performance goals: 147 §200.333 2 CFR Ch. II (1-1-21 Edition) (1) Providing subrecipients with (a) If any litigation, claim, or audit training and technical assistance on is started before the expiration of the program-related matters; and 3-year period, the records must be re- (2) Performing on-site reviews of the tained until all litigation, claims, or subrecipient's program operations; audit findings involving the records (3) Arranging for agreed-upon-proce- have been resolved and final action dures engagements as described in taken. §200.425. (b) When the non-Federal entity is (f) Verify that every subrecipient is notified in writing by the Federal audited as required by Subpart F of awarding agency, cognizant agency for this part when it is expected that the audit, oversight agency for audit, cog- subrecipient's Federal awards expended nizant agency for indirect costs, or during the respective fiscal year pass-through entity to extend the re- equaled or exceeded the threshold set tention period. forth in§200.501. (c) Records for real property and (g) Consider whether the results of equipment acquired with Federal funds the subrecipient's audits, on-site re- must be retained for 3 years after final views, or other monitoring indicate disposition. conditions that necessitate adjust- (d)When records are transferred to or ments to the pass-through entity's own maintained by the Federal awarding records. agency or pass-through entity, the 3- (h) Consider taking enforcement ac year retention requirement is not ap- e tion against noncompliant subrecipi- pl(e) Reoor to the non-Federals entity. ents as described in§200.339 of this part transactions afterfor program income the period of per- and in program regulations. formance. In some cases recipients §200.333 Fixed amount subawards. must report program income after the period of performance. Where there is With prior written approval from the such a requirement, the retention pe- Federal awarding agency, a pass- riod for the records pertaining to the through entity may provide subawards earning of the program income starts based on fixed amounts up to the Sim- from the end of the non-Federal enti- plified Acquisition Threshold, provided ty's fiscal year in which the program that the subawards meet the require- income is earned. ments for fixed amount awards in (f) Indirect cost rate proposals and §200.201. cost allocations plans. This paragraph RETENTION AND ACCESS applies to the following types of docu- RECORDments and their supporting records: In- direct cost rate computations or pro- records. posals, cost allocation plans, and any similar accounting computations of Financial records, supporting docu- the rate at which a particular group of ments, statistical records, and all costs is chargeable (such as computer other non-Federal entity records perti- usage chargeback rates or composite nent to a Federal award must be re- fringe benefit rates). tained for a period of three years from (1) If submitted for negotiation. If the the date of submission of the final ex- proposal, plan, or other computation is penditure report or, for Federal awards required to be submitted to the Federal that are renewed quarterly or annu- Government (or to the pass-through ally, from the date of the submission of entity) to form the basis for negotia- the quarterly or annual financial re- tion of the rate, then the 3-year reten- port, respectively, as reported to the tion period for its supporting records Federal awarding agency or pass- starts from the date of such submis- through entity in the case of a sub- sion. recipient. Federal awarding agencies (2) If not submitted for negotiation. If and pass-through entities must not im- the proposal, plan, or other computa- pose any other record retention re- tion is not required to be submitted to quirements upon non-Federal entities. the Federal Government (or to the The only exceptions are the following: pass-through entity) for negotiation 148 OMB Guidance §200.338 purposes, then the 3-year retention pe- §200.337 Access to records. riod for the proposal, plan, or computa- (a)tion and its supporting records starts Records of non-Federal entities. The from the end of the fiscal Federal awarding agency, Inspectors year (or General, the Comptroller General of other accounting period) covered by the United States, and the pass- the proposal, plan, or other computa- through entity, or any of their author- tion. ized representatives, must have the §200.335 Requests for transfer of right of access to any documents, pa- records. pers, or other records of the non-Fed- eral entity which are pertinent to the The Federal awarding agency must Federal award, in order to make au- request transfer of certain records to dits, examinations, excerpts, and tran- its custody from the non-Federal enti- scripts. The right also includes timely ty when it determines that the records and reasonable access to the non-Fed- possess long-term retention value. eral entity's personnel for the purpose However, in order to avoid duplicate of interview and discussion related to recordkeeping, the Federal awarding such documents. agency may make arrangements for (b) Extraordinary and rare cir- the non-Federal entity to retain any cumstances. Only under extraordinary records that are continuously needed and rare circumstances would such ac- for joint use. cess include review of the true name of victims of a crime. Routine monitoring §200.336 Methods for collection, trans- cannot be considered extraordinary and mission,and storage of information. rare circumstances that would neces- The Federal awarding agency and the sitate access to this information. When non-Federal entity should, whenever access to the true name of victims of a practicable, collect, transmit, and crime is necessary,appropriate steps to store Federal award-related informa- protect this sensitive information must tion in open and machine-readable for- be taken by both the non-Federal enti- mats rather than in closed formats or ty and the Federal awarding agency. on paper in accordance with applicable Any such access, other than under a legislative requirements. A machine- court order or subpoena pursuant to a readable format is a format in a stand- bona fide confidential investigation, and computer language (not English must be approved by the head of the text)that can be read automatically by Federal awarding agency or delegate. a web browser or computer system. The (c) Expiration of right of access. The Federal awarding agency or pass- rights of access in this section are not through entity must always provide or limited to the required retention pe- accept paper versions of Federal award- riod but last as long as the records are related information to and from the retained. Federal awarding agencies non-Federal entity upon request. If and pass-through entities must not im- paper copies are submitted, the Federal pose any other access requirements awarding agency or pass-through enti- upon non-Federal entities. ty must not require more than an §200.338 Restrictions on public access original and two copies. When original to records. records are electronic and cannot be al- tered, there is no need to create and re- No Federal awarding agency may tain paper copies. When original place restrictions on the non-Federal records are paper, electronic versions entity that limit public access to the may be substituted through the use of records of the non-Federal entity perti- duplication or other forms of elec nent to a Federal award, except for tronic media provided that they are Protected personally identifiable infor- subject to periodic quality control re- mation (PII) or when the Federal views, provide reasonable safeguards awarding agency can demonstrate that against alteration, and remain read- such records will be kept confidential able. and would have been exempted from disclosure pursuant to the Freedom of 149 §200.339 2 CFR Ch. II (1-1-21 Edition) Information Act (5 U.S.C. 552) or con- §200.340 Termination. trolled unclassified information pursu- ant to Executive Order 13556 if the (a) The Federal award may be termi- records had belonged to the Federal nated in whole or in part as follows: awarding agency. The Freedom of In- (1) By the Federal awarding agency formation Act (5 U.S.C. 552) (FOIA) or pass-through entity, if a non-Fed- does not apply to those records that re eral entity fails to comply with the main under a non-Federal entity's con terms and conditions of a Federal trol except as required under §200.315. award; Unless required by Federal, state, (2) By the Federal awarding agency local, and tribal statute, non-Federal or pass-through entity, to the greatest entities are not required to permit pub- extent authorized by law, if an award lic access to their records. The non- no longer effectuates the program Federal entity's records provided to a goals or agency priorities; Federal agency generally will be sub- (3) By the Federal awarding agency ject to FOIA and applicable exemp- or pass-through entity with the con- tions. sent of the non-Federal entity, in which case the two parties must agree REMEDIES FOR NONCOMPLIANCE upon the termination conditions, in- cluding the effective date and, in the §200.339 Remedies for noncompliance. case of partial termination, the portion If a non-Federal entity fails to com- to be terminated; ply with the U.S. Constitution, Federal (4) By the non-Federal entity upon statutes, regulations or the terms and sending to the Federal awarding agen- conditions of a Federal award, the Fed- cy or pass-through entity written noti- eral awarding agency or pass-through fication setting forth the reasons for entity may impose additional condi- such termination, the effective date, tions, as described in §200.208. If the and, in the case of partial termination, Federal awarding agency or pass- the portion to be terminated. However, through entity determines that non- if the Federal awarding agency or pass- compliance cannot be remedied by im- through entity determines in the case posing additional conditions, the Fed- of partial termination that the reduced eral awarding agency or pass-through or modified portion of the Federal entity may take one or more of the fol- award or subaward will not accomplish lowing actions, as appropriate in the the purposes for which the Federal circumstances: award was made, the Federal awarding (a) Temporarily withhold cash pay- agency or pass-through entity may ter- ments pending correction of the defi- minate the Federal award in its en- ciency by the non-Federal entity or tirety; or more severe enforcement action by the (5) By the Federal awarding agency Federal awarding agency or pass- or pass-through entity pursuant to ter- through entity. mination provisions included in the (b)Disallow (that is, deny both use of Federal award. funds and any applicable matching (b)A Federal awarding agency should credit for) all or part of the cost of the clearly and unambiguously specify ter- activity or action not in compliance. mination provisions applicable to each (c) Wholly or partly suspend or ter- Federal award, in applicable regula- minate the Federal award. tions or in the award, consistent with (d) Initiate suspension or debarment this section. proceedings as authorized under 2 CFR (c) When a Federal awarding agency part 180 and Federal awarding agency terminates a Federal award prior to regulations (or in the case of a pass- the end of the period of performance through entity, recommend such a pro- due to the non-Federal entity's mate- ceeding be initiated by a Federal rial failure to comply with the Federal awarding agency). award terms and conditions, the Fed- (e) Withhold further Federal awards eral awarding agency must report the for the project or program. termination to the OMB-designated in- (f) Take other remedies that may be tegrity and performance system acces- legally available. sible through SAM (currently FAPIIS). 150 OMB Guidance §200.341 (1) The information required under §200.341 Notification of termination paragraph (c) of this section is not to requirement. be reported to designated integrity and (a) The Federal agency or pass- performance system until the non-Fed- through entity must provide to the eral entity either— non-Federal entity a notice of termi- (i)Has exhausted its opportunities to nation. object or challenge the decision, see (b)If the Federal award is terminated §200.342;or for the non-Federal entity's material (ii) Has not, within 30 calendar days failure to comply with the U.S. Con- after being notified of the termination, stitution, Federal statutes, regula- informed the Federal awarding agency tions, or terms and conditions of the that it intends to appeal the Federal Federal award, the notification must awarding agency's decision to termi- state that— nate. (1) The termination decision will be (2) If a Federal awarding agency, reported to the OMB-designated integ- after entering information into' the rity and performance system accessible designated integrity and performance through SAM(currently FAPIIS); system about a termination, subse- (2) The information will be available quently: in the OMB-designated integrity and (i) Learns that any of that informa- performance system for a period of five tion is erroneous, the Federal awarding years from the date of the termination, agency must correct the information in then archived; the system within three business days; (3) Federal awarding agencies that (ii) Obtains an update to that infor- consider making a Federal award to mation that could be helpful to other the non-Federal entity during that five Federal awarding agencies, the Federal year period must consider that infor- awarding agency is strongly encour- mation in judging whether the non- aged to amend the information in the Federal entity is qualified to receive system to incorporate the update in a the Federal award, when the Federal timely way. share of the Federal award is expected (3) Federal awarding agencies, must to exceed the simplified acquisition not post any information that will be threshold over the period of perform- made publicly available in the non- ance; public segment of designated integrity (4) The non-Federal entity may corn- and performance system that is cov- ment on any information the OMB-des- ered by a disclosure exemption under ignated integrity and performance sys- the Freedom of Information Act. If the tern contains about the non-Federal en- non-Federal entity asserts within tity for future consideration by Fed- seven calendar days to the Federal eral awarding agencies. The non-Fed- awarding agency who posted the infor- eral entity may submit comments to mation, that some of the information the awardee integrity and performance made publicly available is covered by a portal accessible through SAM (cur- disclosure exemption under the Free- rently(CPARS). dom of Information Act, the Federal (5) Federal awarding agencies will awarding agency who posted the infor- consider non-Federal entity comments mation must remove the posting with- when determining whether the non- in seven calendar days of receiving the Federal entity is qualified for a future assertion. Prior to reposting the releas- Federal award. able information, the Federal agency (c) Upon termination of a Federal must resolve the issue in accordance award, the Federal awarding agency with the agency's Freedom of Informa- must provide the information required tion Act procedures. under FFATA to the Federal website (d) When a Federal award is termi- established to fulfill the requirements nated or partially terminated, both the of FFATA, and update or notify any Federal awarding agency or pass- other relevant governmentwide sys- through entity and the non-Federal en- tems or entities of any indications of tity remain responsible for compliance poor performance as required by 41 with the requirements in §§200.344 and U.S.C. 417b and 31 U.S.C. 3321 and im- 200.345. plementing guidance at 2 CFR part 77 151 §200.342 2 CFR Ch. II (1-1-21 Edition) (forthcoming at time of publication). fails to complete the requirements, the See also the requirements for Suspen- Federal awarding agency or pass- sion and Debarment at 2 CFR part 180. through entity will proceed to close out the Federal award with the infor- §200.342 Opportunities to object,hear- mation available. This section specifies ings,and appeals. the actions the non-Federal entity and Upon taking any remedy for non- Federal awarding agency or pass- compliance, the Federal awarding through entity must take to complete agency must provide the non-Federal this process at the end of the period of entity an opportunity to object and performance. provide information and documenta- (a) The recipient must submit, no tion challenging the suspension or ter- later than 120 calendar days after the mination action, in accordance with end date of the period of performance, written processes and procedures pub- all financial, performance, and other lished by the Federal awarding agency. reports as required by the terms and The Federal awarding agency or pass- conditions of the Federal award. A sub- through entity must comply with any recipient must submit to the pass- requirements for hearings, appeals or through entity, no later than 90 cal- other administrative proceedings to endar days(or an earlier date as agreed which the non-Federal entity is enti- upon by the pass-through entity and tled under any statute or regulation subrecipient) after the end date of the applicable to the action involved. period of performance, all financial, §200.343 Effects of suspension and ter- performance, and other reports as re- mination. quired by the terms and conditions of the Federal award. The Federal award- Costs to the non-Federal entity re- ing agency or pass-through entity may sulting from financial obligations in- approve extensions when requested and curred by the non-Federal entity dur- justified by the non-Federal entity, as ing a suspension or after termination applicable. of a Federal award or subaward are not n- allowable unless the Federal awarding (b)Unlessr ass the Federal ya authorizesug ag an agency or pass-through entity ex- cy ension,to non-gh entity m st pressly authorizes them in the notice extension, a non-Federal entity must in- of suspension or termination or subse- liquidate all financial obligations no quently. However, costs during suspen- curred under the Federala award he sion or after termination are allowable later than 120 calendar days after the if: end date of the period of performance (a) The costs result from financial as specified in the terms and conditions obligations which were properly in- of the Federal award. curred by the non-Federal entity before (c) The Federal awarding agency or the effective date of suspension or ter- pass-through entity must make prompt mination, are not in anticipation of it; payments to the non-Federal entity for and costs meeting the requirements in Sub- (b) The costs would be allowable if part E of this part under the Federal the Federal award was not suspended award being closed out. or expired normally at the end of the (d) The non-Federal entity must period of performance in which the ter- promptly refund any balances of unob- mination takes effect. ligated cash that the Federal awarding agency or pass-through entity paid in CLOSEOUT advance or paid and that are not au- thorized to be retained by the non-Fed- eral entity for use in other projects. The Federal awarding agency or pass- See OMB Circular A-129 and see through entity will close out the Fed- §200.346, for requirements regarding eral award when it determines that all unreturned amounts that become de- applicable administrative actions and linquent debts. all required work of the Federal award (e) Consistent with the terms and have been completed by the non-Fed- conditions of the Federal award, the eral entity. If the non-Federal entity Federal awarding agency or pass- 152 OMB Guidance §200.346 through entity must make a settle- the non-Federal entity within the ment for any upward or downward ad- record retention period. justments to the Federal share of costs (2) The requirement for the non-Fed- after closeout reports are received. eral entity to return any funds due as (f) The non-Federal entity must ac- a result of later refunds, corrections, or count for any real and personal prop- other transactions including final indi- erty acquired with Federal funds or re- rect cost rate adjustments. ceived from the Federal Government in (3) The ability of the Federal award- accordance with §§200.310 through ing agency to make financial adjust- 200.316 and 200.330. ments to a previously closed award (g) When a recipient or subrecipient such as resolving indirect cost pay- completes all closeout requirements, ments and making final payments. the Federal awarding agency or pass- (4) Audit requirements in subpart F through entity must promptly corn- of this part. plete all closeout actions for Federal (5) Property management and dis- awards. The Federal awarding agency position requirements in §§200.310 must make every effort to complete through 200.316 of this subpart. closeout actions no later than one year (6) Records retention as required in after the end of the period of perform- §§200.334 through 200.337 of this sub- ance unless otherwise directed.by au- part. thorizing statutes. Closeout actions in- (b) After closeout of the Federal elude Federal awarding agency actions award, a relationship created under the in the grants management and pay- Federal award may be modified or ment systems. ended in whole or in part with the con- (h)If the non-Federal entity does not sent of the Federal awarding agency or submit all reports in accordance with pass-through entity and the non-Fed- this section and the terms and condi- eral entity, provided the responsibil- tions of the Federal Award, the Federal ities of the non-Federal entity referred awarding agency must proceed to close to in paragraph (a) of this section, in- out with the information available eluding those for property management within one year of the period of per- as applicable, are considered and provi- formance end date. sions made for continuing responsibil- (i) If the non-Federal entity does not ities of the non-Federal entity, as ap- submit all reports in accordance with propriate. this section within one year of the=pe- riod of performance end date, the Fed- COLLECTION OF AMOUNTS DUE eral awarding agency must report the §200.346 Collection of amounts due. non-Federal entity's material failure to comply with the terms and condi- (a)Any funds paid to the non-Federal tions of the award with the OMB-des- entity in excess of the amount to ignated integrity and performance sys- which the non-Federal entity is finally tern (currently FAPIIS). Federal determined to be entitled under the awarding agencies may also pursue terms of the Federal award constitute other enforcement actions per §200.339. a debt to the Federal Government. If not paid within 90 calendar days after POST-CLOSEOUT ADJUSTMENTS AND demand, the Federal awarding agency CONTINUING RESPONSIBILITIES may reduce the debt by: § adjustments (1) Making an administrative offset 200.345 Post-closeout against other requests for reimburse- and continuing responsibilities. ments; (a) The closeout of a Federal award (2) Withholding advance payments does not affect any of the following: otherwise due to the non-Federal enti- (1) The right of the Federal awarding ty; or agency or pass-through entity to dis- (3) Other action permitted by Federal allow costs and recover funds on the statute. basis of a later audit or other review. (b) Except where otherwise provided The Federal awarding agency or pass- by statutes or regulations, the Federal through entity must make any cost awarding agency will charge interest disallowance determination and notify on an overdue debt in accordance with 153 §200.400 2 CFR Ch. II (1-1-21 Edition) the Federal Claims Collection Stand- See the definition of indirect(facilities& ards(31 CFR parts 900 through 999).The administrative (F&A)) costs in §200.1 of date from which interest is computed this part. is not extended by litigation or the fil- (f) For non-Federal entities that edu- ing of any form of appeal. cate and engage students in research, the dual role of students as both train- Subpart E—Cost Principles ees and employees (including pre- and post-doctoral staff) contributing to the GENERAL PROVISIONS completion of Federal awards for re- search must be recognized in the appli- §200.400 Policy guide. cation of these principles. The application of these cost prin- (g) The non-Federal entity may not ciples is based on the fundamental earn or keep any profit resulting from premises that: Federal financial assistance, unless ex- (a) The non-Federal entity is respon- illicitly authorized by the terms and sible for the efficient and effective ad- conditions of the Federal award. See ministration of the Federal award also§200.307. through the application of sound man- [78 FR 78608, Dec. 26, 2013, as amended at 79 agement practices. FR 75885, Dec. 19, 2014; 85 FR 49561, Aug. 13, (b) The non-Federal entity assumes 2020] responsibility for administering Fed- eral funds in a manner consistent with §200.401 Application. underlying agreements, program objec- (a) General. These principles must be tives, and the terms and conditions of used in determining the allowable costs the Federal award. of work performed by the non-Federal (c) The non-Federal entity, in rec- entity under Federal awards. These ognition of its own unique combination principles also must be used by the of staff, facilities, and experience, has non-Federal entity as a guide in the the primary responsibility for employ- pricing of fixed-price contracts and ing whatever form of sound organiza- subcontracts where costs are used in tion and management techniques may determining the appropriate price. The be necessary in order to assure proper principles do not apply to: and efficient administration of the (1) Arrangements under which Fed- Federal award. eral financing is in the form of loans, (d)The application of these cost prin- scholarships, fellowships, traineeships, ciples should require no significant or other fixed amounts based on such changes in the internal accounting items as education allowance or pub- policies and practices of the non-Fed- lished tuition rates and fees. eral entity. However, the accounting (2) For IHEs, capitation awards, practices of the non-Federal entity which are awards based on case counts must be consistent with these cost or number of beneficiaries according to principles and support the accumula- the terms and conditions of the Federal tion of costs as required by the prin- award. ciples, and must provide for adequate (3) Fixed amount awards. See also documentation to support costs §200.1 Definitions and 200.201. charged to the Federal award. (4) Federal awards to hospitals (see (e) In reviewing, negotiating and ap- appendix IX to this part). proving cost allocation plans or indi- (5) Other awards under which the rect cost proposals, the cognizant agen- non-Federal entity is not required to cy for indirect costs should generally account to the Federal Government for assure that the non-Federal entity is actual costs incurred. applying these cost accounting prin- (b) Federal contract. Where a Federal ciples on a consistent basis during contract awarded to a non-Federal en- their review and negotiation of indirect tity is subject to the Cost Accounting cost proposals. Where wide variations Standards (CAS), it incorporates the exist in the treatment of a given cost applicable CAS clauses, Standards, and item by the non-Federal entity, the CAS administration requirements per reasonableness and equity of such the 48 CFR Chapter 99 and 48 CFR part treatments should be fully considered. 30 (FAR Part 30). CAS applies directly 154 OMB Guidance §200.404 to the CAS-covered contract and the lowing general criteria in order to be Cost Accounting Standards at 48 CFR allowable under Federal awards: parts 9904 or 9905 takes precedence over (a) Be necessary and reasonable for the cost principles in this subpart E the performance of the Federal award with respect to the allocation of costs. and be allocable thereto under these When a contract with a non-Federal principles. entity is subject to full CAS coverage, (b) Conform to any limitations or ex- the allowability of certain costs under clusions set forth in these principles or the cost principles will be affected by in the Federal award as to types or the allocation provisions of the Cost amount of cost items. Accounting Standards (e.g., CAS 414— 48 CFR 9904.414, Cost of Money as an (c) Be consistent with policies and Element of the Cost of Facilities Cap- procedures that apply uniformly to ital, and CAS 417-48 CFR 9904.417, Cost both federally-financed and other ac- of Money as an Element of the Cost of tivities of the non-Federal entity. Capital Assets Under Construction), (d)Be accorded consistent treatment. apply rather the allowability provi- sions of §200.449. In complying with eral award as a direct cost if any other those requirements, the non-Federal cost incurred for the same purpose in entity's application of cost accounting like circumstances has been allocated practices for estimating, accumu- to the Federal award as an indirect lating, and reporting costs for other cost. Federal awards and other cost objec- (e) Be determined in accordance with tives under the CAS-covered contract generally accepted accounting prin- still must be consistent with its cost ciples (GAAP), except, for state and accounting practices for the CAS-cov- local governments and Indian tribes ered contracts. In all cases, only one only, as otherwise provided for in this set of accounting records needs to be Part. maintained for the allocation of costs (f) Not be included as a cost or used by the non-Federal entity. to meet cost sharing or matching re- (c) Exemptions. Some nonprofit orga- quirements of any other federally-fi- nizations, because of their size and na- nanced program in either the current ture of operations, can be considered to or a prior period. See also§200.306(b). be similar to for-profit entities for pur- (g) Be adequately documented. See pose of applicability of cost principles. also §§200.300 through 200.309 of this Such nonprofit organizations must op- part. erate under Federal cost principles ap- (h) Cost must be incurred during the plicable to for-profit entities located at approved budget period. The Federal 48 CFR 31.2. A listing of these organiza- awarding agency is authorized, at its tions is contained in appendix VIII to discretion, to waive prior written ap- this part. Other organizations, as ap- provals to carry forward unobligated proved by the cognizant agency for in- balances to subsequent budget periods direct costs, may be added from time pursuant to§200.308(e)(3). to time. [78 FR 78608, Dec. 26, 2013, as amended at 85 [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49562,Aug.13,2020] FR 49562,Aug.13,2020] BASIC CONSIDERATIONS §200.404 Reasonable costs. A cost is reasonable if, in its nature §200.402 Composition of costs. and amount, it does not exceed that Total cost. The total cost of a Federal which would be incurred by a prudent award is the sum of the allowable di- person under the circumstances pre- rect and allocable indirect costs less vailing at the time the decision was any applicable credits. made to incur the cost. The question of reasonableness is particularly impor- §200.403 Factors affecting allowability tant when the non-Federal entity is of costs. predominantly federally-funded. In de- Except where otherwise authorized termining reasonableness of a given by statute, costs must meet the fol- cost,consideration must be given to: 155 §200.405 2 CFR Ch. II (1-1-21 Edition) (a) Whether the cost is of a type gen- (c) Any cost allocable to a particular erally recognized as ordinary and nec- Federal award under the principles pro- essary for the operation of the non- vided for in this part may not be Federal entity or the proper and effi- charged to other Federal awards to cient performance of the Federal overcome fund deficiencies, to avoid re- award. strictions imposed by Federal statutes, (b) The restraints or requirements regulations, or terms and conditions of imposed by such factors as: sound busi- the Federal awards, or for other rea- ness practices; arm's-length bar- sons. However, this prohibition would gaining; Federal, state, local, tribal, not preclude the non-Federal entity and other laws and regulations; and from shifting costs that are allowable terms and conditions of the Federal under two or more Federal awards in award. accordance with existing Federal stat- (c) Market prices for comparable utes,regulations, or the terms and con- goods or services for the geographic ditions of the Federal awards. area. (d) Direct cost allocation principles: (d) Whether the individuals con- If a cost benefits two or more projects cerned acted with prudence in the cir- or activities in proportions that can be cumstances considering their respon- determined without undue effort or sibilities to the non-Federal entity, its cost, the cost must be allocated to the employees, where applicable its stu- projects based on the proportional ben- dents or membership, the public at efit. If a cost benefits two or more large,and the Federal Government. projects or activities in proportions (e) Whether the non-Federal entity that cannot be determined because of significantly deviates from its estab- the interrelationship of the work in- lished practices and policies regarding volved, then, notwithstanding para- the incurrence of costs, which may graph (c) of this section, the costs may unjustifiably increase the Federal be allocated or transferred to bone- award's cost. fitted projects on any reasonable docu- [78 FR 78608, Dec. 26, 2013, as amended at 79 mented basis. Where the purchase of FR 75885,Dec.19,2014] equipment or other capital asset is spe- cifically authorized under a Federal §200.405 Allocable costs. award, the costs are assignable to the (a)A cost is allocable to a particular Federal award regardless of the use Federal award or other cost objective if that may be made of the equipment or the goods or services involved are other capital asset involved when no chargeable or assignable to that Fed- longer needed for the purpose for which eral award or cost objective in accord- it was originally required. See also ance with relative benefits received. §§200.310 through 200.316 and 200.439. This standard is met if the cost: (e) If the contract is subject to CAS, (1) Is incurred specifically for the costs must be allocated to the contract Federal award; pursuant to the Cost Accounting (2) Benefits both the Federal award Standards. To the extent that CAS is and other work of the non-Federal en- applicable, the allocation of costs in tity and can be distributed in propor- accordance with CAS takes precedence tions that may be approximated using over the allocation provisions in this reasonable methods;and part. (3) Is necessary to the overall oper- [78 FR 78608, Dec. 26, 2013, as amended at 79 ation of the non-Federal entity and is FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, assignable in part to the Federal award 2020] in accordance with the principles in this subpart. §200.406 Applicable credits. (b) All activities which benefit from (a) Applicable credits refer to those the non-Federal entity's indirect(F&A) receipts or reduction-of-expenditure- cost, including unallowable activities type transactions that offset or reduce and donated services by the non-Fed- expense items allocable to the Federal eral entity or third parties,will receive award as direct or indirect(F&A) costs. an appropriate allocation of indirect Examples of such transactions are: pur- costs. chase discounts, rebates or allowances, 156 OMB Guidance §200.409 recoveries or indemnities on losses, in- (f)§200.313 Equipment; surance refunds or rebates, and adjust- (g) §200.333 Fixed amount subawards; ments of overpayments or erroneous (h) §200.413 Direct costs, paragraph charges. To the extent that such cred- (c); its accruing to or received by the non- (i) §200.430 Compensation—personal Federal entity relate to allowable services,paragraph(h); costs, they must be credited to the (j)§200.431 Compensation—fringe ben- Federal award either as a cost reduc- efits; tion or cash refund, as appropriate. (k)§200.438 Entertainment costs; (b) In some instances, the amounts (1) §200.439 Equipment and other cap- received from the Federal Government ital expenditures; to finance activities or service oper- (m)§200.440 Exchange rates; ations of the non-Federal entity should (n) §200.441 Fines, penalties, damages be treated as applicable credits. Spe- and other settlements; cifically, the concept of netting such (o) §200.442 Fund raising and invest- credit items (including any amounts ment management costs; used to meet cost sharing or matching (p) §200.445 Goods or services for per- requirements) must be recognized in sonal use; determining the rates or amounts to be (q) §200.447 Insurance and indem- charged to the Federal award. (See nification; §§200.436 and 200.468, for areas of poten- (r) §200.454 Memberships, subscrip- tial application in the matter of Fed- tions, and professional activity costs, eral financing of activities.) paragraph(c); [78 FR 78608, Dec. 26, 2013, as amended at 79 (s)§200.455 Organization costs; FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, (t) §200.456 Participant support costs; 2020] (u)§200.458 Pre-award costs; (v) §200.462 Rearrangement and re- §200.407 Prior written approval (prior conversion costs; approval). (w) §200.467 Selling and marketing Under any given Federal award, the costs; reasonableness and allocability of cer- (x) §200.470 Taxes (including Value tain items of costs may be difficult to Added Tax);and determine. In order to avoid subse- (y)§200.475 Travel costs. quent disallowance or dispute based on [78 FR 78608, Dec. 26, 2013, as amended at 79 unreasonableness or nonallocability, FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, the non-Federal entity may seek the 2020] prior written approval of the cognizant agency for indirect costs or the Federal §200.405 Limitation on allowance of awarding agency in advance of the in- costs. currence of special or unusual costs. The Federal award may be subject to Prior written approval should include statutory requirements that limit the the timeframe or scope of the agree- allowability of costs. When the max- ment. The absence of prior written ap- imum amount allowable under a limi- proval on any element of cost will not, tation is less than the total amount de- in itself, affect the reasonableness or termined in accordance with the prin- allocability of that element, unless ciples in this part, the amount not re- prior approval is specifically required coverable1under the Federal award may for allowability as described under cer- not be charged to the Federal award. tain circumstances in the following sections of this part: §200.409 Special considerations. (a) §200.201 Use of grant agreements In addition to the basic consider- (including fixed amount awards), coop- ations regarding the allowability of erative agreements, and contracts, costs highlighted in this subtitle, other paragraph(b)(5); subtitles in this part describe special (b) §200.306 Cost sharing or matching; considerations and requirements appli- (c)§200.307 Program income; cable to states, local governments, In- (d) §200.308 Revision of budget and dian tribes, and IHEs. In addition, cer- program plans; tain provisions among the items of cost (e)§200.311 Real property; in this subpart are only applicable to 157 §200.410 2 CFR Ch. II (1-1-21 Edition) certain types of non-Federal entities, (c) For rates covering a past period, as specified in the following sections: the Federal share of the unallowable (a) Direct and Indirect (F&A) Costs costs will be computed for each year (§§200.412-200.415) of this subpart; involved and a cash refund (including (b) Special Considerations for States, interest chargeable in accordance with Local Governments and Indian Tribes applicable regulations) will be made to (§§200.416 and 200.417) of this subpart; the Federal Government. If cash re- and funds are made for past periods covered (c) Special Considerations for Insti- by provisional or fixed rates, appro- tutions of Higher Education (§§200.418 priate adjustments will be made when and 200.419)of this subpart. the rates are finalized to avoid dupli- [85 FR 49562,Aug.13,2020] cate recovery of the unallowable costs by the Federal Government. §200.410 Collection of unallowable (d) For rates covering the current pe- costs. riod, either a rate adjustment or a re- Payments made for costs determined fund, as described in paragraphs(b)and (c)to be unallowable by either the Federal the cognizant this agencyg must be requiredcco by awarding agency, cognizant agency for choice methodfor indirect costs. indirect costs, or pass-through entity, The tinofotheg must gbe ca for either as direct or indirect costs, must discretion cognizant agency for be refunded (including interest) to the indirect costs,based on its judgment as Federal Government in accordance to which method would be most prat- with instructions from the Federal (etical. l- agency that determined the costs are low The amount lou ed teaton of yuear's i unallowable unless Federal statute or rate willble costs included in each m a regulation directs otherwise. See also the be assumed rto ben the same as low- §§200.300 through 200.309 in subpart D of able amount cr proportion of n base year this part. costs included in the year proposal used to establish the rate. [85 FR 49562,Aug.13,2020] DIRECT AND INDIRECT(F&A)COSTS §200.411 Adjustment of previously ne- gotiated indirect (F&A) cost rates §200.412 Classification of costs. containing unallowable costs. There is no universal rule for (a) Negotiated indirect (F&A) cost classifying certain costs as either di- rates based on a proposal later found to rect or indirect (F&A) under every ac- have included costs that: counting system. A cost may be direct (1) Are unallowable as specified by with respect to some specific service or Federal statutes, regulations or the function, but indirect with respect to terms and conditions of a Federal the Federal award or other final cost award; or objective. Therefore, it is essential (2) Are unallowable because they are that each item of cost incurred for the not allocable to the Federal award(s), same purpose be treated consistently must be adjusted, or a refund must be in like circumstances either as a direct made, in accordance with the require- or an indirect (F&A) cost in order to ments of this section. These adjust- avoid possible double-charging of Fed- ments or refunds are designed to cor- eral awards. Guidelines for determining rect the proposals used to establish the direct and indirect(F&A)costs charged rates and do not constitute a reopening to Federal awards are provided in this of the rate negotiation. The adjust- subpart. ments or refunds will be made regard- less of the type of rate negotiated (pre- §200.413 Direct costs. determined, final, fixed, or provi- (a) General. Direct costs are those sional). costs that can be identified specifically (b) For rates covering a future fiscal with a particular final cost objective, year of the non-Federal entity, the un- such as a Federal award, or other inter- allowable costs will be removed from nally or externally funded activity, or the indirect (F&A) cost pools and the that can be directly assigned to such rates appropriately adjusted. activities relatively easily with a high 158 OMB Guidance §200.414 degree of accuracy. Costs incurred for indirect (F&A) cost rates and be allo- the same purpose in like circumstances cated their equitable share of the non- must be treated consistently as either Federal entity's indirect costs if they direct or indirect(F&A) costs. See also represent activities which: §200.405. (1)Include the salaries of personnel, (b) Application to Federal awards. (2)Occupy space,and Identification with the Federal award (3)Benefit from the non-Federal enti- rather than the nature of the goods and ty's indirect(F&A)costs. services involved is the determining (f) For nonprofit organizations, the factor in distinguishing direct from in- costs of activities performed by the direct (F&A) costs of Federal awards. non-Federal entity primarily as a serv- Typical costs charged directly to a ice to members, clients, or the general Federal award are the compensation of public when significant and necessary employees who work on that award, to the non-Federal entity's mission their related fringe benefit costs, the must be treated as direct costs whether costs of materials and other items of or not allowable, and be allocated an expense incurred for the Federal award, equitable share of indirect(F&A)costs. If directly related to a specific award, Some examples of these types of activi- certain costs that otherwise would be ties include: treated as indirect costs may also be (1) Maintenance of membership rolls, considered direct costs. Examples in- subscriptions, publications, and related elude extraordinary utility consump- functions. See also§200.454. tion, the cost of materials supplied (2) Providing services and informa- from stock or services rendered by spe- tion to members, legislative or admin- cialized facilities, program evaluation istrative bodies, or the public. See also costs, or other institutional service op- §§200.454 and 200.450. erations. (3) Promotion, lobbying, and other (c)The salaries of administrative and forms of public relations. See also clerical staff should normally be treat- §§200.421 and 200.450. ed as indirect (F&A) costs. Direct (4) Conferences except those held to charging of these costs may be appro- conduct the general administration of priate only if all of the following condi- the non-Federal entity. See also tions are met: §200.432. (1) Administrative or clerical serv- (5) Maintenance, protection, and in- , ices are integral to a project or activ- vestment of special funds not used,in ity; operation of the non-Federal entity. (2) Individuals involved can be spe- See also§200.442. cifically identified with the project or (6) Administration of group benefits activity; on behalf of members or clients, in- (3) Such costs are explicitly included cluding life and hospital insurance, an- in the budget or have the prior written nuity or retirement plans, and finan- approval of the Federal awarding agen- cial aid. See also§200.431. cy;and [78 FR 78608, Dec. 26, 2013, as amended at 79 (4) The costs are not also recovered FR 75885, Dec. 19, 2014; 85 FR 49562, Aug. 13, as indirect costs. 2020] (d) Minor items. Any direct cost of minor amount may be treated as an in- §200.414 Indirect(F&A)costs. direct (F&A) cost for reasons of practi- (a) Facilities and administration classi- cality where such accounting treat- fication. For major Institutions of ment for that item of cost is consist- Higher Education(IHE)and major non- ently applied to all Federal and non- profit organizations, indirect (F&A) Federal cost objectives. costs must be classified within two (e) The costs of certain activities are broad categories: "Facilities" and not allowable as charges to Federal "Administration." "Facilities" is de- awards. However, even though these fined as depreciation on buildings, costs are unallowable for purposes of equipment and capital improvement, computing charges to Federal awards, interest on debt associated with cer- they nonetheless must be treated as di- tain buildings, equipment and capital rect costs for purposes of determining improvements, and operations and 159 §200.414 2 CFR Ch. II (1-1-21 Edition) maintenance expenses. "Administra- (2)The Federal awarding agency head tion" is defined as general administra- or delegate must notify OMB of any ap- tion and general expenses such as the proved deviations. director's office, accounting, personnel (3) The Federal awarding agency and all other types of expenditures not must implement, and make publicly listed specifically under one of the sub- available, the policies, procedures and categories of "Facilities" (including general decision-making criteria that cross allocations from other pools, their programs will follow to seek and where applicable). For nonprofit orga- justify deviations from negotiated nizations,library expenses are included rates. in the "Administration" category; for (4) As required under §200.204, the IHEs, they are included in the "Facili- Federal awarding agency must include ties" category. Major IHEs are defined in the notice of funding opportunity as those required to use the Standard the policies relating to indirect cost Format for Submission as noted in ap- rate reimbursement, matching, or cost pendix III to this part, and Rate Deter- share as approved under paragraph urination for Institutions of Higher (e)(1) of this section. As appropriate, Education paragraph C. 11. Major non- the Federal agency should incorporate Fed- profit organizations are those which re- eral awardingssion of these policies into Fed- eral agency outreach activi- ceive more than $10 million dollars in ties with non-Federal entities prior to direct Federal funding. the posting of a notice of funding op- (b)Diversity of nonprofit organizations. portunity. Because of the diverse characteristics (d) Pass-through entities are subject and accounting practices of nonprofit to the requirements in§200.332(a)(4). organizations, it is not possible to (e) Requirements for development specify the types of cost which may be and submission of indirect (F&A) cost classified as indirect (F&A) cost in all rate proposals and cost allocation situations. Identification with a Fed- plans are contained in Appendices III- eral award rather than the nature of VII and Appendix IX as follows: the goods and services involved is the (1) Appendix III to Part 200—Indirect determining factor in distinguishing (F&A) Costs Identification and Assign- direct from indirect (F&A) costs of ment, and Rate Determination for In- Federal awards. However, typical ex- stitutions of Higher Education(IHEs); amples of indirect(F&A)cost for many (2) Appendix IV to Part 200—Indirect nonprofit organizations may include (F&A) Costs Identification and Assign- depreciation on buildings and equip- ment, and Rate.Determination for Non- ment, the costs of operating and main- profit Organizations; taining facilities, and general adminis- (3) Appendix V to Part 200—State/ tration and general expenses, such as Local Governmentwide Central Service the salaries and expenses of executive Cost Allocation Plans; officers, personnel administration, and (4) Appendix VI to Part 200—Public accounting. Assistance Cost Allocation Plans; (c) Federal Agency Acceptance of Nego- (5) Appendix VII to Part 200—States Indirect ct Rates. (See also and Local Government and Indian tiated06.) Tribe Indirect Cost Proposals;and §200.3 (6) Appendix IX to Part 200—Hospital (1) The negotiated rates must be ac- Cost Principles. cepted by all Federal awarding agen- (f) In addition to the procedures out- cies. A Federal awarding agency may lined in the appendices in paragraph(e) use a rate different from the negotiated of this section, any non-Federal entity rate for a class of Federal awards or a that does not have a current nego- single Federal award only when re- tiated (including provisional) rate, ex- quired by Federal statute or regula- cept for those non-Federal entities de- tion, or when approved by a Federal scribed in appendix VII to this part, awarding agency head or delegate paragraph D.1.b, may elect to charge a based on documented justification as de minimis rate of 10% of modified described in paragraph (c)(3) of this total direct costs (MTDC) which may section. be used indefinitely. No documentation 160 OMB Guidance §200.415 is required to justify the 10% de mini- and objectives set forth in the terms mis indirect cost rate. As described in and conditions of the Federal award. I §200.403, costs must be consistently, am aware that any false, fictitious, or charged as either indirect or direct fraudulent information, or the omis- costs, but may not be double charged sion of any material fact, may subject or inconsistently charged as both. If me to criminal, civil or administrative chosen, this methodology once elected penalties for fraud, false statements, must be used consistently for all Fed- false claims or otherwise. (U.S. Code eral awards until such time as a non- Title 18, Section 1001 and Title 31, Sec- Federal entity chooses to negotiate for tions 3729-3730 and 3801-3812)." a rate, which the non-Federal entity (b) Certification of cost allocation may apply to do at any time. plan or indirect (F&A) cost rate pro- (g)Any non-Federal entity that has a posal. Each cost allocation plan or in- current federally-negotiated indirect direct (F&A) cost rate proposal must cost rate may apply for a one-time ex- comply with the following: tension of the rates in that agreement (1)A proposal to establish a cost allo- for a period of up to four years. This cation plan or an indirect (F&A) cost extension will be subject to the review rate, whether submitted to a Federal and approval of the cognizant agency cognizant agency for indirect costs or for indirect costs. If an extension is maintained on file by the non-Federal granted the non-Federal entity may entity, must be certified by the non- not request a rate review until the ex- Federal entity using the Certificate of tension period ends. At the end of the Cost Allocation Plan or Certificate of 4-year extension, the non-Federal enti- Indirect Costs as set forth in appen- ty must re-apply to negotiate a rate. dices III through VII, and IX of this Subsequent one-time extensions (up to part. The certificate must be signed on four years) are permitted if a renegoti- behalf of the non-Federal entity by an ation is completed between each exten- individual at a level no lower than vice sion request. president or chief financial officer of (h) The federally negotiated indirect the non-Federal entity that submits rate, distribution base, and rate type the proposal. for a non-Federal entity(except for the (2) Unless the non-Federal entity has Indian tribes or tribal organizations,as elected the option under§200.414(f), the defined in the Indian Self Determina- Federal Government may either dis- tion, Education and Assistance Act, 25 allow all indirect (F&A) costs or uni- U.S.C. 450b(1)) must be available pub- laterally establish such a plan or rate licly on an OMB-designated Federal when the non-Federal entity fails to website. submit a certified proposal for estab- [78 FR 78608, Dec. 26, 2013, as amended at 79 lishing such a plan or rate in accord- FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, ance with the requirements. Such a 2020] plan or rate may be based upon audited historical data or such other data that §200.415 Required certifications. have been furnished to the cognizant Required certifications include: agency for indirect costs and for which (a) To assure that expenditures are it can be demonstrated that all unal- proper and in accordance with the lowable costs have been excluded. terms and conditions of the Federal When a cost allocation plan or indirect award and approved project budgets, cost rate is unilaterally established by the annual and final fiscal reports or the Federal Government because the vouchers requesting payment under the non-Federal entity failed to submit a agreements must include a certifi- certified proposal, the plan or rate es- cation, signed by an official who is au- tablished will be set to ensure that po- thorized to legally bind the non-Fed- tentially unallowable costs will not be eral entity,which reads as follows: "By reimbursed. signing this report,I certify to the best (c) Certifications by nonprofit orga- of my knowledge and belief that the re- nizations as appropriate that they did port is true, complete, and accurate, not meet the definition of a major non- and the expenditures, disbursements profit organization as defined in and cash receipts are for the purposes §200.414(a). 161 §200.416 2 CFR Ch. II (1-1-21 Edition) (d) See also §200.450 for another re- fringe benefits) may be used in lieu of quired certification. determining the actual indirect costs [78 FR 78608, Dec. 26, 2013, as amended at 79 of the service. These services do not in- FR 75886, Dec. 19, 2014; 85 FR 49563, Aug. 13, elude centralized services included in 2020] central service cost allocation plans as described in Appendix V to Part 200. SPECIAL CONSIDERATIONS FOR STATES, LOCAL GOVERNMENTS AND INDIAN [85 FR 49564,Aug.13,2020] TRIBES SPECIAL CONSIDERATIONS FOR §200.416 Cost allocation plans and in- INSTITUTIONS OF HIGHER EDUCATION direct cost proposals. §200.418 Costs incurred by states and (a) For states, local governments and local governments. Indian tribes, certain services, such as Costs incurred or paid by a state or motor pools, computer centers, pur- local government on behalf of its IHEs chasing, accounting, etc., are provided for fringe benefit programs, such as to operating agencies on a centralized pension costs and FICA and any other basis. Since Federal awards are per- costs specifically incurred on behalf of, formed within the individual operating and in direct benefit to, the IHEs, are agencies, there needs to be a process allowable costs of such IHEs whether whereby these central service costs can or not these costs are recorded in the be identified and assigned to benefitted accounting records of the institutions, activities on a reasonable and con- subject to the following: sistent basis. The central service cost (a) The costs meet the requirements allocation plan provides that process. of§200.402-411 of this subpart; (b) Individual operating agencies (b) The costs are properly supported (governmental department or agency), by approved cost allocation plans in ac- normally charge Federal awards for in- cordance with applicable Federal cost direct costs through an indirect cost accounting principles in this part; and rate. A separate indirect cost rate(s) (c)The costs are not otherwise borne proposal for each operating agency is directly or indirectly by the Federal usually necessary to claim indirect Government. costs under Federal awards. Indirect [78 FR 78608, Dec. 26, 2013, as amended at 85 costs include: FR 49564,Aug.13,2020] (1) The indirect costs originating in each department or agency of the gov- §200.419 Cost accounting standards ernmental unit carrying out Federal and disclosure statement. awards and (a)An IHE that receive an aggregate (2)The costs of central governmental total $50 million or more in Federal services distributed through the cen- awards and instruments subject to this tral service cost allocation plan and subpart (as specified in §200.101) in its not otherwise treated as direct costs. most recently completed fiscal year (c)The requirements for development must comply with the Cost Accounting and submission of cost allocation plans Standards Board's cost accounting (for central service costs and public as- standards located at 48 CFR 9905.501, sistance programs) and indirect cost 9905.502, 9905.505, and 9905.506. CAS-cov- rate proposals are contained in appen- ered contracts and subcontracts award- dices IV,V and VI to this part. ed to the IHEs are subject to the broad- er range of CAS requirements at 48 CFR 9900 through 9999 and 48 CFR part The cost of services provided by one 30(FAR Part 30). agency to another within the govern- (b) Disclosure statement. An IHE that mental unit may include allowable di- receives an aggregate total $50 million rect costs of the service plus a pro- or more in Federal awards and instru- rated share of indirect costs. A stand- ments subject to this subpart(as speci- ard indirect cost allowance equal to fied in §200.101) during its most re- ten percent of the direct salary and cently completed fiscal year must dis- wage cost of providing the service (ex- close their cost accounting practices eluding overtime, shift premiums, and by filing a Disclosure Statement (DS- 162 OMB Guidance §200.419 2), which is reproduced in Appendix III priate by the cognizant agency,for indi- to Part 200. With the approval of the rect costs. Under the terms of CAS cov- cognizant agency for indirect costs, an ered contracts, adjustments in the IHE may meet the DS-2 submission by amount of funding provided may also submitting the DS-2 for each business be required when the estimated pro- unit that received $50 million or more posal costs were not determined in ac- in Federal awards and instruments. cordance with established cost ac- (1) The DS-2 must be submitted to counting practices. the cognizant agency for indirect costs with a copy to the IHE's cognizant (4) Overpayments. Excess amounts agency for audit. The initial DS-2 and paid in the aggregate by the Federal revisions to the DS-2 must be sub- Government under Federal awards due mitted in coordination with the IHE's to a noncompliant cost accounting indirect (F&A)rate proposal, unless an practice used to estimate, accumulate, earlier submission is requested by the or report costs must be credited or re cognizant agency for indirect costs. funded, as deemed appropriate by the IHEs with CAS-covered contracts or cognizant agency for indirect costs. In- subcontracts meeting the dollar terest applicable to the excess amounts threshold in 48 CFR 9903.202-1(f) must paid in the aggregate during the period submit their initial DS-2 or revisions of noncompliance must also be deter- no later than prior to the award of a mined and collected in accordance with CAS-covered contract or subcontract. applicable Federal agency regulations. (2) An IHE must maintain an accu- (5) Compliant cost accounting practice rate DS-2 and comply with disclosed changes. Changes from one compliant cost accounting practices. An IHE cost accounting practice to another must file amendments to the DS-2 to compliant practice that are approved the cognizant agency for indirect costs by the cognizant agency for indirect in advance of a disclosed practice being costs may require cost adjustments if changed to comply with a new or modi- the change has a material effect on fied standard, or when a practice is Federal awards and the changes are changed for other reasons. An IHE may deemed appropriate by the cognizant proceed with implementing the change agency for indirect costs. after it has notified the Federal cog- nizant agency for indirect costs. If the (6) Responsibilities. The cognizant change represents i a variation from 2 agency for indirect cost must: CFR part 200, the change may require (i) Determine cost adjustments for approval by the Federal cognizant all Federal awards in the aggregate on agency for indirect costs,in accordance behalf of the Federal Government. Ac- with §200.102(b). Amendments of a DS- tions of the cognizant agency for indi- 2 may be submitted at any time. Re- rect cost in making cost adjustment submission of a complete, updated DS- determinations must be coordinated 2 is discouraged except when there are with all affected Federal awarding extensive changes to disclosed prac- agencies to the extent necessary. tices. (ii) Prescribe guidelines and establish (3) Cost and funding adjustments. Cost internal procedures to promptly deter- adjustments must be made by the cog- mine on behalf of the Federal Govern- nizant agency for indirect costs if an ment that a DS-2 adequately discloses IHE fails to comply with the cost poli- the IHE's cost accounting practices cies in this part or fails to consistently and that the disclosed practices are follow its established or disclosed cost compliant with applicable CAS and the accounting practices when estimating, requirements of this part. accumulating or reporting the costs of Federal awards, and the aggregate cost (iii)Distribute to all affected Federal impact on Federal awards is material, awarding agencies any DS-2 determina- The cost adjustment must normally be tion of adequacy or noncompliance. made on an aggregate basis for all af- [78 FR 78608, Dec. 26, 2013, as amended at 79 fected Federal awards through an ad- FR 75886, Dec. 19, 2014; 85 FR 49564, Aug. 13, justment of the IHE's future F&A costs 2020] rates or other means considered appro- 163 §200.420 2 CFR Ch. II (1-1-21 Edition) GENERAL PROVISIONS FOR SELECTED those activities dedicated to maintain- ITEMS OF COST ing the image of the non-Federal entity §200.420 Considerations for selected or maintaining or promoting under- standing and favorable relations with items of cost. the community or public at large or This section provides principles to be any segment of the public. applied in establishing the allowability (d) The only allowable public rela- of certain items involved in deter- tions costs are: mining cost, in addition to the require- (1) Costs specifically required by the ments of Subtitle II of this subpart. Federal award; These principles apply whether or not a (2) Costs of communicating with the particular item of cost is properly public and press pertaining to specific treated as direct cost or indirect (F&A) activities or accomplishments which cost. Failure to mention a particular result from performance of the Federal item of cost is not intended to imply award (these costs are considered nec- that it is either allowable or unallow- essary as part of the outreach effort for able;rather, determination as to allow- the Federal award); or 'ability in each case should be based on (3) Costs of conducting general liai- the treatment provided for similar or son with news media and government related items of cost, and based on the public relations officers, to the extent principles described in §§200.402 that such activities are limited to com- through 200.411. In case of a discrep- munication and liaison necessary to ancy between the provisions of a spe- keep the public informed on matters of cific Federal award and the provisions public concern, such as notices of fund- below, the Federal award governs. Cri- ing opportunities, financial matters, teria outlined in §200.403 must be ap- etc. plied in determining allowability. See (e) Unallowable advertising and pub- also§200.102. lie relations costs include the fol- [85 FR 49564,Aug.13,2020] lowing: (1) All advertising and public rela- §200.421 Advertising and public rela- tions costs other than as specified in tions. paragraphs(b)and(d)of this section; (a) The term advertising costs means (2) Costs of meetings, conventions, the costs of advertising media and cor- convocations, or other events related ollary administrative cbsts. Adver- to other activities of the entity (see tising media include magazines, news- also§200.432),including: papers, radio and television, direct (i) Costs of displays, demonstrations, mail, exhibits, electronic or computer and exhibits; transmittals,and the like. (ii) Costs of meeting rooms, hospi- (b) The only allowable advertising tality suites, and other special facili- costs are those which are solely for: ties used in conjunction with shows (1) The recruitment of personnel re- and other special events;and quired by the non-Federal entity for (iii) Salaries and wages of employees performance of a Federal award (See engaged in setting up and displaying also§200.463); exhibits, making demonstrations, and (2) The procurement of goods and providing briefings; services for the performance of a Fed- (3) Costs of promotional items and eral award; memorabilia, including models, gifts, and souvenirs; (3) The disposal of scrap or surplus (4) Costs of advertising and public re- materials acquired in the performance lations designed solely to promote the of a Federal award except when non- non-Federal entity. Federal entities are reimbursed for dis- posal costs at a predetermined amount; [78 FR 76808, Dec. 26, 2013, as amended at 85 or FR 49564,Aug.13,2020] (4) Program outreach and other spe- cific purposes necessary to meet the re- quirements of the Federal award. Costs incurred by advisory councils (c) The term "public relations" in- or committees are unallowable unless eludes community relations and means authorized by statute, the Federal 164 OMB Guidance §200.428 awarding agency or as an indirect cost (3)Limited in scope to one or more of where allocable to Federal awards. See the following types of compliance re- §200.444,applicable to States,local gov- quirements: activities allowed or ernments, and Indian tribes. unallowed; allowable costs/cost grin- [85 FR 49564,Aug.13,2020] ciples; eligibility;and reporting. [78 FR 78608, Dec. 26, 2013, as amended at 85 §200.423 Alcoholic beverages. FR 49564,Aug.13,2020] Costs of alcoholic beverages are unal- lowable. §200.426 Bad debts. Bad debts (debts which have been de- §200.424 Alumni/ae activities. termined to be uncollectable), includ- Costs incurred by IHEs for, or in sup- ing losses (whether actual or esti- port of, alumni/ae activities are unal- mated) arising from uncollectable ac- lowable. counts and other claims, are unallow- able. Related collection costs, and re- §200.425 Audit services. lated legal costs, arising from such (a) A reasonably proportionate share debts after they have been determined of the costs of audits required by, and to be See also §200.uncollectable are also unallow- of in accordance with, the Sin- gle able. also§200.428. Audit Act Amendments of 1996 (31 [85 FR 49565,Aug.13,2020] U.S.C. 7501-7507), as implemented by re- quirements of this part, are allowable. §200.427 Bonding costs. However, the following audit costs are (a)Bonding costs arise when the Fed- unallowable: eral awarding agency requires assur- (1)Any costs when audits required by ance against financial loss to itself or the Single Audit Act and subpart F of others by reason of the act or default this part have not been conducted or of the non-Federal entity. They arise have been conducted but not in accord- also in instances where the non-Fed- ance therewith;and eral entity requires similar assurance, (2) Any costs of auditing a non-Fed- including: bonds as bid, performance, eral entity that is exempted from hay- payment, advance payment, infringe- ing an audit conducted under the Sin- ment, and fidelity bonds for employees gle Audit Act and subpart F of this and officials. part because its expenditures 'under (b) Costs of bonding required pursu- Federal awards are less than $750,000 ant to during the non-Federal entity's fiscal the terms and conditions of the Federal year. award are allowable. (b)The costs of a financial statement (c) Costs of bonding required by the con- audit of a ns of a falin entity that t non-Federal entity in the general duct of its operations are allowable as not currently have a Federal award an indirect cost to the extent that such may be included in the indirect cost bonding is in accordance with sound pool for a cost allocation plan or indi- business practice and the rates and pre- rect cost proposal. (c) Pass-through entities may charge miums are reasonable under the cis- Federal awards for the cost of agreed- cumstances. upon-procedures engagements to mon- §200.428 Collections of improper pay- itor subrecipients (in accordance with ments. subpart D, §§200.331 333) who are ex- The costs incurred by a non-Federal empted from the requirements of the entity to recover improper payments Single Audit Act and subpart F of this part. This cost is allowable only if the are allowable as either direct or indi- agreed-upon-procedures engagements rect costs, as appropriate. Amounts are: collected may be used by the non-Fed- (1) Conducted in accordance with eral entity in accordance with cash GAGAS attestation standards; management standards set forth in (2)Paid for and arranged by the pass- §200.305. through entity; and [85 FR 49565,Aug.13,2020] 165 §200.429 2 CFR Ch. II (1-1-21 Edition) §200.429 Commencement and convoca- Federal awarding agency, a non-Fed- tion costs. eral entity must follow its written non- For IHEs, costs incurred for com- Federal entity-wide policies and prac- mencements and convocations are un- tices concerning the permissible extent allowable, except as provided for in of professional services that can be pro- (B)(9) Student Administration and vided outside the non-Federal entity Services, in appendix III to this part, for non-organizational compensation. as activity costs. Where such non-Federal entity-wide written policies do not exist or do not [85 FR 49565,Aug.13,2020] adequately define the permissible ex- §200.430 Compensation—personal tent of consulting or other non-organi- services. zational activities undertaken for extra outside pay, the Federal Govern- (a) General. Compensation for per- ment may require that the effort of sonal services includes all remunera- professional staff working on Federal tion, paid currently or accrued, for awards be allocated between: services of employees rendered during (1) Non-Federal entity activities, and the period of performance under the Federal award, including but not nec- (2) Non-organizational professional activities. If the Federal awarding essarily limited to wages and salaries. Compensation for personal services agency considers the extent of non-or- may also include fringe benefits which ganizational professional effort exces are addressed in §200.431. Costs of com- sive or inconsistent with the conflicts- pensation are allowable to the extent of interest terms and conditions of the that they satisfy the specific require- Federal award, appropriate arrange- ments of this part, and that the total ments governing compensation will be compensation for individual employ- negotiated on a case-by-case basis. ees: (d) Unallowable costs. (1) Costs which (1) Is reasonable for the services ren- are unallowable under other sections of dered and conforms to the established these principles must not be allowable written policy of the non-Federal enti- under this section solely on the basis ty consistently applied to both Federal that they constitute personnel com- and non-Federal activities; pensation. (2) Follows an appointment made in (2) The allowable compensation for accordance with a non-Federal entity's certain employees is subject to a ceil- laws and/or rules or written policies ing in accordance with statute. For the and meets the requirements of Federal amount of the ceiling for cost-reim- statute,where applicable;and bursement contracts, the covered com- (3) Is determined and supported as pensation subject to the ceiling, the provided in paragraph (i) of this sec- covered employees, and other relevant tion,when applicable. provisions, see 10 U.S.C. 2324(e)(1)(P), (b) Reasonableness. Compensation for and 41 U.S.C. 1127 and 4304(a)(16). For employees engaged in work on Federal other types of Federal awards, other awards will be considered reasonable to statutory ceilings may apply. the extent that it is consistent with (e) Special considerations. Special con- that paid for similar work in other ac- siderations in determining allowability tivities of the non-Federal entity. In of compensation will be given to any cases where the kinds of employees re- change in a non-Federal entity's com- quired for Federal awards are not found pensation policy resulting in a substan- in the other activities of the non-Fed- tial increase in its employees' level of eral entity, compensation will be con- compensation (particularly when the sidered reasonable to the extent that it change was concurrent with an in- is comparable to that paid for similar crease in the ratio of Federal awards to work in the labor market in which the other activities) or any change in the non-Federal entity competes for the treatment of allowability of specific kind of employees involved. types of compensation due to changes (c) Professional activities outside the in Federal policy. non-Federal entity. Unless an arrange- (f) Incentive compensation. Incentive ment is specifically authorized by a compensation to employees based on 166 OMB Guidance §200.430 cost reduction, or efficient perform- activities, such activities must either ance, suggestion awards, safety awards, be specifically provided for in the Fed- etc., is allowable to the extent that the eral award budget or receive prior writ- overall compensation is determined to ten approval by the Federal awarding be reasonable and such costs are paid agency. or accrued pursuant to an agreement (2) Salary basis. Charges for work per- entered into in good faith between the formed on Federal awards by faculty non-Federal entity and the employees members during the academic year are before the services were rendered, or allowable at the IBS rate. Except as pursuant to an established plan fol- noted in paragraph(h)(1)(ii) of this sec- lowed by the non-Federal entity so tion, in no event will charges to Fed- consistently as to imply, in effect, an eral awards, irrespective of the basis of agreement to make such payment. computation, exceed the proportionate (g) Nonprofit organizations. For corn- share of the IBS for that period. This pensation to members of nonprofit or- principle applies to all members of fac- ganizations, trustees, directors, associ- ulty at an institution. IBS is defined as ates, officers, or the immediate fami- the annual compensation paid by an lies thereof, determination must be IHE for an individual's appointment, made that such compensation is rea- whether that individual's time is spent sonable for the actual personal services on research, instruction, administra- rendered rather than a distribution of tion, or other activities. IBS excludes earnings in excess of costs. This may any income that an individual earns include director's and executive corn- outside of duties performed for the mittee member's fees, incentive IHE. Unless there is prior approval by awards, allowances for off-site pay, in- the Federal awarding agency, charges centive pay, location allowances, hard- of a faculty member's salary to a Fed- ship pay, and cost-of-living differen- eral award must not exceed the propor- tials. tionate share of the IBS for the period (h) Institutions of Higher Education during which the faculty member (IHEs). (1) Certain conditions require worked on the award. special consideration and possible limi- (3) Intra-Institution of Higher Edu- tations in determining allowable per- cation (IHE) consulting. Intra-IHE con- sonnej compensation costs under Fed- sulting by faculty should be under- eral awards. Among such conditions taken as an IHE responsibility requir- are the following: ing no compensation in addition to (i) Allowable activities. Charges to IBS. However, in unusual cases where Federal awards may include reasonable consultation is across departmental amounts for activities contributing lines or involves a separate or remote and directly related to work under an operation, and the work performed by agreement, such as delivering special the faculty member is in addition to lectures about specific aspects of the his or her regular responsibilities, any ongoing activity, writing reports and charges for such work representing ad- articles, developing and maintaining ditional compensation above IBS are protocols (human, animals, etc.), man- allowable provided that such con- aging substances/chemicals, managing sulting arrangements are specifically and securing project-specific data, co- provided for in the Federal award or ordinating research subjects, partici- approved in writing by the Federal pating in appropriate seminars, con- awarding agency. sulting with colleagues and graduate (4) Extra Service Pay normally rep- students, and attending meetings and resents overload compensation, subject conferences. to institutional compensation policies (ii) Incidental activities. Incidental for services above and beyond IBS. activities for which supplemental corn- Where extra service pay is a result of pensation is allowable under written Intra-IHE consulting, it is subject to institutional policy (at a rate not to the same requirements of paragraph(b) exceed institutional base salary) need above. It is allowable if all of the fol- not be included in the records described lowing conditions are met: in paragraph (i) of this section to di- (i) The non-Federal entity estab- rectly charge payments of incidental lishes consistent written policies which 167 §200.430 2 CFR Ch. II (1-1-21 Edition) apply uniformly to all faculty mem- (ii) Where sabbatical leave is in- bers,not just those working on Federal eluded in fringe benefits for which a awards. cost is determined for assessment as a (ii) The non-Federal entity estab- direct charge, the aggregate amount of lishes a consistent written definition of such assessments applicable to all work covered by IBS which is specific work of the institution during the base enough to determine conclusively when period must be reasonable in relation work beyond that level has occurred. to the IHE's actual experience under This may be described in appointment its sabbatical leave policy. letters or other documentations. (8) Salary rates for non-faculty mem- (iii) The supplementation amount bers. Non-faculty full-time professional paid is commensurate with the IBS personnel may also earn "extra service rate of pay and the amount of addi- pay" in accordance with the non-Fed- tional work performed. See paragraph eral entity's written policy and con- (h)(2)of this section. sistent with paragraph (h)(1)(i) of this (iv) The salaries, as supplemented, section. fall within the salary structure and (i)Standards for Documentation of Per- pay ranges established by and docu- sonnel Expenses (1) Charges to Federal mented in writing or otherwise applica- awards for salaries and wages must be ble to the non-Federal entity. based on records that accurately re- (v)The total salaries charged to Fed- fleet the work performed. These eral awards including extra service pay records must: are subject to the Standards of Docu- (i)Be supported by a system of inter- mentation as described in paragraph(i) nal control which provides reasonable of this section. assurance that the charges are accu- (5) Periods outside the academic year. rate, allowable, and properly allocated; (i) Except as specified for teaching ac- (ii) Be incorporated into the official tivity in paragraph(h)(5)(ii)of this sec- records of the non-Federal entity; tion, charges for work performed by (iii) Reasonably reflect the total ac- faculty members on Federal awards tivity for which the employee is com- during periods not included in the base pensated by the non-Federal entity, salary period will be at a rate not in not exceeding 100% of compensated ac- excess of the IBS. tivities(for IRE, this per the IHE's def- (ii) Charges for teaching activities inition of IBS); performed by faculty members on Fed- (iv)Encompass federally-assisted and eral awards during periods not included all other activities compensated by the in IBS period will be based on the nor- non-Federal entity on an integrated mal written policy of the IHE gov- basis, but may include the use of sub- erning compensation to faculty mem- sidiary records as defined in the non- bers for teaching assignments during Federal entity's written policy; such periods. (v) Comply with the established ac- (6)Part-time faculty. Charges for work counting policies and practices of the performed on Federal awards by fac- non-Federal entity (See paragraph ulty members having only part-time (h)(1)(ii) above for treatment of inci- appointments will be determined at a dental work for IHEs.);and rate not in excess of that regularly (vi)[Reserved] paid for part-time assignments. (vii) Support the distribution of the (7) Sabbatical leave costs. Rules for employee's salary or wages among spe- sabbatical leave are as follow: cific activities or cost objectives if the (i) Costs of leaves of absence by em- employee works on more than one Fed- ployees for performance of graduate eral award; a Federal award and non- work or sabbatical study, travel, or re- Federal award; an indirect cost activ- search are allowable provided the IHE ity and a direct cost activity; two or has a uniform written policy on sab- more indirect activities which are allo- batical leave for persons engaged in in- cated using different allocation bases; struction and persons engaged in re- or an unallowable activity and a direct search. Such costs will be allocated on or indirect cost activity. an equitable basis among all related (viii) Budget estimates (i.e., esti- activities of the IRE. mates determined before the services 168 OMB Guidance §200.430 are performed) alone do not qualify as (4) Salaries and wages of,employees support for charges to Federal awards, used in meeting cost sharing or match- but may be used for interim accounting ing requirements on Federal awards purposes, provided that: must be supported in the same manner (A) The system for establishing the as salaries and wages claimed for reim- estimates produces reasonable approxi- bursement from Federal awards. mations of the activity actually per- (5) For states, local governments and formed; Indian tribes, substitute processes or (B) Significant changes in the cor- systems for allocating salaries and responding work activity(as defined by wages to Federal awards may be used the non-Federal entity's written poli- in place of or in addition to the records cies)are identified and entered into the described in paragraph (1) if approved records in a timely manner. Short term by the cognizant agency for indirect (such as one or two months) fluctua- cost. Such systems may include, but tion between workload categories need are not limited to, random moment not be considered as long as the dis- sampling, "rolling" time studies, case tribution of salaries and wages is rea- counts, or other quantifiable measures sonable over the longer term; and of work performed. (C) The non-Federal entity's system (i) Substitute systems which use of internal controls includes processes sampling methods (primarily for Tem- to review after-the-fact interim porary Assistance for Needy Families charges made to a Federal award based (TANF), the Supplemental Nutrition on budget estimates. All necessary ad- Assistance Program (SNAP), Medicaid, justment must be made such that the and other public assistance programs) final amount charged to the Federal must meet acceptable statistical sam- award is accurate, allowable, and prop- pling standards including: erly allocated. (A) The sampling universe must in- (ix) Because practices vary as to the clude all of the employees whose sala- activity constituting a full workload ries and wages are to be allocated (for IHEs, IBS), records may reflect based on sample results except as pro- categories of activities expressed as a vided in paragraph(i)(5)(iii) of this sec- percentage distribution of total activi- tion; ties. (B) The entire time period involved (x) It is recognized that teaching, re- must be covered by the sample; and search, service, and administration are (C) The results Must be statistically often inextricably intermingled in an valid and applied to the period being academic setting. When recording sala- sampled. ries and wages charged to Federal (ii) Allocating charges for the sam- awards for IHEs, a precise assessment pled employees' supervisors, clerical of factors that contribute to costs is and support staffs, based on the results therefore not always feasible, nor is it of the sampled employees, will be ac- expected. ceptable. (2) For records which meet the stand- (iii) Less than full compliance with ards required in paragraph (i)(1) of this the statistical sampling standards section, the non-Federal entity will not noted in subsection (5)(i) may be ac- be required to provide additional sup- cepted by the cognizant agency for in- port or documentation for the work direct costs if it concludes that the performed, other than that referenced amounts to be allocated to Federal in paragraph(i)(3)of this section. awards will be minimal, or if it con- (3) In accordance with Department of cludes that the system proposed by the Labor regulations implementing the non-Federal entity will result in lower Fair Labor Standards Act (FLSA) (29 costs to Federal awards than a system CFR part 516), charges for the salaries which complies with the standards. and wages of nonexempt employees, in (6) Cognizant agencies for indirect addition to the supporting documenta- costs are encouraged to approve alter- tion described in this section, must native proposals based on outcomes also be supported by records indicating and milestones for program perform- the total number of hours worked each ance where these are clearly docu- day. merited. Where approved by the Federal 169 §200.431 2 CFR Ch. II (1-1-21 Edition) cognizant agency for indirect costs, tary leave, administrative leave, and these plans are acceptable as an alter- other similar benefits, are allowable if native to the requirements of para- all of the following criteria are met: graph(i)(1)of this section. (1) They are provided under estab- (7)For Federal awards of similar pur- lished written leave policies; pose activity or instances of approved (2) The costs are equitably allocated blended funding, a non-Federal entity to all related activities, including Fed- may submit performance plans that in- eral awards; and, corporate funds from multiple Federal (3) The accounting basis (cash or ac- awards and account for their combined crual) selected for costing each type of use based on performance-oriented metrics, provided that such plans are leave is consistently followed by the approved in advance by all involved non-Federal entity or specified group Federal awarding agencies. In these in- stances, the non-Federal entity must (i) When a non-Federal entity uses submit a request for waiver of the re- the cash basis of accounting, the cost quirements based on documentation of leave is recognized in the period that that describes the method of charging the leave is taken and paid for. Pay, costs, relates the charging of costs to ments for unused leave when an ern- the specific activity that is applicable ployee retires or terminates employ- to all fund sources, and is based on ment are allowable in the year of pay- quantifiable measures of the activity ment. in relation to time charged. (ii) The accrual basis may be only (8) For a non-Federal entity where used for those types of leave for which the records do not meet the standards a liability as defined by GAAP exists described in this section, the Federal when the leave is earned. When a non- Government may require personnel ac- Federal entity uses the accrual basis of tivity reports,including prescribed cer- accounting, allowable leave costs are tifications, or equivalent documenta- the lesser of the amount accrued or tion that support the records as re- funded. quired in this section. (c) Fringe benefits. The cost of fringe [78 FR 78608, Dec. 26, 2013, as amended at 79 benefits in the form of employer con- FR 75886, Dec. 19, 2014; 85 FR 49565, Aug. 13, tributions or expenses for social secu- 2020] rity; employee life, health, unemploy- 1 ment, and worker's compensation in- §200.431 Compensation—fringe bene- surance (except as indicated in fits. §200.447); pension plan costs (see para- (a)General. Fringe benefits are allow- graph (i) of this section); and other ances and services provided by employ- similar benefits are allowable, provided ers to their employees as compensation such benefits are granted under estab- in addition to regular salaries and lished written policies. Such benefits, wages. Fringe benefits include, but are must be allocated to Federal awards not limited to, the costs of leave (vaca- and all other activities in a manner tion, family-related, sick or military), consistent with the pattern of benefits employee insurance, pensions, and un- attributable to the individuals or employment benefit plans. Except as group(s) of employees whose salaries provided elsewhere in these principles, and wages are chargeable to such Fed- the costs of fringe benefits are allow- eral awards and other activities, and able provided that the benefits are rea- charged as direct or indirect costs in sonable and are required by law, non- accordance with the non-Federal enti- Federal entity-employee agreement, or ty's accounting practices. an established policy of the non-Fed- (d) Cost objectives. Fringe benefits eral entity. may be assigned to cost objectives by (b) Leave. The cost of fringe benefits identifying specific benefits to specific in the form of regular compensation individual employees or by allocating paid to employees during periods of au- on the basis of entity-wide salaries and thorized absences from the job, such as wages of the employees receiving the for annual leave, family-related leave, benefits. When the allocation method sick leave, holidays, court leave, mili- is used, separate allocations must be 170 OMB Guidance §200.431 made to selective groupings of employ- (2)The methods of cost allocation are ees, unless the non-Federal entity dem- not discriminatory. onstrates that costs in relationship to (3) Except for State and Local Gov- salaries and wages do not differ signifi- ernments, the cost assigned to each fis- cantly for different groups of employ- cal year should be determined in ac- ees. cordance with GAAP. (e) Insurance. See also §200.447(d)(1) (4) The costs assigned to a given fis- and(2). cal year are funded for all plan partici- (1) Provisions for a reserve under a pants within six months after the end self-insurance program for unemploy- of that year.However,increases to nor- ment compensation or workers' corn- mal and past service pension costs pensation are allowable to the extent caused by a delay in funding the actu- that the provisions represent reason- arial liability beyond 30 calendar days able estimates of the liabilities for after each quarter of the year to which such compensation, and the types of such costs are assignable are unallow- coverage, extent of coverage, and rates able. Non-Federal entity may elect to and premiums would have been allow- follow the "Cost Accounting Standard able had insurance been purchased to for Composition and Measurement of cover the risks.However,provisions for Pension Costs" (48 CFR 9904.412). self-insured liabilities which do not be- (5) Pension plan termination insur- come payable for more than one year ance premiums paid pursuant to the after the provision is made must not Employee Retirement Income Security exceed the present value of the liabil- Act(ERISA) of 1974(29 U.S.C. 1301-1461) ity. are allowable. Late payment charges (2) Costs of insurance on the lives of on such premiums are unallowable. Ex- trustees, officers, or other employees cise taxes on accumulated funding defi- holding positions of similar responsi- ciencies and other penalties imposed bility are allowable only to the extent under ERISA are unallowable. that the insurance represents addi- (6) Pension plan costs may be corn- tonal compensation. The costs of such puted using a pay-as-you-go method or insurance when the non-Federal entity an acceptable actuarial cost method in is named as beneficiary are unallow- accordance with established written able. policies of the non-Federal entity. (3)Actual claims paid to or on behalf (i) For pension plans financed ion a of employees or former employees for pay-as-you-go method, allowable costs workers' compensation, unemployment will be limited to those representing compensation, severance pay,and simi- actual payments to retirees or their lar employee benefits (e.g., post-retire- beneficiaries. ment health benefits), are allowable in (ii) Pension costs calculated using an the year of payment provided that the actuarial cost-based method recognized non-Federal entity follows a consistent by GAAP are allowable for a given fis- costing policy. cal year if they are funded for that (f) Automobiles. That portion of auto- year within six months after the end of mobile costs furnished by the non-Fed- that year. Costs funded after the six- eral entity that relates to personal use month period (or a later period agreed by employees(including transportation to by the cognizant agency for indirect to and from work) is unallowable as costs)are allowable in the year funded. fringe benefit or indirect (F&A) costs The cognizant agency for indirect costs regardless of whether the cost is re- may agree to an extension of the six- ported as taxable income to the em- month period if an appropriate adjust- ployees. ment is made to compensate for the (g) Pension plan costs. Pension plan timing of the charges to the Federal costs which are incurred in accordance Government and related Federal reim- with the established policies of the bursement and the non-Federal enti- non-Federal entity are allowable, pro- ty's contribution to the pension fund. vided that: Adjustments may be made by cash re- (1) Such policies meet the test of rea- fund or other equitable procedures to sonableness. compensate the Federal Government 171 §200.431 2 CFR Ch. II (1-1-21 Edition) for the time value of Federal reim- compensate the Federal Government bursements in excess of contributions for the time value of Federal reim- to the pension fund. bursements in excess of contributions (iii) Amounts funded by the non-Fed- to the PRHP fund. eral entity in excess of the actuarially (3) Amounts funded in excess of the determined amount for a fiscal year actuarially determined amount for a may be used as the non-Federal enti- fiscal year may be used as the non-Fed- ty's contribution in future periods. eral entity contribution in a future pe- (iv) When a non-Federal entity con- riod. verts to an acceptable actuarial cost (4) When a non-Federal entity con- method,as defined by GAAP,and funds verts to an acceptable actuarial cost pension costs in accordance with this method and funds PRHP costs in ac- method, the unfunded liability at the cordance with this method, the initial time of conversion is allowable if am- unfunded liability attributable to prior ortized over a period of years in accord- years is allowable if amortized over a ance with GAAP. period of years in accordance with (v)The Federal Government must re- GAAP, or, if no such GAAP period ex- ceive an equitable share of any pre- ists, over a period negotiated with the viously allowed pension costs (includ- cognizant agency for indirect costs. ing earnings thereon) which revert or (5) To be allowable in the current inure to the non-Federal entity in the year, the PRHP costs must be paid ei- form of a refund, withdrawal, or other ther to: credit. (i) An insurer or other benefit pro- (h) Post-retirement health. Post-retire- pre- ment health plans (PRHP) refers to eider as current year costs or costs of health insurance or health miums,(ii)An or services not included in a pension plan trust fundinurer s trusteeheforthet maintain covered by paragraph(g)of this section aposeo or reserve for sole bene- for - retirees and their spouses, depend- of providing post-retirementb ents, and survivors. PRHP costs may fits to retirees and other beneficiaries. be computed using a pay-as-you-go (6) The Federal Government must re- be method or an acceptable actuarial cost ceivem sa equitable share of any post-re- method in accordance with established amounts of previously allowed written policies of the non-Federal en- tirement benefit costs (including earn- tity. ings thereon) which revert or inure to (1) For PREP financed on a the non-Federal entity in the form of a pay-as- refund,withdrawal,or other credit. you-go method, allowable costs will be limited to those representing actual (i) Severance pay. (1) Severance pay, payments to retirees or their bend also commonly referred to as dismissal ficiaries. wages, is a payment in addition to reg- (2) PRHP costs calculated using an ular salaries and wages, by non-Federal actuarial cost method recognized by entities to workers whose employment GAAP are allowable if they are funded is being terminated. Costs of severance for that year within six months after pay are allowable only to the extent the end of that year. Costs funded after that in each case,it is required by the six-month period (or a later period (i)Law; agreed to by the cognizant agency) are (ii)Employer-employee agreement; allowable in the year funded. The Fed- (iii) Established policy that con- eral cognizant agency for indirect costs stitutes, in effect, an implied agree- may agree to an extension of the six- ment on the non-Federal entity's part; month period if an appropriate adjust- or ment is made to compensate for the (iv) Circumstances of the particular timing of the charges to the Federal employment. Government and related Federal reim- (2) Costs of severance payments are bursements and the non-Federal enti- divided into two categories as follows: ty's contributions to the PREP fund. (i) Actual normal turnover severance Adjustments may be made by cash re- payments must be allocated to all ac- fund, reduction in current year's PRHP tivities; or, where the non-Federal en- costs, or other equitable procedures to - tity provides for a reserve for normal 172 OMB Guidance §200.432 severances, such method will be ac- an equitable basis. Tuition benefits for ceptable if the charge to current oper- family members other than the em- ations is reasonable in light of pay- ployee are unallowable. ments actually made for normal (2) Fringe benefits in the form of tui- severances over a representative past tion or remission of tuition for indi- period, and if amounts charged are al- vidual employees not employed by located to all activities of the non-Fed- IHEs are limited to the tax-free eral entity. amount allowed per section 127 of the (ii) Measurement of costs of abnor- Internal Revenue Code as amended. mal or mass severance pay by means of (3) IHEs may offer employees tuition an accrual will not achieve equity to waivers or tuition reductions, provided both parties. Thus, accruals for this that the benefit does not discriminate purpose are not allowable. However, in favor of highly compensated employ- the Federal Government recognizes its ees. Employees can exercise these ben- responsibility to participate, to the ex- efits at other institutions according to tent of its fair share, in any specific institutional policy. See §200.466, for payment. Prior approval by the Fed- treatment of tuition remission pro- eral awarding agency or cognizant vided to students. agency for indirect cost, as appro- (k) Fringe benefit programs and other priate,is required. benefit costs. For IHEs whose costs are (3) Costs incurred in certain sever- paid by state or local governments, ance pay packages which are in an fringe benefit programs (such as pen- amount in excess of the normal sever- sion costs and FICA) and any other ance pay paid by the non-Federal enti- benefits costs specifically incurred on ty to an employee upon termination of behalf of, and in direct benefit to, the employment and are paid to the em- non-Federal entity, are allowable costs ployee contingent upon a change in of such non-Federal entities whether or management control over, or owner- not these costs are recorded in the ao- ship of, the non-Federal entity's assets, counting records of the non-Federal en- are unallowable. tities,subject to the following: (4)Severance payments to foreign na- (1) The costs meet the requirements tionals employed by the non-Federal of Basic Considerations in §§200.402 entity outside the United States, to through 200.411; the extent that the amount exceeds the (2) The costs are properly supported customary or prevailing practices for by approved cost allocation plans in ac- the non-Federal entity in the United cordance with applicable Federal cost States, are unallowable, unless they accounting principles; and are necessary for the performance of (3) The costs are not otherwise borne Federal programs and approved by the directly or indirectly by the Federal Federal awarding agency. Government. (5)Severance payments to foreign na- [85 FR 49565,Aug.13,2020] tionals employed by the non-Federal entity outside the United States due to §200.432 Conferences. the termination of the foreign national A conference is defined as a meeting, as a result of the closing of, or curtail- retreat, seminar, symposium, work- ment of activities by, the non-Federal shop or event whose primary purpose is entity in that country, are unallow- the dissemination of technical infor- able, unless they are necessary for the mation beyond the non-Federal entity performance of Federal programs and and is necessary and reasonable for approved by the Federal awarding successful performance under the Fed- agency. eral award. Allowable conference costs (j) For IHEs only. (1) Fringe benefits paid by the non-Federal entity as a in the form of undergraduate and grad- sponsor or host of the conference may uate tuition or remission of tuition for include rental of facilities, speakers' individual employees are allowable, fees, costs of meals and refreshments, provided such benefits are granted in local transportation, and other items accordance with established non-Fed- incidental to such conferences unless eral entity policies, and are distributed further restricted by the terms and to all non-Federal entity activities on conditions of the Federal award. As 173 §200.433 2 CFR Ch. II (1-1-21 Edition) needed, the costs of identifying, but with certainty as to the time or inten- not providing, locally available depend- sity, or with an assurance of their hap- ent-care resources are allowable. Con- pening, are unallowable, except as ference hosts/sponsors must exercise noted in§§200.431 and 200.447. discretion and judgment in ensuring that conference costs are appropriate, [78 FR 78608, Dec. 26, 2013, as amended at 79 necessary and managed in a manner FR 75886, Dec. 19, 2014; 85 FR 49567, Aug. 13, that minimizes costs to the Federal 2020] award. The Federal awarding agency §200.434 Contributions and donations. may authorize exceptions where appro- priate for programs including Indian (a) Costs of contributions and dona- tribes, children, and the elderly. See tions, including cash, property, and also§§200.438,200.456,and 200.475. services, from the non-Federal entity [85 FR 49567,Aug.13,2020] to other entities,are unallowable. (b) It is permissible for contingency §200.433 Contingency provisions. amounts other than those excluded in (a) Contingency is that part of a paragraph (a) of this section to be ex- plicitly included of future costs plicitly included in budget estimates, (typi- to the extent they are necessary to im- cally of large construction projects, IT prove the precision of those estimates. systems, or other items as approved by Amounts must be estimated using the Federal awarding agency) which is broadly-accepted cost estimating associated with possible events or con- methodologies, specified in the budget ditions arising from causes the precise documentation of the Federal award, outcome of which is indeterminable at and accepted by the Federal awarding the time of estimate, and that experi- agency. As such, contingency amounts ence shows will likely result, in aggre are to be included in the Federal gate, in additional costs for the ap- award. In order for actual costs in- proved activity or project. Amounts for curred to be allowable, they must corn- major project scope changes, unfore- seen risks, or extraordinary events ply with the cost principles and other may not be included. requirements in this part (see also (b) It is permissible for contingency §§200.300 and 200.403 of this part); be amounts other than those excluded in necessary and reasonable for proper paragraph (a) of this section to be ex- and efficient accomplishment of plicitly included in budget estimates, project or program objectives, and be to the extent they are necessary to im- verifiable from the non-Federal enti- prove the precision of those estimates. ty's records. Amounts must be estimated using (c) Payments made by the Federal broadly-accepted cost estimating awarding agency to the non-Federal methodologies, specified in the budget entity's "contingency reserve" or any documentation of the Federal award, similar payment made for events the and accepted by the Federal awarding occurrence of which cannot be foretold agency. As such, contingency amounts with certainty as to the time or inten- are to be included in the Federal sity, or with an assurance of their hap- award. In order for actual costs in- pening, are unallowable, except as curred to be allowable, they must corn- noted in§§200.431 and 200.447. ply with the cost principles and other (d) To the extent feasible, services requirements in this part (see also donated to the non-Federal entity will §§200.300 and 200.403 of this part); be be supported by the same methods used necessary and reasonable for proper to support the allocability of regular and efficient accomplishment of personnel services. project or program objectives, and be (e) The following provisions apply to verifiable from the non-Federal enti- nonprofit organizations. The value of ty's records. services donated to the nonprofit orga- (c) Payments made by the Federal nization utilized in the performance of awarding agency to the non-Federal a direct cost activity must be consid- entity's "contingency reserve" or any ered in the determination of the non- similar payment made for events the Federal entity's indirect cost rate(s) occurrence of which cannot be foretold and, accordingly, must be allocated a 174 OMB Guidance §200.435 proportionate share of applicable indi- including a conviction due to a plea of rect costs when the following cir- nolo contendere. cumstances exist: (2) Costs include the services of in- (1) The aggregate value of the serv- house or private counsel, accountants, ices is material; consultants, or others engaged to as- (2) The services are supported by a sist the non-Federal entity before, dur- significant amount of the indirect ing, and after commencement of a judi- costs incurred by the non-Federal enti- cial or administrative proceeding, that ty; bear a direct relationship to the pro- (i) In those instances where there is ceeding. no basis for determining the fair mar- (3)Fraud means: ket value of the services rendered, the (i) Acts of fraud or corruption or at- non-Federal entity and the cognizant tempts to defraud the Federal Govern- agency for indirect costs must nego- ment or to corrupt its agents, tiate an appropriate allocation of indi- rect cost to the services. (ii) Acts that constitute a cause for debarment or suspension (as specified (ii) Where donated services directly in agency regulations),and benefit a project supported by the Fed- (iii) Acts which violate the False eral award, the indirect costs allocated Claims Act (31 U.S.C. 3729-3732) or the to the services will be considered as a Anti-kickback Act (41 U.S.C. 1320a- part of the total costs of the project. 7b(b)). Such indirect costs may be reimbursed (4) Penalty does not include restitu- under the Federal award or used to tion, reimbursement, or compensatory meet cost sharing or matching require- damages. menns. (f) Fair market value of donated (5) Proceeding includes an investiga- services must be computed as described tion. in§200.306. (b) Costs. (1) Except as otherwise de- (g) Personal Property and Use of scribed herein, costs incurred in con- Space. nection with any criminal, civil or ad- (1) Donated personal property and ministrative proceeding (including fil- use of space may be furnished to a non- ing of a false certification) commenced Federal entity. The value of the per- by the Federal Government, a state, sonal property and space may not be local government, or foreign govern- charged to the Federal award either as ment, or joined by the Federal Govern- a direct or indirect cost. ment(including a proceeding under the (2)The value of the donations may be False Claims Act), against the non- used to meet cost sharing or matching Federal entity, (or commenced by third share requirements under the condi- parties or a current or former em- tions described in §200.300 of this part. ployee of the non-Federal entity who The value of the donations must be de- submits a whistleblower complaint of termined in accordance with §200.300. reprisal in accordance with 10 U.S.C. Where donations are treated as indirect 2409 or 41 U.S.C.4712), are not allowable costs, indirect cost rates will separate if the proceeding: the value of the donations so that re- (i)Relates to a violation of,or failure imbursement will not be made. to comply with, a Federal, state, local [78 FR78608, Dec. 26, 2013, as amended at 79 or foreign statute, regulation or the FR 75886, Dec. 19, 2014; 85 FRame7,n Aug. terms and conditions of the Federal 2020] award, by the non-Federal entity (in eluding its agents and employees); and §200.435 Defense and prosecution of (ii) Results in any of the following criminal and civil proceedings, dispositions: claims,appeals and patent infringe- (A) In a criminal proceeding, a con- ments. viction. (a) Definitions for the purposes of this (B) In a civil or administrative pro- section. (1)Conviction means a judgment ceeding involving an allegation of or conviction of a criminal offense by fraud or similar misconduct, a deter- any court of competent jurisdiction, mination of non-Federal entity liabil- whether entered upon verdict or a plea, ity. 175 §200.435 2 CFR Ch. II (1-1-21 Edition) (C) In the case of any civil or admin- (2) Payment of the reasonable, nec- istrative proceeding, the disallowance essary, allocable and otherwise allow- of costs or the imposition of a mone- able costs incurred is not prohibited by tary penalty, or an order issued by the any other provision(s) of the Federal Federal awarding agency head or dele- award; gate to the non-Federal entity to take (3) The costs are not recovered from corrective action under 10 U.S.C. 2409 the Federal Government or a third or 41 U.S.C. 4712. party, either directly as a result of the (D)A final decision by an appropriate proceeding or otherwise;and, Federal official to debar or suspend the non-Federal entity, to rescind or void a must etn authorizedeFederalntagofficial Federal award, or to terminate a Fed determine the percentage of costs eral award by reason of a violation or allowed considering the complexity of failure to comply with a statute, regu litigation, generally accepted prin- lation, or the terms and conditions of ciples governing the award of legal fees the Federal award. in civil actions involving the United (E) A disposition by consent or corn- States, and such other factors as may promise, if the action could have re- be appropriate. Such percentage must sulted in any of the dispositions de- not exceed 80 percent. However, if an scribed in paragraphs (b)(1)(ii)(A) agreement reached under paragraph (c) through(D)of this section. of this section has explicitly consid- (2) If more than one proceeding in- ered this 80 percent limitation and per- volves the same alleged misconduct, mitted a higher percentage, then the the costs of all such proceedings are full amount of costs resulting from unallowable if any results in one of the that agreement are allowable. dispositions shown in paragraph (b) of (f) Costs incurred by the non-Federal this section. entity in connection with the defense (c)If a proceeding referred to in para- of suits brought by its employees or ex- graph (b) of this section is commenced employees under section 2 of the Major by the Federal Government and is re- Fraud Act of 1988 (18 U.S.C. 1031), in- solved by consent or compromise pur- eluding the cost of all relief necessary suant to an agreement by the non-Fed- to make such employee whole, where eral entity and the Federal Govern- the non-Federal entity was found liable ment, then the costs incurred may be or settled, are unallowable. allowed to the extent specifically pro- (g) Costs of prosecution of claims vided in such agreement. against the Federal Government, in- (d)If a proceeding referred to in para- eluding appeals of final Federal agency graph (b) of this section is commenced decisions,are unallowable. by a state,local or foreign government, (h) Costs of legal, accounting, and the authorized Federal official may consultant services, and related costs, allow the costs incurred if such author- incurred in connection with patent in- ized official determines that the costs fringement litigation, are unallowable were incurred as a result of: (1)A specific term or condition of the unless otherwise provided for in the Federal award, or Federal award. (2) Specific written direction of an (i) Costs which may be unallowable authorized official of the Federal under this section, including directly awarding agency. associated costs, must be segregated (e) Costs incurred in connection with and accounted for separately. During proceedings described in paragraph (b) the pendency of any proceeding covered of this section, which are not made un- by paragraphs (b) and (f) of this sec- allowable by that subsection, may be tion, the Federal Government must allowed but only to the extent that: generally withhold payment of such (1) The costs are reasonable and nee- costs. However, if in its best interests, essary in relation to the administra- the Federal Government may provide tion of the Federal award and activi- for conditional payment upon provision ties required to deal with the pro- of adequate security, or other adequate ceeding and the underlying cause of ac- assurance, and agreement to repay all tion; unallowable costs, plus interest, if the 176 OMB Guidance §200.436 costs are subsequently determined to lowed for the individual items or class- be unallowable. es of assets involved. [78 FR 78608, Dec. 26, 2013, as amended at 79 (2) The depreciation method used to FR 75886,Dec.19,2014] charge the cost of an asset (or group of assets) to accounting periods must re- §200.436 Depreciation. fleet the pattern of consumption of the (a)Depreciation is the method for al- asset during its useful life. In the ab- locating the cost of fixed assets to peri- sence of clear evidence indicating that ods benefitting from asset use. The the expected consumption of the asset non-Federal entity may be corn- will be significantly greater in the pensated for the use of its buildings, early portions than in the later por- capital improvements, equipment, and tions of its useful life, the straight-line software projects capitalized in accord- method must be presumed to be the ap- ance with GAAP, provided that they propriate method. Depreciation meth- are used, needed in the non-Federal en- ods once used may not be changed un- tity's activities, and properly allocated less approved in advance by the cog- to Federal awards. Such compensation nizant agency. The depreciation meth- must be made by computing deprecia- ods used to calculate the depreciation tion. amounts for indirect (F&A) rate pur- (b) The allocation for depreciation poses must be the same methods used must be made in accordance with Ap- by the non-Federal entity for its finan- pendices III through IX. cial statements. (c) Depreciation is computed apply- (3) The entire building, including the ing the following rules. The computa- shell and all components,may be treat- tion of depreciation must be based on ed as a single asset and depreciated the acquisition cost of the assets in- over a single useful life. A building volved. For an asset donated to the may also be divided into multiple corn- non-Federal entity by a third party, its ponents. Each component item may fair market value at the time of the do- then be depreciated over its estimated nation must be considered as the acqui- useful life. The building components sition cost. Such assets may be depre- must be grouped into three general ciated or claimed as matching but not components of a building: building both. For the computation of deprecia- shell (including construction and de- tion, the acquisition cost will exclude: sign costs), building services systems (1)The cost of land; (e.g., elevators, HVAC, plumbing sys- (2) Any portion of the cost of build- tern and heating and air-conditioning ings and equipment borne by or do- system) and fixed equipment (e.g., nated by the Federal Government, irre- sterilizers, casework, fume hoods, cold spective of where title was originally rooms and glassware/washers). In ex- vested or where it is presently located; ceptional cases, a cognizant agency (3) Any portion of the cost of build- may authorize a non-Federal entity to ings and equipment contributed by or use more than these three groupings. for the non-Federal entity that are al- When a non-Federal entity elects to de- ready claimed as matching or where preciate its buildings by its compo- law or agreement prohibits recovery; nents, the same depreciation methods (4) Any asset acquired solely for the must be used for indirect (F&A) pur- performance of a non-Federal award; poses and financial statements pur- and poses, as described in paragraphs (d)(1) (d) When computing depreciation and(2)of this section. charges, the following must be ob- (4) No depreciation may be allowed served: on any assets that have outlived their (1) The period of useful service or depreciable lives. useful life established in each case for (5) Where the depreciation method is usable capital assets must take into introduced to replace the use allow- consideration such factors as type of ance method, depreciation must be construction, nature of the equipment, computed as if the asset had been de- technological developments in the par- preciated over its entire life (i.e., from titular area, historical data, and the the date the asset was acquired and renewal and replacement policies fol- ready for use to the date of disposal or 177 §200.437 2 CFR Ch. II (1-1-21 Edition) withdrawal from service). The total either in the approved budget for the amount of use allowance and deprecia- Federal award or with prior written ap- tion for an asset(including imputed de- proval of the Federal awarding agency. preciation applicable to periods prior to the conversion from the use allow- §200.439 Equipment and other capital ance method as well as depreciation expenditures. after the conversion) may not exceed (a) See §200.1 for the definitions of the total acquisition cost of the asset. capital expenditures, equipment, special (e) Charges for depreciation must be purpose equipment, general purpose supported by adequate property equipment, acquisition cost, and capital records, and physical inventories must assets. be taken at least once every two years (b) The following rules of allow- to ensure that the assets exist and are ability must apply to equipment and usable, used, and needed. Statistical other capital expenditures: sampling techniques may be used in (1) Capital expenditures for general taking these inventories. In addition, purpose equipment, buildings, and land adequate depreciation records showing are unallowable as direct charges, ex- the amount of depreciation must be cept with the prior written approval of maintained. the Federal awarding agency or pass- [78 FR 78608, Dec. 26, 2013, as amended at 79 through entity. FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, (2) Capital expenditures for special 2020] purpose equipment are allowable as di- rect costs, provided that items with a §200.437 Employee health and welfare unit cost of $5,000 or more have the costs. prior written approval of the Federal (a) Costs incurred in accordance with awarding agency or pass-through enti- the non-Federal entity's documented ty. policies for the improvement of work- (3) Capital expenditures for improve- ing conditions, employer-employee re- ments to land, buildings, or equipment lations, employee health,and employee which materially increase their value performance are allowable. or useful life are unallowable as a di- (b) Such costs will be equitably ap- rect cost except with the prior written portioned to all activities of the non- approval of the Federal awarding agen- Federal entity. Income generated from cy, or pass-through entity. See§200.436, any of these activities will be credited for rules on the allowability of depre- to the cost thereof unless such income ciation on buildings, capital improve- has been irrevocably sent to employee ments, and equipment. See also welfare organizations. §200.465. (c) Losses resulting from operating (4) When approved as a direct charge food services are allowable only if the pursuant to paragraphs (b)(1) through non-Federal entity's objective is to op- (3) of this section, capital expenditures orate such services on a break-even will be charged in the period in which basis. Losses sustained because of oper- the expenditure is incurred, or as oth- ating objectives other than the above erwise determined appropriate and ne- are allowable only: gotiated with the Federal awarding (1) Where the non-Federal entity can agency. demonstrate unusual circumstances; (5) The unamortized portion of any and equipment written off as a result of a (2) With the approval of the cog- change in capitalization levels may be nizant agency for indirect costs. recovered by continuing to claim the otherwise allowable depreciation on §200.438 Entertainment costs. the equipment, or by amortizing the Costs of entertainment, including amount to be written off over a period amusement, diversion, and social ac- of years negotiated with the Federal tivities and any associated costs are cognizant agency for indirect cost. unallowable, except where specific (6) Cost of equipment disposal. If the costs that might otherwise be consid- non-Federal entity is instructed by the ered entertainment have a pro- Federal awarding agency to otherwise grammatic purpose and are authorized dispose of or transfer the equipment 178 OMB Guidance §200.443 the costs of such disposal or transfer §200.442 Fund raising and investment are allowable. management costs. (7) Equipment and other capital ex- (a) Costs of organized fund raising, penditures are unallowable as indirect including financial campaigns, endow- costs. See§200.436. ment drives, solicitation of gifts and [78 FR 78608, Dec. 26, 2013, as amended at 79 bequests, and similar expenses incurred FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, to raise capital or obtain contributions 2020] are unallowable. Fund raising costs for the purposes of meeting the Federal §200.440 Exchange rates. program objectives are allowable with (a) Cost increases for fluctuations in prior written approval from the Fed- exchange rates are allowable costs sub- are covered in§200.460. ject to the availability of funding. (b) Costs of investment counsel and Prior approval of exchange rate fluc- staff and similar expenses incurred to tuations is required only when the enhance income from investments are change results in the need for addi- unallowable except when associated tional Federal funding, or the in- with investments covering pension, creased costs result in the need to sig- self-insurance, or other funds which in- nificantly reduce the scope of the elude Federal participation allowed by project. The Federal awarding agency this part. must however ensure that adequate (c) Costs related to the physical cus- funds are available to cover currency tody and control of monies and securi- fluctuations in order to avoid a viola- ties are allowable. tion of the Anti-Deficiency Act. (d) Both allowable and unallowable (b) The non-Federal entity is re- fund-raising and investment activities quired to make reviews of local cur- must be allocated as an appropriate rency gains to determine the need for share of indirect costs under the condi- additional federal funding before the tions described in§200.413. expiration date of the Federal award. [85 FR 49568,Aug.13,2020] Subsequent adjustments for currency increases may be allowable only when §200.443 Gains and losses on disposi- the non-Federal entity provides the tion of depreciable assets. Federal awarding agency with ade- (a) Gains and losses on the sale, re- quate source documentation from a tirement, or other disposition of depre- commonly used source in effect at the ciable property must be included in the time the expense was made, and to the year in which they occur as credits or extent that sufficient Federal funds are charges to the asset cost grouping(s) in available. which the property was included. The amount of the gain or loss to be in- [78 FR 78608, Dec. 26, 2013, as amended at 79 eluded as a credit or charge to the ap- FR 75886,Dec.19,2014] propriate asset cost grouping(s) is the §200.441 Fines, penalties, damages difference between the amount realized and other settlements. on the property and the undepreciated basis of the property. Costs resulting from non-Federal en- (b) Gains and losses from the disposi- tity violations of, alleged violations of, tion of depreciable property must not or failure to comply with, Federal, be recognized as a separate credit or state, tribal, local or foreign laws and charge under the following conditions: regulations are unallowable, except (1) The gain or loss is processed when incurred as a result of compli- through a depreciation account and is ance with specific provisions of the reflected in the depreciation allowable Federal award, or with prior written under§§200.436 and 200.439. approval of the Federal awarding agen- (2) The property is given in exchange cy. See also§200.435. as part of the purchase price of a simi- lar[85 FR 49568,Aug.13,2020] item and the gain or loss is taken into account in determining the depre- ciation cost basis of the new item. 179 §200.444 2 CFR Ch. II (1-1-21 Edition) (3) A loss results from the failure to Local government in §200.1 of this part), maintain permissible insurance, except up to 50% of salaries and expenses di- as otherwise provided in§200.447. rectly attributable to managing and (4) Compensation for the use of the operating Federal programs by the property was provided through use al- chief executive and his or her staff can lowances in lieu of depreciation. be included in the indirect cost cal- (5) Gains and losses arising from culation without documentation. mass or extraordinary sales, retire- ments, or other dispositions must be [78 FR 78608, Dec. 26, 2013, as amended at 79 considered on a case-by-case basis. FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, (c)Gains or losses of any nature aris- ing 2020] from the sale or exchange of prop- §200.445 Goods or services for per- erty other than the property covered in sonal use. paragraph(a) of this section, e.g., land, must be excluded in computing Federal (a) Costs of goods or services for per- award costs. sonal use of the non-Federal entity's (d) When assets acquired with Fed- employees are unallowable regardless eral funds, in part or wholly, are dis- posed of, the distribution of the pro- able income to the employees. ceeds must be made in accordance with (b) Costs of housing (e.g., deprecia- §§200.310 through 200.316 of this part. tion, maintenance, utilities, fur- nishings, rent), housing allowances and [78 FR 78608, Dec. 26, 2013, as amended at 79 personal living expenses are only al- FR 75886, Dec. 19, 2014; 85 FR 49568, Aug. 13, lowable as direct costs regardless of 2020] whether reported as taxable income to §200.444 General costs of government. the employees.In addition, to be allow- (a) For states, local governments, able direct costs must be approved in and Indian Tribes, the general costs of advance by a Federal awarding agency. government are unallowable (except as §200.446 Idle facilities and idle capac- provided in§200.475). Unallowable costs ity. include: (1) Salaries and expenses of the Office (a) As used in this section the fol- of the Governor of a state or the chief lowing terms have the meanings set executive of a local government or the forth in this section: chief executive of an Indian tribe; (1) Facilities means land and build- (2) Salaries and other expenses of a ings or any portion thereof, equipment state legislature, tribal council, or individually or collectively, or any similar local governmental body, such other tangible capital asset, wherever as a county supervisor, city council, located, and whether owned or leased school board, etc., whether incurred for by the non-Federal entity. purposes of legislation or executive di- (2) Idle facilities means completely rection; unused facilities that are excess to the (3) Costs of the judicial branch of a non-Federal entity's current needs. government; (3) Idle capacity means the unused (4) Costs of prosecutorial activities capacity of partially used facilities. It unless treated as a direct cost to a spe- is the difference between: cific program if authorized by statute (i) That which a facility could or regulation (however, this does not achieve under 100 percent operating preclude the allowability of other legal time on a one-shift basis less operating activities of the Attorney General as interruptions resulting from time lost described in§200.435);and for repairs, setups, unsatisfactory ma- (5) Costs of other general types of terials,and other normal delays and; government services normally provided (ii) The extent to which the facility to the general public, such as fire and was actually used to meet demands police, unless provided for as a direct during the accounting period. A multi- cost under a program statute or regula- shift basis should be used if it can be tion. shown that this amount of usage would (b) For Indian tribes and Councils of normally be expected for the type of fa- Governments (COGs) (see definition for cility involved. 180 OMB Guidance §200.447 (4) Cost of idle facilities or idle ca- tivities are allowable subject to the pacity means costs such as mainte- following limitations: nance, repair, housing, rent, and other (1) Types and extent and cost of cov- related costs, e.g., insurance, interest, erage are in accordance with the non- and depreciation. These costs could in- Federal entity's policy and sound busi- clude the costs of idle public safety ness practice. emergency facilities, telecommuni- (2) Costs of insurance or of contribu- cations, or information technology sys- tions to any reserve covering the risk tern capacity that is built to withstand of loss of, or damage to, Federal Gov- major fluctuations in load, e.g., con- ernment property are unallowable ex- solidated data centers. cept to the extent that the Federal (b) The costs of idle facilities are un- awarding agency has specifically re- allowable except to the extent that: quired or approved such costs. (1) They are necessary to meet work- (3) Costs allowed for business inter- load requirements which may fluctuate ruption or other similar insurance and are allocated appropriately to all must exclude coverage of management benefiting programs;or • fees. (2) Although not necessary to meet (4) Costs of insurance on the lives of fluctuations in workload, they were trustees, officers, or other employees necessary when acquired and are now holding positions of similar respon- idle because of changes in program re- sibilities are allowable only to the ex- quirements, efforts to achieve more ec- tent that the insurance represents ad- onomical operations, reorganization, ditional compensation (see §200.431). termination, or other causes which The cost of such insurance when the could not have been reasonably fore- non-Federal entity is identified as the seen. Under the exception stated in beneficiary is unallowable. this subsection, costs of idle facilities (5)Insurance against defects. Costs of are allowable for a reasonable period of insurance with respect to any costs in- time, ordinarily not to exceed one curred to correct defects in the non- year, depending on the initiative taken Federal entity's materials or work- to use, lease, or dispose of such facili- manship are unallowable. ties. (6) Medical liability (malpractice) in- (c)The costs of idle capacity are nor- surance. Medical liability insurance is mal costs of doing business and are a an allowable cos) of Federal research factor in the normal fluctuations of programs only to the extent that the usage or indirect cost rates from period Federal research programs involve to period. Such costs are allowable, human subjects or training of partici- provided that the capacity is reason- pants in research techniques. Medical ably anticipated to be necessary to liability insurance costs must be treat- carry out the purpose of the Federal ed as a direct cost and must be as- award or was originally reasonable and signed to individual projects based on is not subject to reduction or elimi- the manner in which the insurer alie- nation by use on other Federal awards, cates the risk to the population cov- subletting, renting, or sale, in accord- ered by the insurance. ance with sound business, economic, or (c) Actual losses which could have security practices. Widespread idle ca- been covered by permissible insurance pacity throughout an entire facility or (through a self-insurance program or among a group of' assets having sub- otherwise) are unallowable, unless ex- stantially the same function may be pressly provided for in the Federal considered idle facilities. award.However, costs incurred because §200.447 Insurance and indemnifica- of losses not covered under nominal de- tion. ductible insurance coverage provided in keeping with sound management (a) Costs of insurance required or ap- practice, and minor losses not covered proved and maintained, pursuant to by insurance, such as spoilage, break- the Federal award,are allowable. age, and disappearance of' small hand (b) Costs of' other insurance in con- tools, which occur in the ordinary nection with the general conduct of ac- course of operations,are allowable. 181 §200.448 2 CFR Ch. 1I (1-1-21 Edition) (d) Contributions to a reserve for cer- or other techniques resulting in an eq- tain self-insurance programs including uitable allocation. workers' compensation, unemployment (5) Whenever funds are transferred compensation, and severance pay are from a self-insurance reserve to other allowable subject to the following pro- accounts (e.g., general fund or unre- visions: stricted account), refunds must be (1) The type of coverage and the ex- made to the Federal Government for tent of coverage and the rates and pre- its share of funds transferred,including miums would have been allowed had in- earned or imputed interest from the surance (including reinsurance) been date of transfer and debt interest, if ap- purchased to cover the risks. However, plicable, chargeable in accordance with provision for known or reasonably esti- applicable Federal cognizant agency mated self-insured liabilities, which do for indirect cost, claims collection reg- not become payable for more than one ulations. year after the provision is made, must (e) Insurance refunds must be cred- not exceed the discounted present ited against insurance costs in the year value of the liability. The rate used for the refund is received. discounting the liability must be deter- (f) Indemnification includes securing mined by giving consideration to such the non Federal entity against liabil- factors as the non-Federal entity's set- ities to third persons and other losses tlement rate for those liabilities and not compensated by insurance or oth- investment rate of return. erwise. The Federal Government is ob- itsligated to indemnify the non-Federal (2) Earnings or investment income on entity only to the extent expressly pro- reserves must be credited to those re- vided for in the Federal award, except serves. as provided in paragraph(c) of this sec- (3)(i) Contributions to reserves must tion. be based on sound actuarial principles using historical experience and reason- [78 FR 78608, Dec. 26, 2013, as amended at 85 able assumptions. Reserve levels must FR 49568,Aug.13,2020] be analyzed and updated at least bien- §200.448 Intellectual property. nially for each major risk being in- sured and take into account any rein- (a) Patent costs. (1) The following surance, coinsurance, etc. Reserve ley- costs related to securing patents and els related to employee-related cov- copyrights are allowable: erages will normally be limited to the (i) Costs of preparing disclosures, re- value of claims: ports, and other documents required by (A) Submitted and adjudicated but the Federal award, and of searching the not paid; art to the extent necessary to make such disclosures; (B) Submitted but not adjudicated; (ii) Costs of preparing documents and and any other patent costs in connection (C)Incurred but not submitted. with the filing and prosecution of a (ii) Reserve levels in excess of the United States patent application where amounts based on the above must be title or royalty-free license is required identified and justified in the,cost allo- by the Federal Government to be con- cation plan or indirect cost rate pro- veyed to the Federal Government; and posal. (iii) General counseling services re- (4) Accounting records, actuarial lating to patent and copyright matters, studies, and cost allocations (or bil- such as advice on patent and copyright lings) must recognize any significant laws, regulations, clauses, and em- differences due to types of insured risk ployee intellectual property agree- and losses generated by the various in- ments(See also§200.459). sured activities or agencies of the non- (2) The following costs related to se- Federal entity. If individual depart- curing patents and copyrights are unal- ments or agencies of the non-Federal lowable: entity experience significantly dif- (i) Costs of preparing disclosures, re- ferent levels of claims for a particular ports, and other documents, and of risk, those differences are to be recog- searching the art to make disclosures nized by the use of separate allocations not required by the Federal award; 182 OMB Guidance - §200.449 (ii) Costs in connection with filing acquire, construct, or replace capital and prosecuting any foreign patent ap- assets are allowable, subject to the plication, or any United States patent conditions in this section. application, where the Federal award (b) Capital assets. (1) Capital assets is does not require conveying title or a defined as noted in §200.1 of this part. royalty-free license to the Federal An asset cost includes (as applicable) Government. acquisition costs, construction costs, (b) Royalties and other costs for use of and other costs capitalized in accord- patents and copyrights. (1) Royalties on ance with GAAP. a patent or copyright or amortization (2) For non-Federal entity fiscal of the cost of acquiring by purchase a years beginning on or after January 1, copyright, patent, or rights thereto, necessary for the proper performance and intangible assets include patentssoftware of the Federal award are allowable un- ev computer software.jets, onlyFor tt- development projects, interest at- less: tributable to the portion of the project (i) The Federal Government already costs capitalized in accordance with has a license or the right to free use of GAAP is allowable. the patent or copyright. (c) Conditions for all non-Federal enti- (ii) The patent or copyright has been adjudicated to be invalid, or has been ties. (1)The non-Federal entity uses the administratively determined to be in- capital assets in support of Federal valid. awards; (iii) The patent or copyright is con- (2) The allowable asset costs to ac- sidered to be unenforceable. quire facilities and equipment are lim- (iv) The patent or copyright is ex- ited to a fair market value available to pired. the non-Federal entity from an unre- (2) Special care should be exercised in lated(arm's length)third party. determining reasonableness where the (3) The non-Federal entity obtains royalties may have been arrived at as a the financing via an arm's-length result of less-than-arm's-length bar- transaction(that is, a transaction with gaining,such as: an unrelated third party); or claims re- (i) Royalties paid to persons, includ- imbursement of actual interest cost at ing corporations, affiliated with the a rate available via such a transaction. non-Federal entity. (4) The non-Federal entity limits (ii) Royalties paid to unaffiliated claims for Federal reimbursement of parties, including corporations, under interest costs to the least expensive al- an agreement entered into in con- ternative. For example, a lease con- templation that a Federal award would tract that transfers ownership by the be made. end of the contract may be determined (iii) Royalties paid under an agree- less costly than purchasing through ment entered into after a Federal other types of debt financing, in which award is made to a non-Federal entity. case reimbursement must be limited to (3) In any case involving a patent or the amount of interest determined if copyright formerly owned by the non- leasing had been used. Federal entity, the amount of royalty (5) The non-Federal entity expenses allowed must not exceed the cost which or capitalizes allowable interest cost in would have been allowed had the non- accordance with GAAP. Federal entity retained title thereto. (6) Earnings generated by the invest- [78 FR 78608, Dec. 26, 2013, as amended at 79 ment of borrowed funds pending their FR 75886, Dec. 19, 2014; 85 FR 49569, Aug. 13, disbursement for the asset costs are 2020] used to offset the current period's§200.449 Interest. al- lowable interest cost, whether that cost is expensed or capitalized. Earn- (a) General. Costs incurred for inter- ings subject to being reported to the est on borrowed capital, temporary use Federal Internal Revenue Service of endowment funds, or the use of the under arbitrage requirements are ex- non-Federal entity's own funds, how- cludable. ever represented, are unallowable. Fi- (7) The following conditions must nancing costs (including interest) to apply to debt arrangements over $1 183 §200.450 2 CFR Ch. II (1-1-21 Edition) million to purchase or construct facili- (c)(5), above) also applies to earnings ties, unless the non-Federal entity on debt service reserve funds. makes an initial equity contribution to (2) The non-Federal entity will nego- the purchase of 25 percent or more. For tiate the amount of allowable interest this purpose, "initial equity contribu- cost related to the acquisition of facili- tion" means the amount or value of ties with asset costs of $1 million or contributions made by the non-Federal more, as outlined in paragraph (c)(7) of entity for the acquisition of facilities this section. For this purpose, a non- prior to occupancy. Federal entity must consider only cash (i) The non-Federal entity must re- inflows and outflows attributable to duce claims for reimbursement of in- that portion of the real property used terest cost by an amount equal to im- for Federal awards. puted interest earnings on excess cash (e) Additional conditions for IHEs. flow attributable to the portion of the For costs to be allowable, the IHE facility used for Federal awards. must have incurred the interest costs (ii) The non-Federal entity must im- after July 1, 1982, in connection with acquisitions of capital assets that oc- pute interest on excess cash flow as fol- curred after that date. lows: (f) Additional condition for nonprofit (A) Annually, the non-Federal entity organizations. For costs to be allow- must prepare a cumulative (from the able, the nonprofit organization in- inception of the project) report of curred the interest costs after Sep- monthly cash inflows and outflows, re- tember 29, 1995, in connection with ac- gardless of the funding source. For this quisitions of capital assets that oc- purpose, inflows consist of Federal re- curred after that date. imbursement for depreciation, amorti- (g) The interest allowability provi- zation of capitalized construction in- sions of this section do not apply to a terest, and annual interest cost. Out- nonprofit organization subject to "full flows consist of initial equity contribu- coverage" under the Cost Accounting tions, debt principal payments(less the Standards (CAS), as defined at 48 CFR pro-rata share attributable to the cost 9903.201-2(a). The non-Federal entity's of land), and interest payments. Federal awards are instead subject to (B)To compute monthly cash inflows CAS 414 (48 CFR 9904.414), "Cost of and outflows, the non-Federal entity Money as an Element of the Cost of Fa- , must divide the annual amounts deter- cilities Capital", and CAS 417 (48 CFR mined in step (i) by the number of 9904.417), "Cost of Money as an Element months in the year (usually 12) that of the Cost of Capital Assets Under the building is in service. Construction". (C) For any month in which cumu- [78 FR 78608, Dec. 26, 2013, as amended at 80 lative cash inflows exceed cumulative FR 54409, Sept. 10, 2015; 85 FR 49569, Aug. 13, outflows, interest must be calculated 2020] on the excess inflows for that month and be treated as a reduction to allow- §200.450 Lobbying. able interest cost. The rate of interest (a)The cost of certain influencing ac- to be used must be the three-month tivities associated with obtaining Treasury bill closing rate as of the last grants, contracts, or cooperative agree- business day of that month. ments, or loans is an unallowable cost. (8) Interest attributable to a fully de- Lobbying with respect to certain preciated asset is unallowable. grants, contracts, cooperative agree- (d) Additional conditions for states, ments, and loans is governed by rel- local governments and Indian tribes. evant statutes, including among oth- For costs to be allowable, the non-Fed- ers, the provisions of 31 U.S.C. 1352, as eral entity must have incurred the in- well as the common rule, "New Re- terest costs for buildings after October strictions on Lobbying" published on 1, 1980, or for land and equipment after February 26, 1990,including definitions, September 1,1995. and the Office of Management and (1) The requirement to offset interest Budget "Governmentwide Guidance for earned on borrowed funds against cur- New Restrictions on Lobbying" and no- rent allowable interest cost (paragraph tices published on December 20, 1989, 184 l- OMB Guidance §200.450 June 15, 1990, January 15, 1992, and Jan- sions or committee hearings, gathering uary 19, 1996. information regarding legislation, and (b) Executive lobbying costs. Costs in- analyzing the effect of legislation, curred in attempting to improperly in- when such activities are carried on in fluence either directly or indirectly, an support of or in knowing preparation employee or officer of the executive for an effort to engage in unallowable branch of the Federal Government to lobbying. give consideration or to act regarding a (2) The following activities are ex- Federal award or a regulatory matter cepted from the coverage of paragraph are unallowable. Improper influence (c)(1)of this section: means any influence that induces or (i) Technical and factual presen- tends to induce a Federal employee or tations on topics directly related to officer to give consideration or to act the performance of a grant, contract, regarding a Federal award or regu- or other agreement (through hearing latory matter on any basis other than testimony, statements, or letters to the merits of the matter. the Congress or a state legislature, or (c) In addition to the above, the fol- subdivision, member, or cognizant staff lowing restrictions are applicable to member thereof),in response to a docu- nonprofit organizations and IHEs: mented request (including a Congres- (1) Costs associated with the fol- sional Record notice requesting testi- lowing activities are unallowable: mony or statements for the record at a (i) Attempts to influence the out- regularly scheduled hearing) made by comes of any Federal, state, or local the non-Federal entity's member of election, referendum, initiative, or congress, legislative body or a subdivi- similar procedure, through in-kind or sion, or a cognizant staff member cash contributions, endorsements, pub- thereof, provided such information is licity,or similar activity; readily obtainable and can be readily (ii) Establishing, administering, con- put in deliverable form, and further tributing to, or paying the expenses of put in deliverable form, and further a political party, campaign, political provided that costs under this section action committee, or other organiza- for travel, lodging or meals are unal- tion established for the purpose of in- loveable unless incurred to offer testi- fluencing the outcomes of elections in mony at a regularly scheduled Congres- the United States; sional hearing pursuant to a written (iii)Any attempt to influence: request for such presentation made by (A) The introduction of Federal or the Chairman or Ranking Minority state legislation; Member of the Committee or Sub- (B) The enactment or modification of committee conducting such hearings; any pending Federal or state legisla- (ii) Any lobbying made unallowable tion through communication with any by paragraph (c)(1)(iii) of this section member or employee of the Congress or to influence state legislation in order state legislature (including efforts to to directly reduce the cost, or to avoid influence state or local officials to en- material impairment of the non-Fed- gage in similar lobbying activity); eral entity's authority to perform the (C)The enactment or modification of grant, contract, or other agreement; or any pending Federal or state legisla- (iii) Any activity specifically author- tion by preparing, distributing, or ized by statute to be undertaken with using publicity or propaganda, or by funds from the Federal award. urging members of the general public, (iv) Any activity excepted from the or any segment thereof, to contribute definitions of "lobbying" or "influ- to or participate in any mass dem- encing legislation" by the Internal onstration, march, rally, fund raising Revenue Code provisions that require drive, lobbying campaign or letter nonprofit organizations to limit their writing or telephone campaign; or participation in direct and "grass (D) Any government official or em- roots" lobbying activities in order to ployee in connection with a decision to retain their charitable deduction sta- sign or veto enrolled legislation; tus and avoid punitive excise taxes, (iv) Legislative liaison activities, in- I.R.C. §§501(c)(3), 501(h), 4911(a), includ- cluding attendance at legislative ses- ing: 185 §200.451 2 CFR Ch. II (1-1-21 Edition) (A) Nonpartisan analysis, study, or any significant questions or disagree- research reports; ments concerning the interpretation or (B) Examinations and discussions of application of this section. Any such broad social, economic, and similar advance resolutions must be binding in problems;and any subsequent settlements, audits, or (C) Information provided upon re- investigations with respect to that quest by a legislator for technical ad- grant or contract for purposes of inter- vice and assistance, as defined by I.R.C. pretation of this part, provided, how- §4911(d)(2) and 26 CFR 56.4911-2(c)(1)- ever, that this must not be construed (c)(3). to prevent a contractor or non-Federal (v) When a non-Federal entity seeks entity from contesting the lawfulness reimbursement for indirect (F&A) of such a determination. costs, total lobbying costs must be sep- arately identified in the indirect(F&A) [78 FR 78608, Dec. 26, 2013, as amended at 85 cost rate proposal, and thereafter FR 49569,Aug.13,2020] treated as other unallowable activity costs in accordance with the proce- §200.451 Losses on other awards or dures of§200.413. contracts. (vi)The non-Federal entity must sub- Any excess of costs over income mit as part of its annual indirect under any other award or contract of (F&A)cost rate proposal a certification any nature is unallowable. This in- that the requirements and standards of eludes, but is not limited to, the non- this section have been complied with. (See also§200.415.) Federal entity's contributed portion by reason of cost-sharing agreements or (vii)(A)Time logs, calendars, or simi- any under-recoveries through negotia- lar records are not required to be cre- ated for purposes of complying with tion of flat amounts for indirect (F&A) the record keeping•,requirements in costs. Also, any excess of costs over rau- ed §200.302 with respect to lobbying costs thorized funding levels transferred during any particular calendar month from any award or contract to another when: award or contract is unallowable. All (1)The employee engages in lobbying losses are not allowable indirect (F&A) (as defined in paragraphs (c)(1) and costs and are required to be included in (c)(2) of this section) 25 percent or less the appropriate indirect cost rate base of the employee's compensated hours of for allocation of indirect costs. employment during that calendar month;and §200.452 Maintenance and repair (2)Within the preceding five-year pe- costs. riod, the non-Federal entity has not Costs incurred for utilities, insur- materially misstated allowable or un- ance, security, necessary maintenance, allowable costs of any nature, includ- janitorial services, repair, or upkeep of ing legislative lobbying costs. buildings and equipment (including (B) When conditions in paragraph Federal property unless otherwise pro- (c)(2)(vii)(A)(1) and (2) of this section vided for)which neither add to the per- are met, non-Federal entities are not manent value of the property nor ap- required to establish records to support preciably prolong its intended life, but the allowability of claimed costs in ad- keep it in an efficient operating condi- dition to records already required or tion, are allowable. Costs incurred for maintained. Also, when conditions in improvements which add to the perma- paragraphs (c)(2)(vii)(A)(1) and (2) of nent value of the buildings and equip- this section are met, the absence of time logs, calendars, or similar records ment or appreciably prolong their in- will not serve as a basis for disallowing tended life must be treated as capital costs by contesting estimates of lob- expenditures (see §200.439). These costs hying time spent by employees during are only allowable to the extent not a calendar month. paid through rental or other agree- (viii) The Federal awarding agency ments. must establish procedures for resolving [85 FR 49569,Aug.13,2020] in advance, in consultation with OMB, 186 OMB Guidance §200.458 §200.453 Materials and supplies costs, §200.455 Organization costs. including costs of computing de- Costs such as incorporation fees, bro- vices. kers' fees,fees to promoters, organizers (a) Costs incurred for materials, sup- or management consultants, attorneys, plies, and fabricated parts necessary to accountants, or investment counselor, carry out a Federal award are allow- whether or not employees of the non- able. Federal entity in connection with es- (b) Purchased materials and supplies tablishment or reorganization of an or- must be charged at their actual prices, ganization, are unallowable except net of applicable credits. Withdrawals with prior approval of the Federal from general stores or stockrooms awarding agency. must be charged at their actual net cost under any recognized method of §200.456 Participant support costs. pricing inventory withdrawals, consist- Participant support costs as defined ently applied. Incoming transportation in §200.1 are allowable with the prior charges are a proper part of materials approval of the Federal awarding agen- and supplies costs. cy. (c) Materials and supplies used for the performance of a Federal award [85 FR 49569,Aug.13,2020] may be charged as direct costs. In the §200.457 Plant and security costs. specific case of computing devices, charging as direct costs is allowable for Necessary and reasonable expenses devices that are essential and allo- incurred for protection and security of cable, but not solely dedicated, to the facilities, personnel,and work products performance of a Federal award. are allowable. Such costs include, but (d) Where federally-donated or fur- are not limited to, wages and uniforms nished materials are used in per- of personnel engaged in security activi- forming the Federal award, such mate- ties; equipment; barriers; protective rials will be used without charge. (non-military)gear, devices, and equip- ment; contractual security services; [78 FR 78608, Dec. 26, 2013, as amended at 79 FR 75887,Dec.19,2014] and consultants. Capital expenditures for plant security purposes are subject §200.454 Memberships, subscriptions, to§200.439. and professional activity costs. [85 FR 49569,Aug.13,2020] (a) Costs of the non-Federal entity's membership in business, technical, and §200.455 Pre-award costs. professional organizations are allow- Pre-award costs are those incurred able. prior to the effective date of the Fed- (b) Costs of the non-Federal entity's eral award or subaward directly pursu- subscriptions to business, professional, ant to the negotiation and in anticipa- and technical periodicals are allowable. tion of the Federal award where such (c) Costs of membership in any civic costs are necessary for efficient and or community organization are allow- timely performance of the scope of able with prior approval by the Federal work. Such costs are allowable only to awarding agency or pass-through enti- the extent that they would have been ty. allowable if incurred after the date of (d) Costs of membership in any coun- the Federal award and only with the try club or social or dining club or or- written approval of the Federal award- ganization are unallowable. ing agency. If charged to the award, (e) Costs of membership in organiza- these costs must be charged to the ini- tions whose primary purpose is lob- tial budget period of the award, unless bying are unallowable. See also otherwise specified by the Federal §200.450. awarding agency or pass-through enti- [78 FR 78608, Dec. 26, 2013, as amended at 85 ty. FR 49569,Aug.13,2020] [85 FR 49569,Aug.13,2020] 187 §200.459 2 CFR Ch. II (1-1-21 Edition) §200.459 Professional service costs. by evidence of bona fide services avail- (a) Costs of professional and consult- antable or rendered. services rendered by persons who [78 FR 78608, Dec. 26, 2013, as amended at 85 are members of a particular profession FR 49569,Aug.13,2020] or possess a special skill, and who are §200.460 Proposal costs. not officers or employees of the non- Federal entity, are allowable, subject Proposal costs are the costs of pre- to paragraphs (b)and (c) of this section paring bids, proposals, or applications when reasonable' in relation to the on potential Federal and non-Federal services rendered and when not contin- awards or projects, including the devel- gent upon recovery of the costs from opment of data necessary to support the Federal Government. In addition, the non-Federal entity's bids or pro- legal and related services are limited posals. Proposal costs of the current accounting period of both successful under§200.435. and unsuccessful bids and proposals (b)In determining the allowability of normally should be treated as indirect costs in a particular case,no single fac- (F&A) costs and allocated currently to tor or any special combination of fac- all activities of the non-Federal entity. tors is necessarily determinative. How- No proposal costs of past accounting ever, the following factors are relevant: periods will be allocable to the current (1) The nature and scope of the serv- period. ice rendered in relation to the service required. §200.461 Publication and printing (2) The necessity of contracting for costs. the service, considering the non-Fed- (a) Publication costs for electronic eral entity's capability in the par- and print media, including distribu- ticular area. tion, promotion, and general handling (3) The past pattern of such costs, are allowable. If these costs are not particularly in the years prior to Fed- identifiable with a particular cost ob- eral awards. jective, they should be allocated as in- (4) The impact of Federal awards on direct costs to all benefiting activities the non-Federal entity's business (i.e., of the non-Federal entity. what new problems have arisen). (b) Page charges for professional (5)Whether the proportion of Federal journal publications are allowable work to the non-Federal entity's total where: business is such as to influence the (1) The publications report work sup- non-Federal entity in favor of incur- ported by the Federal Government; and ring the cost, particularly where the (2)The charges are levied impartially services rendered are not of a con- on all items published by the journal, tinuing nature and have little relation- whether or not under a Federal award. ship to work under Federal awards. (3)r The non-Federalderalwr duringenity may charge the Federal award close- (6) Whether the service can be per- out for the costs of publication or shar- formed more economically by direct ing of research results if the costs are employment rather than contracting. not incurred during the period of per- (7) The qualifications of the indi- formalSice of the Federal award. If vidual or concern rendering the service charged to the award, these costs must and the customary fees charged, espe- be charged to the final budget period of cially on non-federally funded activi- the award, unless otherwise specified ties. by the Federal awarding agency. (8) Adequacy of the contractual [78 FR 78608, Dec. 26, 2013, as amended at 85 agreement for the service(e.g., descrip- FR 49569,Aug.13,2020] tion of the service, estimate of time re- quired, rate of compensation, and ter- §200.462 Rearrangement and recon- mination provisions). version costs. (c) In addition to the factors in para- (a) Costs incurred for ordinary and graph (b) of this section, to be allow- normal rearrangement and alteration able, retainer fees must be supported of facilities are allowable as indirect 188 OMB Guidance §200.464 costs. Special arrangements and alter- that may be proposed as a direct cost. ations costs incurred specifically for a Since short-term visas are issued for a Federal award are allowable as a direct specific period and purpose, they can be cost with the prior approval of the Fed- clearly identified as directly connected eral awarding agency or pass-through to work performed on a Federal award. entity. For these costs to be directly charged (b) Costs incurred in the restoration to a Federal award, they must: or rehabilitation of the non-Federal en- (1) Be critical and necessary for the tity's facilities to approximately the conduct of the project; same condition existing immediately (2) Be allowable under the applicable prior to commencement of Federal cost principles; awards, less costs related to normal (3) Be consistent with the non-Fed- wear and tear,are allowable. eral entity's cost accounting practices §200.463 Recruiting costs. and non-Federal entity policy;and (4) Meet the definition of "direct (a) Subject to paragraphs (b) and (c) cost" as described in the applicable of this section, and provided that the cost principles. size of the staff recruited and main- [98 FR 78608, Dec. 26, 2013, as amended at 79 tamed is in keeping with workload re- FR 75887, Dec. 19, 2014; 85 FR 49569, Aug. 13, quirements, costs of"help wanted" ad- 2020] vertising, operating costs of an em- ployment office necessary to secure §200.464 Relocation costs of employ- and maintain an adequate staff, costs ees. of operating an aptitude and edu- (a) Relocation costs are costs inci- cational testing program, travel costs dent to the permanent change of duty of employees while engaged in recruit- assignment (for an indefinite period or ing personnel, travel costs of appli- for a stated period of not less than 12 cants for interviews for prospective months) of an existing employee or employment, and relocation costs in- upon recruitment of a new employee. curred incident to recruitment of new Relocation costs are allowable, subject employees, are allowable to the extent to the limitations described in para- that such costs are incurred pursuant graphs (b), (c), and (d) of this section, to the non-Federal entity's standard provided that: recruitment program. Where the non- (1) The move is for the benefit of the Federal entity uses employment agen- employer. cies, costs not in excess of standard (2) Reimbursement to the employee commercial rates for such services are is in accordance with an established allowable. written policy consistently followed by (b) Special emoluments, fringe bene- the employer. fits, and salary allowances incurred to (3) The reimbursement does not ex- attract professional personnel that do ceed the employee's actual (or reason- not meet the test of reasonableness or ably estimated)expenses. do not conform with the established (b) Allowable relocation costs for practices of the non-Federal entity,are current employees are limited to the unallowable. following: (c) Where relocation costs incurred (1) The costs of transportation of the incident to recruitment of a new em- employee, members of his or her imme- ployee have been funded in whole or in diate family and his household, and part to a Federal award, and the newly personal effects to the new location. hired employee resigns for reasons (2) The costs of finding a new home, within the employee's control within 12 such as advance trips by employees and months after hire, the non-Federal en- spouses to locate living quarters and City will be required to refund or credit temporary lodging during the transi- the Federal share of such relocation tion period, up to maximum period of costs to the Federal Government. See 30 calendar days. also§200.464. (3) Closing costs, such as brokerage, (d) Short-term, travel visa costs (as legal, and appraisal fees, incident to opposed to longer-term, immigration the disposition of the employee's visas) are generally allowable expenses former home. These costs, together 189 §200.465 2 CFR Ch. II (1-1-21 Edition) with those described in (4), are limited this section, rental costs are allowable to 8 per cent of the sales price of the to the extent that the rates are reason- employee's former home. able in light of such factors as: rental (4) The continuing costs of ownership costs of comparable property, if any; (for up to six months) of the vacant market conditions in the area; alter- former home after the settlement or natives available; and the type, life ex- lease date of the employee's new per- pectancy, condition, and value of the manent home, such as maintenance of property leased. Rental arrangements buildings and grounds (exclusive of fix- should be reviewed periodically to de- ing-up expenses), utilities, taxes, and termine if circumstances have changed property insurance. and other options are available. (5) Other necessary and reasonable (b)Rental costs under "sale and lease expenses normally incident to reloca- back" arrangements are allowable only tion, such as the costs of canceling an up to the amount that would be al- unexpired lease, transportation of per- lowed had the non-Federal entity con- sonal property, and purchasing insur- tinued to own the property. This ance against loss of or damages to per- amount would include expenses such as sonal property. The cost of canceling depreciation, maintenance, taxes, and an unexpired lease is limited to three insurance. times the monthly rental. (c) Rental costs under "less-than- (c)Allowable relocation costs for new arm's-length" leases are allowable only employees are limited to those de- up to the amount(as explained in para- scribed in paragraphs (b)(1) and (2) of graph (b) of this section). For this pur- this section. When relocation costs in- pose, a less-than-arm's-length lease is curred incident to the recruitment of one under which one party to the lease new employees have been charged to a agreement is able to control or sub- Federal award and the employee re- stantially influence the actions of the signs for reasons within the employee's other. Such leases include, but are not control within 12 months after hire, limited to those between: the non-Federal entity must refund or enti- credit the Federal Government for its (1) Divisions of the non-Federal share of the cost. If dependents are not ty;(2) permitted at the location for any rea- The non-Federal entity under offi- son and the costs do not include costs common control through common of transporting household goods, ithe cers, directors, or members;and costs of travel to an overseas location (3) The non-Federal entity and a di- must be considered travel costs in ac- rector, trustee, officer, or key em- cordance with §200.474 Travel costs, ployee of the non-Federal entity or an and not this relocations costs of em- immediate family member, either di- ployees(See also§200.464). rectly or through corporations, trusts, (d) The following costs related to re- or similar arrangements in which they location are unallowable: hold a controlling interest. For exam- (1) Fees and other costs associated ple, the non-Federal entity may estab- with acquiring a new home. lish a separate corporation for the sole (2) A loss on the sale of a former purpose of owning property and leasing home. it back to the non-Federal entity. (3) Continuing mortgage principal (4) Family members include one and interest payments on a home being party with any of the following rela- sold. tionships to another party: (4) Income taxes paid by an employee (i)Spouse,and parents thereof; related to reimbursed relocation costs. (ii)Children,and spouses thereof; [78 FR 78608, Dec. 26, 2013, as amended at 79 (iii)Parents, and spouses thereof; FR 75887, Dec. 19, 2014; 85 FR 49570, Aug. 13, (iv)Siblings, and spouses thereof; 2020] (v) Grandparents and grandchildren, and spouses thereof; §200.465 Rental costs of real property (vi) Domestic partner and parents and equipment. thereof, including domestic partners of (a) Subject to the limitations de- any individual in 2 through 5 of this scribed in paragraphs (b) through (d) of definition;and 190 OMB Guidance §200.466 (vii) Any individual related by blood for purposes such as the home office or affinity whose close association with workspace is unallowable. the employee is the equivalent of a [78 FR 78608, Dec. 26, 2013, as amended at 85 family relationship. FR 49569,Aug.13,2020] (5) Rental costs under leases which are required to be treated as capital §200.466 Scholarships and student aid leases under GAAP are allowable only costs. up to the amount(as explained in para graph (b) of this section) that would be (a) Costs of scholarships, fellowships, allowed had the non-Federal entity and other programs of student aid at purchased the property on the date the IHEs are allowable only when the pur lease agreement was executed. The pro- pose of the Federal award is to provide visions of GAAP must be used to deter- training to selected participants and mine whether a lease is a capital lease. the charge is approved by the Federal Interest costs related to capital leases awarding agency. However, tuition re- are allowable to the extent they meet mission and other forms of compensa- the criteria in §200.449 Interest. Unal- tion paid as, or in lieu of, wages to stu- lowable costs include amounts paid for dents performing necessary work are profit, management fees, and taxes allowable provided that: that would not have been incurred had (1) The individual is conducting ac- the non-Federal entity purchased the tivities necessary to the Federal property. award; (6) The rental of any property owned (2) Tuition remission and other sup by any individuals or entities affiliated port are provided in accordance with with the non-Federal entity, to include established policy of the IHE and con- commercial or residential real estate, sistently provided in a like manner to for purposes such as the home office students in return for similar activities workspace is unallowable. conducted under Federal awards as (d) Rental costs under leases which well as other activities; and are required to be accounted for as a fi- (3) During the academic period, the nanced purchase under GASB stand- student is enrolled in an advanced Be- ards or a finance lease under FASB gree program at a non-Federal entity standards under GAAP are allowable or affiliated institution and the activi- only up to the amount (as explained in ties of the student in relation to the paragraph (b) of this section) that Federal award are related to the degree would be allowed had the non-Federal program; entity purchased the property on the (4)The tuition or other payments are date the lease agreement was executed. reasonable compensation for the work Interest costs related to these leases performed and are conditioned explic- are allowable to the extent they meet itly upon the performance of necessary the criteria in §200.449. Unallowable work; and costs include amounts paid for profit, (5) It is the IHE's practice to simi- management fees,and taxes that would larly compensate students under Fed- not have been incurred had the non- eral awards as well as other activities. Federal entity purchased the property. (b) Charges for tuition remission and (e) Rental or lease payments are al- other forms of compensation paid to lowable under lease contracts where students as, or in lieu of, salaries and the non-Federal entity is required to wages must be subject to the reporting recognize an intangible right-to-use requirements in §200.430, and must be lease asset (per GASB) or right of use treated as direct or indirect cost in ac- operating lease asset (per FASB) for cordance with the actual work being purposes of financial reporting in ac- performed. Tuition remission may be cordance with GAAP. charged on an average rate basis. See (f) The rental of any property owned also§200.431. by any individuals or entities affiliated [78 FR 78608, Dec. 26, 2013, as amended at 85 with the non-Federal entity, to include FR 49569,Aug.13,2020] commercial or residential real estate, 191 §200.467 2 CFR Ch. II (1-1-21 Edition) §200.467 Selling and marketing costs. §200.469 Student activity costs. Costs of selling and marketing any Costs incurred for intramural activi- products or services of the non-Federal ties, student publications, student entity (unless allowed under §200.421) clubs, and other student activities, are are unallowable, except as direct costs, unallowable, unless specifically pro- with prior approval by the Federal vided for in the Federal award. awarding agency when necessary for §200.470 Taxes (including Value the performance of the Federal award. Added Tax). [85 FR 49570,Aug.13,2020] (a) For states, local governments and Indian tribes: §200.468 Specialized service facilities. (1)Taxes that a governmental unit is (a) The costs of services provided by legally required to pay are allowable, highly complex or specialized facilities except for self-assessed taxes that dis operated by the non-Federal entity, proportionately affect Federal pro such as computing facilities, wind tun- grams or changes in tax policies that disproportionately affect Federal pro- nels, and reactors are allowable, pro- grams. vided the charges for the services meet (2) Gasoline taxes, motor vehicle the conditions of either paragraph (b) fees, and other taxes that are in effect or (c) of this section, and, in addition, user fees for benefits provided to the take into account any items of income Federal Government are allowable. or Federal financing that qualify as ap- (3) This provision does not restrict plicable credits under§200.406. the authority of the Federal awarding (b) The costs of such services, when agency to identify taxes where Federal material, must be charged directly to participation is inappropriate. Where applicable awards based on actual the identification of the amount of un- usage of the services on the basis of a allowable taxes would require an inor- schedule of rates or established meth- dinate amount of effort, the cognizant odology that: agency for indirect costs may accept a (1) Does not discriminate between ac- reasonable approximation thereof. tivities under Federal awards and other (b) For nonprofit organizations and activities of the non-Federal entity, in- IH•Es: eluding usage by the non-Federal enti (1) In general, taxes which the non- ty for internal purposes,and Federalientity is required to pay and which are paid or accrued in accord- (2)Is designed to recover only the ag- ance with GAAP, and payments made gregate costs of the services. The costs to local governments in lieu of taxes of each service must consist normally which are commensurate with the local of both its direct costs and its allocable government services received are al- share of all indirect (F&A) costs. Rates lowable,except for: must be adjusted at least biennially, (i) Taxes from which exemptions are and must take into consideration over/ available to the non-Federal entity di- under-applied costs of the previous pe- rectly or which are available to the riod(s). non-Federal entity based on an exemp- (c) Where the costs incurred for a tion afforded the Federal Government service are not material, they may be and, in the latter case, when the Fed- allocated as indirect(F&A)costs. eral awarding agency makes available (d) Under some extraordinary cir- the necessary exemption certificates, cumstances, where it is in the best in- (ii) Special assessments on land terest of the Federal Government and which represent capital improvements, the non-Federal entity to establish al- and ternative costing arrangements, such (iii)Federal income taxes. arrangements may be worked out with (2) Any refund of taxes, and any pay- the Federal cognizant agency for indi- ment to the non-Federal entity of in- rect costs. terest thereon, which were allowed as Federal award costs, will be credited [78 FR 78608, Dec. 26, 2013, as amended at 85 either as a cost reduction or cash re- FR 49569,Aug.13,2020] fund, as appropriate, to the Federal 192 OMB Guidance §200.472 Government. However, any interest ac- §200.472 Termination costs. tually paid or credited to an non-Fed- Termination of a Federal award gen- eral entity incident to a refund of tax, erally gives rise to the incurrence of interest, and penalty will be paid or costs, or the need for special treatment credited to the Federal Government of costs, which would not have arisen only to the extent that such interest had the Federal award not been termi- accrued over the period during which nated. Cost principles covering these the non-Federal entity has been reim- items are set forth in this section. bursed by the Federal Government for They are to be used in conjunction the taxes,interest, and penalties. with the other provisions of this part (c) Value Added Tax (VAT) Foreign in termination situations. taxes charged for the purchase of goods (a) The cost of items reasonably usa- or services that a non-Federal entity is ble on the non-Federal entity's other legally required to pay in country is an work must not be allowable unless the allowable expense under Federal non-Federal entity submits evidence awards. Foreign tax refunds or applica that it would not retain such items at de- ble credits under Federal awards rerer cost without sustaining a loss. In to receipts, or reduction of expendi- ablytiding whether such items are reason- tures,which operate to offset or reduce Federal us entity,ble on other work lo the non- tures, the Federal awarding expense items that are allocable to agency should consider the non-Federal Federal awards as direct or indirect entity's plans and orders for current costs. To the extent that such credits and scheduled activity. Contempora- accrued or received by the non-Federal neous purchases of common items by entity relate to allowable cost, these the non-Federal entity must be re- costs must be credited to the Federal garded as evidence that such items are awarding agency either as costs or cash reasonably usable on the non-Federal refunds. If the costs are credited back entity's other work. Any acceptance of to the Federal award, the non-Federal common items as allocable to the ter- entity may reduce the Federal share of minated portion of the Federal award costs by the amount of the foreign tax must be limited to the extent that the reimbursement, or where Federal quantities of such items on hand, in award has not expired, use the foreign transit, and on order are in excess of government tax refund for approved ac- the reasonable quantitative require- tivities under the Federal award with ments of other work. prior approval of the Federal awarding (b) If in a particular case, despite all agency. reasonable efforts by the non-Federal entity, certain costs cannot be discon- §200.471 Telecommunication costs and tinued immediately after the effective video surveillance costs. date of termination, such costs are (a) Costs incurred for telecommuni- generally allowable within the limita- tions set forth in this part, except that cations and video surveillance services any such costs continuing after termi- or equipment such as phones, internet, nation due to the negligent or willful video surveillance, cloud servers are al- failure of the non-Federal entity to dis- lowable except for the following cir- continue such costs must be unallow- cumstances: able. (b) Obligating or expending covered (c) Loss of useful value of special telecommunications and video surveil- tooling, machinery, and equipment is lance services or equipment or services generally allowable if: as described in§200.216 to: (1) Such special tooling, special ma- (1) Procure or obtain, extend or chinery, or equipment is not reason- renew a contract to procure or obtain; ably capable of use in the other work of (2) Enter into a contract (or extend the non-Federal entity, or renew a contract)to procure; or (2) The interest of the Federal Gov- (3)Obtain the equipment, services, or ernment is protected by transfer of systems. title or by other means deemed appro- priate by the Federal awarding agency [85 FR 49570,Aug.13,2020] (see also§200.313(d)), and 193 §200.473 2 CFR Ch. II (1-1-21 Edition) (3) The loss of useful value for any the amount allocated is otherwise con- one terminated Federal award is lim- sistent with the basic guidelines con- ited to that portion of the acquisition tained in§200.414. The indirect costs so cost which bears the same ratio to the allocated must exclude the same and total acquisition cost as the termi- similar costs claimed directly or indi- nated portion of the Federal award rectly as settlement expenses. bears to the entire terminated Federal [78 FR 78608, Dec. 26, 2013. Redesignated and award and other Federal awards for amended at 85 FR 49570,Aug.13,2020] which the special tooling, machinery, or equipment was acquired. §200.473 Training and education costs. (d) Rental costs under unexpired leases are generally allowable where The cost of training and education clearly shown to have been reasonably provided for employee development is necessary for the performance of the allowable. terminated Federal award less the re- [78 FR 78608,Dec.26,2013.Redesignated at 85 sidual value of such leases, if: FR 49570,Aug.13,2020] (1) The amount of such rental claimed does not exceed the reasonable §200.474 Transportation costs. use value of the property leased for the Costs incurred for freight, express, period of the Federal award and such cartage, postage, and other transpor- further period as may be reasonable, tation services relating either to goods and (2) The non-Federal entity makes all purchased, in process, or delivered, are reasonable efforts to terminate, assign, be wable. When such costs can invreaolved, be identified with the items involved, settle, or otherwise reduce the cost of they may be charged directly as trans- such lease. There also may be included portation costs or added to the cost of the cost of alterations of such leased such items. Where identification with property, provided such alterations the materials received cannot readily were necessary for the performance of be made, inbound transportation cost the Federal award, and of reasonable in- restoration required by the provisions may be charged cost to accountsthe ifappro the non- of the lease. direct (F&A) if the Federal entity follows a consistent, eq- (e) Settlement expenses including the uitable procedure in this respect. Out- following are generally allowable: bound freight, if reimbursable under (1) Accounting, legal, clerical, and the terms and conditions of the Federal similar costs reasonably necessary for: award, should be treated as a direct (i) The preparation and presentation cost. to the Federal awarding agency of set- tlement claims and supporting data [78 FR 78608,Dec.26,2013.Redesignated at 85 with respect to the terminated portion FR 49570,Aug.13,2020] of the Federal award, unless the termi- §200.47b Travel costs. nation is for cause (see subpart D, in- cluding§§200.339-200.343);and (a) General. Travel costs are the ex- (ii) The termination and settlement penses for transportation, lodging, sub- of subawards. sistence, and related items incurred by (2) Reasonable costs for the storage, employees who are in travel status on transportation, protection, and disposi- official business of the non-Federal en- tion of property provided by the Fed- tity. Such costs may be charged on an eral Government or acquired or pro- actual cost basis, on a per diem or duced for the Federal award. mileage basis in lieu of actual costs in- (f)Claims under subawards,including curred, or on a combination of the two, the allocable portion of claims which provided the method used is applied to are common to the Federal award and an entire trip and not to selected days to other work of the non-Federal enti- of the trip, and results in charges con- ty, are generally allowable. An appro- sistent with those normally allowed in priate share of the non-Federal entity's like circumstances in the non-Federal indirect costs may be allocated to the entity's non-federally-funded activities amount of settlements with contrac- and in accordance with non-Federal en- tors and/or subrecipients, provided that tity's written travel reimbursement 194 OMB Guidance §200.500 policies. Notwithstanding the provi- sive unrestricted accommodations sions of §200.444, travel costs of offi- class offered by commercial airlines cials covered by that section are allow- are unallowable except when such ac- able with the prior written approval of commodations would: the Federal awarding agency or pass- (i)Require circuitous routing; through entity when they are specifi- (ii) Require travel during unreason- cally related to the Federal award. able hours; (b) Lodging and subsistence. Costs in- (iii)Excessively prolong travel; curred by employees and officers for (iv) Result in additional costs that travel, including costs of lodging, other would offset the transportation say- subsistence, and incidental expenses, ings;or must be considered reasonable and oth- (v)Offer accommodations not reason- erwise allowable only to the extent ably adequate for the traveler's med- such costs do not exceed charges nor- ical needs. The non-Federal entity mally allowed by the non-Federal enti- must justify and document these condi- ty in its regular operations as the re- tions on a case-by-case basis in order sult of the non-Federal entity's written for the use of first-class or business- travel policy. In addition, if these costs class airfare to be allowable in such are charged directly to the Federal cases. award documentation must justify (2) Unless a pattern of avoidance is that: detected, the Federal Government will (1) Participation of the individual is generally not question a non-Federal necessary to the Federal award;and entity's determinations that cus- (2) The costs are reasonable and con- tomary standard airfare or other dis- sistent with non-Federal entity's es- count airfare is unavailable for specific tablished travel policy. trips if the non-Federal entity can (c)(1) Temporary dependent care demonstrate that such airfare was not costs (as dependent is defined in 26 available in the specific case. U.S.C. 152) above and beyond regular (f) Air travel by other than commercial dependent care that directly results carrier. Costs of travel by non-Federal from travel to conferences is allowable entity-owned, -leased, or -chartered provided that: aircraft include the cost of lease, char- (i)The costs are a direct result of the ter, operation (including personnel individual's travel for the Federal costs), maintenance, depreciation, in- award; surance, and other related Gosts. The (ii) The costs are consistent with the portion of such costs that exceeds the non-Federal entity's documented tray- cost of airfare as provided for in para- el policy for all entity travel;and graph (d) of this section, is unallow- (iii) Are only temporary during the able. travel period. [78 FR 78608, Dec. 26, 2013, as amended at 79 (2) Travel costs for dependents are FR 75887, Dec. 19, 2014. Redesignated and unallowable, except for travel of dura- amended at 85 FR 49570,Aug.13,2020] tion of six months or more with prior approval of the Federal awarding agen- §200.476 Trustees. cy. See also§200.432. Travel and subsistence costs of trust- (d) In the absence of an acceptable, ees(or directors)at IHEs and nonprofit written non-Federal entity policy re- garding travel costs, the rates and organizations are allowable. See also amounts established under 5 U.S.C. §200.475. 5701-11, ("Travel and Subsistence Ex- [85 FR 49571,Aug.13,2020] penses; Mileage Allowances"), or by the Administrator of General Services, Subpart F—Audit Requirements or by the President (or his or her des- ignee) pursuant to any provisions of GENERAL such subchapter must apply to travel under Federal awards (48 CFR 31.205- §200.500 Purpose. 46(a)). This part sets forth standards for ob- (e) Commercial air travel. (1) Airfare taining consistency and uniformity costs in excess of the basic least expen- among Federal agencies for the audit 195 • §200.501 2 CFR Ch. II (1-1-21 Edition) of non-Federal entities expending Fed- (f) Subrecipients and contractors. An eral awards. auditee may simultaneously be a re- cipient, a subrecipient, and a con- AUDITS tractor. Federal awards expended as a §200.501 Audit requirements. recipient or a subrecipient are subject to audit under this part. The payments (a)Audit required. A non-Federal enti- received for goods or services provided ty that expends$750,000 or more during as a contractor are not Federal awards. the non-Federal entity's fiscal year in consider- Federal awards must have a single or Section in determiningete set gth the rations whether pay- program-specific audit conducted for ments constitute a Federal award or a that year in accordance with the provi- sions of this part. payment for goods or services provided (b) Single audit. A non-Federal entity as a contractor. that expends $750,000 or more during (g) Compliance responsibility for con- the non-Federal entity's fiscal year in tractors. In most cases, the auditee's Federal awards must have a single compliance responsibility for contrac- audit conducted in accordance with tors is only to ensure that the procure- §200.514 except when it elects to have a ment, receipt, and payment for goods program-specific audit conducted in ac- and services comply with Federal stat- cordance with paragraph(c) of this sec- utes, regulations, and the terms and tion. conditions of Federal awards. Federal (c) Program-specific audit election. award compliance requirements nor- When an auditee expends Federal mally do not pass through to contrac- awards under only one Federal pro- tors. However, the auditee is respon- gram (excluding R&D) and the Federal sible for ensuring compliance for pro- program's statutes, regulations, or the curement transactions which are struc- terms and conditions of the Federal tured such that the contractor is re- award do not require a financial state- sponsible for program compliance or ment audit of the auditee, the auditee the contractor's records must be re- may elect to have a program-specific li- audit conducted in accordance with viewed Also,to determinethese program procurementconve §200.507. A program-specific audit may ante. n when mjorpro- not be elected for R&D unless all of the transactions relate to a major pro Federal awards expended were received gram, the scope of the audit must in- from the same Federal agency, or the clude determining whether these trai�s- same Federal agency and the same actions are in compliance with Federal pass-through entity, and that Federal statutes, regulations, and the terms agency, or pass-through entity in the and conditions of Federal awards. case of a subrecipient, approves in ad- (h) For-profit subrecipient. Since this vance a program-specific audit. part does not apply to for-profit sub- (d) Exemption when Federal awards ex- recipients, the pass-through entity is pended are less than$750,000. A non-Fed- responsible for establishing require- eral entity that expends less than ments, as necessary, to ensure compli- $750,000 during the non-Federal entity's ance by for-profit subrecipients. The fiscal year in Federal awards is exempt agreement with the for-profit sub- from Federal audit requirements for recipient must describe applicable that year, except as noted in §200.503, compliance requirements and the for- but records must be available for re- profit subrecipient's compliance re- view or audit by appropriate officials sponsibility. Methods to ensure compli- of the Federal agency,pass-through en- ance for Federal awards made to for- tity, and Government Accountability profit subrecipients may include pre- Office(GAO). award audits, monitoring during the (e) Federally Funded Research and De- agreement, and post-award audits. See velopment Centers (FFRDC). Manage- also§200.332. ment of an auditee that owns or oper- ates a FFRDC may elect to treat the [78 FR 78608, Dec. 26, 2013, as amended at 79 FFRDC as a separate entity for pur- FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, poses of this part. 2020] 196 OMB Guidance §200.503 §200.502 Basis for determining Fed- awards expended under this part when eral awards expended. the Federal statutes, regulations, and (a) Determining Federal awards ex- the terms and conditions of Federal pended. The determination of when a awards pertaining to such loans impose Federal award is expended must be no continuing compliance require- based on when the activity related to ments other than to repay the loans. the Federal award occurs. Generally, (e) Endowment funds. The cumulative the activity pertains to events that re- balance of Federal awards for endow- quire the non-Federal entity to comply ment funds that are federally re- with Federal statutes, regulations, and stricted are considered Federal awards the terms and conditions of Federal expended in each audit period in which awards, such as: expenditure/expense the funds are still restricted. transactions associated with awards in- (f) Free rent. Free rent received by 'eluding grants, cost-reimbursement itself is not considered a Federal award contracts under the FAR, compacts expended under this part. However,free with Indian Tribes, cooperative agree- rent received as part of a Federal ments, and direct appropriations; the award to carry out a Federal program disbursement of funds to subrecipients; must be included in determining Fed- the use of loan proceeds under loan and eral awards expended and subject to loan guarantee programs; the receipt of audit under this part. property; the receipt of surplus prop- (g) Valuing non-cash assistance. Fed- erty; the receipt or use of program in- eral non-cash assistance, such as free come; the distribution or use of food rent, food commodities, donated prop- commodities; the disbursement of erty, or donated surplus property, must amounts entitling the non-Federal en- be valued at fair market value at the tity to an interest subsidy; and the pe- time of receipt or the assessed value riod when insurance is in force. provided by the Federal agency. (b) Loan and loan guarantees (loans). (h) Medicare. Medicare payments to a Since the Federal Government is at non-Federal entity for providing pa- risk for loans until the debt is repaid, tient care services to Medicare-eligible the following guidelines must be used individuals are not considered Federal to calculate the value of Federal awards expended under this part. awards expended under loan programs, (i) Medicaid. Medicaid payments to a except as noted in paragraphs (c) and subrecipient for providing patient care (d)of this section: services to Medicaid-eligible individ- (1) Value of new loans made or re- uals are not considered Federal awards ceived during the audit period;plus expended under this part unless a state (2) Beginning of the audit period bal- requires the funds to be treated as Fed- ance of loans from previous years for eral awards expended because reim- which the Federal Government imposes bursement is on a cost-reimbursement continuing compliance requirements; basis. plus Na- (3) Any interest subsidy, cash, or ad- (j)tional Certain Unionloan providedminiby the. For ministrative cost allowance received. purposes Credit part,A loans m (c) Loan and loan guarantees (loans) at e of this loans made from IHEs. When loans are made to students the National Creditand Centralnion Share Insur- IHEs. of an IHE but the IHE does not make Facilityace Fund a the a Liquidity ibu- the loans, then only the value of loans tio that are funded non-Federal nt entities made during the audit period must be are nots considered insured ederlawardsex- considered Federal awards expended in are not Federal that audit period. The balance of loans pended. for previous audit periods is not in- [78 FR 78608, Dec. 26, 2013, as amended at 79 eluded as Federal awards expended be- FR 75887,Dec.19,2014] cause the lender accounts for the prior balances. §200.503 Relation to other audit re- (d) Prior loan and loan guarantees quirements. (loans). Loans, the proceeds of which (a)An audit conducted in accordance were received and expended in prior with this part must be in lieu of any fi- years, are not considered Federal nancial audit of Federal awards which 197 §200.504 2 CFR Ch. II (1-1-21 Edition) a non-Federal entity is required to un- agency may request that an auditee dergo under any other Federal statute have a particular Federal program au- or regulation. To the extent that such dited as a major program in lieu of the audit provides a Federal agency with Federal awarding agency conducting or the information it requires to carry arranging for the additional audits. To out its responsibilities under Federal allow for planning, such requests statute or regulation, a Federal agency should be made at least 180 calendar must rely upon and use that informa- days prior to the end of the fiscal year tion. to be audited. The auditee, after con- (b) Notwithstanding subsection (a), a sultation with its auditor, should Federal agency, Inspectors General, or promptly respond to such a request by GAO may conduct or arrange for addi- informing the Federal awarding agency tional audits which are necessary to whether the program would otherwise carry out its responsibilities under be audited as a major program using Federal statute or regulation. The pro- the risk-based audit approach de- visions of this part do not authorize scribed in §200.518 and, if not, the esti- any non-Federal entity to constrain, in mated incremental cost. The Federal any manner, such Federal agency from awarding agency must then promptly carrying out or arranging for such ad- confirm to the auditee whether it ditional audits, except that the Federal wants the program audited as a major agency must plan such audits to not be program. If the program is to be au- duplicative of other audits of Federal dited as a major program based upon awards. Prior to commencing such an this Federal awarding agency request, audit, the Federal agency or pass- and the Federal awarding agency through entity must review the FAC agrees to pay the full incremental for recent audits submitted by the non- costs, then the auditee must have the Federal entity, and to the extent such program audited as a major program.A audits meet a Federal agency or pass- pass-through entity may use the provi- through entity's needs, the Federal sions of this paragraph for a sub- agency or pass-through entity must recipient. rely upon and use such audits. Any ad- [78 FR 78608, Dec. 26, 2013, as amended at 85 ditional audits must be planned and FR 49570,Aug.13,2020] performed in such a way as to build upon work performed, including the §200.504 Frequency of audits. audit documentation, sampling, and Except for the provisions for biennial testing already performed, by other audits provided in paragraphs (a) and auditors. (b) of this section, audits required by (c) The provisions of this part do not this part must be performed annually. limit the authority of Federal agencies Any biennial audit must cover both to conduct, or arrange for the conduct years within the biennial period. of, audits and evaluations of Federal (a) A state, local government, or In- awards, nor limit the authority of any dian tribe that is required by constitu- Federal agency Inspector General or tion or statute, in effect on January 1, other Federal official. For example, re- 1987, to undergo its audits less fre- quirements that may be applicable quently than annually, is permitted to under the FAR or CAS and the terms undergo its audits pursuant to this and conditions of a cost-reimbursement part biennially. This requirement must contract may include additional appli- still be in effect for the biennial period. cable audits to be conducted or ar- (b) Any nonprofit organization that ranged for by Federal agencies. had biennial audits for all biennial pe- (d)Federal agency to pay for additional riods ending between July 1, 1992, and audits. A Federal agency that conducts January 1, 1995, is permitted to under- or arranges for additional audits must, go its audits pursuant to this part bi- consistent with other applicable Fed- ennially. eral statutes and regulations, arrange for funding the full cost of such addi- §200.505 Sanctions. tional audits. In cases of continued inability or un- (e) Request for a program to be audited willingness to have an audit conducted as a major program. A Federal awarding in accordance with this part, Federal 198 OMB Guidance §200.507 agencies and pass-through entities Federal statutes, regulations, and the must take appropriate action as pro- terms and conditions of Federal awards vided in§200.339. that could have a direct and material [85 FR 49571,Aug.13,2020] effect on the Federal program con- sistent with the requirements of §200.506 Audit costs. §200.514(d)for a major program; See§200.425. (iv)Follow up on prior audit findings, perform procedures to assess the rea- [85 FR 49571,Aug.13,2020] sonableness of the summary schedule of prior audit findings prepared by the §200.507 Program-specific audits. auditee in accordance with the require- (a) Program-specific audit guide avail- ments of§200.511, and report, as a cur- able. In some cases; a program-specific rent year audit finding, when the audi- audit guide will be available to provide tor concludes that the summary sched- specific guidance to the auditor with ule of prior audit findings materially respect to internal controls, compli- misrepresents the status of any prior ance requirements, suggested audit audit finding; and procedures, and audit reporting re- (v) Report any audit findings con- quirements. A listing of current pro- sistent with the requirements of gram-specific audit guides can be found §200.516. in the compliance supplement, Part 8, (4) The auditor's report(s) may be in Appendix VI, Program-Specific Audit the form of either combined or sepa- Guides, which includes a website where rate reports and may be organized dif- a copy of the guide can be obtained. ferently from the manner presented in When a current program-specific audit this section. The auditor's report(s) guide is available, the auditor must must state that the audit was con- follow GAGAS and the guide when per- ducted in accordance with this part forming a program-specific audit. and include the following: (b) Program-specific audit guide not (i) An opinion (or disclaimer of opin- available. (1) When a current program- ion) as to whether the financial state- specific audit guide is not available, ment(s) of the Federal program is pre- the auditee and auditor must have ba- sented fairly in all material respects in sically the same responsibilities for the accordance with the stated accounting Federal program as they would have policies; for an audit of a major program in a (ii) A report on internal control re- single audit. lated to the Federal program, which (2) The auditee must prepare the fi- must describe the scope of testing of nancial statement(s) for the Federal internal control and the results of the program that includes, at a minimum, tests; a schedule of expenditures of Federal (iii)A report on compliance which in- awards for the program and notes that eludes an opinion (or disclaimer of describe the significant accounting opinion) as to whether the auditee policies used in preparing the schedule, complied, with laws, regulations, and a summary schedule of prior audit find- the terms and conditions of Federal ings consistent with the requirements awards which could have a direct and of §200.511(b), and a corrective action material effect on the Federal pro- plan consistent with the requirements gram;and of§200.511(c). (iv) A schedule of findings and ques- (3)The auditor must: tioned costs for the Federal program (i) Perform an audit of the financial that includes a summary of the audi- statement(s) for the Federal program tor's results relative to the Federal in accordance with GAGAS; program in a format consistent with (ii) Obtain an understanding of inter- §200.515(d)(1) and findings and ques- nal controls and perform tests of inter- tioned costs consistent with the re- nal controls over the Federal program quirements of§200.515(d)(3). consistent with the requirements of (c) Report submission for program-spe- §200.514(c)for a major program; cific audits. (1) The audit must be corn- (iii)Perform procedures to determine pleted and the reporting required by whether the auditee has complied with paragraph (c)(2) or (c)(3) of this section 199 §200.508 2 CFR Ch. II (1-1-21 Edition) submitted within the earlier of 30 cal- audit guide, or program statutes and endar days after receipt of the audi- regulations. tor's report(s), or nine months after [78 FR 78608, Dec. 26, 2013, as amended at 79 the end of the audit period, unless a FR 75887, Dec. 19, 2014; 85 FR 49571, Aug. 13, different period is specified in a pro- 2020] gram-specific audit guide. Unless re- stricted by Federal law or regulation, AUDITEES the auditee must make report copies available for public inspection. §200.508 Auditee responsibilities. Auditees and auditors must ensure The auditee must: that their respective parts of the re- (a) Procure or otherwise arrange for porting package do not include pro- the audit required by this part in ac- tected personally identifiable informa- cordance with §200.509, and ensure it is tion. properly performed and submitted (2) When a program-specific audit when due in accordance with§200.512. guide is available, the auditee must (b) Prepare appropriate financial electronically submit to the FAC the statements, including the schedule of data collection form prepared in ac- expenditures of Federal awards in ac- cordance with §200.512(b),as applicable cordance with§200.510. to a program-specific audit, and the re- (c) Promptly follow up and take cor- porting required by the program-spe- rective action on audit findings, in- cific audit guide. eluding preparation of a summary (3) When a program-specific audit schedule of prior audit findings and a guide is not available, the reporting corrective action plan in accordance package for a program-specific audit with§200.511(b)and,(c),respectively. must consist of the financial state- (d)Provide the auditor with access to ment(s) of the Federal program, a sum- personnel, accounts, books, records, mary schedule of prior audit findings, supporting documentation, and other and a corrective action plan as de- information as needed for the auditor scribed in paragraph (b)(2) of this sec- to perform the audit required by this tion, and the auditor's report(s) de- part. scribed in paragraph (b)(4) of this sec- [78 FR 78608, Dec. 26, 2013, as amended at 85 tion.The data collection form prepared FR 49572,Aug.13,2020] in accordance with§200.512(b), as appli- §200.509 Auditor selection. cable to a prograni-specific audit, and one copy of this reporting package (a) Auditor procurement. In procuring must be electronically submitted to audit services, the auditee must follow the FAC. the procurement standards prescribed (d) Other sections of this part may by the Procurement Standards in apply. Program-specific audits are sub- §§200.317 through 200.326 of subpart D of ject to: this part or the FAR (48 CFR part 42), (1)200.500 Purpose through 200.503 Re- as applicable. When procuring audit lation to other audit requirements, services, the objective is to obtain paragraph(d); high-quality audits. In requesting pro- (2) 200.504 Frequency of audits posals for audit services, the objectives through 200.506 Audit costs; and scope of the audit must be made clear and the non-Federal entity must (3) 200.508 Auditee responsibilities request a copy of the audit organiza- through 200.509 Auditor selection; (4)200.511 Audit findings follow-up; tion's peer review report which the (5) 200.512 Report submission, para- auditor is required to provide under graphs(e)through(h); GAGAS. Factors to be considered in evaluating each proposal for audit (6)200.513 Responsibilities; services include the responsiveness to (7) 200.516 Audit findings through the request for proposal, relevant expe- 200.517 Audit documentation; rience, availability of staff with profes- (8)200.521 Management decision;and sional qualifications and technical (9)Other referenced provisions of this abilities, the results of peer and exter- part unless contrary to the provisions nal quality control reviews, and price. of this section, a program-specific Whenever possible, the auditee must 200 OMB Guidance §200.511 make positive efforts to utilize small auditee may list the amount of Federal businesses, minority-owned firms, and awards expended for each Federal women's busine,ss enterprises, in pro- award year separately. At a minimum, curing audit services as stated in the schedule must: §200.321, or the FAR (48 CFR part 42), (1) List individual Federal programs as applicable. by Federal agency. For a cluster of pro- (b) Restriction on auditor preparing in- grams, provide the cluster name, list direct cost proposals. An auditor who individual Federal programs within the prepares the indirect cost proposal or cluster of programs, and provide the cost allocation plan may not also be se- applicable Federal agency name. For lected to perform the audit required by R&D, total Federal awards expended this part when the indirect costs recov- must be shown either by individual ered by the auditee during the prior Federal award or by Federal agency year exceeded $1 million. This restric- and major subdivision within the Fed- tion applies to the base year used in eral agency. For example, the National the preparation of the indirect cost Institutes of Health is a major subdivi- proposal or cost allocation plan and sion in the Department of Health and any subsequent years in which the re- Human Services. sulting indirect cost agreement or cost (2) For Federal awards received as a allocation plan is used to recover costs. subrecipient, the name of the pass- (c) Use of Federal auditors. Federal through entity and identifying number auditors may perform all or part of the assigned by the pass-through entity work required under this part if they must be included. comply fully with the requirements of (3) Provide total Federal awards ex- this part. pended for each individual Federal pro- [78 FR 78608, Dec. 26, 2013, as amended at 85 gram and the Assistance Listings Num- FR 49572,Aug.13,2020] ber or other identifying number when the Assistance Listings information is §200.510 Financial statements. not available. For a cluster of pro- (a) Financial statements. The auditee grams also provide the total for the must prepare financial statements that cluster. reflect its financial position, results of (4)Include the total amount provided operations or changes in net assets, to subrecipients from each Federal pro- and, where appropriate, cash flows for gram. the fiscal year audited. The financial (5) For loan or loan guarantee pro- statements statements must be for the same orga- grams described in §200.502(b), identify nizational unit and fiscal year that is in the notes to the schedule the bal- chosen to meet the requirements of ances outstanding at the end of the this part. However, non-Federal entity- audit period. This is in addition to in- wide financial statements may also in- eluding the total Federal awards ex- clude departments, agencies, and other pended for loan or loan guarantee pro- organizational units that have separate grams in the schedule. audits in accordance with §200.514(a) (6) Include notes that describe that and prepare separate financial state- significant accounting policies used in ments. preparing the schedule, and note (b) Schedule of expenditures of Federal whether or not the auditee elected to awards. The auditee must also prepare use the 10% de minimis cost rate as a schedule of expenditures of Federal covered in§200.414. awards for the period covered by the [78 FR 78608, Dec. 26, 2013, as amended at 79 auditee's financial statements which FR 75887, Dec. 19, 2014; 85 FR 49572, Aug. 13, must include the total Federal awards 2020] expended as determined in accordance §200.511 Audit findings follow-up. §200.502. While not required, the g auditee may choose to provide infor- (a)General. The auditee is responsible mation requested by Federal awarding for follow-up and corrective action on agencies and pass-through entities to all audit findings. As part of this re- make the schedule easier to use. For sponsibility, the auditee must prepare example, when a Federal program has a summary schedule of prior audit find- multiple Federal award years, the ings. The auditee must also prepare a 201 §200.512 2 CFR Ch. II (1-1-21 Edition) corrective action plan for current year (ii) The Federal agency or pass- audit findings. The summary schedule through entity is not currently fol- of prior audit findings and the correc- lowing up with the auditee on the audit tive action plan must include the ref- finding; and erence numbers the auditor assigns to (iii) A management decision was not audit findings under §200.516(c). Since issued. the summary schedule may include (c) Corrective action plan. At the corn- audit findings from multiple years, it pletion of the audit, the auditee must must include the fiscal year in which prepare, in a document separate from the finding initially occurred. The cor- the auditor's findings described in rective action plan and summary §200.516, a corrective action plan to ad- schedule of prior audit findings must dress each audit finding included in the include findings relating to the finan- current year auditor's reports.The cor- cial statements which are required to rective action plan must provide the be reported in accordance with name(s) of the contact person(s) re- GAGAS. sponsible for corrective action, the cor- (b) Summary schedule of prior audit rective action planned, and the antici- findings. The summary schedule of pated completion date. If the auditee prior audit findings must report the does not agree with the audit findings status of all audit findings included in or believes corrective action is not re- the prior audit's schedule of findings quired, then the corrective action plan and questioned costs. The summary must include an explanation and spe- schedule must also include audit find- cific reasons. ings reported in the prior audit's sum- [78 FR 78608, Dec. 26, 2013, as amended at 85 mary schedule of prior audit findings FR 49572,Aug.13,2020] except audit findings listed as cor- rected in accordance with paragraph §200.512 Report submission. (b)(1) of this section, or no longer valid (a) General. (1) The audit must be or not warranting further action in ac- completed and the data collection form cordance with paragraph (b)(3) of this described in paragraph (b) of this sec- section. tion and reporting package described in (1) When audit findings were fully paragraph (c) of this section must be corrected, the summary schedule need submitted within the earlier of 30 cal- only list the audit findings and state endar days after receipt of the audi- that corrective action was taken.1 tor's report(s), or nine months after (2) When audit findings were not cor- the end of the audit period. If the due rected or were only partially corrected, date falls on a Saturday, Sunday, or the summary schedule must describe Federal holiday, the reporting package the reasons for the finding's recurrence is due the next business day. and planned corrective action, and any (2) Unless restricted by Federal stat- partial corrective action taken. When utes or regulations, the auditee must corrective action taken is significantly make copies available for public in- different from corrective action pre- spection. Auditees and auditors must viously reported in a corrective action ensure that their respective parts of plan or in the Federal agency's or pass- the reporting package do not include through entity's management decision, protected personally identifiable infor- the summary schedule must provide an mation. explanation. (b)Data collection. The FAC is the re- (3) When the auditee believes the pository of record for subpart F of this audit findings are no longer valid or do part reporting packages and the data not warrant further action, the reasons collection form. All Federal agencies, for this position must be described in pass-through entities and others inter- the summary schedule. A valid reason ested in a reporting package and data for considering an audit finding as not collection form must obtain it by ac- warranting further action is that all of cessing the FAC. the following have occurred: (1) The auditee must submit required (i) Two years have passed since the data elements described in Appendix X audit report in which the finding oc- to Part 200, which state whether the curred was submitted to the FAC; audit was completed in accordance 202 OMB Guidance §200.512 with this part and provides informa- paragraph (c) of this section, the audi- tion about the auditee, its Federal pro- tor must complete the applicable data grams, and the results of the audit. elements of the data collection form. The data must include information The auditor must sign a statement to available from the audit required by be included as part of the data collec- this part that is necessary for Federal tion form that indicates, at a min- agencies to use the audit to ensure in- imum, the source of the information tegrity for Federal programs. The data included in the form, the auditor's re- elements and format must be approved sponsibility for the information, that by OMB, available from the FAC, and the form is not a substitute for the re- include collections of information from porting package described in paragraph the reporting package described in (c)of this section, and that the content paragraph (c) of this section. A senior of the form is limited to the collection level representative of the auditee (e.g., of information prescribed by OMB. state controller, director of finance, (c) Reporting package. The reporting chief executive officer, or chief finan- package must include the: cial officer) must sign a statement to (1) Financial statements and sched- be included as part of the data collec- ule of expenditures of Federal awards tion that says that the auditee com- discussed in §200.510(a) and (b), respec- plied with the requirements of this tively; part, the data were prepared in accord (2) Summary schedule of prior audit ance with this part (and the instruc- findings discussed in§200.511(b); tions accompanying the form), the re- porting package does not include pro (3) Auditor's reports) discussed in tected personally identifiable informa- §200.515;and tion, the information included in its (4) Corrective action plan discussed entirety is accurate and complete, and in§200.511(c). that the FAC is authorized to make the (d) Submission to FAC. The auditee reporting package and the form pub- must electronically submit to the FAC holy available on a website. the data collection form described in (2) Exception for Indian Tribes and paragraph (b) of this section and the Tribal Organizations. An auditee that is reporting package described in para- an Indian tribe or a tribal organization graph(c)of this section. (as defined in the Indian Self-Deter- (e) Requests for management letters mination, Education and Assistance issued by the auditor. In response to re- Act (ISDEAA), 25 U.S.C. 450b(1)) may quests by a Federal agency or pass- opt not to authorize the FAC to make through entity, auditees must submit a the reporting package publicly avail- copy of any management letters issued able on a Web site, by excluding the au- by the auditor. thorization for the FAC publication in (f) Report retention requirements. the statement described in paragraph Auditees must keep one copy of the (b)(1) of this section. If this option is data collection form described in para- exercised, the auditee becomes respon- graph (b) of this section and one copy sible for submitting the reporting of the reporting package described in package directly to any pass-through paragraph (c) of this section on file for entities through which it has received three years from the date of submis- a Federal award and to pass-through sion to the FAC. entities for which the summary sched- (g)FAC responsibilities. The FAC must ule of prior audit findings reported the make available the reporting packages status of any findings related to Fed- received in accordance with paragraph eral awards that the pass-through enti- (c) of this section and§200.507(c) to the ty provided. Unless restricted by Fed- public, except for Indian tribes exer- eral statute or regulation, if the cising the option in (b)(2) of this sec- auditee opts not to authorize publica- tion, and maintain a data base of com- tion,it must make copies of the report- pleted audits, provide appropriate fin- ing package available for public inspec- formation to Federal agencies, and fol- tion. low up with known auditees that have (3) Using the information included in not submitted the required data collec- the reporting package described in tion forms and reporting packages. 203 §200.513 2 CFR Ch. II (1-1-21 Edition) (h) Electronic filing. Nothing in this tions. Cooperate and provide support to part must preclude electronic submis- the Federal agency designated by OMB sions to the FAC in such manner as to lead a governmentwide project to may be approved by OMB. determine the quality of single audits [78 FR 78608, Dec. 26, 2013, as amended at 79 by providing a reliable estimate of the FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, extent that single audits conform to 2020] applicable requirements, standards, and procedures; and to make rec- FEDERAL AGENCIES ommendations to address noted audit §200.513 Responsibilities. quality issues, including recommenda- tions for any changes to applicable re- (a)(1) Cognizant agency for audit re- quirements, standards and procedures sponsibilities. A non-Federal entity ex- indicated by the results of the project. pending more than$50 million a year in The governmentwide project can rely Federal awards must have a cognizant on the current and on-going quality agency for audit. The designated cog- control review work performed by the nizant agency for audit must be the agencies, State auditors, and profes- Federal awarding agency that provides sional audit associations. This govern- the predominant amount of funding di- mentwide audit quality project must rectly (direct funding) (as listed on the be performed once every 6 years (or at Schedule of expenditures of Federal such other interval as determined by awards, see §200.510(b)) to a non-Fed- OMB), and the results must be public. eral entity unless OMB designates a (iii) Promptly inform other affected specific cognizant agency for audit. Federal agencies and appropriate Fed- When the direct funding represents less eral law enforcement officials of any than 25 percent of the total expendi- direct reporting by the auditee or its tures (as direct and subawards) by the auditor required by GAGAS or statutes non-Federal entity, then the Federal and regulations. agency with the predominant amount (iv) Advise the community of inde- of total funding is the designated cog- pendent auditors of any noteworthy or nizant agency for audit. important factual trends related to the (2) To provide for continuity of cog- quality of audits stemming from qual- nizance, the determination of the pre- ity control reviews. Significant prob- dominant amount of direct funding lems or quality issues consistently must be based upon direct Federal identified through quality control re- awards expended in the non-Federal en- views of audit reports must be referred tity's fiscal years ending in 2019, and to appropriate state licensing agencies every fifth year thereafter. and professional bodies. (3) Notwithstanding the manner in (v) Advise the auditor, Federal which audit cognizance is determined, awarding agencies, and, where appro- a Federal awarding agency with cog- priate, the auditee of any deficiencies nizance for an auditee may reassign found in the audits when the defi- cognizance to another Federal award- ciencies require corrective action by ing agency that provides substantial the auditor. When advised of defi- funding and agrees to be the cognizant ciencies, the auditee must work with agency for audit. Within 30 calendar the auditor to take corrective action. days after any reassignment, both the If corrective action is not taken, the old and the new cognizant agency for cognizant agency for audit must notify audit must provide notice of the the auditor, the auditee, and applicable change to the FAC, the auditee, and, if Federal awarding agencies and pass- known, the auditor. The cognizant through entities of the facts and make agency for audit must: recommendations for follow-up action. (i)Provide technical audit advice and Major inadequacies or repetitive sub- liaison assistance to auditees and audi- standard performance by auditors must tors. be referred to appropriate state licens- (ii) Obtain or conduct quality control ing agencies and professional bodies for reviews on selected audits made by disciplinary action. non-Federal auditors, and provide the (vi) Coordinate, to the extent prac- results to other interested organiza- tical, audits or reviews made by or for 204 OMB Guidance §200.513 Federal agencies that are in addition (i) Issue a management decision as to the audits made pursuant to this prescribed in§200.521; part, so that the additional audits or (ii) Monitor the recipient taking ap- reviews build upon rather than dupli- propriate and timely corrective action; cate audits performed in accordance (iii) Use cooperative audit resolution with this part. mechanisms (see the definition of coop- (vii) Coordinate a management deci- erative audit resolution in §200.1 of this sion for cross-cutting audit findings part) to improve Federal program out- (see in §200.1 of this part) that affect comes through better audit resolution, the Federal programs of more than one follow-up, and corrective action; and agency when requested by any Federal (iv) Develop a baseline, metrics, and awarding agency whose awards are in- targets to track, over time, the effec- cluded in the audit finding of the tiveness of the Federal agency's proc- auditee. ess to follow-up on audit findings and (viii) Coordinate the audit work and on the effectiveness of Single Audits in reporting responsibilities among audi- improving non-Federal entity account- tors to achieve the most cost-effective ability and their use by Federal award- audit. ing agencies in making award deci- (ix) Provide advice to auditees as to sions. how to handle changes in fiscal years. (4) Provide OMB annual updates to (b) Oversight agency for audit respon- the compliance supplement and work sibilities. An auditee who does not have with OMB to ensure that the oomph- a designated cognizant agency for ance supplement focuses the auditor to audit will be under the general over- test the compliance requirements most sight of the Federal agency determined likely to cause improper payments, in accordance with §200.1 oversight fraud, waste, abuse or generate audit agency for audit. A Federal agency with finding for which the Federal awarding oversight for an auditee may reassign agency will take sanctions. oversight to another Federal agency (5) Provide OMB with the name of a that agrees to be the oversight agency single audit accountable official from for audit. Within 30 calendar days after among the senior policy officials of the any reassignment, both the old and the Federal awarding agency who must be: new oversight agency for audit must (i) Responsible for ensuring that the provide notice of the change to the agency fulfills all the requirements of FAC, the auditee, and, if known, the paragraph (c)of this section and effec- auditor. The oversight agency for tively uses the single audit process to audit: reduce improper payments and improve (1) Must provide technical advice to Federal program outcomes. auditees and auditors as requested. (ii) Held accountable to improve the (2) May assume all or some of the re- effectiveness of the single audit process sponsibilities normally performed by a based upon metrics as described in cognizant agency for audit. paragraph(c)(3)(iv)of this section. (c) Federal awarding agency respon- (iii) Responsible for designating the sibilities. The Federal awarding agency Federal agency's key management sin- must perform the following for the gle audit liaison. Federal awards it makes (See also the (6) Provide OMB with the name of a requirements of§200.211): key management single audit liaison (1) Ensure that audits are completed who must: and reports are received in a timely (i) Serve as the Federal awarding manner and in accordance with the re- agency's management point of contact quirements of this part. for the single audit process both within (2) Provide technical advice and and outside the Federal Government. counsel to auditees and auditors as re- (ii) Promote interagency coordina- quested. tion, consistency, and sharing in areas (3) Follow-up on audit findings to en- such as coordinating audit follow-up; sure that the recipient takes appro- identifying higher-risk non-Federal en- priate and timely corrective action. As tities; providing input on single audit part of audit follow-up, the Federal and follow-up policy; enhancing the awarding agency must: utility of the FAC; and studying ways 205 §200.514 2 CFR Ch. II (1-1-21 Edition) to use single audit results to improve ed fairly in all material respects in re- Federal award accountability and best lation to the auditee's financial state- practices. ments as a whole. (iii) Oversee training for the Federal (c) Internal control. (1) The compli- awarding agency's program manage- ance supplement provides guidance on ment personnel related to the single internal controls over Federal pro- audit process. grams based upon the guidance in (iv) Promote the Federal awarding Standards for Internal Control in the agency's use of cooperative audit reso- Federal Government issued by the lution mechanisms. Comptroller General of the United (v) Coordinate the Federal awarding States and the Internal Control—Inte- agency's activities to ensure appro- priate and timely follow-up and correc- grated Framework, issued by the Com- tive action on audit findings. mittee of Sponsoring Organizations of (vi) Organize the Federal cognizant the Treadway Commission(COSO). agency for audit's follow-up on cross- (2)In addition to the requirements of cutting audit findings that affect the GAGAS, the auditor must perform pro- Federal programs of more than one cedures to obtain an understanding of Federal awarding agency. internal control over Federal programs (vii) Ensure the Federal awarding sufficient to plan the audit to support agency provides annual updates of the a low assessed level of control risk of compliance supplement to OMB. noncompliance for major programs. (viii) Support the Federal awarding (3) Except as provided in paragraph agency's single audit accountable offi- (c)(4) of this section, the auditor must: cial's mission. (i) Plan the testing of internal con- [78 FR 78608, Dec. 26, 2013, as amended at 79 trol over compliance for major pro- FR 75887, Dec. 19, 2014; 85 FR 49573, Aug. 13, grams to support a low assessed level 2020] of control risk for the assertions rel- AUDITORS evant to the compliance requirements for each major program;and §200.514 Scope of audit. (ii) Perform testing of internal con- (a) General. The audit must be con- trol as planned in paragraph (c)(3)(i) of ducted in accordance with GAGAS. The this section. audit must cover the entire operations (4) When internal control over some of the auditee, or, at the option of the or all of the compliance requirements auditee, such audit must include a se- for a major program are likely to be in- ries of audits that cover departments, effective in preventing or detecting agencies, and other organizational noncompliance, the planning and per- units that expended or otherwise ad- forming of testing described in para- ministered Federal awards during such graph (c)(3) of this section are not re- audit period, provided that each such quired for those compliance require- audit must encompass the financial ments. However, the auditor must re- statements and schedule of expendi- port a significant deficiency or mate- tures of Federal awards for each such rial weakness in accordance with department, agency, and other organi- §200.516 Audit findings, assess the re- zational unit, which must be consid- lated control risk at the maximum, ered to be a non-Federal entity. The fi- and consider whether additional corn- nancial statements and schedule of ex- pliance tests are required because of penditures of Federal awards must be ineffective internal control. for the same audit period. (d) Compliance. (1) In addition to the (b) Financial statements. The auditor requirements of GAGAS, the auditor must determine whether the financial must determine whether the auditee statements of the auditee are presented has complied with Federal statutes, fairly in all material respects in ac regulations, and the terms and condi- cordance with generally accepted ac- counting principles. The auditor must may also determine whether the schedule of a direct and material effect on each of expenditures of Federal awards is stat- its major programs. 206 OMB Guidance §200.515 (2) The principal compliance require- §200.515 Audit reporting. ments applicable to most Federal pro The auditor's report(s) may be in the grams and the compliance require- ments of the largest Federal programs form of either combined or separate re are included in the compliance supple- ports and may be organized differently ment. from the manner presented in this sec- (3) For the compliance requirements tion. The auditor's report(s) must state related to Federal programs contained that the audit was conducted in ac- in the compliance supplement,an audit cordance with this part and include the of these compliance requirements will following: meet the requirements of this part. (a) Financial statements. The auditor Where there have been changes to the must determine and provide an opinion compliance requirements and the (or disclaimer of opinion) whether the changes are not reflected in the com- financial statements of the auditee are pliance supplement, the auditor must presented fairly in all materials re- determine the current compliance re- spects in accordance with generally ac- quirements and modify the audit proce- cepted accounting principles (or a spe- dures accordingly. For those Federal cial purpose framework such as cash, programs not covered in the compli- modified cash, or regulatory as re- ance supplement, the auditor must fol- quired by state law). The auditor must low the compliance supplement's guid- also decide whether the schedule of ex- ance for programs not included in the penditures of Federal awards is stated supplement. fairly in all material respects in rela- (4) When internal control over some tion to the auditee's financial state- or all of the compliance requirements ments as a whole. for a major program are likely to be in- (b) A report on internal control over effective in preventing or detecting financial reporting and compliance noncompliance, the planning and per- with provisions of laws, regulations, forming of testing described in para- contracts, and award agreements, non- graph (c)(3) of this section are not re- compliance with which could have a quired for those compliance require- material effect on the financial state- ments. However, the auditor must re- ments. This report must describe the port a significant deficiency or mate- scope of testing of internal control and rial weakness in accordance with §200.516, assess the related control risk compliance and the results of the tests, at the and, where applicable, it will refer to (e) Audit follow-up. The auditor must the separate schedule of findings and follow-up on prior audit findings, per- questioned costs described in Para form procedures to assess the reason- graph(d)of this section. ableness of the summary schedule of (c) A report on compliance for each prior audit findings prepared by the major program and a report on internal auditee in accordance with §200.511(b), control over compliance. This report and report, as a current year audit must describe the scope of testing of finding, when the auditor concludes internal control over compliance, in- that the summary schedule of prior elude an opinion or disclaimer of opin- audit findings materially misrepre- ion as to whether the auditee complied sents the status of any prior audit find- with Federal statutes, regulations, and ing. The auditor must perform audit the terms and conditions of Federal follow-up procedures regardless of awards which could have a direct and whether a prior audit finding relates to material effect on each major program a major program in the current year. and refer to the separate schedule of (f)Data collection form. As required in findings and questioned costs described §200.512(b)(3), the auditor must corn- in paragraph(d)of this section. plete and sign specified sections of the (d) A schedule of findings and ques- data collection form. tioned costs which must include the [78 FR 78608, Dec. 26, 2013, as amended at 79 following three components: FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, (1) A summary of the auditor's re- 2020] sults,which must include: 207 §200.516 2 CFR Ch. II (1-1-21 Edition) (i) The type of report the auditor awards, as reported under paragraphs issued on whether the financial state- (d)(2) and (d)(3) of this section, respec- ments audited were prepared in accord- tively, must be reported in both sec- ance with GAAP (i.e., unmodified opin- tions of the schedule. However, the re- ion, qualified opinion, adverse opinion, porting in one section of the schedule or disclaimer of opinion); may be in summary form with a ref- (ii) Where applicable, a statement erence to a detailed reporting in the about whether significant deficiencies other section of the schedule. or material weaknesses in internal con- (e) Nothing in this part precludes trol were disclosed by the audit of the combining of the audit reporting re- financial statements; quired by this section with the report- (iii) A statement as to whether the ing required by §200.512(b) when al- audit disclosed any noncompliance lowed by GAGAS and appendix X to that is material to the financial state- this part. ments of the auditee; [78 FR 78608, Dec. 26, 2013, as amended at 79 (iv) Where applicable, a statement FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, about whether significant deficiencies 2020] or material weaknesses in internal con- trol over major programs were dis- §200.516 Audit findings. closed by the audit; (a) Audit findings reported. The audi- (v) The type of report the auditor tor must report the following as audit issued on compliance for major pro- findings in a schedule of findings and grams (i.e., unmodified opinion, quali- questioned costs: fied opinion, adverse opinion, or dis- (1) Significant deficiencies and mate- claimer of opinion); rial weaknesses in internal control (vi) A statement as to whether the over major programs and significant audit disclosed any audit findings that instances of abuse relating to major the auditor is required to report under programs. The auditor's determination §200.516(a); of whether a deficiency in internal con- (vii) An identification of major pro- trol is a significant deficiency or a ma- grams by listing each individual major terial weakness for the purpose of re- program;however, in the case of a clus- porting an audit finding is in relation ter of programs, only the cluster name to a type of compliance requirement as shown on the Schedule of Expendi- for a major program identified in the tures of Federal Awards is required; Compliance Supplement. (viii) The dollar threshold used to (2) Material noncompliance with the distinguish between Type A and Type B provisions of Federal statutes, regula- programs, as described in §200.518(b)(1) tions, or the terms and conditions of or (3) when a recalculation of the Type Federal awards related to a major pro- A threshold is required for large loan gram. The auditor's determination of or loan guarantees; and whether a noncompliance with the pro- (ix) A statement as to whether the visions of Federal statutes, regula- auditee qualified as a low-risk auditee tions, or the terms and conditions of under§200.520. Federal awards is material for the pur- (2) Findings relating to the financial pose of reporting an audit finding is in statements which are required to be re- relation to a type of compliance re- ported in accordance with GAGAS. quirement for a major program identi- (3) Findings and questioned costs for fied in the compliance supplement. Federal awards which must include (3) Known questioned costs that are audit findings as defined in §200.516(a). greater than $25,000 for a type of com- (i) Audit findings (e.g., internal con- pliance requirement for a major pro- trol findings, compliance findings, gram. Known questioned costs are questioned costs, or fraud) that relate those specifically identified by the to the same issue must be presented as auditor. In evaluating the effect of a single audit finding. Where practical, questioned costs on the opinion on audit findings should be organized by compliance, the auditor considers the Federal agency or pass-through entity. best estimate of total costs questioned (ii)Audit findings that relate to both (likely questioned costs), not just the the financial statements and Federal questioned costs specifically identified 208 OMB Guidance §200.516 (known questioned costs). The auditor auditee to prepare a corrective action must also report known questioned plan and take corrective action, and costs when likely questioned costs are for Federal agencies and pass-through greater than $25,000 for a type of corn- entities to arrive at a management de- pliance requirement for a major pro- cision. The following specific informa- gram. In reporting questioned costs, tion must be included, as applicable, in the auditor must include information audit findings: to provide proper perspective for judg- (1) Federal program and specific Fed- ing the prevalence and consequences of eral award identification including the the questioned costs. Assistance Listings title and number, (4) Known questioned costs that are Federal award identification number greater than $25,000 for a Federal pro- and year, name of Federal agency, and gram which is not audited as a major name of the applicable pass-through program. Except for audit follow-up, entity. When information, such as the the auditor is not required under this Assistance Listings title and number part to perform audit procedures for or Federal award identification num- such a Federal program; therefore, the ber, is not available, the auditor must auditor will normally not find ques- provide the best information available tioned costs for a program that is not to describe the Federal award. audited as a major program. However, require- if the auditor does become aware of The criteria or specific ment upon which the audit findingdingi s questioned costs for a Federal program based, including the Federal statutes, that is not audited as a major program regulations, or the terms and condi- (e.g., as part of audit follow-up or other tions of the Federal awards. Criteria audit procedures) and the known ques- de- tioned costs are greater than $25,000, generally identify the required or then the auditor must report this as an sired state or expectation with respect audit finding. to the program or operation. Criteria (5) The circumstances concerning provide a context for evaluating evi why the auditor's report on compliance dence and understanding findings. for each major program is other than (3) The condition found, including an unmodified opinion, unless such cir- facts that support the deficiency iden cumstances are otherwise reported as tified in the audit finding. audit findings in the schedule of find- (4) A statement of cause that identi- ings and questioned costs for Federal fies the reason or explanation for the awards. condition or the factors responsible for (6) Known or likely fraud affecting a the difference between the situation Federal award, unless such fraud is that exists (condition) and the required otherwise reported as an audit finding or desired state (criteria), which may in the schedule of findings and ques- also serve as a basis for recommenda- tioned costs for Federal awards. This tions for corrective action. paragraph does not require the auditor (5) The possible asserted effect to to report publicly information which Provide sufficient information to the could compromise investigative or auditee and Federal agency, or pass- legal proceedings or to make an addi- through entity in the case of a sub- tional reporting when the auditor con- recipient, to permit them to determine firms that the fraud was reported out- the cause and effect to facilitate side the auditor's reports under the di- prompt and proper corrective action. A rect reporting requirements of GAGAS. statement of the effect or potential ef- (7) Instances where the results of fect should provide a clear, logical link audit follow-up procedures disclosed to establish the impact or potential that the summary schedule of prior impact of the difference between the audit findings prepared by the auditee condition and the criteria. in accordance with §200.511(b) materi- (6) Identification of questioned costs ally misrepresents the status of any and how they were computed. Known prior audit finding. questioned costs must be identified by (b) Audit finding detail and clarity. applicable Assistance Listings num- Audit findings must be presented in ber(s) and applicable Federal award sufficient detail and clarity for the identification number(s). 209 §200.517 2 CFR Ch. II (1-1-21 Edition) (7)Information to provide proper per- quality review, to resolve audit find- spective for judging the prevalence and ings, or to carry out oversight respon- consequences of the audit findings, sibilities consistent with the purposes such as whether the audit findings rep- of this part. Access to audit docu- resent an isolated instance or a sys- mentation includes the right of Federal temic problem. Where appropriate, in- agencies to obtain copies of audit docu- stances identified must be related to mentation, as is reasonable and nec- the universe and the number of cases essary. examined and be quantified in terms of dollar value. The auditor should report §200.518 Major program determina- whether the sampling was a statis- tion. tically valid sample. (a) General. The auditor must use a (8) Identification of whether the risk-based approach to determine audit finding was a repeat of a finding which Federal programs are major pro- in the immediately prior audit and if grams. This risk-based approach must so any applicable prior year audit find- include consideration of: current and ing numbers. prior audit experience, oversight by (9) Recommendations to prevent fu- Federal agencies and pass-through en- ture occurrences of the deficiency iden- tities,and the inherent risk of the Fed- tified in the audit finding. eral program. The process in para- (10) Views of responsible officials of graphs (b) through (h) of this section the auditee. must be followed. (c) Reference numbers. Each audit (b) Step one. (1) The auditor must finding in the schedule of findings and identify the larger Federal programs, questioned costs must include a ref- which must be labeled Type o- erence number in the format meeting gramdefined A d as the requirements of the data collection Federal Type A programs eade as form submission required by§200.512(b) expended programs with Federal period ex- to allow for easy referencing of the daring eel the auditthet ex- to audit findings during follow-up. seeding artha levels outlined in table in this paragraph(b)(1): [78 FR 78608, Dec. 26, 2013, as amended at 85 FR 49574,Aug.13,2020] Total Federal awards ex- Type NB threshold pended §200.517 Audit documentation. Equal to or exceed$750,000 $750,000. but less than or equal to (a) Retention of audit documentation. $25 million. The auditor must retain audit docu- Exceed$25 million but less Total Federal awards ex- mentation and reports for a minimum than or equal to$100 mil- pended times.03. of three years after the date of lion. issuance of the auditor's report(s) to Exceed$100 million but less $3 million. than or equal to$1 billion. the auditee, unless the auditor is noti- Exceed$1 billion but less Total Federal awards ex- fied in writing by the cognizant agency than or equal to$10 billion. pended times.003. for audit, oversight agency for audit, Exceed or$10 egbalbillion to$20butlesbillion. $30 million. cognizant agency for indirect costs, or entity to extend the re- Exceed$20 billion Total Federal ex- pass-through awards pended times.0015. tention period. When the auditor is aware that the Federal agency, pass- (2) Federal programs not labeled through entity, or auditee is con- Type A under paragraph (b)(1) of this testing an audit finding, the auditor section must be labeled Type B pro- must contact the parties contesting grams. the audit finding for guidance prior to (3) The inclusion of large loan and destruction of the audit documentation loan guarantees(loans)must not result and reports. in the exclusion of other programs as (b) Access to audit documentation. Type A programs. When a Federal pro- Audit documentation must be made gram providing loans exceeds four available upon request to the cognizant times the largest non-loan program it or oversight agency for audit or its des- is considered a large loan program,and ignee, cognizant agency for indirect the auditor must consider this Federal cost, a Federal agency, or GAO at the program as a Type A program and ex- completion of the audit, as part of a elude its values in determining other 210 OMB Guidance §200.518 Type A programs. This recalculation of ticular recipient to allow the Federal the Type A program is performed after awarding agency to comply with 31 removing the total of all large loan U.S.C. 3515. The Federal awarding programs. For the purposes of this agency must notify the recipient and, paragraph a program is only considered if known, the auditor of OMB's ap- to be a Federal program providing proval at least 180 calendar days prior loans if the value of Federal awards ex- to the end of the fiscal year to be au- pended for loans within the program dited. comprises fifty percent or more of the (d) Step three. (1) The auditor must total Federal awards expended for the identify Type B programs which are program. A cluster of programs is high-risk using professional judgment treated as one program and the value and the criteria in §200.519. However, of Federal awards expended under a the auditor is not required to identify loan program is determined as de- more high-risk Type B programs than scribed in§200.502. at least one fourth the number of low- (4) For biennial audits permitted risk Type A programs identified as low- under §200.504, the determination of risk under Step 2 (paragraph (c) of this Type A and Type B programs must be section). Except for known material based upon the Federal awards ex- weakness in internal control or compli- pended during the two-year period. ance problems as discussed in (c) Step two. (1) The auditor must §200.519(b)(1) and (2) and (c)(1), a single identify Type A programs which are criterion in risk would seldom cause a low-risk. In making this determina- Type B program to be considered high- tion, the auditor must consider wheth- risk. When identifying which Type B er the requirements in §200.519(c), the programs to risk assess, the auditor is results of audit follow-up, or any encouraged to use an approach which changes in personnel or systems affect- provides an opportunity for different ing the program indicate significantly high-risk Type B programs to be au- increased risk and preclude the pro- dited as major over a period of time. gram from being low risk. For a Type (2)The auditor is not expected to per- A program to be considered low-risk, it form risk assessments on relatively must have been audited as a major,pro- small Federal programs. Therefore, the gram in at least one of the two most auditor is only required to perform risk recent audit periods (in the most re- assessments on Type B programs that cent audit period in the case of a bien- exceed twenty-five percent (0.25) of the nial audit), and, in the most recent Type A threshold determined in Step 1 audit period, the program must have (paragraph(b)of this section). not had: (e) Step four. At a minimum, the (i) Internal control deficiencies auditor must audit all of the following which were identified as material as major programs: weaknesses in the auditor's report on (1) All Type A programs not identi- internal control for major programs as fied as low risk under step two (para- required under§200.515(c); graph(c)(1)of this section). (ii) A modified opinion on the pro- (2) All Type B programs identified as gram in the auditor's report on major high-risk under step three (paragraph programs as required under §200.515(c); (d)of this section). or (3) Such additional programs as may (iii)Known or likely questioned costs be necessary to comply with the per- that exceed five percent of the total centage of coverage rule discussed in Federal awards expended for the pro- paragraph (f) of this section. This may gram. require the auditor to audit more pro- (2) Notwithstanding paragraph (c)(1) grams as major programs than the of this section, OMB may approve a number of Type A programs. Federal awarding agency's request that (f) Percentage of coverage rule. If the a Type A program may not be consid- auditee meets the criteria in §200.520, ered low risk for a certain recipient. the auditor need only audit the major For example, it may be necessary for a programs identified in Step 4 (para- large Type A program to be audited as graphs (e)(1)and (2) of this section)and a major program each year at a par- such additional Federal programs with 211 §200.519 2 CFR Ch. II (1-1-21 Edition) Federal awards expended that, in ag- ence to Federal statutes, regulations, gregate, all major programs encompass and the terms and conditions of Fed- at least 20 percent (0.20) of total Fed- eral awards and the competence and eral awards expended. Otherwise, the experience of personnel who administer auditor must audit the major programs the Federal programs. identified in Step 4 (paragraphs (e)(1) (i) A Federal program administered and (2) of this section) and such addi- under multiple internal control struc- tional Federal programs with Federal tures may have higher risk. When as- awards expended that, in aggregate, all sessing risk in a large single audit, the major programs encompass at least 40 percent (0.40) of total Federal awards auditor must consider whether weak- expended. nesses are isolated in a single oper- (g)Documentation of risk. The auditor ating unit (e.g., one college campus) or must include in the audit documenta- pervasive throughout the entity. tion the risk analysis process used in (ii) When significant parts of a Fed- determining major programs. eral program are passed through to (h) Auditor's judgment. When the subrecipients, a weak system for moni- major program determination was per- toring subrecipients would indicate formed and documented in accordance higher risk. with this Subpart, the auditor's judg- (2) Prior audit findings would indi- ment in applying the risk-based ap- cate higher risk, particularly when the proach to determine major programs situations identified in the audit find- must be presumed correct. Challenges ings could have a significant impact on by Federal agencies and pass-through a Federal program or have not been entities must only be for clearly im- corrected. proper use of the requirements in this (3) Federal programs not recently au- part. However, Federal agencies and dited as major programs may be of pass-through entities may provide higher risk than Federal programs re- auditors guidance about the risk of a cently audited as major programs with- particular Federal program and the out audit findings. auditor must consider this guidance in determining major programs in audits (c) Oversight exercisedrugh tiy Federal agen- cies and pass-through entities. (1) Over- not yet completed. sight exercised by Federal agencies or [78 FR 78608, Dec. 26, 2013, as amended at 79 pass-through entities could be used to FR 75887, Dec. 19, 2014; 85 FR 49574, Aug. 13, assess risk. For example, recent moni- 2020] toring or other reviews performed by §200.519 Criteria for Federal program an oversight entity that disclosed no risk. significant problems would indicate lower risk, whereas monitoring that (a) General. The auditor's determina- disclosed significant problems would tion should be based on an overall eval- indicate higher risk. uation of the risk of noncompliance oc- curring that could be material to the (2) Federal agencies,with the concur- Federal program. The auditor must rence of OMB, may identify Federal consider criteria, such as described in programs that are higher risk. OMB paragraphs (b), (c), and (d) of this sec- will provide this identification in the tion, to identify risk in Federal pro- compliance supplement. grams. Also, as part of the risk anal- (d) Inherent risk of the Federal pro- ysis, the auditor may wish to discuss a gram. (1) The nature of a Federal pro- particular Federal program with gram may indicate risk. Consideration auditee management and the Federal should be given to the complexity of agency or pass-through entity. the program and the extent to which (b) Current and prior audit experience. the Federal program contracts for (1)Weaknesses in internal control over goods and services. For example, Fed- Federal programs would indicate high- eral programs that disburse funds er risk. Consideration should be given through third-party contracts or have to the control environment over Fed- eligibility criteria may be of higher eral programs and such factors as the risk. Federal programs primarily in- expectation of management's adher- volving staff payroll costs may have 212 OMB Guidance §200.521 high risk for noncompliance with re- (d) The auditor did not report a sub- quirements of §200.430, but otherwise stantial doubt about the auditee's abil- be at low risk. ity to continue as a going concern. (2)The phase of a Federal program in (e) None of the Federal programs had its life cycle at the Federal agency audit findings from any of the fol- may indicate risk. For example, a new lowing in either of the preceding two Federal program with new or interim audit periods in which they were classi- regulations may have higher risk than fied as Type A programs: an established program with time-test- (1) Internal control deficiencies that ed regulations. Also, significant were identified as material weaknesses changes in Federal programs, statutes, in the auditor's report on internal con- regulations, or the terms and condi- trol for major programs as required tions of Federal awards may increase under§200.515(c); risk. (2) A modified opinion on a major (3)The phase of a Federal program in program in the auditor's report on its life cycle at the auditee may indi- major programs as required under cate risk. For example, during the first §2(3) K(o);or ts and last years that an auditee partici- (3) Known or fivelik percently questioned total pates in a Federal that exceeded of the total program, the risk Federal awards expended for a Type A may be higher due to start-up or close- program during the audit period. out of program activities and staff. during the audit period. (4) Type B programs with larger Fed- [78 FR 78608, Dec. 26, 2013, as amended at 85 eral awards expended would be of high- FR 49575,Aug.13,2020] er risk than programs with substan- MANAGEMENT DECISIONS tially smaller Federal awards ex- pended. §200.521 Management decision. [78 FR 78608, Dec. 26, 2013, as amended at 85 (a) General. The management deci- FR 49575,Aug.13,2020] sion must clearly state whether or not the audit finding is sustained, the rea- §200.520 Criteria for a low-risk sons for the decision, and the expected auditee. auditee action to repay disallowed An auditee that meets all of the fol- costs, make financial adjustments, or lowing conditions for each of the pre take other action. If the auditee has ceding two audit period must qualify not completed corrective action, a as a low-risk auditee and be eligible for timetable for follow-up should be reduced audit coverage in accordance given. Prior to issuing the manage- with§200.518. ment decision, the Federal agency or Single audits were performed on pass-through entity may request addi- (a) on an annual basis in accordance with the from information clor ding a request from the auditee, including a request provisions of this Subpart, including for auditor assurance related to the submitting the data collection form and the reporting package to the FAC documentation, . Thea way of mitigating de- within the timeframe specified in disallowed costs. any managementppealp oc§200.512. A non-Federal entity that has ess cision ilauld describe any appeal proot biennial audits does not e available to the auditee. While not qualify as a required, the Federal agency or pass- low-risk auditee. through entity may also issue a man- (b) The auditor's opinion on whether agement decision on findings relating the financial statements were prepared to the financial statements which are in accordance with GAAP, or a basis of required to be reported in accordance accounting required by state law, and with GAGAS. the auditor's in relation to opinion on (b) Federal agency. As provided in the schedule of expenditures of Federal §200.513(a)(3)(vii), the cognizant agency awards were unmodified. for audit must be responsible for co- (c) There were no deficiencies in in- ordinating a management decision for ternal control which were identified as audit findings that affect the programs material weaknesses under the require- of more than one Federal agency. As ments of GAGAS. provided in §200.513(c)(3)(i), a Federal 213 Pt. 200, App. I 2 CFR Ch. II (1-1-21 Edition) awarding agency is responsible for announcement). For example, a Federal issuing a management decision for awarding agency may want to include Sec- findings that relate to Federal awards tion A information about the types of non- it makes to non-Federal entities. Federal entities who are eligible to apply. (c)Pass-through entity. As provided in The format specifies a standard location for §200.332(d), the pass-through entity that information in Section C.1 but does not Sec- must be responsible for issuing a man- preclude repeating the information in tion A or creating a cross reference between agement decision for audit findings Section A and C.1, as long as a potential ap- that relate to Federal awards it makes plicant can find the information quickly and to subrecipients. easily from the standard location. (d) Time requirements. The Federal The sections of the full text of the an- awarding agency or pass-through enti- nouncement are described in the following ty responsible for issuing a manage- paragraphs. ment decision must do so within six A.PROGRAM DESCRIPTION—REQUIRED months of acceptance of the audit re- port by the FAC. The auditee must ini- This section contains the full program de- tiate and proceed with corrective ac- scription of the funding opportunity. It may tion as rapidly as possible and correc- be as long as needed to adequately commu- tive action should begin no later than nicate to potential applicants the areas in upon receipt of the audit report. which funding may be provided.. It describes (e) Reference numbers. Management the Federal awarding agency's funding prior- decisions must include the reference ities or the technical or focus areas in which pro- numbersthe the auditor assigned to each vide Federal awarding agency intends may naudit finding in accordance with assistance.program As historyappr g it in- 200.516 c . elude any program (e.g.,whether this § ( ) is a new program or a new or changed area of [78 FR 78608, Dec. 26, 2013, as amended at 85 program emphasis). This section must in- FR 49575,Aug.13,2020] elude program goals and objectives, a ref- erence to the relevant Assistance Listings, a APPENDIX I TO PART 200—FULL TEXT OF description of how the award will contribute NOTICE OF FUNDING OPPORTUNITY to the achievement of the program's goals and objectives, and the expected perform- The full text of the notice of funding op- ance goals,indicators,targets,baseline data, portunity is organized in sections. The re- data collection, and other outcomes such quired format outlined in this appendix indi- Federal awarding agency expects to achieve, cates immediately following the title of each and may include examples of successful section whether that section is required in projects that have been funded previously. every announcement or is a Federal award- This section also may include other informa- ing agency option.The format is designed so tion the Federal awarding agency deems nec- that similar types of information will appear essary,and must at a minimum include cita- in the same sections in announcements of tions for authorizing statutes and regula- different Federal funding opportunities. To- tions for the funding opportunity. ward that end, there is text in each of the following sections to describe the types of in- B.FEDERAL AWARD INFORMATION—REQUIRED formation that a Federal awarding agency would include in that section of an actual This section provides sufficient informa- announcement. tion to help an applicant make an informed A Federal awarding agency that wishes to decision about whether to submit a proposal. include information that the format does not Relevant information could include the total specifically discuss may address that subject amount of funding that the Federal awarding in whatever section(s) is most appropriate. agency expects to award through the an- For example, if a Federal awarding agency nouncement; the expected performance indi- chooses to address performance goals in the cators, targets, baseline data, and data col- announcement,it might do so in the funding lection; the anticipated number of Federal opportunity description,the application con- awards; the expected amounts of individual tent,or the reporting requirements. Federal awards (which may be a range); the Similarly, when this format calls for a amount of funding per Federal award,on av- type of information to be in a particular sec- erage,experienced in previous years;and the tion, a Federal awarding agency wishing to anticipated start dates and periods of per- address that subject in other sections may formance for new Federal awards. This sec- elect to repeat the information in those sec- tion also should address whether applica- tions or use cross references between the sec- tions for renewal or supplementation of ex- tions (there should be hyperlinks for cross- isting projects are eligible to compete with references in any electronic versions of the applications for new Federal awards. 214 • OMB Guidance Pt. 200, App. I This section also must indicate the type(s) 2. Cost Sharing or Matching—Required. An- of assistance instrument(e.g., grant, cooper- nouncements must state whether there is re- ative agreement) that may be awarded if ap- quired cost sharing, matching, or cost par- plications are successful. If cooperative ticipation without which an application agreements may be awarded, this section ei- would be ineligible (if cost sharing is not re- ther should describe the "substantial in- quired, the announcement must explicitly volvement" that the Federal awarding agen- say so). Required cost sharing may be a cer- cy expects to have or should reference where tam percentage or amount, or may be in the the potential applicant can find that infor- form of contributions of specified items or mation (e.g., in the funding opportunity de- activities(e.g., provision of equipment).It is scription in Section A. or Federal award ad- important that the announcement be clear ministration information in Section D. If about any restrictions on the types of cost procurement contracts also may be awarded, (e.g., in-kind contributions) that are accept- this must be stated. able as cost sharing.Cost sharing as an eligi- bility criterion includes requirements based C.ELIGIBILITY INFORMATION in statute or regulation, as described in This section addresses the considerations §200.306 of this Part. This section should or factors that determine applicant or appli- refer to the appropriate portion(s)of section pre-award stating any pre-award requirements for cation eligibility. This _includes the eligi- submission of letters or other documentation bility of particular types of applicant organi- to verify commitments to meet cost-sharing zations, any factors affecting the eligibility requirements if a Federal award is made. of the principal investigator or project direc- 3. Other—Required,if applicable.If there are tor, and any criteria that make particular other eligibility criteria (i.e., criteria that projects ineligible. Federal agencies should have the effect of making an application or make clear whether an applicant's failure to project ineligible for Federal awards, wheth- meet an eligibility criterion by the time of er referred to as "responsiveness" criteria, an application deadline will result in the "go-no go" criteria, "threshold" criteria, or Federal awarding agency returning the ap- in other ways), must be clearly stated and plication without review or, even though an must include a reference to the regulation of application may be reviewed, will preclude requirement that describes the restriction, the Federal awarding agency from making a as applicable. For example, if entities that Federal award.Key elements to be addressed have been found to be in violation of a par- are: titular Federal statute are ineligible, it is 1. Eligible Applicants—Required. Announce- important to say so. This section must also ments must clearly identify the types of en- state any limit on the number of applica- tities that are eligible to apply. If there are tions an applicant may submit under the an- no restrictions on eligibility, this section nouncement and make clear whether the may simply indicate that all potential appli. limitation is on the submitting organization, cants are eligible.If there are restrictions mi. individual investigator/program director, or eligibility, it is important to be clear about both. This'section should also address any the specific types of entities that are eligi- eligibility criteria for beneficiaries or for ble, not just the types that are ineligible. program participants other than Federal For example, if the program is limited to award recipients. nonprofit organizations subject to 26 U.S.C. 501(c)(3) of the tax code (26 U.S.C. 501(c)(3)), D.APPLICATION AND SUBMISSION INFORMATION the announcement should say so. Similarly, 1. Address to Request Application Package— it is better to state explicitly that Native Required. Potential applicants must be told American tribal organizations are eligible how to get application forms, kits, or other than to assume that they can unambiguously materials needed to apply(if this announce- infer that from a statement that nonprofit ment contains everything needed, this sec- organizations may apply.Eligibility also can tion need only say so). An Internet address be expressed by exception, (e.g., open to all where the materials can be accessed is ac- types of domestic applicants other than indi- ceptable. However, since high-speed Internet viduals). This section should refer to any access is not yet universally available for portion of Section D specifying documenta- downloading documents, and applicants may tion that must be submitted to support an have additional accessibility requirements, eligibility determination (e.g., proof of there also should be a way for potential ap- 501(c)(3)status as determined by the Internal plicants to request paper copies of materials, Revenue Service or an authorizing tribal res- such as a U.S. Postal Service mailing ad- olution). To the extent that any funding re- dress, telephone or FAX number, Telephone striction in Section D.6 could affect the eli- Device for the Deaf (TDD), Text Telephone gibility of an applicant or project, the an- (TTY) number, and/or Federal Information nouncement must either restate that restric- Relay Service(FIRS)number. tion in this section or provide a cross-ref- 2. Content and Form of Application Submis- erence to its description in Section D.6. Sion—Required. This section must identify 215 Pt. 200, App. I 2 CFR Ch. II (1-1-21 Edition) the required content of an application and if an applicant has not fully complied with the forms or formats that an applicant must the requirements by the time the Federal use to submit it. If any requirements are awarding agency is ready to make a Federal stated elsewhere because they are general re- award,the Federal awarding agency may de- quirements that apply to multiple programs termine that the applicant is not qualified to or funding opportunities, this section should receive a Federal award and use that deter- refer to where those requirements may be mination as a basis for making a Federal found. This section also should include re- award to another applicant. quired forms or formats as part of the an.. 4. Submission Dates and Times—Required. nouncement or state where the applicant Announcements must identify due dates and may obtain them. times for all submissions. This includes not This section should specifically address only the full applications but also any pre- content and form or format requirements liminary submissions (e.g., letters of intent, for: white papers, or pre-applications).It also in- i. Pre-applications, letters of intent, or cludes any other submissions of information white papers required or encouraged (see before Federal award that are separate from Section D.4), including any limitations on the full application. If the funding oppor- the number of pages or other formatting re- tunity is a general announcement that is quirements similar to those for full applica- open for a period of time with no specific due tions. dates for applications, this section should ii. The application as a whole. For all sub- say so. Note that the information on dates missions, this would include any limitations that is included in this section also must ap- on the number of pages, font size and type- pear with other overview information in a lo- face, margins, paper size, number of copies, cation preceding the full text of the an- and sequence or assembly requirements. If nouncement(see§200.204 of this part). electronic submission is permitted or re- 5.Intergovernmental Review—Required,if ap- quired, this could include special require- plicable.If the funding opportunity is subject ments for formatting or signatures. to Executive Order 12372, "Intergovern- iii. Component pieces of the application mental Review of Federal Programs," the (e.g., if all copies of the application must notice must say so and applicants must con- bear original signatures on the face page or tact their state's Single Point of Contact the program narrative may not exceed 10 (SPOC) to find out about and comply with pages).This includes any pieces that may be the state's process under Executive Order submitted separately by third parties (e.g., 12372, it may be useful to inform potential references or letters confirming commit- applicants that the names and addresses of ments from third parties that will be con- the SPOCs are listed in the Office of Manage- tributing a portion of any required cost shar- ment and Budget's website. ing). 6. Funding Restrictions—Required. Notices iv. Information that successful applicants must include information on funding restric- must submit after notification of intent to tionp in order to allow an applicant to de- make a Federal award,but prior to a Federal velop an application and budget consistent award. This could include evidence of com- with program requirements. Examples are pliance with requirements relating to human whether construction is an allowable activ- subjects or information needed to comply ity, if there are any limitations on direct with the National Environmental Policy Act costs such as foreign travel or equipment (NEPA)(42 U.S.C.4321-4370h). purchases, and if there are any limits on in- 3. Unique entity identifier and System for direct costs(or facilities and administrative Award Management (SAM)—Required. This costs).Applicants must be advised if Federal paragraph must state clearly that each ap- awards will not allow reimbursement of pre- plicant(unless the applicant is an individual Federal award costs. or Federal awarding agency that is excepted 7. Other Submission Requirements—Required. from those requirements under 2 CFR This section must address any other submis- 25.110(b) or(c), or has an exception approved sion requirements not included in the other by the Federal awarding agency under 2 CFR paragraphs of this section. This might in- 25.110(d)) is required to: (i) Be registered in elude the format of submission,i.e.,paper or SAM before submitting its application; (ii) electronic, for each type of required submis- Provide a valid unique entity identifier in its sion. Applicants should not be required to application; and (iii) Continue to maintain submit in more than one format and this sec- an active SAM registration with current in- tion should indicate whether they may formation at all times during which it has an choose whether to submit applications in active Federal award or an application or hard copy or electronically,may submit only plan under consideration by a Federal award- in hard copy, or may submit only electroni- ing agency. It also must state that the Fed- tally. eral awarding agency may not make a Fed- This section also must indicate where ap- eral award to an applicant until the appli- plications(and any pre-applications)must be cant has complied with all applicable unique submitted if sent by postal mail, electronic entity identifier and SAM requirements and, means, or hand-delivery. For postal mail 216 OMB Guidance Pt. 200,App. I submission,this must include the name of an tant that the announcement be clear about office, official, individual or function (e.g., any restrictions on the types of cost(e.g.,in- application receipt center) and a complete kind contributions) that are acceptable as mailing address. For electronic submission, cost sharing. this must include the URL or email address; 2. Review and Selection Process—Required. whether a password(s) is required; whether This section may vary in the level of detail particular software or other electronic capa- provided. The announcement must list any bilities are required; what to do in the event program policy or other factors or elements, of system problems and a point of contact other than merit criteria, that the selecting who will be available in the event the appli- official may use in selecting applications for cant experiences technical difficulties. Federal award(e.g., geographical dispersion, E.APPLICATION REVIEW INFORMATION program balance, or diversity). The Federal awarding agency may also include other ap- 1. Criteria—Required. This section must ad- propriate details. For example, this section dress the criteria that the Federal awarding may indicate who is responsible for evalua- agency will use to evaluate applications. tion against the merit criteria(e.g.,peers ex- This includes the merit and other review cri- ternal to the Federal awarding agency or teria that evaluators will use to judge appli- Federal awarding agency personnel) and/or cations,including any statutory,regulatory, who makes the final selections for Federal or other preferences(e.g.,minority status or awards.If there is a multi-phase review proc- Native American tribal preferences) that ess(e.g., an external panel advising internal will be applied in the review process. These Federal awarding agency personnel who criteria are distinct from eligibility criteria make final recommendations to the deciding that are addressed before an application is official),the announcement may describe the accepted for review and any program policy phases. It also may include: the number of or other factors that are applied during the people on an evaluation panel and how it op- selection process, after the review process is erates, the way reviewers are selected, re- completed. The intent is to make the appli- viewer qualifications, and the way that con- cation process transparent so applicants can flirts of interest are avoided.With respect to make informed decisions when preparing electronic methods for providing informa- their applications to maximize fairness of tion about funding opportunities or accept- the process.The announcement should clear- ing applicants' submissions of information, ly describe all criteria, including any sub- each Federal awarding agency is responsible criteria. If criteria vary in importance, the for compliance with Section 508 of the Reha- announcement should specify the relative bilitation Act of 1973(29 U.S.C.794d). percentages,weights, or other means used to In addition,if the Federal awarding agency distinguish among them. For statutory, reg- permits applicants to nominate suggested re- ulatory, or other preferences, the announce- viewers of their applications or suggest those ment should provide a detailed explanation they feel may be inappropriate due to a con- of those preferences with an explicit indica- flict of interest, that information should be tion of their effect(e.g.,whether they result included in this section. in additional points being assigned). 3. For any Federal award under a notice of If an applicant's proposed cost sharing will funding opportunity,if the Federal awarding be considered in the review process (as op- agency anticipates that the total Federal posed to being an eligibility criterion de- share will be greater than the simplified ac- scribed in Section C.2), the announcement quisition threshold on any Federal award must specifically address how it will be con- under a notice of fundingopportunity sidered (e.g., to assign a certain number ofmce may additional points to applicants who offer include, overt the periodraf performance,, this section must also inform applicants: cost sharing, or to break ties among applica- i.That the Federal awarding agency,prior tions with equivalent scores after evaluation to making a Federal award with a total against all other factors).If cost sharing will amount of Federal share greater than the not be considered in the evaluation, the an- simplified acquisition threshold, is required nouncement should say so, so that there is to review and consider any information no ambiguity for potential applicants.Vague about the applicant that is in the designated statements that cost sharing is encouraged, integrity and performance system accessible without clarification as to what that means, through SAM (currently FAPIIS) (see 41 are unhelpful to applicants. It also is impor- U.S.C.2313); ii.That an applicant,at its option,may re- i With respect to electronic methods for view information in the designated integrity providing information about funding oppor- and performance systems accessible through tunities or accepting applicants'submissions SAM and comment on any information about of information, each Federal awarding agen- itself that a Federal awarding agency pre- cy is responsible for compliance with Section viously entered and is currently in the des- 508 of the Rehabilitation Act of 1973 (29 ignated integrity and performance system U.S.C.794d). accessible through SAM; 217 Pt. 200, App. I 2 CFR Ch. II (1-1-21 Edition) iii. That the Federal awarding agency will how to obtain it) or Internet site where ap- consider any comments by the applicant, in plicants can see the terms and conditions.If addition to the other information in the des- this funding opportunity will lead to Federal ignated integrity and performance system, awards with some special terms and condi- in making a judgment about the applicant's tions that differ from the Federal awarding integrity, business ethics, and record of per- agency's usual (sometimes called "general") formance under Federal awards when corn- terms and conditions, this section should pleting the review of risk posed by appli- highlight those special terms and conditions. cants as described in§200.206. Doing so will alert applicants that.have re- 4. Anticipated Announcement and Federal ceived Federal awards from the Federal Award Dates—Optional. This section is in- awarding agency previously and might not tended to provide applicants with informa- otherwise expect different terms and condi- tion they can use for planning purposes. If tions. For the same reason, the announce- there is a single application deadline fol- ment should inform potential applicants lowed by the simultaneous review of all ap- about special requirements that could apply plications, the Federal awarding agency can to particular Federal awards after the review include in this section information about the of applications and other information, based anticipated dates for announcing or noti- on the particular circumstances of the effort fying successful and unsuccessful applicants to be supported(e.g.,if human subjects were and for having Federal awards in place.If ap- to be involved or if some situations may jus- plications are received and evaluated on a tify special terms on intellectual property, "rolling" basis at different times during an data sharing or security requirements). extended period, it may be appropriate to 3. Reporting—Required. This section must give applicants an estimate of the time need- include general information about the type ed to process an application and notify the applicant of the Federal awarding agency's and financial of submissiono perfo (paperpa), frequency,lec- decision, and means of or elec- tronic) of post-Federal award reporting re- F.FEDERAL AWARD ADMINISTRATION quirements. Highlight any special reporting INFORMATION requirements for Federal awards under this funding opportunity that differ (e.g., by re- 1. Federal Award Notices—Required. This port type, frequency, form/format, or cir- section must address what a successful appli- cumstances for use) from what the Federal cant can expect to receive following selec- awarding agency's Federal awards usually tion. If the Federal awarding agency's prac- require.Federal awarding agencies must also tice is to provide a separate notice stating describe in this section all relevant require- that an application has been selected before ments such as those at 2 CFR 180.335 and it actually makes the Federal award, this 180.350. section would be the place to indicate that If the Federal share of any Federal award the letter is not an authorization to begin may include more tlxan $500,000 over the pe- performance (to the extent that it allows riod of performance, this section must in- charging to Federal awards of pre-award form potential applicants about the post costs at the non-Federal entity's own risk). award reporting requirements reflected in This section should indicate that the notice appendix XII to this part. of Federal award signed by the grants officer (or equivalent) is the authorizing document, G.FEDERAL AWARDING AGENCY CONTACT(S)— and whether it is provided through postal REQUIRED mail or by electronic means and to whom.It also may address the timing, form, and con- The announcement must give potential ap- tent of notifications to unsuccessful appli- plicants a point(s) of contact for answering cants.See also§200.211. questions or helping with problems while the 2. Administrative and National Policy Re- funding opportunity is open. The intent of quirements—Required.This section must iden- this requirement is to be as helpful as pos- tify the usual administrative and national sible to potential applicants, so the Federal policy requirements the Federal awarding awarding agency should consider approaches agency's Federal awards may include. Pro- such as giving: viding this information lets a potential ap- i. Points of contact who may be reached in plicant identify any requirements with multiple ways(e.g., by telephone, FAX, and/ which it would have difficulty complying if or email,as well as regular mail). its application is successful. In those cases, ii. A fax or email address that multiple early notification about the requirements al- people access, so that someone will respond lows the potential applicant to decide not to even if others are unexpectedly absent dur- apply or to take needed actions before re- ing critical periods. ceiving the Federal award. The announce- iii. Different contacts for distinct kinds of ment need not include all of the terms and help(e.g.,one for questions of programmatic conditions of the Federal award, but may content and a second for administrative refer to a document(with information about questions). 218 OMB Guidance Pt. 200, App. II H.OTHER INFORMATION—OPTIONAL Compliance Programs, Equal Employment This section may include any additional Opportunity,Department of Labor." information that will assist a potential ap- (D)Davis-Bacon Act,as amended(40 U.S.C. plicant.For example,the section might: 3141-3148).When required by Federal program i. Indicate whether this is a new program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal or a one-time initiative. entities must include a provision for compli- ii. Mention related programs or other up- once with the Davis-Bacon Act (40 U.S.C. coming or ongoing Federal awarding agency 3141-3144, and 3146-3148) as supplemented by funding opportunities for similar activities. Department of Labor regulations (29 CFR iii. Include current Internet addresses for Part 5, "Labor Standards Provisions Appli- Federal awarding agency Web sites that may cable to Contracts Covering Federally Fi- be useful to an applicant in understanding nanced and Assisted Construction"). In ac- the program. cordance with the statute, contractors must iv.Alert applicants to the need to identify be required to pay wages to laborers and me- proprietary information and inform them chanics at a rate not less than the prevailing about the way the Federal awarding agency wages specified in a wage determination will handle it. made by the Secretary of Labor.In addition, v. Include certain routine notices to appli- cants (e.g., that the Federal Government is contractors must be required to pay wages not obligated to make any Federal award as not less than once a week. The non-Federal a result of the announcement or that only entity must place a copy of the current pre- grants officers can bind the Federal Govern- vailing wage determination issued by the De- ment to the expenditure of funds). partment of Labor in each solicitation. The decision to award a contract or subcontract [78 FR 78608, Dec. 26, 2013, as amended at 80 must be conditioned upon the acceptance of FR 43310, July 22, 2015; 85 FR 49575, Aug. 13, the wage determination.The non-Federal en- 20201 tity must report all suspected or reported violations to the Federal awarding agency. APPENDIX II TO PART 200—CONTRACT The contracts must also include a provision PROVISIONS FOR NON-FEDERAL ENTI- for compliance with the Copeland "Anti- TY CONTRACTS UNDER FEDERAL Kickback" Act (40 U.S.C. 3145), as supple- AWARDS mented by Department of Labor regulations (29 CFR Part 3, "Contractors and Sub- In addition to other provisions required by contractors on Public Building or Public the Federal agency or non-Federal entity,all Work Financed in Whole or in Part by Loans contracts made by the non-Federal entity or Grants from the United States").The Act under the Federal award must contain provi- provides that each contractor or sub- sions covering the following,as applicable. recipient must be prohibited from inducing, (A) Contracts for more than the simplified by any means, any person employed in the acquisition threshold, which is the inflation construction, completion,or repair of public adjusted amount determined by the Civilian work, to give up any part of the compensa- Agency Acquisition Council and the Defense tion to which he or she is otherwise entitled. Acquisition Regulations Council (Councils) The non-Federal entity must report all sus- as authorized by 41 U.S.C. 1908,must address pected or reported violations to the Federal administrative, contractual, or legal rem- awarding agency. edies in instances where contractors violate (E) Contract Work Hours and Safety or breach contract terms, and provide for Standards Act (40 U.S.C. 3701-3708). Where such sanctions and penalties as appropriate. applicable,all contracts awarded by the non- (B) All contracts in excess of$10,000 must Federal entity in excess of$100,000 that in- address termination for cause and for con- volve the employment of mechanics or labor- venience by the non-Federal entity including ers must include a provision for compliance the manner by which it will be effected and with 40 U.S.C.3702 and 3704,as supplemented the basis for settlement. by Department of Labor regulations(29 CFR (C) Equal Employment Opportunity. Ex- Part 5).Under 40 U.S.C.3702 of the Act, each cept as otherwise provided under 41 CFR contractor must be required to compute the Part 60, all contracts that meet the defini- wages of every mechanic and laborer on the tion of"federally assisted construction con- basis of a standard work week of 40 hours. tract"in 41 CFR Part 60-1.3 must include the Work in excess of the standard work week is equal opportunity clause provided under 41 permissible provided that the worker is corn- CFR 60-1.4(b), in accordance with Executive pensated at a rate of not less than one and a Order 11246, "Equal Employment Oppor- half times the basic rate of pay for all hours tunity" (30 FR 12319,12935,3 CFR Part,1964- worked in excess of 40 hours in the work 1965 Comp.,p.339),as amended by Executive week.The requirements of 40 U.S.C. 3704 are Order 11375, "Amending Executive Order applicable to construction work and provide 11246 Relating to Equal Employment Oppor- that no laborer or mechanic must be re- tunity," and implementing regulations at 41 quired to work in surroundings or under CFR part 60, "Office of Federal Contract working conditions which are unsanitary, 219 • Pt. 200, App. III 2 CFR Ch. II (1-1-21 Edition) hazardous or dangerous. These requirements Such disclosures are forwarded from tier to do not apply to the purchases of supplies or tier up to the non-Federal award. materials or articles ordinarily available on (J)See§200.323. the open market, or contracts for transpor- (K)See§200.216. tation or transmission of intelligence. (L)See§200.322. (F) Rights to Inventions Made Under a [78 FR 78608, Dec. 26, 2013, as amended at 79 Contract or Agreement.If the Federal award" FR 75888, Dec. 19, 2014; 85 FR 49577, Aug. 13, meets the definition of"funding agreement 2020] under 37 CFR§401.2 (a) and the recipient or subrecipient wishes to;enter into a contract APPENDIX III TO PART 200—INDIRECT with a small business firm or nonprofit orga- nization regarding the substitution of par- (F&A) COSTS IDENTIFICATION AND ties, assignment or performance of experi- ASSIGNMENT, AND RATE DETERMINA- mental, developmental, or research work TION FOR INSTITUTIONS OF HIGHER under that "funding agreement," the recipi- EDUCATION(IHES) ent or subrecipient must comply with the re- quirements of 37 CFR Part 401, "Rights to In- A.GENERAL ventions Made by Nonprofit Organizations This appendix provides criteria for identi- and Small Business Firms Under Govern- fying and computing indirect (or indirect ment Grants, Contracts and Cooperative Agreements," and any implementing regula- (F&A)) rates are IHEs (institutions).tacITed for tions issued by the awarding agency. (F&A) costs those that are incurred for (G)Clean Air Act(42 U.S.C.7401-7671q.)and common or joint objectives and therefore the Federal Water Pollution Control Act (33 cannot be identified readily and specifically U.S.C.1251-1387),as amended—Contracts and with a particular sponsored project, an institu- subgrantsin- of amounts in excess of $150,000 structionalactiactivity, or any other dis- must contain a provision that requires the tional activity. See subsection B.1 for a non-Federal award to agree to comply with costs. of the components of indirect (F&A) all applicable standards, orders or regula- tions costs. issued pursuant to the Clean Air Act 1.Major Functions of an Institution (42 U.S.C. 7401-7671q) and the Federal Water Pollution Control Act as amended(33 U.S.C. Refers to instruction, organized research, 1251-1387).Violations must be reported to the other sponsored activities and other institu- Federal awarding agency and the Regional tional activities as defined in this section: Office of the Environmental Protection a. Instruction means the teaching and Agency(EPA). training activities of an institution. Except (H) Debarment and Suspension (Executive for research training as provided in sub- Orders 12549 and 12689)—A contract award section b,this term includes all teaching and (see 2 CFR 180.220)must not be made to par- training activities,whether they are offered ties listed on the governmentwide exclusions for credits toward a degree or certificate or in the System for Award Management on a non-credit basis, and whether they are (SAM), in accordance with the OMB guide- offered through regular academic depart- lines at 2 CFR 180 that implement Executive ments or separate divisions, such as a sum- Orders 12549 (3 CFR part 1986 Comp., p. 189) mer school division or an extension division. and 12689 (3 CFR part 1989 Comp., p. 235), Also considered part of this major function "Debarment and Suspension." SAM Exclu- are departmental research, and, where sions contains the names of parties debarred, agreed to,university research. suspended, or otherwise excluded by agen- (1)Sponsored instruction and training means cies, as well as parties declared ineligible specific instructional or training activity es- under statutory or regulatory authority tablished by grant, contract, or cooperative other than Executive Order 12549. agreement. For purposes of the cost prin- (I) Byrd Anti-Lobbying Amendment (31 ciples, this activity may be considered a U.S.C. 1352)—Contractors that apply or bid major function even though an institution's for an award exceeding$100,000 must file the accounting treatment may include it in the required certification. Each tier certifies to instruction function. the tier above that it will not and has not (2) Departmental research means research, used Federal appropriated funds to pay any development and scholarly activities that person or organization for influencing or at- are not organized research and, con- tempting to influence an officer or employee sequently, are not separately budgeted and of any agency,a member of Congress, officer accounted for. Departmental research, for or employee of Congress,or an employee of a purposes of this document, is not considered member of Congress in connection with ob- as a major function, but as a part of the in- taining any Federal contract, grant or any struction function of the institution. other award covered by 31 U.S.C. 1352. Each (3) Only mandatory cost sharing or cost tier must also"disclose any lobbying with sharing specifically committed in the project non-Federal funds that takes place in con- budget must be included in the organized re- nection with obtaining any Federal award. search base for computing the indirect(F&A) 220 OMB Guidance Pt. 200,App. III cost rate or reflected in any allocation of in- rate groupings of cost within one or more of direct costs. Salary costs above statutory the indirect (F&A) cost categories referred limits are not considered cost sharing, to in subsection B.1. In general, the cost b. Organized research means all research groupings established within a category and development activities of an institution should constitute, in each case, a pool of that are separately budgeted and accounted those items of expense that are considered to for.It includes: be of like nature in terms of their relative (1) Sponsored research means all research contribution to (or degree of remoteness and development activities that are spon- from)the particular cost objectives to which Bored by Federal and non-Federal agencies distribution is appropriate. Cost groupings and organizations.This term includes activi- should be established considering the general ties involving the training of individuals in guides provided in subsection c of this sec- research techniques (commonly called re- tion. Each such pool or cost grouping should search training)where such activities utilize then be distributed individually to the re- the same facilities as other research and de- lated cost objectives, using the distribution velopment activities and where such activi- base or method most appropriate in light of ties are not included in the instruction func- the guidelines set forth in subsection d of tion. this section. (2) University research means all research c. General considerations on cost groupings. and development activities that are sepa- The extent to which separate cost groupings rately budgeted and accounted for by the in- and selective distribution would be appro- stitution under an internal application of in- priate at an institution is a matter of judg- stitutional funds. University research, for ment to be determined on a case-by-case purposes of this document, must be corn- basis.Typical situations which may warrant bined with sponsored research under the the establishment of two or more separate function of organized research, cost groupings (based on account classifica- c.Other sponsored activities means programs tion or analysis) within an indirect (F&A) and projects financed by Federal and non- cost category include but are not limited to Federal agencies and organizations which in- the following: volve the performance of work other than in- (1)If certain items or categories of expense struction and organized research. Examples relate solely to one of the major functions of of such programs and projects are health the institution or to less than all functions, service projects and community service pro- such expenses should be set aside as a sepa- grams.However,when any of these activities rate cost grouping for direct assignment or are undertaken by the institution without selective allocation in accordance with the outside support, they may be classified as guides provided in subsections b and d. other institutional activities. (2)If any types of expense ordinarily treat- d. Other institutional activities means all ac- ed as general administration or depart- tivities of an institution except for instruc- mental administration are charged to Fed- tion, departmental research, organized re- eral awards as direct costs,expenses applica- search,and other sponsored activities,as de- ble to other activities of the institution fined in this section; indirect(F&A)cost ac- when incurred for the same purposes in like tivities identified in this Appendix para- circumstances must, through separate cost graph B,Identification and assignment of in- groupings, be excluded from the indirect direct (F&A) costs; and specialized services (F&A) costs allocable to those Federal facilities described in§200.468 of this part. awards and included in the direct cost of other activities for cost allocation purposes. 2.Criteria for Distribution (3)If it is determined that certain expenses a. Base period. A base period for distribu- are for the support of a service unit or facil- tion of indirect (F&A) costs is the period ity whose output is susceptible of measure- during which the costs are incurred. The ment on a workload or other quantitative base period normally should coincide with basis, such expenses should be set aside as a the fiscal year established by the institution, separate cost grouping for distribution on but in any event the base period should be so such basis to organized research, instruc- selected as to avoid inequities in the dis- tional,and other activities at the institution tribution of costs. or within the department. b. Need for cost groupings. The overall ob- (4) If activities provide their own pur- jective of the indirect(F&A) cost allocation chasing, personnel administration, building process is to distribute the indirect (F&A) maintenance or similar service,the distribu- costs described in Section B, Identification tion of general administration and general and assignment of indirect (F&A) costs, to expenses, or operation and maintenance ex- the major functions of the institution in pro- penses to such activities should be accom- portions reasonably consistent with the na- plished through cost groupings which include ture and extent of their use of the institu- only that portion of central indirect (F&A) tion's resources. In order to achieve this ob- costs (such as for overall management) jective, it may be necessary to provide for which are properly allocable to such activi- selective distribution by establishing sepa- ties. 221 Pt. 200, App. III 2 CFR Ch. II (1-1-21 Edition) (5) If the institution elects to treat fringe than that in Section B must not be used to benefits as indirect (F&A) charges, such distribute utility or student services costs. costs should be set aside as a separate cost Instead,subsection B.4.c,may be used in the grouping for selective distribution to related recovery of utility costs. cost objectives. e.Order of distribution. • (6) The number of separate cost groupings (1)Indirect (F&A) costs are the broad cat- within a category should be held within egories of costs discussed in Section B.1. practical limits, after taking into consider- (2) Depreciation, interest expenses, oper- ation the materiality of the amounts in- ation and maintenance expenses,and general volved and the degree of precision attainable administrative and general expenses should through less selective methods of distribu- be allocated in that order to the remaining tion. indirect (F&A) cost categories as well as to d. Selection of distribution method. the major functions and specialized service (1) Actual conditions must be taken into facilities of the institution. Other cost cat- account in selecting the method or base to egories may be allocated in the order deter- be used in distributing individual cost mined to be most appropriate by the institu- groupings. The essential consideration in se- tions.When cross allocation of costs is made lecting a base is that it be the one best suit- as provided in subsection(3),this order of al- ed for assigning the pool of costs to cost ob- location does not apply. jectives in accordance with benefits derived; (3) Normally an indirect (F&A) cost cat- with a traceable cause-and-effect relation- egory will be considered closed once it has ship; or with logic and reason,where neither been allocated to other cost objectives, and benefit nor a cause-and-effect relationship is costs may not be subsequently allocated to determinable. it. However, a cross allocation of costs be- (2) If a cost grouping can be identified di- tween two or more indirect (F&A) cost cat- rectly with the cost objective benefitted, it egories may be used if such allocation will should be assigned to that cost objective. result in a more equitable allocation of (3) If the expenses in a cost grouping are costs. If a cross allocation is used,an appro- more general in nature,the distribution may priate modification to the composition of be based on a cost analysis study which re- the indirect (F&A) cost categories described sults in an equitable distribution of the in Section B is required. costs. Such cost analysis studies may take into consideration weighting factors, popu- B.IDENTIFICATION AND ASSIGNMENT OF lation,or space occupied if appropriate. Cost INDIRECT(F&A)COSTS analysis studies,however,must(a)be appro- 1.Definition of Facilities and Administration priately documented in sufficient detail for subsequent review by the cognizant agency See §200.414 which provides the basis for for indirect costs, (b) distribute the costs to these indirect cost requirements. the related cost objectives in accordance with the relative benefits derived,(c)be sta- 2.Depreciation tistically sound,(d)be performed specifically a. The expenses under this heading are the at the institution at which the results are to portion of the costs of the institution's be used,and(e)be reviewed periodically,but buildings, capital improvements to land and not less frequently than rate negotiations, buildings, and equipment which are com- updated if necessary, and used consistently. puted in accordance with§200.436. Any assumptions made in the study must be b. In the absence of the alternatives pro- stated and explained. The use of cost anal- vided for in Section A.2.d, the expenses in- ysis studies and periodic changes in the cluded in this category must be allocated in method of cost distribution must be fully the following manner: justified. (1) Depreciation on buildings used exclu- (4) If a cost analysis study is not per- sively in the conduct of a single function, formed, or if the study does not result in an and on capital improvements and equipment equitable distribution of the costs, the dis- used in such buildings, must be assigned to tribution must be made in accordance with that function. the appropriate base cited in Section B, un- (2)Depreciation on buildings used for more less one of the following conditions is met: than one function, and on capital improve- (a) It can be demonstrated that the use of ments and equipment used in such buildings, a different base would result in a more equi- must be allocated to the individual functions table allocation of the costs, or that a more performed in each building on the basis of readily available base would not increase the usable square feet of space, excluding com- costs charged to Federal awards,or mon areas such as hallways, stairwells, and (b)The institution qualifies for, and elects rest rooms. to use, the simplified method for computing (3) Depreciation on buildings, capital im- indirect (F&A) cost rates described in Sec- provements and equipment related to space tion D. (e.g., individual rooms, laboratories) used (5) Notwithstanding subsection (3), effec- jointly by more than one function(as deter- tive July 1,1998,a cost analysis or base other mined by the users of the space) must be 222 OMB Guidance Pt.200,App. III treated as follows. The cost of each jointly natives in paragraphs (c)(1) and (2) of this used unit of space must be allocated to belie- section: fitting functions on the basis of: (1)Where space is devoted to a single func- (a) The employee full-time equivalents tion and metering allows unambiguous meas- (FTEs) or salaries and wages of those indi- urement of usage related to that space,costs vidual functions benefitting from the use of must be assigned to the function located in that space;or that space. (b)Institution-wide employee FTEs or sal- (2) Where space is allocated to different aries and wages applicable to the benefitting functions and metering does not allow unam- major functions (see Section A.1) of the in- biguous measurement of usage by function, stitution. costs must be allocated as follows: (4) Depreciation on certain capital im- (i) Utilities costs should be apportioned to provements to land, such as paved parking functions in the same manner as deprecia- areas,fences,sidewalks,and the like,not in- tion, based on the calculated difference be- chided in the cost of buildings,must be allo- tween the site or building actual square foot- cated to user categories of students and em- age for monitored research laboratory space ployees on a full-time equivalent basis. The (site, building, floor, or room), and a sepa- amount allocated to the student category rate calculation prepared by the IHE using must be assigned to the instruction function the "effective square footage" described in of the institution. The amount allocated to subsection(c)(2)(ii)of this section. the employee category must be further allo- (ii)"Effective square footage"allocated to cated to the major functions of the institu- research laboratory space must be calculated tion in proportion to the salaries and wages as the actual square footage times the rel- of all employees applicable to those func- ative energy utilization index(REUI)posted tions. on the OMB Web site at the time of a rate determination. 3.Interest A. This index is the ratio of a laboratory Interest on debt associated with certain energy use index (lab EUI) to the cor- responding index for overall average college buildings, equipment and capital, improve- or university space(college EUI). ments, as defined in§200.449, must be classi- B.In July 2012,values for these two indices fied as an expenditure under the category (taken respectively from the Lawrence Facilities. These costs must be allocated in Berkeley Laboratory"Labs for the 21st Cen- the same manner as the depreciation on the tury"benchmarking tool and the US Depart- buildings, equipment and capital improve- ment of Energy "Buildings Energy ments to which the interest relates. Databook" and were 310 kBtu/sq ft-yr. and 4.Operation and Maintenance Expenses 155 kBtu/sq ft-yr., so that the adjustment ratio is 2.0 by this methodology. To retain a. The expenses under this heading are currency, OMB will adjust the EUI numbers those that have been incurred for the admin- from time to time(no more often than annu- istration, supervision, operation, mainte- ally nor less often than every 5 years), using nance,preservation,and protection of the in- reliable and publicly disclosed data. Current stitution's physical plant. They include ex- values of both the EUIs and the REUI will be penses normally incurred for such items as posted on the OMB website. janitorial and utility services; repairs and 5.General Administration and General Expenses ordinary or normal alterations of buildings, p furniture and equipment; care of grounds; a. The expenses under this heading are maintenance and operation of buildings and those that have been incurred for the general other plant facilities; security; earthquake executive and administrative offices of edu- and disaster preparedness; environmental cational institutions and other expenses of a safety;hazardous waste disposal; property, general character which do not relate solely liability and all other insurance relating to to any major function of the institution;i.e., property; space and capital leasing; facility solely to (1) instruction, (2) organized re- planning and management; and central re- search, (3) other sponsored activities, or (4) ceiving. The operation and maintenance ex- other institutional activities. The general pense category should also include its allo- administration and general expense category cable share of fringe benefit costs, deprecia- should also include its allocable share of tion,and interest costs. fringe benefit costs, operation and mainte- b. In the absence of the alternatives pro- nance expense, depreciation, and interest vided for in Section A.2.d, the expenses in- costs. Examples of general administration cluded in this category must be allocated in and general expenses include:Those expenses the same manner as described in subsection incurred by administrative offices that serve 2.b for depreciation. the entire university system of which the in- c. A utility cost adjustment of up to 1.3 stitution is a part; central offices of the in- percentage points may be included in the ne- stitution such as the President's or gotiated indirect cost rate of the IHE for or- Chancellor's office, the offices for institu- ganized research, per the computation alter- tion-wide financial management, business 223 Pt. 200, App. III 2 CFR Ch. II (1-1-21 Edition) services, budget and planning, personnel travel, office supplies, stockrooms, and the management, and safety and risk manage- like. ment; the office of the General Counsel; and (3) Other fringe benefit costs applicable to the operations of the central administrative the salaries and wages included in sub- management information systems. General sections (1) and (2) are allowable, as well as administration and general expenses must an appropriate share of general administra- not include expenses incurred within non- tion and general expenses, operation and university-wide deans' offices, academic de- maintenance expenses,and depreciation. partments,organized research units,or simi- (4) Federal agencies may authorize reim- lar organizational units.(See subsection 6.) bursement of additional costs for department b. In the absence of the alternatives pro- heads and faculty only in exceptional cases vided for in Section A.2.d, the expenses in- where an institution can demonstrate undue cluded in this category must be grouped first hardship or detriment to project perform- according to common major functions of the ance. institution to which they render services or b.The following guidelines apply to the de- provide benefits. The aggregate expenses of termination of departmental administrative each group must then be allocated to serv- costs as direct or indirect(F&A)costs. iced or benefitted functions on the modified (1) In developing the departmental admin- total cost basis. Modified total costs consist istration cost pool,special care should be ex- of the same elements as those in Section C.2. ercised to ensure that costs incurred for the When an activity included in this indirect same purpose in like circumstances are (F&A) cost category provides a service or treated consistently as either direct or indi- product to another institution or organiza- rect (F&A) costs. For example, salaries of tion, an appropriate adjustment must be technical staff, laboratory supplies (e.g., made to either the expenses or the basis of chemicals), telephone toll charges, animals, allocation or both,to assure a proper alloca- animal care costs, computer costs, travel tion of costs. costs, and specialized shop costs must be treated as direct costs wherever identifiable 6.Departmental Administration Expenses to a particular cost objective. Direct charg- a. The expenses under this heading are ing of these costs may be accomplished those that have been incurred for adminis- through specific identification of individual trative and supporting services that benefit costs to benefitting cost objectives, or common or joint departmental activities or through recharge centers or specialized serv- objectives in academic deans' offices, aca- ice facilities, as appropriate under the cir- demic departments and divisions, and orga- cumstances.See§§200.413(c)and 200.468. nized research units. Organized research (2) Items such as office supplies, postage, units include such units as institutes, study local telephone costs,and memberships must centers, and research centers. Departmental normally be treated as indirect(F&A)costs. administration expenses are subject to the c. In the absence of the alternatives pro- following limitations. vided for in Section A.2.d, the expenses in- (1) Academic deans' offices. Salaries and cluded in this category must be allocated as operating expenses are limited to those at- follows: tributable to administrative functions. (1) The administrative expenses of the (2)Academic departments: dean's office of each college and school must (a),Salaries and fringe benefits attrib- be allocated to the academic departments utable to the administrative work(including within that college or school on the modified bid and proposal preparation) of faculty (in- total cost basis. eluding department heads) and other profes- (2) The administrative expenses of each sional personnel conducting research and/or academic department, and the department's instruction, must be allowed at a rate of 3.6 share of the expenses allocated in subsection percent of modified total direct costs. This (1)must be allocated to the appropriate func- category does not include professional busi- tions of the department on the modified ness or professional administrative officers. total cost basis. This allowance must be added to the com- putation of the indirect (F&A) cost rate for 7•Sponsored Projects Administration major functions in Section C; the expenses a.The expenses under this heading are lim- covered by the allowance must be excluded ited to those incurred by a separate organi- from the departmental administration cost zation(s)established primarily to administer pool. No documentation is required to sup- sponsored projects, including such functions port this allowance. as grant and contract administration (Fed- (b) Other administrative and supporting eral and non-Federal), special security, pur- expenses incurred within academic depart- chasing,personnel,administration, and edit- ments are allowable provided they are treat- ing and publishing of research and other re- ed consistently in like.circumstances. This ports.They include the salaries and expenses would include expenses such as the salaries of the head of such organization, assistants, of secretarial and clerical staffs, the salaries and immediate staff, together with the sala- of administrative officers and assistants, ries and expenses of personnel engaged in 224 OMB Guidance Pt.200,App. III supporting activities maintained by the or- (2) The amount in the professional em- ganization,such as stock rooms,print shops, ployee category must be assigned to the and the like. This category also includes an major functions of the institution in propor- allocable share of fringe benefit costs, gen- tion to the salaries and wages of all faculty eral administration and general expenses, members and other professional employees operation and maintenance expenses,and de- applicable to those functions. preciation. Appropriate adjustments will be (3)The amount in the other users category made for services provided to other functions must be assigned to the other institutional or organizations. activities function of the institution. b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- 9.Student Administration and Services cluded in this category must be allocated to a. The expenses under this heading are the major functions of the institution under those that have been incurred for the admin- which the sponsored projects are conducted istration of student affairs and for services on the basis of the modified total cost of sponsored projects, to students, including expenses of such ac- c. An appropriate adjustment must be tivities as deans of students,admissions,reg- made to eliminate any duplicate charges to istrar, counseling and placement services, Federal awards when this category includes student advisers, student health and infir- similar or identical activities as those in- mary services, catalogs, and commence- cluded in the general administration and menu and convocations. The salaries of general expense category or other indirect members of the academic staff whose respon- (F&A) cost items, such as accounting, pro- sibilities to the institution require adminis- curement,or personnel administration. trative work that benefits sponsored projects may also be included to the extent that the 8.Library Expenses portion charged to student administration is determined in accordance with subpart E of a. The expenses under this heading are this Part. This expense category also in- those that have been incurred for the oper- eludes the fringe benefit costs applicable to ation of the library, including the cost of the salaries and wages included therein, an books and library materials purchased for appropriate share of general administration the library, less any items of library income and general expenses, operation and mainte- that qualify as applicable credits under nance,interest expense,and depreciation. §200.406.The library expense category should b. In the absence of the alternatives pro- also include the fringe benefits applicable to vided for in Section A.2.d, the expenses in the salaries and wages included therein, an this category must be allocated to the in- appropriate share of general administration struction function,and subsequently to Fed- and general expense, operation and mainte- eral awards in that function. nance expense, and depreciation. Costs in- curred in the purchases of rare books (mu- 10. Offset for Indirect (F&A) Expenses Other- seum-type books) with no value to Federal wise Provided for by the Federal Govern- awards should not be allocated to them. ment b. In the absence of the alternatives pro- vided for in Section A.2.d, the expenses in- a. The items to be accumulated under this cluded in this category must be allocated heading are the reimbursements and other first on the basis of primary categories of payments from the Federal Government users, including students, professional em- which are made to the institution to support ployees,and other users. solely, specifically, and directly,in whole or (1) The student category must consist of in part, any of the administrative or service full-time equivalent students enrolled at the activities described in subsections 2 through institution, regardless of whether they earn 9• credits toward a degree or certificate. b. The items in this group must be treated (2) The professional employee category as a credit to the affected individual indirect must consist of all faculty members and (F&A) cost category before that category is other professional employees of the institu- allocated to benefitting functions. tion, on a full-time equivalent basis. This C.DETERMINATION AND APPLICATION OF category may also include post-doctorate INDIRECT(F&A)COST RATE OR RATES fellows and graduate students. (3) The other users category must consist 1.Indirect(F&A)Cost Pools of a reasonable factor as determined by insti- tutional records to account for all other a. (1) Subject to subsection b, the separate users of library facilities. categories of indirect (F&A) costs allocated c.Amount allocated in paragraph b of this to each major function of the institution as section must be assigned further as follows: prescribed in Section B, must be aggregated (1) The amount in the student category and treated as a common pool for that func- must be assigned to the instruction function tion. The amount in each pool must be di- of the institution. vided by the distribution base described in 225 Pt. 200, App. III 2 CFR Ch. II (1-1-21 Edition) subsection 2 to arrive at a single indirect tiated indirect(F&A)costs will be treated as (F&A)cost rate for each function. an offset before allocation to instruction,or- (2) The rate for each function is used to ganized research, other sponsored activities, distribute indirect(F&A) costs to individual and other institutional activities. The base Federal awards of that function. Since a on which such remaining expenses are allo- common pool is established for each major cated should be appropriately adjusted. function of the institution, a separate indi- rect(F&A)cost rate would be established for 4.Predetermined Rates for Indirect(F&A)Costs each of the major functions described in Sec- Public Law 87-638(76 Stat.437)as amended tion A.1 under which Federal awards are car- (41 U.S.C. 4708) authorizes the use of pre- ried out. determined rates in determining the "indi- (3) Each institution's indirect (F&A) cost rect costs" (indirect (F&A) costs) applicable rate process must be appropriately designed under research agreements with educational to ensure that Federal sponsors do not in institutions.The stated objectives of the law any way subsidize the indirect(F&A)costs of are to simplify the administration of cost- other sponsors, specifically activities spon- type research and development contracts(in- sored by industry and foreign governments. eluding grants) with educational institu- Accordingly, each allocation method used to tions, to facilitate the preparation of their identify and allocate the indirect(F&A)cost budgets, and to permit more expeditious pools, as described in Sections A.2 and B.2 closeout of such contracts when the work is through B.9,must contain the full amount of completed. In view of the potential advan- the institution's modified total costs or tages offered by this procedure, negotiation other appropriate units of measurement used of predetermined rates for indirect (F&A) to make the computations. In addition, the costs for a period of two to four years should final rate distribution base (as defined in be the norm in those situations where the subsection 2) for each major function (orga- cost experience and other pertinent facts nized research,instruction,etc.,as described available are deemed sufficient to enable the in Section A.1 functions of an institution) parties involved to reach an informed judg- must contain all the programs or activities ment as to the probable level of indirect which utilize the indirect (F&A) costs allo- (F&A) costs during the ensuing accounting cated to that major function.At the time an periods. indirect(F&A)cost proposal is submitted to a cognizant agency for indirect costs, each 5.Negotiated Fired Rates and Carry-Forward institution must describe the process it uses Provisions to ensure that Federal funds are not used to subsidize industry and foreign government forWhenfiscal a fixed rate is other negotiatedm inr advance), th a year (or time period), the funded programs. over-or under-recovery for that year may be 2.The Distribution Basis included as an adjustment to the indirect (F&A) cost for the next rate negotiation. Indirect(F&A)costs must be distributed to When the rate is negotiated before the carry- applicable Federal awards and other benefit- forward adjustment is determined,the carry- ting activities within each major function forward amount may be applied to the next (see section A.1) on the basis of modified subsequent rate negotiation. When such ad- total direct costs (MTDC), consisting of all justments are to be made,each fixed rate ne- salaries and wages,fringe benefits,materials gotiated in advance for a given period will be and supplies, services, travel, and up to the computed by applying the expected indirect first $25,000 of each subaward (regardless of (F&A) costs allocable to Federal awards for the period covered by the subaward). MTDC the forecast period plus or minus the carry- is defined in§200.1.For this purpose,an indi- forward adjustment(over-or under-recovery) rect (F&A) cost rate should be determined from the prior period, to the forecast dis- for each of the separate indirect (F&A) cost tribution base. Unrecovered amounts under pools developed pursuant to subsection 1. lump-sum agreements or cost-sharing provi- The rate in each case should be stated as the sions of prior years must not be carried for- percentage which the amount of the par- ward for consideration in the new rate nego- ticular indirect (F&A) cost pool is of the tiation. There must, however,be an advance modified total direct costs identified with understanding in each case between the in- such pool. stitution and the cognizant agency for indi- 3.Negotiated Lump Sum for Indirect(F&A) rect costs as to whether these differences Costs will be considered in the rate negotiation rather than making the determination after A negotiated fixed amount in lieu of indi- the differences are known. Further, institu- rect(F&A)costs may be appropriate for self- tions electing to use this carry-forward pro- contained, off-campus, or primarily subcon- vision may not subsequently change without tracted activities where the benefits derived prior approval of the cognizant agency for from an institution's indirect(F&A)services indirect costs. In the event that an institu- cannot be readily determined. Such nego- tion returns to a post-determined rate, any 226 OMB Guidance Pt.200,App. III over-or under-recovery during the period in 8.Limitation on Reimbursement of which negotiated fixed rates and carry-for- Administrative Costs ward provisions were followed will be in- cluded in the subsequent a. Notwithstanding the provisions of oats q post-determined section C.l.a, the administrative costs rates. Where multiple rates are used, the charged to Federal awards awarded or same procedure will be applicable for deter- amended (including continuation and re- mining each rate. newel awards)with effective dates beginning on or after the start of the institution's first 6.Provisional and Final Rates for Indirect fiscal year which begins on or after October (F&A)Costs 1, 1991, must be limited to 26% of modified Where the cognizant agency for indirect total direct costs(as defined in subsection 2) costs determines that cost experience and for the total of General Administration and General Expenses, Departmental Adminis- other pertinent facts do not justify the use tration, Sponsored Projects Administration, of predetermined rates, or a fixed rate with and Student Administration and Services a carry-forward, or if the parties cannot (including their allocable share of deprecia- agree on an equitable rate,a provisional rate tion, interest costs, operation and mainte- must be established. To prevent substantial nance expenses, and fringe benefits costs, as overpayment or underpayment, the provi- provided by Section B,and all other types of sional rate may be adjusted by the cognizant expenditures not listed specifically under agency for indirect costs during the institu- one of the subcategories of facilities in Sec- tion's fiscal year. Predetermined or fixed tion B. rates may replace provisional rates at any b. Institutions should not change their ac- time prior to the close of the institution's counting or cost allocation methods if the ef- fiscal year. If a provisional rate is not re- fect is to change the charging of a particular placed by a predetermined or fixed rate prior type of cost from F&A to direct,or to reclas- to the end of the institution's fiscal year, a sify costs, or increase allocations from the final rate will be established and upward or administrative pools identified in paragraph downward adjustments will be made based on B.1 of this Appendix to the other F&A cost the actual allowable costs incurred for the pools or fringe benefits. Cognizant agencies period involved. for indirect cost are authorized to allow changes where an institution's charging 7.Fixed Rates for the Life of the Sponsored practices are at variance with acceptable Agreement practices followed by a substantial majority of other institutions. a. Except as provided in paragraph(c)(1)of §200.414,Federal agencies must use the nego- 9.Alternative Method for Administrative Costs tiated rates in effect at the time of the ini- a. Notwithstanding the provisions of sub- tial award throughout the life of the Federal section C.1.a, an institution may elect to award. Award levels for Federal awards may claim a fixed allowance for the "Adminis- not be adjusted in future years as a result of tration"portion of indirect(F&A)costs.The changes in negotiated rates. "Negotiated allowance could be either 24% of modified rates" per the rate agreement include final, total direct costs or a percentage equal to fixed, and predetermined rates and exclude 95% of the most recently negotiated fixed or provisional rates. "Life" for the purpose of predetermined rate for the cost pools in- this subsection means each competitive seg- eluded under"Administration" as defined in ment of a project. A competitive segment is Section B.1,whichever is less. Under this al- a period of years approved by the Federal ternative, no cost proposal need be prepared awarding agency at the time of the Federal for the"Administration"portion of the indi- award. If negotiated rate agreements do not rect(F&A)cost rate nor is further identifica- extend through the life of the Federal award tion or documentation of these costs re- at the time of the initial award,then the ne- quired(see subsection c).Where a negotiated gotiated rate for the last year of the Federal indirect (F&A) cost agreement includes this award must be extended through the end of alternative, an institution must make no the life of the Federal award. further charges for the expenditure cat- egories described in Section B.5, Section B.6, b. Except as provided in §200.414, when an Section B.7,and Section B.9. educational institution does not have a nego- b. In negotiations of rates for subsequent tiated rate with the Federal Government at periods, an institution that has elected the the time of an award (because the edu- option of subsection a may continue to exer- cational institution is a new recipient or the cise it at the same rate without further iden- parties cannot reach agreement on a rate), tification or documentation of costs. the provisional rate used at the time of the c. If an institution elects to accept a award must be adjusted once a rate is nego- threshold rate as defined in subsection a of tiated and approved by the cognizant agency this section, it is not required to perform a for indirect costs. detailed analysis of its administrative costs. 227 Pt.200, App. III 2 CFR Ch. II (1-1-21 Edition) However, in order to compute the facilities d. Resolving questioned costs. The cog- components of its indirect (F&A) cost rate, nizant agency for indirect costs must con- the institution must reconcile its indirect duct any necessary negotiations with an edu- (F&A) cost proposal to its financial state- cational institution regarding amounts ques- ments and make appropriate adjustments tioned by audit that are due the Federal and reclassifications to identify the costs of Government related to costs covered by a ne- each major function as defined in Section gotiated agreement. A.1,as well as to identify and allocate the fa- e. Reimbursement. Reimbursement to cog- cilities components. Administrative costs nizant agencies for indirect costs for work that are not identified as such by the insti- Performed under this Part may be made by tution's accounting system(such as those in- reimbursement billing under the Economy curred in academic departments) will be Act,31 U.S.C.1535. classified as instructional costs for purposes f. Procedure for establishing facilities and of reconciling indirect (F&A) cost proposals administrative rates must be established by to financial statements and allocating facili- one of the following methods: ties costs. (1) Formal negotiation. The cognizant agency for indirect costs is responsible for 10.Individual Rate Components negotiating and approving rates for an edu- In order to provide mutually agreed-upon cational institution on behalf of all Federal information for management purposes, each agencies. Federal awarding agencies that do indirect (F&A) cost rate negotiation or de- not have cognizance for indirect costs must termination must include development of a notify the cognizant agency for indirect es- rate for each indirect(F&A)cost pool as well costs of specific concerns(i.e., a need to s the overall indirect(F&A cost rate. tablish special cost rates)which could affect the negotiation process.The cognizant agen- 11.Negotiation and Approval of Indirect(F&A) cy for indirect costs must address the con- Rate cerns of all interested agencies, as appro- priate. A pre-negotiation conference may be a. Cognizant agency for indirect costs is scheduled among all interested agencies, if defined in Subpart A. necessary.The cognizant agency for indirect (1)Cost negotiation cognizance is assigned costs must then arrange a negotiation con- to the Department of Health and Human ference with the educational institution. Services (HHS) or the Department of De- (2)Other than formal negotiation.The cog- fense's Office of Naval Research (DOD), nor- nizant agency for indirect costs and edu- mally depending on which of the two agen- cational institution may reach an agreement cies (HHS or DOD) provides more funds di- on rates without a formal negotiation con- rectly to the educational institution for the ference; for example, through correspond- most recent three years. Information on ence or use of the simplified method de- funding must be derived from relevant data scribed in this section D of this Appendix. gathered by the National Science Founda- gf. Formalizing determinations and agree- tion. In cases where neither HHS nor DOD ments. The cognizant agency for indirect provides Federal funding directly to an edu- costs must formalize all determinations or cational institution, the cognizant agency agreements reached with an educational in- for indirect costs assignment must default to stitution and provide copies to other agen- HHS. Notwithstanding the method for cog- cies having an interest. Determinations nizance determination described in this sec- should include a description of any adjust- Lion, other arrangements for cognizance of a ments, the actual amount, both dollar and particular educational institution may also percentage adjusted,and the reason for mak- be based in part on the types of research per- ing adjustments. formed at the educational institution and h. Disputes and disagreements. Where the must be decided based on mutual agreement cognizant agency for indirect costs is unable between HHS and DOD.Where a non-Federal to reach agreement with an educational in- entity only receives funds as a subrecipient, stitution with regard to rates or audit reso- see§200.332. lution, the appeal system of the cognizant (2)After cognizance is established, it must agency for indirect costs must be followed continue for a five-year period. for resolution of the disagreement. b.Acceptance of rates.See§200.414. 12.Standard Format for Submission c. Correcting deficiencies. The cognizant agency for indirect costs must negotiate For facilities and administrative (indirect changes needed to correct systems defi- (F&A)) rate proposals, educational institu- ciencies relating to accountability for Fed- tions must use the standard format, shown eral awards. Cognizant agencies for indirect in section E of this appendix,to submit their costs must address the concerns of other af- indirect (F&A) rate proposal to the cog- fected agencies,as appropriate,and must ne- nizant agency for indirect costs. The cog- gotiate special rates for Federal agencies nizant agency for indirect costs may, on an that are required to limit recovery of indi- institution-by-institution basis,grant excep- rect costs by statute. tions from all or portions of Part II of the 228 OMB Guidance Pt. 200,App. III standard format requirement. This require- ries and wages included in the indirect(F&A) ment does not apply to educational institu- cost pool must be separately identified. tions that use the simplified method for cal- c.Establish a salary and wage distribution culating indirect(F&A)rates,as described in base,determined by deducting from the total Section D of this Appendix. of salaries and wages as established in sub- As provided in section C.10 of this appen- section a from the amount of salaries and dix,each F&A cost rate negotiation or deter- wages included under subsection b. mination must include development of a rate d. Establish the indirect (F&A) cost rate, for each F&A cost pool as well as the overall determined by dividing the amount in the in- F&A rate. direct (F&A) cost pool, subsection b, by the D.SIMPLIFIED METHOD FOR SMALL amount of the distribution base, subsection INSTITUTIONS O. e.Apply the indirect(F&A)cost rate to di- 1.General rect salaries and wages for individual agree- ments to determine the amount of indirect a. Where the total direct cost of work coy- (F&A)costs allocable to such agreements. ered by this Part at an institution does not exceed$10 million in a fiscal year, the sim- 3.Simplified Procedure—Modified Total Direct plified procedure described in subsections 2 Cost Base or 3 may be used in determining allowable a.Establish the total costs incurred by the indirect (F&A) costs. Under this simplified institution for the base period. procedure, the institution's most recent an- b. Establish an indirect (F&A) cost pool nual financial report and immediately avail- able supporting information must be utilized consisting of the expenditures (exclusive of as a basis for determining the indirect(F&A) capital items and other costs specifically cost rate applicable to all Federal awards. identified as unallowable)which customarily The institution may use either the salaries are classified under the following titles or and wages (see subsection 2) or modified their equivalents: total direct costs (see subsection 3) as the (1) General administration and general ex- distribution basis. penses(exclusive of costs of student adminis- b. The simplified procedure should not be tration and services, student activities, stu- used where it produces results which appear dent aid,and scholarships). inequitable to the Federal Government or (2) Operation and maintenance of physical the institution. In any such case, indirect plant and depreciation(after appropriate ad- (F&A) costs should be determined through justment for costs applicable to other insti- use of the regular procedure. tutional activities). (3)Library. 2.Simplified Procedure—Salaries and Wages (4) Department administration expenses, Base which will be computed as 20 percent of the a. Establish the total amount of salaries salaries anti expenses of deans and heads of and wages paid to all employees of the insti- departments. In those cases where expendi- tution. tures classified under subsection (1) have b. Establish an indirect (F&A) cost pool previously been allocated to other institu- consisting of the expenditures (exclusive of tional activities,they may be included in the capital items and other costs specifically indirect(F&A)cost pool. The modified total identified as unallowable)which customarily direct costs amount included in the indirect are classified under the following titles or (F&A) cost pool must be separately identi- their equivalents: fied. (1) General administration and general ex- c. Establish a modified total direct cost penses(exclusive of costs of student adminis- distribution base, as defined in Section C.2, tration and services, student activities, stu- The distribution basis, that consists of all dent aid,and scholarships). institution's direct functions. (2) Operation and maintenance of physical d. Establish the indirect (F&A) cost rate, plant and depreciation(after appropriate ad- determined by dividing the amount in the in- justment for costs applicable to other insti- direct (F&A) cost pool, subsection b, by the tutional activities). amount of the distribution base, subsection (3)Library. c. (4) Department administration expenses, e. Apply the indirect (F&A) cost rate to which will be computed as 20 percent of the the modified total direct costs for individual salaries and expenses of deans and heads of agreements to determine the amount of indi- departments. rect (F&A) costs allocable to such agree- In those cases where expenditures classi- ments. fied under subsection (1) have previously E.DOCUMENTATION REQUIREMENTS been allocated to other institutional activi- ties, they may be included in the indirect The standard format for documentation re- (F&A) cost pool. The total amount of sala- quirements for indirect(indirect(F&A))rate 229 Pt. 200, App. IV 2 CFR Ch. II (1-1-21 Edition) proposals for claiming costs under the reg- Certificate of Indirect(F&A)Costs ular method is available on the OMB This is to certify that to the best of my website. knowledge and belief: F.CERTIFICATION (1)I have reviewed the indirect(F&A)cost proposal submitted herewith; 1.Certification of Charges (2)All costs included in this proposal[iden- tifyTo assure that expenditures for Federal date] to establish billing or,final indi- awards are proper and in accordance with rectcovered(F by costs ratallowablee foa [identifyaccordance period the agreement documents and approved withh requirementsratr]are fthe in elagreagree- project budgets, the annual and/or final fis- the towhihtheyof Federal with the which apply and the cal reports or vouchers requesting payment cost principles applicable to those agree- under the agreements will include a certifi- ments. cation, signed by an authorized official of (3)This proposal does not include any costs the university, which reads "By signing this which are unallowable under subpart E of report,I certify to the best of my knowledge this part such as(without limitation):Public and belief that the report is true, complete, relations costs,contributions and donations, and accurate,and the expenditures,disburse- entertainment costs,fines and penalties,lob- ments and cash receipts are for the purposes bying costs, and defense of fraud pro- and intent set forth in the award documents. ceedings;and I am aware that any false, fictitious, or fraudulent information, or the omission of pr(4) All allocablecosts includedtoFederal in this agreementsproposal are any material fact, may subject me to crimi- the basisaly ofaef sal on relation- nal, civil or administrative the et e a beneficial or causal ndte penalties for ship between the expenses incurred and the fraud, false statements, false claims or oth- agreements to which they are allocated in erwise. (U.S. Code, Title 18, Section 1001 and accordance with applicable requirements. Title 31,Sections 3729-3733 and 3801-3812)". I declare that the foregoing is true and cor- 2.Certification of Indirect(F&A)Costs rect. Institution of Higher Education: a. Policy. Cognizant agencies must not ac- Signature: cept a proposed indirect cost rate unless Name of Official: such costs have been certified by the edu- cational institution using the Certificate of indirect (F&A) Costs set forth in subsection Date of Execution: F.2.c [78 FR 78608, Dec. 26, 2013, as amended at 79 b.The certificate must be signed on behalf FR 75888, Dec. 19, 2014; 80 FR 54409, Sept. 10, of the institution by the chief financial offi- 2015;85 FR 49577,Aug.13,2020] cer or an individual designated by an indi- vidual at a level no lower than vice president APPENDIX IV TO PART 200—INDIRECT or chief financial officer. (F&A) COSTS IDENTIFICATION AND An indirect (F&A)cost rate is not binding ASSIGNMENT, AND RATE DETERMINA- upon the Federal Government if the most re- TION FOR NONPROFIT ORGANIZA- cent required proposal from the institution TIONS has not been certified. Where it is necessary to establish indirect (F&A) cost rates, and A.GENERAL. the institution has not submitted a certified proposal for establishing such rates in ac- 1. Indirect costs are those that have been cordance with the requirements of this sec- incurred for common or joint objectives and tion,the Federal Government must unilater- cannot be readily identified with a par- ally establish such rates. Such rates may be ticular final cost objective. Direct cost of based upon audited historical data or such minor amounts may be treated as indirect other data that have been furnished to the costs under the conditions described in cognizant agency for indirect costs and for §200.413(d). After direct costs have been de- which it can be demonstrated that all unal- termined and assigned directly to awards or lowable costs have been excluded.When indi- other work as appropriate,indirect costs are rect(F&A) cost rates are unilaterally estab- those remaining to be allocated to benefit- lished by the Federal Government because of ting cost objectives. A cost may not be allo- failure of the institution to submit a cer- cated to a Federal award as an indirect cost tified proposal for establishing such rates in if any other cost incurred for the same pur- accordance with this section, the rates es- pose, in like circumstances, has been es- tablished will be set at a level low enough to signed to a Federal award as a direct cost. ensure that potentially unallowable costs 2. "Major nonprofit organizations" are de- will not be reimbursed. fined in paragraph (a) of §200.414. See Indi- c. Certificate. The certificate required by rect cost rate reporting requirements in sec- this section must be in the following form: tions B.2.e and B.3.g of this Appendix. 230 OMB Guidance Pt.200, App. IV B.ALLOCATION OF INDIRECT COSTS AND used where the level of Federal awards to an DETERMINATION OF INDIRECT COST RATES organization is relatively small. b. Both the direct costs and the indirect 1.General costs must exclude capital expenditures and a. If a nonprofit organization has only one unallowable costs. However, unallowable in- major function, or where all its major func- cludecosts which represent activities must be condi- tions benefit from its indirect costs to ap- tionsd s the direct costs under the(e). proximately the same degree, the allocation described in§,distribution base di- of indirect costs and the computation of an recc. costshe (exludi base may b total indirect cost rate may be accomplished and otherr distortinging items,capita expendituressub- through simplified allocation and $ ,000 r such as salaries p ' procedures, as awards for $25,000 or more), direct salaries described in section B.2 of this Appendix. and wages, or other base which results in an b. If an organization has several major equitable distribution.The distribution base functions which benefit from its indirect must exclude participant support costs as de- costs in varying degrees, allocation of indi- fined in§200.1. rect costs may require the accumulation of d. Except where a special rate(s) is re- such costs into separate cost groupings quired in accordance with section B.5 of this which then are allocated individually to ben- Appendix, the indirect cost rate developed efitting functions by means of a base which under the above principles is applicable to best measures the relative degree of benefit. all Federal awards of the organization. If a The indirect costs allocated to each function special rate(s)is required, appropriate modi- are then distributed to individual Federal fications must be made in order to develop awards and other activities included in that the special rate(s). function by means of an indirect cost rate(s). e. For an organization that receives more c. The determination of what constitutes than$10 million in direct Federal funding in an organization's major functions will de- a fiscal year,a breakout of the indirect cost pend on its purpose in being; the types of component into two broad categories,Facili- services it renders to the public, its clients, ties and Administration as defined in para- and its members;and the amount of effort it graph(a)of§200.414, is required. The rate in devotes to such activities as fundraising, each case must be stated as the percentage public information and membership activi- which the amount of the particular indirect ties. cost category (i.e., Facilities or Administra- d. Specific methods for allocating indirect tion) is of the distribution base identified costs and computing indirect cost rates with that category. along with the conditions under which each 3.Multiple Allocation Base Method method should be used are described in sec- tion B.2 through B.5 of this Appendix. a. General. Where an organization's indi- e.The base period for the allocation of in- rect costs benefit its major functions in direct costs is the period in which such costs varying degrees,indirect costs must be accu- are incurred and accumulated for allocation mulated into separate cost groupings, as de- to work performed in that period. The base scribed in subparagraph b. Each grouping period normally should coincide with the or- must then be allocated individually to bene- ganization's fiscal year but, in any event, fitting functions by means of a base which must be so selected as to avoid inequities in best measures the relative benefits. The de- the allocation of the costs. fault allocation bases by cost pool are de- scribed in section B.3.c of this Appendix. 2.Simplified Allocation Method b. Identification of indirect costs. Cost groupings must be established so as to per- a.Where an organization's major functions mit the allocation of each grouping on the benefit from its indirect costs to approxi- basis of benefits provided to the major func- mately the same degree,the allocation of in- tions. Each grouping must constitute a pool direct costs may be accomplished by(i)sepa- of expenses that are of like character in rating the organization's total costs for the terms of functions they benefit and in terms base period as either direct or indirect, and of the allocation base which best measures (ii) dividing the total allowable indirect the relative benefits provided to each func- costs (net of applicable credits) by an equi- tion.The groupings are classified within the table distribution base. The result of this two broad categories: "Facilities" and "Ad- process is an indirect cost rate which is used ministration," as described in section A.3 of to distribute indirect costs to individual this Appendix.The indirect cost pools are de- Federal awards.The rate should be expressed fined as follows: as the percentage which the total amount of (1) Depreciation. The expenses under this allowable indirect costs bears to the base se- heading are the portion of the costs of the lected. This method should also be used organization's buildings, capital improve- where an organization has only one major ments to land and buildings, and equipment function encompassing a number of indi- which are computed in accordance with vidual projects or activities, and may be §200.436. 231 Pt. 200, App. IV 2 CFR Ch. II (1-1-21 Edition) (2) Interest. Interest on debt associated in accordance with benefits derived; a trace- with certain buildings, equipment and cap- able cause and effect relationship; or logic ital improvements are computed in accord- and reason, where neither the cause nor the ance with§200.449. effect of the relationship is determinable. (3) Operation and maintenance expenses. When an allocation can be made by assign- The expenses under this heading are those ment of a cost grouping directly to the func- that have been incurred for the administra- tion benefitted,the allocation must be made tion, operation, maintenance, preservation, in that manner.When the expenses in a cost and protection of the organization's physical grouping are more general in nature, the al- plant. They include expenses normally in- location must be made through the use of a curred for such items as: janitorial and util- selected base which produces results that are ity services; repairs and ordinary or normal equitable to both the Federal Government alterations of buildings,furniture and equip- and the organization. The distribution must ment; care of grounds; maintenance and op- be made in accordance with the bases de- eration of buildings and other plant facili- scribed herein unless it can be demonstrated ties; security; earthquake and disaster pre- that the use of a different base would result paredness; environmental safety; hazardous in a more equitable allocation of the costs, waste disposal; property, liability and other or that a more readily available base would insurance relating to property; space and not increase the costs charged to Federal capital leasing; facility planning and man- awards. The results of special cost studies agement; and central receiving. The oper- (such as an engineering utility study) must ation and maintenance expenses category not be used to determine and allocate the in- must also include its allocable share of direct costs to Federal awards. fringe benefit costs, depreciation, and inter- (1) Depreciation. Depreciation expenses est costs. must be allocated in the following manner: (4) General administration and general ex- (a) Depreciation on buildings used exclu- penses. The expenses under this heading are sively in the conduct of a single function, those that have been incurred for the overall and on capital improvements and equipment general executive and administrative offices used in such buildings, must be assigned to of the organization and other expenses of a that function. general nature which do not relate solely to (b)Depreciation on buildings used for more any major function of the organization.This than one function, and on capital improve- category must also include its allocable ments and equipment used in such buildings, share of fringe benefit costs, operation and must be allocated to the individual functions maintenance expense, depreciation, and in- performed in each building on the basis of terest costs. Examples of this category in- usable square feet of space, excluding corn- elude central offices, such as the director's mon areas, such as hallways, stairwells, and office, the office of finance, business serv- restrooms. ices, budget and planning, personnel, safety (c) Depreciation on buildings, capital im- f and risk management,general counsel,man- provements and equipment relattd space agement information systems, and library (e.g., individual rooms, and laboratories) costs. used jointly by more than one function (as In developing this cost pool, special care determined by the users of the space) must should be exercised to ensure that costs in- be treated as follows.The cost of each joint- curred for the same purpose in like cir- ly used unit of space must be allocated to cumstances are treated consistently as ei- the benefitting functions on the basis of: ther direct or indirect costs. For example, (i)the employees and other users on a full- salaries of technical staff, project supplies, time equivalent (FTE) basis or salaries and project publication, telephone toll charges, wages of those individual functions benefit- computer costs, travel costs, and specialized ting from the use of that space;or services costs must be treated as direct costs (ii) organization-wide employee FTEs or wherever identifiable to a particular pro- salaries and wages applicable to the benefit- gram.The salaries and wages of administra- ting functions of the organization. tive and pooled clerical staff should nor- (d) Depreciation on certain capital im- mally be treated as indirect costs. Direct provements to land, such as paved parking charging of these costs may be appropriate areas,fences,sidewalks,and the like,not in- as described in§200.413. Items such as office eluded in the cost of buildings,must be alit,- supplies,postage,local telephone costs,peri- cated to user categories on a FTE basis and odicals and memberships should normally be distributed to major functions in proportion treated as indirect costs. to the salaries and wages of all employees c. Allocation bases. Actual conditions applicable to the functions. must be taken into account in selecting the (2) Interest. Interest costs must be allo- base to be used in allocating the expenses in cated in the same manner as the deprecia- each grouping to benefitting functions. The tion on the buildings, equipment and capital essential consideration in selecting a method equipment to which the interest relates. or a base is that it is the one best suited for (3) Operation and maintenance expenses. assigning the pool of costs to cost objectives Operation and maintenance expenses must 232 OMB Guidance Pt. 200, App. IV be allocated in the same manner as the de- egories: "Facilities" and "Administration," preciation. as described in§200.414(a). (4) General administration and general ex- penses. General administration and general 4.Direct Allocation Method expenses must be allocated to benefitting a. Some nonprofit organizations treat all functions based on modified total costs costs as direct costs except general adminis- (MTC).The MTC is the modified total direct tration and general expenses. These organi- costs(MTDC),as described in§200.1,plus the zations generally separate their costs into allocated indirect cost proportion. The ex- three basic categories: (i) General adminis- penses included in this category could be tration and general expenses, (ii) fund- grouped first according to major functions of raising, and (iii) other direct functions (in- the organization to which they render serv- cluding projects performed under Federal ices or provide benefits. The aggregate ex- awards). Joint costs, such as depreciation, penses of each group must then be allocated rental costs, operation and maintenance of to benefitting functions based on MTC. facilities, telephone expenses, and the like d.Order of distribution. are prorated individually as direct costs to (1) Indirect cost categories consisting of each category and to each Federal award or depreciation,interest,operation and mainte- other activity using a base most appropriate nance, and general administration and gen- to the particular cost being prorated. eral expenses must be allocated in that order b.This method is acceptable,provided each to the remaining indirect cost categories as joint cost is prorated using a base which ac- well as to the major functions of the organi- curately measures the benefits provided to zation. Other cost categories should be allo- each Federal award or other activity. The cated in the order determined to be most ap- bases must be established in accordance with propriate by the organization. This order of reasonable criteria and be supported by cur- allocation does not apply if cross allocation rent data. This method is compatible with of costs is made as provided in section B.3.d.2 the Standards of Accounting and Financial of this Appendix. Reporting for Voluntary Health and Welfare (2)Normally,an indirect cost category will Organizations issued jointly by the National be considered closed once it has been allo- Health Council, Inc., the National Assembly cated to other cost objectives, and costs of Voluntary Health and Social Welfare Or- must not be subsequently allocated to it. ganizations,and the United Way of America. However,a cross allocation of costs between c. Under this method, indirect costs con- two or more indirect costs categories could sist exclusively of general administration be used if such allocation will result in a and general expenses. In all other respects, more equitable allocation of costs. If a cross the organization's indirect cost rates must allocation is used, an appropriate modifica- be computed in the same manner as that de- tion to the composition of the indirect cost scribed in section B.2 of this Appendix. categories is required. 5.Special Indirect Cost Rates e. Application of indirect cost rate or rates. Except where a special indirect cost In some instances, a single indirect cost rate(s)is required in accordance with section rate for all activities of an organization or B.5 of this Appendix, the separate groupings for each major function of the organization of indirect costs allocated to each major may not be appropriate, since it would not function must be aggregated and treated as a take into account those different factors common pool for that function.The costs in which may substantially affect the indirect the common pool must then be distributed to costs applicable to a particular segment of individual Federal awards included in that work.For this purpose,a particular segment function by use of a single indirect cost rate. of work may be that performed under a sin- f. Distribution basis. Indirect costs must gle Federal award or it may consist of work be distributed to applicable Federal awards under a group of Federal awards performed and other benefitting activities within each in a common environment. These factors major function on the basis of MTDC (see may include the physical location of the definition in§200.1). work, the level of administrative support re- g. Individual Rate Components. An indi- quired, the nature of the facilities or other rect cost rate must be determined for each resources employed,the scientific disciplines separate indirect cost pool developed. The or technical skills involved, the organiza- rate in each case must be stated as the per- tional arrangements used, or any combina- centage which the amount of the particular tion thereof. When a particular segment of indirect cost pool is of the distribution base work is performed in an environment which identified with that pool. Each indirect cost appears to generate a significantly different rate negotiation or determination agreement level of indirect costs, provisions should be must include development of the rate for made for a separate indirect cost pool appli- each indirect cost pool as well as the overall cable to such work. The separate indirect indirect cost rate. The indirect cost pools cost pool should be developed during the must be classified within two broad cat- course of the regular allocation process, and 233 Pt. 200, App. IV 2 CFR Ch. II (1-1-21 Edition) the separate indirect cost rate resulting rates. Once an agency is assigned cognizance therefrom should be used, provided it is de- for a particular nonprofit organization, the termined that (i) the rate differs signifi- assignment will not be changed unless there cantly from that which would have been ob- is a shift in the dollar volume of the Federal tained under sections B.2,B.3,and B.4 of this awards directly funded to the organization Appendix, and (ii) the volume of work to for at least three years. All concerned Fed- which the rate would apply is material. eral agencies must be given the opportunity C.NEGOTIATION AND APPROVAL OF INDIRECT to participate in the negotiation process but, COST RATES after a rate has been agreed upon, it will be accepted by all Federal agencies. When a I.Definitions Federal agency has reason to believe that special operating factors affecting its Fed- As used in this section,the following terms eral awards necessitate special indirect cost have the meanings set forth in this section: rates in accordance with section B.5 of this a. Cognizant agency for indirect costs means Appendix, it will,prior to the time the rates the Federal agency responsible for negoti- are negotiated, notify the cognizant agency ating and approving indirect cost rates for a for indirect costs. (See also §200.414.) If the nonprofit organization on behalf of all Fed- nonprofit does not receive any funding from eral agencies. any Federal agency, the pass-through entity b.Predetermined rate means an indirect cost is responsible for the negotiation of the indi- rate, applicable to a specified current or fu- rect cost rates in accordance with ture period, usually the organization's fiscal §200.332(a)(4). year.The rate is based on an estimate of the b. Except as otherwise provided in costs to be incurred during the period.A pre- §200.414(f), a nonprofit organization which determined rate is not subject to adjust- has not ment. previously established an indirect c. Fixed rate means an indirect cost rate cost rate with a Federal agency must submit its initial indirect cost proposal immediately which has the same characteristics as a pre- after the organization is advised that a Fed- determined rate, except that the difference eral award will be made and, in no event, between the estimated costs and the actual later than three months after the effective costs of the period covered by the rate is car- date of the Federal award. ried forward as an adjustment to the rate a.Unless approved by the cognizant agency computation of a subsequent period. for indirect costs in accordance with d. Final rate means an indirect cost rate applicable to a specified past period which is §200.414(g), organizations that have pre- based on the actual costs of the period. A viously established indirect cost rates must final rate is not subject to adjustment. submit a new indirect cost proposal to the e. Provisional rate or billing rate means a cognizant agency for indirect costs within temporary indirect cost rate applicable to a six months after the close of each fiscal year. specified period which is used for funding,in- d.A predetermined rate may be negotiated terim reimbursement, and reporting indirect for use on Federal awards where there is rea- costs on Federal awards pending the estab- sonable assurance, based on past experience lishment of a final rate for the period. and reliable projection of the organization's f. Indirect cost proposal means the docu- costs, that the rate is not likely to exceed a mentation prepared by an organization to rate based on the organization's actual costs. substantiate its claim for the reimbursement e. Fixed rates may be negotiated where of indirect costs. This proposal provides the predetermined rates are not considered ap- basis for the review and negotiation leading propriate.A fixed rate,however,must not be to the establishment of an organization's in- negotiated if(i) all or a substantial portion direct cost rate. of the organization's Federal awards are ex- g.Cost objective means a function,organiza- pected to expire before the carry-forward ad- tional subdivision, contract, Federal award, justment can be made;(ii)the mix of Federal or other work unit for which cost data are and non-Federal work at the organization is desired and for which provision is made to too erratic to permit an equitable carry-for- accumulate and measure the cost of proc- ward adjustment; or (iii) the organization's esses, projects,jobs and capitalized projects. operations fluctuate significantly from year to year. 2.Negotiation and Approval of Rates f.Provisional and final rates must be nego- a. Unless different arrangements are tiated where neither predetermined nor fixed agreed to by the Federal agencies concerned, rates are appropriate. Predetermined or the Federal agency with the largest dollar fixed rates may replace provisional rates at value of Federal awards directly funded to an any time prior to the close of the organiza- organization will be designated as the cog- tion's fiscal year. If that event does not nizant agency for indirect costs for the nego- occur,a final rate will be established and up- tiation and approval of the indirect cost ward or downward adjustments will be made rates and,where necessary, other rates such based on the actual allowable costs incurred as fringe benefit and computer charge-out for the period involved. 234 OMB Guidance Pt. 200,App. V g. The results of each negotiation must be Date of Execution: formalized in a written agreement between [78 FR 78608, Dec. 26, 2013, as amended at 80 the cognizant agency for indirect costs and FR 54410, Sept: 10, 2015; 85 FR 49579, Aug. 13, the nonprofit organization. The cognizant 2020] agency for indirect costs must make avail- able copies of the agreement to all concerned APPENDIX V TO PART 200—STATE/LOCAL Federal agencies. GOVERNMENTWIDE CENTRAL SERVICE h.If a dispute arises in a negotiation of an COST ALLOCATION PLANS indirect cost rate between the cognizant agency for indirect costs and the nonprofit A.GENERAL organization,the dispute must be resolved in accordance with the appeals procedures of 1.Most governmental units provide certain the cognizant agency for indirect costs. services, such as motor pools,computer cen- t. To the extent that problems are encoun- ters, purchasing, accounting, etc., to oper- tered among the Federal agencies in connec- ating agencies on a centralized basis. Since tion with the negotiation and approval proc- federally-supported awards are performed ess, OMB will lend assistance as required to within the individual operating agencies, resolve such problems in a timely manner. there needs to be a process whereby these central service costs can be identified and D.Certification of Indirect(F&A)Costs assigned to benefitted activities on a reason- (1) Required Certification. No proposal to able and consistent basis.The central service establish indirect (F&A) cost rates must be cost allocation plan provides that process. acceptable unless such costs have been cer- All costs and other data used to distribute tified by the nonprofit organization using the costs included in the plan should be sup- the Certificate of Indirect (F&A) Costs set ported by formal accounting and other forth in section j. of this appendix. The cer- records that will support the propriety of the tificate must be signed on behalf of the orga- costs assigned to Federal awards. nization by an individual at a level no lower 2. Guidelines and illustrations of central than vice president or chief financial officer service cost allocation plans are provided in for the organization. a brochure published by the Department of (2) Each indirect cost rate proposal must Health and Human Services entitled "A be accompanied by a certification in the fol- Guide for State, Local and Indian Tribal Gov- lowing form: ernments: Cost Principles and Procedures for Developing Cost Allocation Plans and Indirect Certificate of Indirect(F&A)Costs Cost Rates for Agreements with the Federal This is to certify that to the best of my Government."A copy of this brochure may be obtained from the HHS Cost Allocation Serv- knowledge and belief: ices or at their website. (1)I have reviewed the indirect(F&A)cost proposal submitted herewith; B.DEFINITIONS (2)All costs included in this proposal[iden- tifydate] to establish billing or final indi- rect (F&A) costs rate for [identify period ganizational unit or sub-division within a covered by rate] are allowable in accordance governmental unit that is responsible for the with the requirements of the Federal awards performance or administration of Federal to which they apply and with subpart E of awards or activities of the governmental this part. unit. (3)This proposal does not include any costs 2. Allocated central services means central which are unallowable under subpart E of services that benefit operating agencies but this part such as(without limitation):Public are not billed to the agencies on a fee-for- relations costs, contributions and donations, service or similar basis.These costs are allo- entertainment costs,fines and penalties,lob- cated to benefitted agencies on some reason- hying costs, and defense of fraud pro- able basis. Examples of such services might ceedings;and include general accounting, personnel ad- (4) All costs included in this proposal are ministration,purchasing,etc. properly allocable to Federal awards on the 3.Billed central services means central serv- basis of a beneficial or causal relationship ices that are billed to benefitted agencies or between the expenses incurred and the Fed- programs on an individual fee-for-service or eral awards to which they are allocated in similar basis.Typical examples of billed cen- accordance with applicable requirements. tral services include computer services, transportation services, insurance, and I declare that the foregoing is true and cor- fringe benefits. rect. 4. Cognizant agency g y for indirect costs is de- Nonprofit Organization: fined in §200.1. The determination of cog- Signature: nizant agency for indirect costs for states Name of Official: and local governments is described in section Title: F.1. 235 Pt. 200, App.V 2 CFR Ch. II (1-1-21 Edition) 5. Major local government means local gov- submitted only once; subsequent plans ernment that receives more than$100 million should merely indicate any changes since the in direct Federal awards subject to this Part. last plan. C.SCOPE OF THE CENTRAL SERVICE COST - 1.General ALLOCATION PLANS - All proposed plans must be accompanied by The central service cost allocation plan the following: an organization chart suffi- will include all central service costs that ciently detailed to show operations including will be claimed(either as a billed or an allo- the central service activities of the state/ cated cost)under Federal awards and will be local government whether or not they are documented as described in section E. omit- shown as benefitting from central service ted from the plan will not be reimbursed. functions; a copy of the Comprehensive SUBMISSION REQUIREMENTS An- nual Financial Report(or a copy of the Exec- D. utive Budget if budgeted costs are being pro- 1.Each state will submit a plan to the De- posed)to support the allowable costs of each partment of Health and Human Services for central service activity included in the plan; each year in which it claims central service and, a certification (see subsection 4.) that costs under Federal awards. The plan should the plan was prepared in accordance with include(a)a projection of the next year's al- this Part,contains only allowable costs, and located central service cost(based either on was prepared in a manner that treated simi- actual costs for the most recently completed lar costs consistently among the various year or the budget projection for the coming Federal awards and between Federal and year),and(b)a reconciliation of actual allo- non-Federal awards/activities. cated central service costs to the estimated 2.Allocated Central Services costs used for either the most recently com- pleted year or the year immediately pre- For each allocated central service*, the ceding the most recently completed year. plan must also include the following: a brief 2. Each major local government is also re- description of the service, an identification quired to submit a plan to its cognizant of the unit rendering the service and the op- agency for indirect costs annually. erating agencies receiving the service, the 3. All other local governments claiming items of expense included in the cost of the central service costs must develop a plan in service, the method used to distribute the accordance with the requirements described cost of the service to benefitted agencies, in this Part and maintain the plan and re- and a summary schedule showing the alloca- lated supporting documentation for audit. tion of each service to the specific benefitted These local governments are not required to agencies. If any self-insurance funds or submit their plans for Federal approval un- fringe benefits costs are treated as allocated less they are specifically requested to do so (rather than billed) central services, docu- by the cognizant agency for indirect costs. mentation discussed in subsections 3.b. and Where a local' government only receives c.must also be included. funds as a subrecipient,the pass-through en- tity will be responsible for monitoring the 3.Billed Services subrecipient's plan. a. General. The information described in 4. All central service cost allocation plans this section must be provided for all billed will be prepared and, when required, sub- central services, including internal service mitted within six months prior to the begin- funds, self-insurance funds, and fringe ben- ning of each of the governmental unit's fis- efit funds. cal years in which it proposes to claim cen- b.Internal service funds. tral service costs. Extensions may be grant- (1) For each internal service fund or simi- ed by the cognizant agency for indirect costs lar activity with an operating budget of $5 • on a case-by-case basis. million or more, the plan must include: A E.DOCUMENTATION REQUIREMENTS FOR brief description of each service; a balance SUBMITTED PLANS sheet for each fund based on individual ac- counts contained in the governmental unit's The documentation requirements described accounting system;a revenue/expenses state- , in this section may be modified,expanded,or ment, with revenues broken out by source, reduced by the cognizant agency for indirect e.g., regular billings, interest earned, etc.; a costs on a case-by-case basis. For example, listing of all non-operating transfers (as de- the requirements may be reduced for those fined by GAAP) into and out of the fund; a central services which have little or no im- description of the procedures (methodology) pact on Federal awards. Conversely, if a re- used to charge the costs of each service to view of a plan indicates that certain addi- users, including how billing rates are deter- tional information is needed, and will likely mined; a schedule of current rates; and, a be needed in future years, it may be rou- schedule comparing total revenues (includ- tinely requested in future plan submissions. ing imputed revenues)generated by the serv- Items marked with an asterisk (*) should be ice to the allowable costs of the service, as 236 OMB Guidance Pt. 200,App.V determined under this part, with an expla- allowable in accordance with the require- nation of how variances will be handled. ments of this Part and the Federal award(s) (2) Revenues must consist of all revenues to which they apply. Unallowable costs have generated by the service, including unbilled been adjusted for in allocating costs as indi- and uncollected revenues.If some users were cated in the cost allocation plan. not billed for the services(or were not billed (2) All costs included in this proposal are at the full rate for that class of users), a properly allocable to Federal awards on the schedule showing the full imputed revenues basis of a beneficial or causal relationship associated with these users must be pro- between the expenses incurred and the Fed- vided. Expenses must be broken out by ob- eral awards to which they are allocated in ject cost categories (e.g., salaries, supplies, accordance with applicable requirements. etc.). Further, the same costs that have been c. Self-insurance funds. For each self-insur- treated as indirect costs have not been ance fund, the plan must include: the fund claimed as direct costs. Similar types of balance sheet; a statement of revenue and costs have been accounted for consistently. expenses including a summary of billings I declare that the foregoing is true and cor- and claims paid by agency; a listing of all rect. non-operating transfers into and out of the fund; the type(s) of risk(s) covered by the Governmental Unit: fund (e.g., automobile liability, workers' Signature: compensation, etc.); an explanation of how Name of Official: the level of fund contributions are deter- Title: mined, including a copy of the current actu- Date of Execution: arial report (with the actuarial assumptions used)if the contributions are determined on F.NEGOTIATION AND APPROVAL OF CENTRAL an actuarial basis; and, a description of the SERVICE PLANS procedures used to charge or allocate fund 1.Federal Cognizant Agency for Indirect Costs contributions to benefitted activities. Re- Assignments for Cost Negotiation serve levels in excess of claims(1)submitted and adjudicated but not paid, (2) submitted In general, unless different arrangements but not adjudicated,and(3)incurred but not are agreed to by the concerned Federal agen- submitted must be identified and explained. cies, for central service cost allocation d. Fringe benefits. For fringe benefit costs, plans, the cognizant agency responsible for the plan must include:a listing of fringe ben- review and approval is the Federal agency efits provided to covered employees, and the with the largest dollar value of total Federal overall annual cost of each type of benefit; awards with a governmental unit. For indi- current fringe benefit policies; and proce- rect cost rates and departmental indirect dures used to charge or allocate the costs of cost allocation plans, the cognizant agency the benefits to benefitted activities.In addi- is the Federal agency with the largest dollar tion, for pension and pest-retirement health value of direct Federal awards with a govern- insurance plans, the following information mental unit or component, as appropriate. must be provided: the governmental unit's Once designated as the cognizant agency for funding policies, e.g., legislative bills, trust indirect costs, the Federal agency must re- agreements, or state-mandated contribution main so for a period of five years. In addi- rules, if different from actuarially deter- tion,the following Federal agencies continue mined rates;the pension plan's costs accrued to be responsible for the indicated govern- for the year; the amount funded,and date(s) mental entities: of funding; a copy of the current actuarial Department of Health and Human Services— report(including the actuarial assumptions); Public assistance and state-wide cost alloca- the plan trustee's report; and, a schedule tion plans for all states (including the Dis- from the activity showing the value of the trict of Columbia and Puerto Rico), state interest cost associated with late funding. and local hospitals, libraries and health dis- 4.Required Certification tricts. Department of the Interior—Indian tribal Each central service cost allocation plan governments, territorial governments, and will be accompanied by a certification in the state and local park and recreational dis- following form: tricts. CERTIFICATE OF COST ALLOCATION Department of Labor—State and local labor PLAN departments. Department of Education—School districts This is to certify that I have reviewed the and state and local education agencies. cost allocation plan submitted herewith and Department of Agriculture—State and local to the best of my knowledge and belief: agriculture departments. (1)All costs included in this proposal[iden- Department of Transportation—State and tify date]to establish cost allocations or bil- local airport and port authorities and transit lings for[identify period covered by plan]are districts. 237 Pt. 200, App. V 2 CFR Ch. 1I (1-1-21 Edition) Department of Commerce—State and local able in accordance with applicable cognizant economic development districts. agency claims collection regulations. These Department of Housing and Urban Develop- adjustments or refunds are designed to cor- ment—State and local housing and develop- rect the plans and do not constitute a re- ment districts. opening of the negotiation. Environmental Protection Agency—State and local water and sewer districts. G.OTHER POLICIES 2.Review 1.Billed Central Service Activities All proposed central service cost allocation Each billed central service activity must plans that are required to be submitted will separately account for all revenues (includ- be reviewed,negotiated,and approved by the ing imputed revenues)generated by the serv- cognizant agency for indirect costs on a ice, expenses incurred to furnish the service, timely basis. The cognizant agency for indi- and profit/loss. rect costs will review the proposal within six months of receipt of the proposal and either 2. Working Capital Reserves negotiate/approve the proposal or advise the governmental unit of the additional docu- Internal service funds are dependent upon mentation needed to support/evaluate the a reasonable level of working capital reserve proposed plan or the changes required to to operate from one billing cycle to the next. make the proposal acceptable. Once an Charges by an internal service activity to agreement with the governmental unit has provide for the establishment and mainte- been reached,the agreement will be accepted !lance of a reasonable level of working cap- and used by all Federal agencies, unless pro- ital reserve, in addition to the full recovery hibited or limited by statute. Where a Fed- of costs,are allowable.A working capital re- eral awarding agency has reason to believe serve as part of retained earnings of up to 60 that special operating factors affecting its calendar days cash expenses for normal oper- Federal awards necessitate special consider- ating purposes is considered reasonable. A ation, the funding agency will, prior to the working capital reserve exceeding 60 cal- time the plans are negotiated, notify the endar days may be approved by the cog- cognizant agency for indirect costs. nizant agency for indirect costs in excep- tional cases. 3.Agreement 3.Carry-Forward Adjustments of Allocated The results of each negotiation must be Central Service Costs formalized in a written agreement between the cognizant agency for indirect costs and Allocated central service costs are usually the governmental unit. This agreement will negotiated and approved for a future fiscal be subject to re-opening if the agreement is Year on a "fixed with carry-forward" basis. subsequently found to violate a statute or Under this procedure, the fixed amounts for the information upon which the'plan was ne- the future year covered by agreement are gotiated is later found to be materially in- not subject to adjustment for that year. complete or inaccurate. The results of the However, when the actual costs of the year negotiation must be made available to all involved become known, the differences be- Federal agencies for their use. tween the fixed amounts previously approved and the actual costs will be carried forward 4.Adjustments and used as an adjustment to the fixed Negotiated cost allocation plans based on a amounts established for a later year. This proposal later found to have included costs carry-forward"procedure applies to all cen- that: (a) are unallowable (i) as specified by tral services whose costs were fixed in the law or regulation,(ii)as identified in subpart approved plan. However, a carry-forward ad- F, General Provisions for selected Items of justment is not permitted,for a central serv- Cost of this Part, or (iii) by the terms and ice activity that was not included in the ap- conditions of Federal awards,or(b)are unal- proved plan, or for unallowable costs that lowable because they are clearly not allo- must be reimbursed immediately. cable to Federal awards,must be adjusted,or 4.Adjustments of Billed Central Services a refund must be made at the option of the cognizant agency for indirect costs, includ- Billing rates used to charge Federal awards ing earned or imputed interest from the date must be based on the estimated costs of pro- of transfer and debt interest, if applicable, viding the services, including an estimate of chargeable in accordance with applicable the allocable central service costs. A com- Federal cognizant agency for indirect costs parison of the revenue generated by each regulations. Adjustments or cash refunds billed service (including total revenues may include, at the option of the cognizant whether or not billed or collected)to the ac- agency for indirect costs, earned or imputed tual allowable costs of the service will be interest from the date of expenditure and de- made at least annually, and an adjustment linquent debt interest, if applicable, charge- will be made for the difference between the 238 OMB Guidance Pt.200, App. VI revenue and the allowable costs. These ad- rect)are normally charged to Federal awards justments will be made through one of the by implementing the public assistance cost following adjustment methods: (a)a cash re- allocation plan.This Appendix extends these fund including earned or imputed interest requirements to all Federal awarding agen- from the date of transfer and debt interest,if cies whose programs are administered by a applicable, chargeable in accordance with state public assistance agency. Major feder- applicable Federal cognizant agency for indi- ally-financed programs typically adminis- rect costs regulations to the Federal Govern- tered by state public assistance agencies in- ment for the Federal share of the adjust- clude: Temporary Aid to Needy Families ment, (b) credits to the amounts charged to (TANF), Medicaid, Food Stamps, Child Sup- the individual programs, (c) adjustments to port Enforcement, Adoption Assistance and future billing rates,or(d)adjustments to al- Foster Care, and Social Services Block located central service costs.Adjustments to Grant. allocated central services will not be per- mitted where the total amount of the adjust- B.DEFINITIONS ment for a particular service (Federal share 1. State public assistance agency means a and non-Federal) share exceeds $500,000. Ad- state agency administering or supervising justment methods may include,at the option the administration of one or more public as- of the cognizant agency, earned or imputed sistance programs operated by the state as interest from the date of expenditure and de- identified in Subpart E of 45 CFR Part 95. linquent debt interest, if applicable, charge- For the purpose of this Appendix, these pro- able in accordance with applicable cognizant grams include all programs administered by agency claims collection regulations. the state public assistance agency. 2. State public assistance agency costs means 5.Records Retention all costs incurred by, or allocable to,'the All central service cost allocation plans state public assistance agency, except ex- and related documentation used as a basis penditures for financial assistance, medical for claiming costs under Federal awards contractor payments, food stamps, and pay- must be retained for audit in accordance ments for services and goods provided di- with the records retention requirements con- rectly to program recipients. tained in subpart D of this part. C.POLICY 6.Appeals State public assistance agencies will de- If a dispute arises in the negotiation of a velop, document and implement, and the plan between the cognizant agency for indi- Federal Government will review, negotiate, rect costs and the governmental unit, the and approve, public assistance cost alloca- dispute must be resolved in accordance with tion plans in accordance with Subpart E of 45 the appeals procedures of the cognizant CFR Part 95. The plan will include all pro- agency for indirect costs. grams administered by the state public as- sistance agency. Where a letter of approval 7.OMB Assistance or disapproval is transmitted to do state pub- To the extent that problems are encoun- lie assistance agency in accordance with tered among the Federal agencies or govern- Subpart E, the letter will apply to all Fed- mental units in connection with the negotia- eral agencies and programs. The remaining tion and approval process, OMB will lend as- sections of this Appendix (except for the re- sistance, as required, to resolve such prob- quirement for certification) summarize the lems in a timely manner. provisions of Subpart E of 45 CFR Part 95. [78 FR 78608, Dec. 26, 2013, as amended at 80 D. SUBMISSION, DOCUMENTATION, AND AP- FR 54410, Sept. 10,2015; 85 FR 49581,Aug. 13, PROVAL OF PUBLIC ASSISTANCE COST ALLO- 2020] CATION PLANS VI TO PART 200—PUBLIC 1. State public assistance agencies are re- APPENDIXASSISTANCE COST ALLOCATION PLANS quired to promptly submit amendments to theicost allocation plan to HHS for review A.GENERAL and approval. 2. Under the coordination process outlined Federally-financed programs administered in section E, affected Federal agencies will by state public assistance agencies are fund- review all new plans and plan amendments ed predominately by the Department of and provide comments, as appropriate, to Health and Human Services (HHS). In sup- HHS. The effective date of the plan or plan port of its stewardship requirements, HHS amendment will be the first day of the cal- has published requirements for the develop- endar quarter following the event that re- ment, documentation, submission, negotia- quired the amendment, unless another date tion, and approval of public assistance cost is specifically approved by HHS.HHS,as the allocation plans in Subpart E of 45 CFR Part cognizant agency for indirect costs acting on 95. All administrative costs(direct and indi- behalf of all affected Federal agencies, will, 239 Pt. 200, App. VII 2 CFR Ch. II (1-1-21 Edition) as necessary, conduct negotiations with the APPENDIX VII TO PART 200—STATES AND state public assistance agency and will in- LOCAL GOVERNMENT AND INDIAN form the state agency of the action taken on TRIBE INDIRECT COST PROPOSALS the plan or plan amendment. A.GENERAL E.REVIEW OF IMPLEMENTATION OF APPROVED 1. IridlreCt costs are those that have been PLANS incurred for common or joint purposes. 1. Since public assistance cost allocation These costs benefit more than one cost ob- plans are of a narrative nature, the review jective and cannot be readily identified with during the plan approval process consists of a particular final cost objective without ef- evaluating the appropriateness of the pro- fort disproportionate to the results achieved. posed groupings of costs (cost centers) and After direct costs have been determined and the related allocation bases. As such, the assigned directly to Federal awards and Federal Government needs some assurance other activities as appropriate,indirect costs are those remaining to be allocated to bene- that the cost allocation plan has been imple- fitted cost objectives. A cost may not be al- mented as approved.This is accomplished by located to a Federal award as an indirect reviews by the Federal awarding agencies, cost if any other cost incurred for the same single audits, or audits conducted by the purpose, in like circumstances, has been as- cognizant agency for indirect costs. signed to a Federal award as a direct cost. 2. Where inappropriate charges affecting 2. Indirect costs include (a) the indirect more than one Federal awarding agency are costs originating in each department or identified, the cognizant HHS cost negotia- agency of the governmental unit carrying tion office will be advised and will take the out Federal awards and(b) the costs of cen- lead in resolving the issue(s)as provided for tral governmental services distributed in Subpart E of 45 CFR Part 95. through the central service cost allocation 3. If a dispute arises in the negotiation of plan(as described in Appendix V to this part) a plan or from a disallowance involving two and not otherwise treated as direct costs. or more Federal awarding agencies, the dis- 3. Indirect costs are normally charged to puteFederal awards by the use of an indirect cost must be resolved in accordance with the rate. A separate indirect cost rate(s) is usu- appeals procedures set out in 45 CFR Part 16. ally necessary for each department or agen- Disputes involving only one Federal award- cy of the governmental unit claiming indi- ing agency will be resolved in accordance rect costs under Federal awards. Guidelines with the Federal awarding agency's appeal and illustrations of indirect cost proposals process. are provided in a brochure published by the 4.To the extent that problems are encoun- Department of Health and Human Services tered among the Federal awarding agencies entitled"A Guide for States and Local Govern- or governmental units in connection with went Agencies: Cost Principles and Procedures the negotiation and approval process,the Of- for Establishing Cost Allocation Plans and Indi- fice of Management and Budget will lend as- rect Cost Rates for Grants and Contracts with sistance, as required, to resolve such prob- the Federal Government."A copy of this bro- lems in a timely manner. chure may be obtained from HHS Cost Allo- cation Services or at their website. F.UNALLOWABLE COSTS 4. Because of the diverse characteristics and accounting practices of governmental Claims developed under approved cost allo- units,the types of costs which may be classi- cation plans will be based on allowable costs Pied as indirect costs cannot be specified in as identified in this Part.Where unallowable all situations. However, typical examples of costs have been claimed and reimbursed, indirect costs may include certain state/ they will be refunded to the program that re- local-wide central service costs, general ad- imbursed the unallowable cost using one of ministration of the non-Federal entity ac- the following methods: (a)a cash refund, (b) counting and personnel services performed offset to a subsequent claim,or(c)credits to within the non-Federal entity, depreciation the amounts charged to individual Federal on buildings and equipment, the costs of op- awards. Cash refunds, offsets, and credits erating and maintaining facilities. may include at the option of the cognizant 5. This Appendix does not apply to state agency for indirect cost, earned or imputed public assistance agencies. These agencies interest from the date of expenditure and de- should refer instead to Appendix VI to this linquent debt interest, if applicable, charge- part. able in accordance with applicable cognizant B.DEFINITIONS agency for indirect cost claims collection regulations. 1.Base means the accumulated direct costs (normally either total direct salaries and [78 FR 78608, Dec. 26, 2013, as amended at 85 wages or total direct costs exclusive of any FR 49581,Aug.13,2020] extraordinary or distorting expenditures) 240 OMB Guidance Pt. 200, App.VII used to distribute indirect costs to indi- available are deemed sufficient to enable the vidual Federal awards. The direct cost base parties involved to reach an informed judg- selected should result in each Federal award ment as to the probable level of indirect bearing a fair share of the indirect costs in costs during the ensuing accounting periods. reasonable relation to the benefits received 10.Provisional rate means a temporary indi- from the costs. rect cost rate applicable to a specified period 2. Base period for the allocation of indirect which is used for funding,interim reimburse- costs is the period in which such costs are in- ment, and reporting indirect costs on Fed- curred and accumulated for allocation to ac- eral awards pending the establishment of a tivities performed in that period. The base "final"rate for that period. period normally should coincide with the governmental unit's fiscal year, but in any C.ALLOCATION OF INDIRECT COSTS AND event,must be so selected as to avoid inequi- DETERMINATION OF INDIRECT COST RATES ties in the allocation of costs. 1.General 3. Cognizant agency for indirect costs means the Federal agency responsible for reviewing a. Where a governmental unit's depart- and approving the governmental unit's indi- ment or agency has only one major function, rect cost rate(s)on the behalf of the Federal or where all its major functions benefit from Government. The cognizant agency for indi- the indirect costs to approximately the same rect costs assignment is described in Appen- degree, the allocation of indirect costs and dix V,section F. the computation of an indirect cost rate may 4.Final rate means an indirect cost rate ap- be accomplished through simplified alloca- plicable to a specified past period which is tion procedures as described in subsection 2. based on the actual allowable costs of the pe- b. Where a governmental unit's depart- riod. A final audited rate is not subject to ment or agency has several major functions adjustment. which benefit from its indirect costs in vary- . 5. Fixed rate means an indirect cost rate ing degrees, the allocation of indirect costs which has the same characteristics as a pre- may require the accumulation of such costs determined rate, except that the difference into separate cost groupings which then are between the estimated costs and the actual, allocated individually to benefitted func- allowable costs of the period covered by the tions by means of a base which best meas- rate is carried forward as an adjustment to ures the relative degree of benefit.The indi- the rate computation of a subsequent period. rect costs allocated to each function are 6. Indirect cost pool is the accumulated then distributed to individual Federal costs that jointly benefit two or more pro- awards and other activities included in that grams or other cost objectives. function by means of an indirect cost rate(s). 7. Indirect cost rate is a device for deter- c. Specific methods for allocating indirect mining in a reasonable manner the propor- costs and computing indirect cost rates tion of indirect costs each program should along with the conditions under which each bear. It is the ratio (expressed as a percent- method should be used are described in sub- age) of the indirect costs to a direct cost sections 2,3 and 4. base. 8. Indirect cost rate proposal means the doc- 2.Simplified Method umentation prepared by a governmental unit a. Where a non-Federal entity's major or subdivision thereof to substantiate its re- functions benefit from its indirect costs to quest for the establishment of an indirect approximately the same degree, the alloca- cost rate. tion of indirect costs may be accomplished 9.Predetermined rate means an indirect cost by (1) classifying the non-Federal entity's rate, applicable to a specified current or fu- total costs for the base period as either di- ture period, usually the governmental unit's rect or indirect,and(2)dividing the total al- fiscal year.This rate is based on an estimate lowable indirect costs (net of applicable of the costs to be incurred during the period. credits) by an equitable distribution base. Except under very unusual circumstances, a The result of this process is an indirect cost predetermined rate is not subject to adjust- rate which is used to distribute indirect ment. (Because of legal constraints, pre- costs to individual Federal awards.The rate determined rates are not permitted for Fed- should be expressed as the percentage which eral contracts; they may, however, be used the total amount of allowable indirect costs for grants or cooperative agreements.) Pre- bears to the base selected. This method determined rates may not be used by govern- should also be used where a governmental mental units that have not submitted and unit's department or agency has only one negotiated the rate with the cognizant agen- major function encompassing a number of in- cy for indirect costs.In view of the potential dividual projects or activities, and may be advantages offered by this procedure, nego- used where the level of Federal awards to tiation of predetermined rates for indirect that department or agency is relatively costs for a period of two to four years should small. be the norm in those situations where the b. Both the direct costs and the indirect cost experience and other pertinent facts costs must exclude capital expenditures and 241 Pt. 200, App. VII 2 CFR Ch. II (1-1-21 Edition) unallowable costs. However, unallowable e.The distribution base used in computing costs must be included in the direct costs if the indirect cost rate for each function may they represent activities to which indirect be(1)total direct costs(excluding capital ex- costs are properly allocable. penditures and other distorting items such c.The distribution base may be(1)total di- as pass-through funds,subawards in excess of rect costs (excluding capital expenditures $25,000, participant support costs, etc.), (2) and other distorting items, such as pass- direct salaries and wages, or(3)another base through funds, subcontracts in excess of which results in an equitable distribution. $25,000, participant support costs, etc.), (2) An indirect cost rate should be developed for direct salaries and wages, or(3)another base each separate indirect cost pool developed. which results in an equitable distribution. The rate in each case should be stated as the Multiple Allocation Base Method percentage relationship between the par- 3. ticular indirect cost pool and the distribu- a. Where a non-Federal entity's indirect tion base identified with that pool. costs benefit its major functions in varying degrees, such costs must be accumulated 4.Special Indirect Cost Rates into separate cost groupings. Each grouping a. In some instances,a single indirect cost must then be allocated individually to bene- rate for all activities of a non-Federal entity fitted functions by means of a base which or for each major function of the agency may best measures the relative benefits. not be appropriate. It may not take into ac- b.The cost groupings should be established count those different factors which may sub- so as to permit the allocation of each group- stantially affect the indirect costs applicable ing on the basis of benefits provided to the major functions. Each grouping should con- to a particular program or group of pro- physical stitute a pool of expenses that are of like grams.The factors may include the physical administra- character in terms of the functions they ben- tlocation of the work,the level of natureof hefit and in terms of the allocation base cili support required, theemployed, the or- whichfr- best measures the relative benefits gani es or other resources the provided to each function. The number of ganizational arrangements used,or any com- separate groupings should be held within bination thereof. When a particular Federal practical limits, taking into consideration award is carried out in an environment the materiality of the amounts involved and which appears to generate a significantly the degree of precision needed. for different level o indirect costs, provisions c.Actual conditions must be taken into ac- should be made f a separate indirect cost count in selecting the base to be used in allo- pool applicable to that Federal award. The ' Gating the expenses in each grouping to ben- separate indirect cost pool should be devel- efitted functions. When an allocation can be aped during the course of the regular alloca- made by assignment of a cost grouping di- tion process, and the separate indirect cost rectly to the function benefitted, the alloca- rate resulting therefrom should be used,pro- tion must be made in that manner.When the vided that: (1) Tie rate differs significantly expenses in a grouping are more general in from the rate which would have been devel- nature, the allocation should be made aped under paragraphs (C)(2) and (C)(3) of through the use of a selected base which pro- this Appendix, and (2) the Federal award to duces results that are equitable to both the which the rate would apply is material in Federal Government and the governmental amount. unit.In general,any cost element or related b. Where Federal statutes restrict the re- factor associated with the governmental imbursement of certain indirect costs, it unit's activities is potentially adaptable for may be necessary to develop a special rate use as an allocation base provided that:(1)it for the affected Federal award.Where a"re- can readily be expressed in terms of dollars stricted rate" is required, the same proce- or other quantitative measures (total direct dure for developing a non-restricted rate will costs, direct salaries and wages, staff hours be used except for the additional step of the applied, square feet used, hours of usage, elimination from the indirect cost pool those number of documents processed, population costs for which the law prohibits reimburse- served,and the like),and(2)it is common to ment. the benefitted functions during the base pe- D.SUBMISSION AND DOCUMENTATION OF riod. d. Except where a special indirect cost PROPOSALS rate(s) is required in accordance with para- 1.Submission of Indirect Cost Rate Proposals graph (C)(4) of this Appendix, the separate groupings of indirect costs allocated to each a. All departments or agencies of the gov- major function must be aggregated and ernmental unit desiring to claim indirect treated as a common pool for that function. costs under Federal awards must prepare an The costs in the common pool must then be indirect cost rate proposal and related docu- distributed to individual Federal awards in- mentation to support those costs. The pro- eluded in that function by use of a single in- posal and related documentation must be re- direct cost rate. tained for audit in accordance with the 242 OMB Guidance Pt.200,App. VII records retention requirements contained in c. The approximate amount of direct base §200.334. costs incurred under Federal awards. These b. A governmental department or agency costs should be broken out between salaries unit that receives more than $35 million in and wages and other direct costs. direct Federal funding must submit its indi- d. A chart showing the organizational rect cost rate proposal to its cognizant agen- structure of the agency during the period for cy for indirect costs.Other governmental de- which the proposal applies, along with a partment or agency must develop an indirect functional statement(s) noting the duties cost proposal in accordance with the require- and/or responsibilities of all units that com- ments of this Part and maintain the proposal prise the agency. (Once this is submitted, and related supporting documentation for only revisions need be submitted with subse- audit. These governmental departments or quent proposals.) agencies are not required to submit their 3.Required certification. proposals unless they are specifically re- quested to do so by the cognizant agency for Each indirect cost rate proposal must be indirect costs. Where a non-Federal entity accompanied by a certification in the fol- only receives funds as a subrecipient, the lowing form: pass-through entity will be responsible for CERTIFICATE OF INDIRECT COSTS negotiating and/or monitoring the subrecipi- ent's indirect costs. This is to certify that I have reviewed the c. Each Indian tribal government desiring indirect cost rate proposal submitted here- reimbursement of indirect costs must submit with and to the best of my knowledge and its indirect cost proposal to the Department belief: of the Interior(its cognizant agency for indi- (1)All costs included in this proposal[iden- rect costs). tify date] to establish billing or final indi- d. Indirect cost proposals must be devel- rect costs rates for [identify period covered oped(and, when required, submitted) within by rate]are allowable in accordance with the six months after the close of the govern- requirements of the Federal award(s) to mental unit's fiscal year,unless an exception which they apply and the provisions of this is approved by the cognizant agency for indi- Part. Unallowable costs have been adjusted rect costs. If the proposed central service for in allocating costs as indicated in the in- cost allocation plan for the same period has direct cost proposal not been approved by that time, the indirect (2) All costs included in this proposal are cost proposal may be prepared including an properly allocable to Federal awards on the amount for central services that is based on basis of a beneficial or causal relationship the latest federally-approved central service between the expenses incurred and the agree- cost allocation plan. The difference between ments to which they are allocated in accord- these central service amounts and the ance with applicable requirements. Further, amounts ultimately approved will be corn- the same costs that havetbeen treated as in- pensated for by an adjustment in a subse- direct costs have not been claimed as direct quent period. costs. Similar types of costs have been ac- counted for consistently and the Federal 2.Documentation of Proposals Government will be notified of any account- The following must be included with each ing changes that would affect the predeter- indirect cost proposal: mined rate. a.The rates proposed,including subsidiary I declare that the foregoing is true and cor- work sheets and other relevant data, cross rect. referenced and reconciled to the financial Governmental Unit: data noted in subsection b.Allocated central Signature: service costs will be supported by the sum- Name of Official: mary table included in the approved central Title: service cost allocation plan. This summary Date of Execution: table is not required to be submitted with E.NEGOTIATION AND APPROVAL OF RATES the indirect cost proposal if the central serv- ice cost allocation plan for the same fiscal 1. Indirect cost rates will be reviewed, ne- year has been approved by the cognizant gotiated, and approved by the cognizant agency for indirect costs and is available to agency on a timely basis. Once a rate has the funding agency. been agreed upon, it will be accepted and b. A copy of the financial data (financial used by all Federal agencies unless prohib- statements, comprehensive annual financial ited or limited by statute. Where a Federal report, executive budgets, accounting re- awarding agency has reason to believe that ports,etc.)upon which the rate is based.Ad- special operating factors affecting its Fed- justments resulting from the use of eral awards necessitate special indirect cost unaudited data will be recognized,where ap- rates, the funding agency will, prior to the propriate, by the Federal cognizant agency time the rates are negotiated,notify the cog- . for indirect costs in a subsequent proposal. nizant agency for indirect costs. 243 Pt. 200, App. VIII 2 CFR Ch. II (1-1-21 Edition) 2. The use of predetermined rates, if al- made on a case-by-case basis as warranted by lowed, is encouraged where the cognizant the circumstances involved. agency for indirect costs has reasonable as- surance based on past experience and reli- 3.Indirect Cost Allocations Not Using Rates able projection of the non-Federal entity's de- costs, that the rate is not likely to exceed a In certain situations, governmental rate based on actual costs.Long-term agree- ments utilizing predetermined rates extend- governmental unit), because of the nature of ing over two or more years are encouraged, their Federal awards,may be required to de- where appropriate. velop a cost allocation plan that distributes 3. The results of each negotiation must be indirect(and, in some cases, direct) costs to formalized in a written agreement between the specific funding sources.In these cases,a the cognizant agency for indirect costs and narrative cost allocation methodology the governmental unit. This agreement will should be developed, documented, main- be subject to re-opening if the agreement is tained for audit, or submitted, as appro- subsequently found to violate a statute, or priate, to the cognizant agency for indirect the information upon which the plan was ne- costs for review,negotiation,and approval. gotiated is later found to be materially in- 4.Appeals complete or inaccurate. The agreed upon rates must be made available to all Federal If a dispute arises in a negotiation of an in- agencies for their use. direct cost rate (or other rate) between the 4. Refunds must be made if proposals are cognizant agency for indirect costs and the later found to have included costs that (a) governmental unit, the dispute must be re- are unallowable(i)as specified by law or reg- solved in accordance with the appeals proce- ulation, (ii) as identified in §200.420, or (iii) dures of the cognizant agency for indirect by the terms and conditions of Federal costs. awards, or (b) are unallowable because they are clearly not allocable to Federal awards. 5.Collection of Unallowable Costs and These adjustments or refunds will be made Erroneous Payments regardless of the type of rate negotiated Costs specifically identified as unallowable (predetermined,final,fixed,or provisional). and charged to Federal awards either di- F.OTHER POLICIES rectly or indirectly will be refunded(includ- ing interest chargeable in accordance with 1.Fringe Benefit Rates applicable Federal cognizant agency for indi- If overall fringe benefit rates are not ap- rect costs regulations). proved for the governmental unit as part of 6.OMB Assistance the central service cost allocation plan, these rates will be reviewed, negotiated and To the extent that problems are encoun- approved for individual recipient agencies tered among the Federal agencies'or govern- during the indirect cost negotiation process. mental units in connection with the negotia- In these cases, a proposed fringe benefit rate tion and approval process,OMB will lend as- computation should accompany the indirect sistance, as required, to resolve such prob- cost proposal. If fringe benefit rates are not lems in a timely manner. used at the recipient agency level (i.e., the [78 FR 78608, Dec. 26, 2013, as amended at 79 agency specifically identifies fringe benefit FR 75889,R Dec. 19, 2014;, 2 85 FR Omen1, Aug. 79 costs to individual employees), the govern- FR 3, mental unit should so advise the cognizant 20207 agency for indirect costs. APPENDIX VIII TO PART 200— NON- 2.Billed Services Provided by the Recipient PROFIT ORGANIZATIONS EXEMPTED Agency FROM SUBPART E OF PART 200 In some cases, governmental departments 1. Advance Technology Institute (ATI), or agencies (components of the govern- Charleston, South Carolina mental unit) provide and bill for services similar to those covered by central service 2. Aerospace Corporation, El Segundo, Cali- cost allocation plans (e.g., computer cen- fornia ters). Where this occurs, the governmental 3. American Institutes of Research (AIR), departments or agencies (components of the Washington,DC governmental unit)should be guided by the 4.Argonne National Laboratory, Chicago,Il- requirements in Appendix V relating to the linois development of billing rates and documenta- 5. Atomic Casualty Commission, Wash- tion requirements, and should advise the ington,DC cognizant agency for indirect costs of any 6. Battelle Memorial Institute, billed services. Reviews of these types of Headquartered in Columbus,Ohio services (including reviews of costing/billing 7. Brookhaven National Laboratory, Upton, methodology, profits or losses, etc.) will be New York 244 Exhibit D r, Z .. .. 0000 0000 0000 0000 0000 0000 O 00 CO Ill 00010 10OtOM 010 0 N 00 CN 00010 010 C 10 G W 01 C tD N H In N M N CO 00 W N 1-1 CO N V' M H N o v.-1 co 01 M r Ca N 10 In NI/ N M C In 0) CO CO CO01 C CT CO N C In N V' t�COH V' C 01 N n WM N C 1!1 r M In to CO N C Mr- N V' to 1` 011010 alm In W U min too 11) 0' W rt 01 O 0 0 N• 00001Il 0 0 0 0 00 0 0 0 0 0 0 0 0 0000 0000 000 0 O InN0 00100 OM U] u) In In'10In O ul C 1n U) N tD M N HNM C u) W O M C0011.00 r- r-I M CO H N N 1D 1` V1 M H kO cnNal 000 ru)U)M N kr, 10C 0 .-i .-lH NM*DM NaM1- CO )t0 MMWCO CO N C In N N C In N CO 10 t0 CO M In tD CO M m D W ill O 100 110j o 0 0 0 0000 0000 0000 0000 0000 CO CO0001N 0 000 00030 0000 MONO MONO Ou) C O 1- 01 C t0 0 01 01 M N W 'a 1 O H H.-I 0 0) H U CO N 0 C U) N C M r 1.004 H CO tD CI H 0) CO N t~ t0 0000 00 H H H I-1 N U. C In tD N C u) tD N*II In N 011111.003 CO u)10 W H a to M 0 0000 0000 0000 0000 000 0 0000 0000 U 0 CO 0 0 0 101000 10 1n V'1n 0 0 tD 0 M 1n 10 0 O M W 0 O 1n C O N r` u)O 01 01 01 W N M M to N 10 V M OW 011.0 In V'0101 w Nm100 NN00 m011^M V' 0 CO C 10aMH W1Dtn VI Wr 10 I[) H N(11 N M C/D N C C t0 N C U) 1` N V'10 1` N a In Is Ln O W 01 0 0 0000 00 0 0 0 00 00 0000 0000 0 000 0000 0000 M 111 C 0 0 0 10 0 10 In 0 0 0 m W Ul In 0 CO M 0 VI H H H N M M 1D W H 01 M H C M 1` !` N N m O 01 H 1`O M 0)tD N W Ea H N N W C 0 W C N W C 01 N N C 01 C H 00 10 in M H 01 lO m N O HH U N CO C u) N C C 10 N M V1 m N in 010 N C C t0 N C U W N tT 1n N a 0. .... . . .. ... . ... . . .. . H 0 O u)CO M O In I'111 In 0 t0 0 000441 0 N 0 0 01 u)N m N m 10 111 N CO 0 t0 01 10 0) C N CO 01 M 01 N NW M N CO H If C M CO W H H. m O.N O Ui 0) H 1-O H 10 m W 01 m CO CO 0 CO 0 M N N C 01 m W W N M 0) N M N PI M HCOM1n NMCIf H MMIn NMC U) NM C10 Nm CW NMC0 Cl Zi 0000 0000 O O 0 0 0000 0000 0000 0 0 0 0 O 00030 In 0uCIn 100010 1010010 0000 10Ml00 OM MO U) M.-1 0.0 U C W W h W In M 01 CO W CO CO 0 tO CO C` u)C N H H H N CO t0 CO 0110 01 N CO H N 01 co N� t` 01 m N 01 M 01 N 0 C H 11) H In N/0 COM HNMC HMmU) HNMC HNMV1 HMMM NMCU1 N1•) CIn N O• 010030 000 0 0LC) N 0 0000 0000 00 .00 o 0 0 o o o o o 0 00030 0 10 CO 0 10 0 CO 0 In In 0 to 01000 CO W CO u)C 0 (1) 0 C N 0f 0 C N H C1)W CO 0)1/40 N H N m CO C C` 01 N CO V'C 01 CO N W C 1n OM H H 1n 10 H H 1,W C 10 CO OW CO W 0 10 01 WU .-I N N PI H N in .0, H N m.0 H N M C H N M C H 0) M .0. H� ClrM .0. p. 0 0 0 U U U t '.I C.) U U r. II UlHCAW dU)al HN �.7 U) HU1WW NI) HCO U1HIn NHVJWW iv; �y El Hz 4H H $ NE+ H £ mH Hz El H £ IlH H $ I H' r.t�t tc *44) ",�J' itl MHO HO U uHO U /11-1Z � O HZFi0 12HZH0 1 r, i 01 H 14 H H H ri H H a' H 14 H 1-1 H OHZ H a H Z H a H 'H 1 �`' NA aH F., a OH g .7H OP aH .-.1 f7H 1-7 0H .,III. 11`l 121 1N Q � . z . z WaPCzGa� 0 101. )' 0 mr, arw' ar3 I . z. .wg . z 1„' tip A. o W o O O v W o O o W o O o W o O GI o W o O o o O ��r f pro G A. Mr� tDr7 NM > 1Orl Mp 0 �l OM > 0 r1 L1Mp n a Om�tD ,� ( �ry 'j3 +� o u 44 >1p al i C, 0 z z w �'w !id 0 Z "� �a) Z +I �, 5 w f i b 1' a, 00 Cl a x " ..-1' I u W Cl C C.) 0 ''�' )w U O rk' Cl w Ul 31' H H al )u 0 N III RI 10 �7,yF 3 4 Cl s Exhibit E k a § [ Q ■f 03 f £ @ ) ii CD 3 ID } 3 £ 013 & ) 3 >° > > CD a -0 C' 2 # G f ! ia ; 2 a ^ ° — ; - (/ ( k 0 xi xi - \ CD 0. ° A3 ƒ DC33 > C � cr CD ¥ m ¥ CD q. ( ] . . / © , - - R. Bo § } $ \ \ ( { co E a az z \ >co 3 — fEk - .• a 27 ® E m • 0 — — 0. ' ` cc ° 0 0 / / ° 7 .. .. .. .. DAD 0 CD qo . ; o -i. 0 e ) To- cl- co / 0 ` ^e = | o `! k~Q � mz(| m � o(4® § ` -0 ri la Co 2 . ° K ® ) C k 0 - 8 ` / I ° \ ƒ o y E q m § ° 7 x; _ƒ o * - P. }� \ci \x j \ , i ƒ —[ PI _ 2 CD § z ° 2 3 = e 2 -n 2o )@ w.m• a 9,N co ro k ; = / !& . E o «�£ \ wz ) } J / «3 o $B ° ; / E § j \/ 0§ \2 ) 0 k [ ° ƒ | B [ . {§ . % £ c co a . . q — jm-13 j . § ] \ 2 2. _ \� \r c `o § ; ! ; 3 M 0 0 PI ' n 0 / Co 2. ( Exhibit F Certification Regarding U.S.Department of.Housing Debarment and Suspension and Urban Development Certification A: Certification Regarding Debarment, Suspension and Other Responsibility Matters — Primary Covered Transactions 1.The prospective primary participant certifies to the best of its knowledge 4. The prospective primary participant shall provide Immediate and belief that its principals: written notice to the department or agency to whom this proposal is submitted if at any time the prospective primary participant teams a. Are not presently debarred, suspended, proposed for debarment, that its certification was erroneous when submitted or has become declared ineligible, or voluntarily excluded from covered transactions by erroneous by reason of changed circumstances. any Federal debarment or agency; 5. The terms covered transaction, debarred, suspended, b. Have not within a three-year period preceding this proposal, been Ineligible, lower tier covered transaction, participant, person, convicted of or had a civil judgment rendered against them for commission primary covered transaction, principal, proposal, and of fraud or a criminal offense in connection with obtaining,attempting to voluntarily excluded, as used in this clause,have the meanings obtain, or performing a public (Federal, State, or local) transaction or set out in the Definitions and Coverage sections of the rules contract under a public transaction; violation of Federal or State antitrust Implementing Executive Order 12549. You may contact the statutes or commission of embezzlement, theft, forgery, bribery, department or agency to which this proposal is being submitted for falsification,or destruction of records,making false statement,or receiving assistance in obtaining a copy of these regulations. stolen property; 6. The prospective primary participant agrees by submitting this c.Are not presently indicted for or otherwise criminally or civilly charged by proposal that,should the proposed covered transaction be entered a governmental entity(Federal, State or local)with commission of any of into,it shall not knowingly enter any lower tier covered transaction the offenses enumerated in paragraph(1)(b)of this certification;and with a person who is debarred;suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, d. Have not within a three-year period preceding this application/proposal unless authorized by the department or agency entering into this had one or more public transactions(Federal,State or local)terminated for transaction. cause or default. 7.The prospective primary participant further agrees by submitting 2.Where the prospective primary participant is unable to certify to any of this proposal that it will include the clause titled "Certification the statement in this certification,such prospective participant shall attach Regarding Debarment,. Suspension, Ineligibility and Voluntary an explanation to this proposal. Exclusion — Lower Tier Covered Transaction," provided by the department or agency entering into this covered transaction,without Instructions for Certification(A) modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions. 1. By signing and submitting this proposal, the prospective primary participant is providing the certification set out below, 8. A participant in a covered transaction may rely upon a certification of a prospective participant in a lower tier covered 2.The inability of a person to provide the certification required below will transaction that it is not debarred, suspended, ineligible, or not necessarily result in denial of participation in this covered transaction. voluntarily excluded form the covered transaction, unless it knows The prospective participant shall submit an explanation of why it cannot that the certification is erroneous. A participant may decide the provide the certification set out below. The certification or explanation will method and frequency by which it determines this eligibility of its be considered in connection with the department or agency's principals. Each participant may, but is not required to,check the determination whether to enter into this transaction. However,failure of Non-procurement list. the prospective primary participant to furnish a certification of the prospective primary participant tofurnish a certification or an explanation 9. Nothing contained in the foregoing shall be construed to require shall disqualify such person from participation in this transaction. establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and 3.The certification In this clause is a material representation of fact upon information of a participant is not required to exceed that which is which reliance was in place when the department or agency determined to normally possessed by a prudent person in the ordinary course of enter into this transaction. If it Is later determined that the prospective business dealings. primary participant knowingly rendered an erroneous certification, in addition to other remedies available to the Federal Government, the 10.Except for transactions authorized under paragraph(6)of these department or agency may terminate this transaction for cause or.default. instructions, if a participant in a covered transaction knowingly enters into a lower tier covered transaction with a person who is suspended, debarred, ineligible, or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency may terminate this transaction for cause of default. . 1 Page 1 of 2 form HUD-2992(3/98) 1 Certification B: Certification Regarding Debarment, Suspension, Ineligible and Voluntary Exclusion—Lower Tier Covered Transactions 1. The prospective lower tier participant certifies, by submission of this 5.The prospective lower tier participant agrees by submitting this proposal,that neither it not its principals is presently debarred,suspended, proposal that,should the proposed covered transaction be entered proposed for debarment, declared ineligible, or voluntarily excluded from into,it shall not knowingly enter into an lower tier transaction with a participation in this transaction by any Federal department or agency. person who is debarred, suspended, declared ineligible, or voluntarily excluded from participation in this covered transaction, 2.Where the prospective lower tier participant is unable to testify to any of unless authorized by the department or agency with which this the statements in this certification,such prospective participant shall attach transaction originated. an explanation to this proposal. 6. The prospective lower tier participant further agrees by Instructions for Certification(B) submitting this proposal that it will include this clause titled "Certification Regarding Debarment, Suspension, Ineligibility and 1. By signing and submitting this proposal, the prospective lower tier Voluntary Exclusion — Lower Tier Covered Transaction,"without participant Is providing the certification set out below. modification, in all lower tier covered transactions and in all solicitations for lower tier covered transactions. 2.The certification in this clause is a material representation of fact upon which reliance was placed when this transaction was entered into. If it is 7. A participant In a covered transaction may rely upon a later determined that the prospective lower tier participant knowingly certification of a prospective participant in a lower tier covered rendered an erroneous certification,in addition to other remedies available transaction that it is not debarred, suspended, ineligible, or to the Federal Government, the department or agency with which this voluntarily excluded from the covered transaction,unless it knows transaction originated may pursue available remedies,including suspension that the certification is erroneous. A participant may decide the and/or debarment. method and frequency by which it determines the eligibility of its principals. Each participant may,but is not required to,check the 3. The prospective lower tier participant shall provide Immediate written Non-procurement list. notice to the person to which this proposal is submitted if at any time the prospective lower tier participant learns that Its certification was,erroneous 8.Nothing contained in the foregoing shall be construed to require when submitted or has become by reason of changed circumstances. establishment of a system of records in order to render in good faith the certification required by this clause. The knowledge and 4. The terms Covered transaction, debarred, suspended, Ineligible, Information of a participant Is not required to exceed that which is lower tier covered transaction, participant, person, primary covered 'normally possessed by a prudent person In the ordinary course of transaction, principal, proposal,and voluntarily excluded, as used In business dealings. this clause, have the meanings set out In the Definitions and Coverage sections of rules implementing Executive Order 12549. You may contact 9.Except for transactions authorized under paragraph(5)of these the person to which this proposal is submitted for assistance in obtaining a instructions, if a participant in a lower covered transaction copy of these regulations. knowingly enters into a lower tier covered transaction with a person who is suspended,debarred,ineligible,or voluntarily excluded from participation in this transaction, in addition to other remedies available to the Federal Government, the department or agency with which this transaction originated may pursue available remedies Including suspension and/or debarment. Applicant _ Bate Signature of Authorized Certifying Official 7IEIe Page 2 of 2 form HUD-2992(3/98) 1 Exhibit G FEDERAL FINANCIAL REPORT (Follow form instructions) 1. Federal Agency and Organizational Element 2. Federal Grant or Other Identifying Number Assigned by Federal Agency Page of to Which Report is Submitted (To report multiple grants,use FFR Attachment) 1 pages 3. Recipient Organization(Name and complete address including Zip code) 4a. DUNS Number 4b. EIN 5. Recipient Account Number or Identifying Number 6. Report Type 7. Basis of Accounting • (To report multiple grants,use FFR Attachment) ❑Quarterly ❑Semi-Annual ❑Annual ❑Final D Cash D Accrual 8. Project/Grant Period 9. Reporting Period End Date From: (Month,Day,Year) To: (Month,Day,Year) (Month,Day,Year) 10. Transactions Cumulative (Use lines a-c for single or multiple grant reporting) Federal Cash (To report multiple grants,also use FFR Attachment): a. Cash Receipts b. Cash Disbursements c. Cash on Hand(line a minus b) 0.00 (Use lines d-o for single grant reporting) Federal Expenditures and Unobligated Balance: • d.Total Federal funds authorized e. Federal share of expenditures f. Federal share of unliquidated obligations g. Total Federal share(sum of lines e and f) 0.00 h. Unobligated balance of Federal funds(lined minus g) 0.00 Recipient Share: i. Total recipient share required j. Recipient share of expenditures k. Remaining recipient share to be provided(line i minus j) 0.00 Program Income: I. Total Federal program income earned • m. Program income expended in accordance with the deduction alternative n. Program income expended in accordance with the addition alternative o. Unexpended program income(line I minus line m or line n) 0.00 a. Type b.Rate c.Period From Period To d.Base e.Amount Charged f.Federal Share 11.Indirect Expense • g.Totals: 12. Remarks:Attach any explanations deemed necessary or information required by Federal sponsoring agency in compliance with governing legislation: 13. Certification: By signing this report,I certify that it is true,complete,and accurate to the best of my knowledge. I am aware that any false,fictitious,or fraudulent information may subject me to criminal,civil,or administrative penalities. (U.S.Code,Title 18,Section 1001) a.Typed or Printed Name and Title of Authorized Certifying Official c.Telephone(Area code,number and extension) d. Email address b.Signature of Authorized Certifying Official e. Date Report Submitted (Month,Day,Year) 14.Agency use only Standard Form 425 OMB Approval Number:0348-0061 Expiration Dale:10/31/2011 Paperwork Burden Statement According to the Paperwork Reduction Act,as amended,no persons are required to respond to a collection of information unless it displays a valid OMB Control Number.The valid OMB control number for this information collection is 0348-0061. Public reporting burden for this collection of information is estimated to average 1.5 hours per response,including time for reviewing instructions, searching existing data sources,gathering and maintaining the data needed,and completing and reviewing the collection of information.Send comments regarding the burden estimate or any other aspect of this collection of information,including suggestions for reducing this burden,to the Office of Management and Budget,Paperwork Reduction Project(0348-0060),Washington,DC 20503. 2 CFR Part 200.338-340 Exhibit H TERMINATION AND ENFORCEMENT (a) Remedies for non-compliance. If a grantee or sub-grantee materially fails to comply with any term of an award, whether stated in a federal statute or regulation, an assurance, in a State plan or application, a notice of award, or elsewhere, the awarding agency may take one or more of the following actions, as appropriate in the circumstances: (1) Temporarily withhold cash payments pending correction of the deficiency by the grantee or sub-grantee or more severe enforcement action by the awarding agency, (2) Disallow(that is, deny both use of funds and matching credit for) all or part of the cost of the activity or action not in compliance, (3) Wholly or partly suspend or terminate the current award for the grantee's or sub-grantee's program, (4) Withhold further awards for the program,or, (5) Take other remedies that may be legally available. (b) Hearings, appeals. In taking an enforcement action, the awarding agency will provide the grantee or sub-grantee an opportunity for such hearing, appeal or other administrative proceeding to which the grantee or sub-grantee is entitles under any statute or regulation applicable to the action involved. (c) Effects of suspension and termination. Costs of grantee or sub-grantee resulting from obligations incurred by the grantee or sub-grantee during a suspension or after termination of an award are not allowable unless the awarding agency expressly authorizes them in the notice of suspension or termination or subsequently. Other grantee or sub-grantee costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if: (1) The costs result from obligations which were properly incurred by the grantee or sub- grantee before the effective date of suspension or termination,are not in anticipation of it, and,in the case of a termination,are non-cancelable,and, (2) The costs would be allowable if the award were not suspended or expired normally at the end of the funding period in which the termination takes effect. (d) Relationship to Debarment and Suspension. The enforcement remedies identified in this section, including suspension and termination, do not preclude grantee or sub-grantee from being subject to "Debarment and Suspension"under EO 12549(2 CFR Part 200.213). TERMINATION FOR CONVENIENCE Except as provided in Appendix 11, 2 CFR, Part 200.338-340 awards may be terminated in whole or in part only as follows: (a) By the awarding agency with the consent of the grantee or sub-grantee in which case the two parties shall agree upon the termination conditions, including the effective date and in the case of partial termination,the portion to be terminated,or (b) By the grantee or sub-grantee upon written notification to the awarding agency, setting forth the reasons for such termination, the effective date, and in the case of partial termination, the portion to be terminated. However, if, in the case of a partial termination, the awarding agency determines that the remaining portion of the award will not accomplish the purposes for which the award was made, the awarding agency may terminate the award in its entirety under either 2 CFR Part 200.339 or Paragraph(a)of this section. O EQUAL HOUSING OPPORTUNITY Rev. 09/30/19 Exhibit I EQUAL EMPLOYMENT OPPORTUNITY CLAUSE During the performance of this Contract, the Contractor agrees as follows: • (1) The Contractor and its subcontractors shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, age, sexual orientation, gender identity, national origin, disability or familial status. As used herein, the work "treated" shall mean and include, without limitation, the following: Recruited, whether by advertising or by other means; compensated; selected for training, including apprenticeship; promoted; upgraded; demoted; downgraded; transferred; laid off; and terminated. The Contractor agrees to and shall post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officers setting forth the provisions of this nondiscrimination clause. (2) The Contractor and its subcontractors shall, in all solicitations Or advertisements for employees placed by or on behalf of the Contractor, state that all qualified applicants will receive consideration for employment without regard to race, religion, color, sexual orientation, gender identity, sex, national origin, age, disability or familial status. (3) The Contractor and its subcontractors shall send to each representative of workers with which he has a collective bargaining agreement or other contract or understanding a notice advising the labor union or worker's representative of the Contractor's commitments under the equal employment opportunity clause of the City and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (4) The Contractor and its subcontractors shall furnish to the City's Human Rights and Relations Contract Compliance Officer all federal forms containing the information and reports required by the federal government for federal contracts under federal rules and regulations, including the information required by Omaha Municipal Code Sections 10-192 to 10-194, inclusive, and shall permit reasonable access to his records. Records accessible to the Human Rights and Relations Contract Compliance Officer shall be those which are related to Paragraphs (1) through (7) of this Exhibit and only after reasonable notice is given to the Contractor. The purpose for this provision is to provide for investigation to ascertain compliance with the program provided for herein. (5) The Contractor and its subcontractors shall take such actions with respect to any subcontractor as the City may direct as a means of enforcing the provisions of Paragraphs (1) through (7) herein, including penalties and sanctions for noncompliance; however, in the event the Contractor becomes involved in or is threatened with litigation as the result of such directions by the City, the City will enter into such litigation as is necessary to protect the interests of the City and to Revised and approved 5/23/2012 effectuate the provisions of this division; and in the case of contracts receiving federal assistance, the Contractor or the City may request the United States to enter into such litigation to protect the interests of the United States. (6) The Contractor shall file and shall cause his subcontractors, if any, to file compliance reports with the Contractor in the same form and to the same extent as required by the federal government for federal contracts under federal rules and regulations. Such compliance reports shall be filed with the Human Rights and Relations Contract Compliance Officer. Compliance reports filed at such times as directed shall contain information as to the employment practices, policies, programs and statistics of the Contractor and his subcontractors. (7) The Contractor shall include the provisions of Paragraphs (1) through (7) of this Section, "Equal Employment Opportunity Clause", and Omaha Municipal Code Section 10-193 in every contract, subcontract or purchase order so that such provisions will be binding upon each subcontractor or vendor. (Code 1980, Section 10-192; Ordinance No. 35344, Sections 1, 9-26-00) Revised and approved 5/23/2012 Exhibit J SECTION 3 CLAUSE All Section 3 covered contracts shall include the following clause (referred to as the Section 3 clause): A. The work to be performed under this contract is subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. 1701u (Section 3). The purpose of Section 3 is to ensure that employment and other economic opportunities generated by HUD assistance or HUD-assisted projects covered by Section 3 shall, to the greatest extent feasible, be directed to low- and very low-income persons, particularly persons who are recipients of HUD assistance for housing. B. The parties to this contract agree to comply with HUD's regulations in 24 CFR Part 75, which implement Section 3. As evidenced by their execution of this contract, the parties to this contract certify that they are under no contractual or other impediment that would prevent them from complying with the Part 75 regulations. C. The contractor agrees to send to each labor organization or representative of workers with which the contractor has a collective bargaining agreement or other understanding, if any, a notice advising the labor organization or workers' representative of the contractor's commitments under this Section 3 clause, and will post copies of the notice in conspicuous places at the work site where both employees and applicants for training and employment positions can see the notice. The notice shall describe the Section 3 preference, shall set forth minimum number and job titles subject to hire, availability of apprenticeship and training positions, the qualifications for each; and the name and location of the person(s) taking applications for each of the positions; and the anticipated date the work shall begin. D. The contractor agrees to include this Section 3 clause in every subcontract subject to compliance with regulations in 24 CFR Part 75, and agrees to take appropriate action, as provided in an applicable provision of the subcbntract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR Part 75. The contractor will not subcontract with any subcontractor where the contractor has notice or knowledge that the subcontractor has been found in violation of the regulations in 24 CFR Part 75. E. The contractor will certify that any vacant employment positions, including training positions, that are filled (1) after the contractor is selected but before the contract is executed, and (2) with persons other than those to whom the regulations of 24 CFR Part 75 require employment opportunities to be directed were not filled to circumvent the contractor's obligations under 24 CFR Part 75. F. Noncompliance with HUD's regulations in 24 CFR Part 75 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD- assisted contracts. G. With respect to work performed in connection with Section 3 covered Indian housing assistance, Section 7(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this contract. Section 7(b) requires that to the greatest extent feasible (i) preference and opportunities for training and employment shall be given to Indians, and (ii) preference in the award of contracts and subcontracts shall be given to Indian organizations and Indian-owned Economic Enterprises. Parties to this contract that are subject to the provisions of Section 7(b) agree to comply with Section 3 to the maximum extent feasible, but not in derogation of compliance with Section 7 (b). Providing Other Economic Opportunities. (a) General. In accordance with the findings of the Congress, as stated in Section 3, that other economic opportunities offer an effective means of empowering low- income persons, a recipient is encouraged to undertake efforts to provide to low- income persons economic opportunities other than training, employment and contract awards, in connection with Section 3 covered assistance. (b) Other training and employment-related opportunities. Other economic opportunities to train and employ Section 3 residents include, but need not be limited to, use of "upward mobility", "bridge" and trainee positions to fill vacancies; and hiring Section 3 residents in part-time positions. (c) Other business-related economic opportunities: (1) A recipient or contractor may provide economic opportunities to establish, stabilize or expand Section 3 business concerns, including micro-enterprises. Such opportunities include, but are not limited to formation of Section 3 joint ventures, financial support for affiliating with franchise development, use of labor only contracts for building trades, purchase of supplies and materials from housing authority resident-owned businesses, purchase of materials and supplies from PHA resident-owned businesses and use of procedures under 24 CFR part 963 regarding HA contracts to HA resident-owned businesses. A recipient or contractor may employ these methods directly or may provide incentives to non-Section 3 businesses to utilize such methods to provide other economic opportunities to low-income persons. (2) A Section 3 joint venture means an association of business concerns, one of which qualifies as a Section 3 business concern, formed by written joint venture agreement to engage in and carry out a specific business venture for which purpose the business concerns combine their efforts, resources and skills for joint profit, but not necessarily on a continuing or permanent basis for conducting business generally, and for which the Section 3 business concern: (i) Is responsible for a clearly defined portion of the work to be performed and holds management responsibilities in the joint venture; and (ii) Performs at least 25 percent of the work and is contractually entitled to compensation proportionate to its work. Exhibit K UNITED STATES CITIZENSHIP ATTESTATION FORM FOR PUBLIC BENEFIT For the purposes of complying with Neb. Rev. Stat. §§ 4-108 through 4-114, I attest as follows: ❑ I am a citizen of the United States. OR ❑ I am a qualified alien under the Federal Immigration and Nationality Act. My immigration status and alien number as follows: and I agree to provide a copy of my USCIS (United States Citizenship and Immigration Services) documentation upon request. I hereby attest that my response and the information provided on this form and any related application for public benefits are true, complete and accurate and I understand that this information may be used to verify my lawful presence in the United States. PRINT NAME: By: SIGNATURE: DATE: ONFI V,,Q:Library/HCD Forms/Citizenship-Attestation Form for Public Benefit 10/26/2009 Exhibit L AFFIDAVIT FOR EMPLOYEE CLASSIFICATION ACT STATE OF ) )§ COUNTY OF ) I, ,being first duly sworn under oath,state and depose as follows: 1. I am competent to testify to,and have personal knowledge of,the matters stated in this affidavit. 2. I am(a contractor)(the authorized agent of the contractor ). I attest to the following: (a) each individual performing services for such contractor is properly classified under the Nebraska Employee Classification Act, 2010 LB 563 ("the Act"), (b) such contractor has completed a federal I-9 immigration form and has such form on file for each employee performing services, (c) such contractor has complied with Neb. Rev. Stat. section 4-114 (federal immigration verification system), (d) such contractor has no reasonable basis to believe that any individual performing services for such contractor is an undocumented worker, and (e) as of the time of the contract, such contractor is not barred from contracting with the state or any political subdivision pursuant to the Act. FURTHER AFFIANT SAYETH NAUGHT. Affiant SUBSCRIBED AND SWORN TO before me this day of ,20 Notary Public A EQUAL HOUSING OPPORTUNITY Approved 6/1/10 Exhibit M MINORITY BUSINESS & WOMEN BUSINESS ENTERPRISE PLAN June 2021 PLANNING DEPARTMENT CITY OF OMAHA 0Nt+}IA,A, omaha NA& CITY PLANNING Jean Stothert, David K.Fanslau City of Omaha Mayor City of Omaha Planning Department Omaha/Douglas Civic Center 1 Reviewed and approved 6/24/2021 MINORITY BUSINESS/WOMEN BUSINESS ENTERPRISE PLAN INTRODUCTION Minority and women business sectors play an important part in Omaha's overall plans for future growth, progress, and prosperity. It is vital to the City's economic condition and well-being that minority and women businesses expand, thrive and prosper, generating economic stability and increased job opportunities. Towards the fulfillment and accomplishment of these important objectives, the City of Omaha remains committed to minority and women business development. The City of Omaha's approach to minority/women business development is embedded in its policy of non- discrimination in the conduct of City business including the procurement of goods, materials and services, construction and community and economic development projects. The City recognizes its obligations to each segment of the various communities it serves. It is in recognition of these responsibilities that the City established the City's Contract Compliance Ordinance. The Ordinance commits the City to: 1. Require contractors and/or vendors to provide employment opportunities without regard to race, color, sex, religion, or national origin; 2. Monitor contractor and vendor equal opportunity performance; and 3. Increase the total number and total dollar volume of City contracts awarded to minority-owned and women-owned firms. GOALS AND OBJECTIVES The following represents a summary of the goals and objectives of the Planning Department as they relate to minority and women-owned businesses: 1. Encourage, increase and promote business and procurement opportunities for women-owned businesses; 2. Increase and expand the awareness and understanding regarding the concerns, obstacles, and hindrances preventing increased MBE/WBE participation in Planning Department activities; 3. Assist MBE's/WBE's through the revitalization of business districts; 4. Assist minority and female entrepreneurs in the formation and growth of new small businesses; and 5. Provide technical assistance to neighborhood organizations, MBE's and WBE's to increase their participation in the Planning Department programs and activities at all levels. SCOPE OF WORK In order to accomplish these objectives,the Planning Department will: 1. Require that recipients of grant awards,consulting contracts,or loans to adopt the City's MBE/WBE Enterprise Plan. The Minority Business/Women Business Enterprise and Fair Housing plan must be filled out by contractors, developers, corporations,partnerships and/or sole proprietors. 2. Ensure that Requests for Proposals have the MBE/WBE Enterprise Plan. 3. Ensure that the programs of the Planning Department are advertised in the appropriate new media whose markets are targeted toward MBE/WBE. 2 Reviewed and approved 6/24/2021 4. Implement an outreach effort informing MBE and WBE firms and capture information on these firms doing business with the Planning Department. 5. Implement a system to identify MBE and WBE firms and capture information on these firms doing business with the Planning Department. 6. Require developers, corporations, partnerships and/or sole proprietors to register with the Human Rights & Relations Department. In addition, require these entities to complete CC-1 (Human Relations Department). The following information has been developed to assist you in complying with the MBE/WBE requirements in the agreement with the City of Omaha. If you have any questions, please contact Edward Dantzler at (402)444-5150 Ext. 2009. • J 5 3 Reviewed and approved 6/24/2021 MBE/WBE FOR GOODS AND SERVICES Your company must make vendors aware of equal opportunity utilization of minority,disabled and women- owned businesses. To accomplish this goal, you must provide a copy of the approved MBE/WBE Participation Plan to all businesses providing goods and/or services to the project. Your company must provide the opportunity for Minority Business Enterprises and Women Business Enterprises to provide goods and services through all phases of the project. A concerted effort must be made to allow these businesses to actively compete for project contracts. This effort will include utilization of the following resources and documentation of your actions to achieve these objectives. City of Omaha Housing and Community Development Division 1819 Farnam Street Room 1111 Omaha,NE 68183 Edward Dantzler, Construction Manager hcdbidcompliance(a,cityofomaha.org (402) 444-5150 Ext. 2009 Fax: (402) 444-5201 City of Omaha Human Rights &Relations 1819 Farnam Street Room 502 Omaha,NE 68183 Christian Espinosa Torres, City of Omaha SEB Program Administrator christian.espinosa@cityofomaha.org (402) 444-5052 Fax: (402)444-5058 REACH Greater Omaha Chamber of Commerce 808 ConAgra Drive Suite 400 Omaha,NE 68102 Winsley Durand, Executive Director wdurand@selectgreateromaha.com (402) 346-5000 Fax: (402) 346-7050 4 Reviewed and approved 6/24/2021 MBE/WBE FOR GOODS AND SERVICES Urban League of Nebraska, Inc. 3040 Lake Street Omaha,NE 68110 Wayne Brown, Interim President/CEO wayne.brown(cr�,urbanleagueneb.org (402) 453-9730 U.S. Small Business Administration 10675 Bedford Avenue Suite 100 Omaha,NE 68134 Melissa(Lisa)Tedesco,Deputy District Director Melissa.tedesco@sba.gov (402) 221-7229 College of Business Administration Mammel Hall Suite 200 67th and Pine Streets Omaha,NE 68182 Veronica Doga, Director, Procurement Technical Assistance Program vdoga@unomaha.edu (402) 554-6253 Goodwill Industries, Inc. 4805 North 72nd Street Omaha,NE 68134 Sarah Alba,Employment Solutions Coordinator salba@goodwillomaha.org (402) 951-2919 Paralyzed Veterans of America Great Plains Chapter 7612 Maple Street Omaha,NE 68134 Amanda Vazquez, Government Relations Director vazquez@greatplainspva.org (402) 398-1422 5 Reviewed and approved 6/24/2021 CITY OF OMAHA CONTRACTOR INFORMATION FORM Date: Project Address: Owner Information Name: Address: City,St.,Zip: Phone: General Contractor Information Name: Address: City,St.,Zip: Phone: Federal Tax ID or SSN Contract Amount $ Woman Owned Business ❑Yes ❑No BRE(Business Owned Race/Ethnic)Code: (BRE Code: 1 White American; 2 Black American; 3 Native American; 4 Hispanic American 5 Asian/Pacific American; 6 Hasidic Jews Subcontractor Information (Complete for each subcontractor for the project) Name/Address Fed Tax Contract Woman Own BRE ID/SSN Amt. Code Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: 6 Reviewed and approved 6/24/2021 Date: Project Address: Owner Information Name: General Contractor Information Name: (BRE Code: 1 White American; 2 Black American; 3 Native American; 4 Hispanic American 5 Asian/Pacific American; 6 Hasidic Jews Name/Address Fed Tax Contract Woman Own BRE ID/SSN Amt. Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St:,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: Name: $ ❑Yes ❑No Address: City,St.,Zip: Phone: 7 Reviewed and approved 6/24/2021 DEFINITIONS: 1. American Indian or Alaska Native. A person having origins in any of the original peoples of North and South America (including Central America), and who maintains tribal affiliation or community attachment. 2. Asian. A person having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent including,for example, Cambodia, China, India,Japan,Korea,Malaysia,Pakistan, the Philippine Islands, Thailand and Vietnam. 3. Black or African American. A person having origins in any of the black racial groups of Africa. Terms such as "Haitian" or"Negro"can be used in addition to "Black"or"African American". 4. Native Hawaiian or Other Pacific Islander. A person having origins in any of the original peoples of Hawaii, Guam, Samoa or other Pacific Islands. 5. White. A person having origins in any of the original peoples of Europe, the Middle East or North Africa. 8 Reviewed and approved 06/24/2021 MINORITY BUSINESS/WOMEN BUSINESS ENTERPRISE AND FAIR HOUSING PLAN As Owner(s), , I/we agree that my/our contractors and subcontractors will make our best efforts to ensure the construction services, contracts and employment opportunities are affirmatively marketed to women and members of minority groups as outlined in the City of Omaha's Policy for Minority Business/Women Business Enterprise and to further Fair Housing, where applicable, in the following manner. 1. Provide employment opportunities without regard to race, color, sex, age, religion, national origin, familial or handicap status; 2. Encourage, increase and promote business and procurement opportunities for women- owned businesses; 3. Award contracts to eligible minority-owned and women-owned firms; 4. Monitor contractor and vendor equal opportunity performance. As Owner(s), , I/we agree that our contractors and subcontractors will not discriminate against any employee or applicant for employment because of race, color, sex, age, religion, national origin, familial or handicap status. As Owner(s), , I/we agree that my/our contractors and subcontractors shall in all solicitations or advertisements for employment give all qualified applicants consideration for employment without regard to race, color, sex, age, religion, national origin, familial or handicap status. As Owner(s), , I/we certify that I/we support the furtherance of fair housing choice and that I/we will not discriminate on the basis of race, color, religion, sex, national origin, familial status, marital or handicap status in the rental or sale of the assisted property nor in any activities related to the sale, rental, and operation of the assisted property in accordance with the applicable laws and regulations. Dated this day of , 20 Business or Corporation(if applicable) By: Signature of Owner/Authorized Representative Name Print Owner/Authorized Representative Name A OPPORTUNITY 9 Reviewed and approved 06/24/2021 Invitation to Bid to MBE/WBE Sub-contractors and Suppliers The attached sample notice for "Invitation to Bid to Sub-contractors and Suppliers" must be used to advertise opportunity for minority, disabled and women-owned businesses to provide goods and services for the project being bid. Proof of this effort is shown by contractor emailing a copy of the notice to the service resources in this document and all others being advertised to for this project shall be included in the bid submitted. NOTE: Email a copy of notice to the following: ed.dantzlerc cityofomaha.org christian.espinosa@cityofomaha.org wdurand@selectgreateromaha.com wayne.brown@urbanleagueneb.org melissa.tedescoAsba.gov vdoga@unomaha.edu salba@goodwillomaha.org vazquez@greatplainspva.org 10 Reviewed and approved 06/24/2021 NOTE: Contractor must submit a copy of this notice with bid submitted. SAMPLE NOTICE PROJECT: (project name) (COMPANY NAME) General Contractor (Address) (Phone) (Email) INVITATION TO BID FOR SUB-CONTRACTORS AND SUPPLIERS: (COMPANY NAME)WILL BE BIDDING AS A GENERAL CONTRACTOR ON: (PROJECT NAME) (PROJECT ADDRESS) PROJECT BIDS AT(BID TIME, BID DAY, BID DATE) (DESCRIPTION) 11 Reviewed and approved 06/24/2021 Exhibit N DECLARATION Applicant— Income State of Nebraska ) ) § County of Douglas ) TO: Whom It May Concern: I, Affiant/s herein, certify that I have reported all of my income to the City of Omaha in accordance with the following Definition of Income: CITY OF OMAHA - DEFINITION OF INCOME Annual Income Includes: 1. Wages,salaries,tips,commissions, etc.; 2. Self-employment income from owned non-farm business, including proprietorships and partnerships; income from other self-employment sources; 3. Farm self-employment income; 4. Interest,dividends,net rental income,or income from estates or trusts,or regular recurring gifts; 5. Social security or railroad retirement; 6. Supplemental Security Income, Aid to Families with Dependent Children, or other public assistance or public welfare programs; 7. Retirement,survivor or disability pensions; 8. Any other sources of income received regularly including Veterans' (VA) payments, unemployment compensation,child support and alimony;and 9. Income from assets,as shown below: a. amounts in savings certificates,money market funds and other investment accounts. b. stocks,bonds, savings certificates,money market funds and other investment accounts. c. equity in real property or other capital investments. Equity is the estimated current market value of the asset less the unpaid balance on all loans secured by the asset and reasonable costs (such as broker fees) that would be incurred in selling the asset. Do not include equity in principle residence(home equity). d. the cash value of trusts that are available to the household. e. IRA, Keogh and similar retirement savings accounts, even though withdrawal would result in a penalty. f. contributions to company retirement/pension funds that can be withdrawn without retiring or terminating employment. g. assets which, although owned by more than one person, allow unrestricted access by the applicant. h. lump sum receipts such as inheritances, capital gains, lottery winnings, insurance settlements and other claims. i. personal property held as an investment such as gems,jewelry, coin collections,antique cars, etc. j. cash value of life insurance policies. k. assets disposed of for less than fair market value during two years preceding certification or re- certification. 10. Actual income from assets if total assets are$5,000 or less. OPPORTUNITY Q:Library/HCD Forms/Affidavit Applicant—Definition of Income 1/4/2012 Annual Income Does Not Include the Following Assets: 1. necessary personal property,except as noted in 9(i). 2. interest in Indian trust lands. 3. assets that are a part of an active business or farming operation. NOTE: Rental properties are considered personal assets held as an investment rather than business assets unless real estate is the applicant's/tenant's main occupation. 4. assets not accessible to the family and which provide no income for the family. 5. vehicles especially equipped for the handicapped. 6. equity in owner-occupied cooperatives and manufactured homes in which the family lives 7. equity in principle residence(home equity). I further certify that I am aware of the following: PENALTY FOR FALSE OR FRAUDULENT STATEMENT, U.S.C. Title 18, Section 1001, provides: "Whoever, in any matter within jurisdiction of any department or agency of the United States knowingly and willfully falsifies...or makes false, fictitious or fraudulent statements or representations...(or makes or uses any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry,) shall be fined not more than $10,000.00 or imprisoned not more than five (5) years,or both". Signature Signature O EQUAL HOUSING OPPORTUNITY Exhibit 0 Federal Sub-award Reporting System (FSRS) 9 Digit DUNS Number: Organization Name: Address: Address/City/State/Zip+4 Question 1:During your'organization's preceding completed fiscal year,did the legal entity to which the DUNS number belongs receive(1) 80 percent or more of its annual gross revenues in U.S.federal contracts, subcontracts, loans,grants, subgrants,and/or cooperative agreements;and (2)$25,000,000 or more in annual gross revenues from U.S.federal contracts,subcontracts, loans,grants, subgrants, and/or cooperative agreements? OYES ONO If YES please answer Question 2 Question 2:Does the public have access to information about the compensation of the executives in your organization (the legal entity to which the DUNS number provided belongs)through periodic reports filed under section 13(a)or 15(d)of the Securities,Exchange Act of 1934(15 U.S.C.78m(a), 78o(d))or section 6104 of the Internal Revenue Code of 1986? OYES ONO If NO please answer Question 3 Question 3:What are the Names and Total Compensation for the top 5 employees in your organization? Name Compensation 1 2 3 4 5 Signature of Authorized Official Date Requirements for Federal Funding Accountability and Transparency Act Implementation In September 2010, the Office of Management and Budget issued Interim Final Guidance in the Federal Register(Volume 75, No. 177, September 14, 2010, 2 CFR Part 170)to establish reporting requirements necessary for the implementation of the Federal Funding Accountability and Transparency Act of 2006(Pub. L. 109-282), as amended by section 6202 of Public Law 110-252. This award term implements those requirements and is located at 2 CFR Part 170. Learn more Appendix A to Part 170—Award Term Reporting Subawards and Executive Compensation. a. Reporting of first-tier subawards. 1. Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that obligates $25,000 or more in Federal funds that does not include Recovery funds(as defined in section 1512(a)(2) of the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5) for a subaward to an entity (see definitions in paragraph e. of this award term). 2, Where and when to report. I. You must report each obligating action described in paragraph a.l. of this award term to the Federal Funding Accountabilit and Trans.arenc Act Subaward Reporting System (FSRS). For subaward information, report no later than the end of the month following the month in which the obligation was made. (For example, if the obligation was made on November 7, 2010, the obligation must be reported by no later than December 31, 2010.) a. What to report. You must report the information about each obligating action that the submission instructions posted at http://www.fsrs.gov specify. b. Reporting Total Compensation of Recipient Executives. 1. Applicability and what to report. You must report total compensation for each of your five most highly compensated executives for the preceding completed fiscal year, if— i, the total Federal funding authorized to date under this award is$25,000 or more; ii, in the preceding fiscal year, you received— A. 80 percent or more of your annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and B. $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and ill. The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a)or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at the Executive Compensation page of the SEC website.) 2, Where and when to report. You must report executive total compensation described in paragraph b.1. of this award term: I, As part of your registration profile at the Central Contractor Reoistry+. hi. By the end of the month following the month in which this award is made, and annually thereafter. c. Reporting of Total Compensation of Subrecipient Executives. L Applicability and what to report. Unless you are exempt as provided in paragraph d. of this award term, for each first-tier subrecipient under this award, you shall report the names and total compensation of each of the subrecipient's five most highly compensated executives for the subrecipient's preceding completed fiscal year, if i. in the subrecipient's preceding fiscal year, the subrecipient received— A. 80 percent or more of its annual gross revenues from Federal procurement contracts (and subcontracts) and Federal financial assistance subject to the Transparency Act, as defined at 2 CFR 170.320 (and subawards); and B. $25,000,000 or more in annual gross revenues from Federal procurement contracts (and subcontracts), and Federal financial assistance subject to the Transparency Act(and subawards); and ii. The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at the Executive Compensation page of the SEC website.) 2. Where and when to report. You must report subrecipient executive total compensation described in paragraph c.1. of this award term: i. To the recipient. ii, By the end of the month following the month during which you make the subaward. For example, if a subaward is obligated on any date during the month of October of a given year(i.e., between October 1 and 31), you must report any required compensation information of the subrecipient by November 30 of that year. d. Exemptions If, in the previous tax year, you had gross income, from all sources, under$300,000, you are exempt from the requirements to report: la Subawards,and II, The total compensation of the five most highly compensated executives of any subrecipient. e. Definitions. For purposes of this award term: 1. "Entity" means all of the following, as defined in 2 CFR part 25: I. A Governmental organization, which is a State, local government, or Indian tribe; ii, A foreign public entity; A domestic or foreign nonprofit organization; iv, A domestic or foreign for-profit organization; v, A Federal agency, but only as a subrecipient under an award or subaward to a non-Federal entity. 2. "Executive" means officers, managing partners, or any other employees in management positions. 3, "Subaward": i. This term means a legal instrument to provide support for the performance of any portion of the substantive project or program for which you received this award and that you as the recipient award to an eligible subrecipient. ii. The term does not include your procurement of property and services needed to carry out the project or program (for further explanation, see Sec. II .210 of the attachment to OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations"). A subaward may be provided through any legal agreement, including an agreement that you or a subrecipient considers a contract. 4, "Subrecipient" means an entity that: i, Receives a subaward from you (the recipient) under this award; and ii. Is accountable to you for the use of the Federal funds provided by the subaward. 5, "Total compensation" means the cash and noncash dollar value earned by the executive during the recipient's or subrecipient's preceding fiscal year and includes the following (for more information see 17 CFR 229.402(c)(2)): i, Salary and bonus. ii. Awards of stock, stock options, and stock appreciation rights. Use the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with the Statement of Financial Accounting Standards No. 123 (Revised 2004) (FAS 123R), Shared Based Payments. ill. Earnings for services under non-equity incentive plans. This does not include group life, health, hospitalization or medical reimbursement plans that do not discriminate in favor of executives, and are available generally to all salaried employees. iv, Change in pension value. This is the change in present value of defined benefit and actuarial pension plans. V. Above-market earnings on deferred compensation which is not tax- qualified. vi. Other compensation, if the aggregate value of all such other compensation (e.g. severance, termination payments, value of life insurance paid on behalf of the employee,perquisites or property)for the executive exceeds $10,000. Exhibit P CITY OF OMAHA AFFIRMATIVE MARKETING POLICY AND MONITORING PROCEDURES ,„ , n Effective: October 1, 1999 EQUAL HOUSING CITY PLANNING Revised: August 1,2021 OPPORTUNITY To further the commitment to nondiscrimination and equal opportunity in housing, and in accordance with the regulations of the HOME Investments Partnerships Program (HOME) of the United States Department of Housing and Urban Development,the Community Development Division of the City of Omaha's Urban Planning Department has established procedures to affirmatively market housing assisted with federal, state, and city funding. All recipients of City funding must comply with the City's affirmative marketing requirements, either by crafting an individual plan(as in the case of projects with 5+HOME units), or contributing towards the City's affirmative marketing plan. Affirmative marketing consists of efforts to inform persons that are "least likely to apply" or under-represented groups in a neighborhood or community about opportunities for housing. The affirmative marketing efforts target individuals who—due to their race,color,national origin,sex,gender identity,sexual orientation,religion,familial status, disability, and/or limited English proficiency-may not know about housing opportunities or feel welcome to apply for housing. To encourage opportunities for all community members participate in housing-related services and rent or purchase affordable housing units,Affirmative Marketing Plans identify community members for targeted marketing strategies and special outreach through social service organizations. Additionally, Affirmative Marketing Plans include training and professional development opportunities to increase awareness and knowledge of fair housing and affirmative marketing strategies for potential tenants, staff, community partners, and others. Plans also detail how entities carrying out affirmative marketing assess their efforts for ongoing improvement. The following policy fulfills the requirement established by the HOME final rule(24 CFR 92.351(a))to develop written affirmative marketing procedures and requirements for all HOME-funded programs (homeowner rehabilitation and homebuyer assistance). There are five elements for the City of Omaha's affirmative marketing procedure: 1. Description of the City's plans to inform the public, subrecipients, owners, and potential applicants and tenants about Federal, State, and Local fair housing and civil rights laws and the City's Affirmative Marketing Plan and policy. 2. Requirements and practices that each subrecipient and owner of City-funded housing must adhere to in order to carry out the City's affirmative marketing procedures and requirements. 3. Procedures used by subrecipients and owners to inform and solicit applications from persons in the housing market area who are least likely to apply for the housing without special outreach. 4. List of records the City and owners must keep to document and assess efforts made to affirmative market units. 5. Description of how the City will assess success of affirmative marketing actions and what corrective actions will be taken when requirements are not met. 1. Description of the City's plans to inform the public,subrecipients,owners,and potential applicants and tenants about Federal, State, and Local fair housing and civil rights laws and the City's Affirmative Marketing Plan and policy. The Community Development Division of the City of Omaha's Planning Department will: • Include the Equal Housing Opportunity logo and/or slogan, and a logo and/or slogan indicating accessibility to persons with disabilities, in all press releases, solicitations,and program information materials. • Work in partnership with the Mayor's Office of Human Rights and Relations and fund community partners (e.g. Family Housing Advisory Services) to provide the public with information, referral, case investigation services and counseling regarding fair housing laws and policies. • Post the Affirmative Marketing Policy and Affirmative Marketing Plan on the Department's website: https://planninghcd.cityofomaha.org/ and include Fair Housing information on a scrolling digital display in the Department's reception area. • Provide and require all funded agencies to provide homeowners,tenants,and rental property owners copies of Fair Housing brochures. • Provide ongoing trainings to subrecipients about Fair Housing laws and affirmative marketing requirements. • Make housing and program information available in multiple languages and work with community partners to provide oral and written translation services, as needed. • Partner with groups to provide written translations and oral and signed interpretations for individuals with visual and/or auditory impairments. • Place public notices in the major distribution news media, such as Omaha World Herald, and in media serving individuals and groups that are least likely to apply for housing opportunities. Additionally, the City will provide a list of these diverse media outlets to subrecipients. • Meet with property owners and assist them in preparing program applications as requested and necessary. 2. Requirements and practices that each subrecipient and owner of City-funded housing must adhere to in order to carry out the City's affirmative marketing procedures and requirements. • Inform and solicit applications from persons in the housing market area who are least likely to apply for housing without special outreach. • Project owners with 5 or more HOME-funded units must submit an Affirmative Marketing Plan to the City of Omaha for review 120 days prior to initiating sales or rental marketing activities and revise the plan at least every five years throughout the affordability period. Alternatively,project owners can elect to further the City of Omaha's Affirmative Marketing Plan. Under either option, the owner will provide annual reports on affirmative marketing efforts to the City. • Use the Equal Housing Opportunity logo and/or slogan on all correspondence and advertising(signs, advertisements,brochures,direct mail solicitations,press releases,websites,etc.)relating to the sale or rental of units or in promoting housing programs. ■ Prominently display the HUD-approved Fair Housing poster and Equal Housing Opportunity logo in all project sites and offices in which housing-related transactions (Exhibit 1). • Advertise housing opportunities in a local citywide newspaper of general circulation, such as the Omaha World Herald, and in minority and non-English language newspapers. Submit to the City copies of such advertisements annually. ■ Circulate flyers and advertisements (at least six weeks prior to the opening of any waiting lists) to the City of Omaha Community partners list. • All advertising depicting persons shall depict persons of majority and minority groups, including a diversity of race, gender, sexual orientation,age,religion,family status or any other protected class. • Submit and retain records documenting efforts to affirmatively market and assess the results of these efforts, including copies of all letters notifying the outreach agencies of vacancies. Outreach agencies may include, but are not limited to, the agencies in the Community Contacts list (Exhibit 2). The owner will submit a Demographics Form for Applicants (Exhibit 3), which includes the name, racial/ethnic characteristics, income and family size for each person responding to the advertisement. • Maintain a nondiscriminatory hiring policy for staff engaged in the sale or rental of properties or provision of housing-related services. • Owners must comply with affirmative marketing requirements and take corrective actions when the City determines the results of such actions do not satisfactorily achieve Fair Housing goals. • Adopt antidiscrimination tenant selection policies and maintain waitlist protocols that encourage participation for individuals least likely to apply. • Owners selected for a rehabilitation program shall notify in-place tenants in writing of their involvement in the program and provide them with the following options in accordance with provisions of the Uniform Relocation Act, including options to: remain in the present unit during rehabilitation; move temporarily to another unit within the project while his/her unit is being rehabilitated;or permanently relocate or voluntarily abandon the unit during the rehabilitation. Each in-place tenant in the project will receive a copy of the City of Omaha's written Tenant Assistance Policy(TAP) and shall advise said tenant(s) of the impact of the project on him or her. The Owner shall provide the TAP to the tenant immediately after submission of the Owner's application for participation in the City's program. 3. Procedures used by subrecipients and owners to inform and solicit applications from persons in the housing market area who are least likely to apply for the housing without special outreach. • Identify populations least likely to apply based on census-tract level demographic data compared to demographic information of current residents, applicants, and/or participants. • Develop an outreach strategy and advertising materials that include pertinent information to the individual or group (e.g. accessibility features of the unit) in an effective tactic (e.g. non-English language flyers) • Outreach to Omaha Housing Authority and at least three community contacts that work with the identified population about housing opportunities. See Community Contact List. • Document advertisements and outreach activities and place in the project's Affirmative Marketing file. • Record the demographics of those responding to outreach efforts using the City's Demographics Form for Applicants. • Annually assess the current population served in the housing program or project relative to surrounding demographics to determine changes in target populations. • Submit annual assessment,copies of marketing materials,and demographic information to the City of Omaha for review. 4. List of records the City and owners must keep to document and assess efforts made to affirmative market units. The City will retain the following records regarding efforts made to affirmatively market HOME-Assisted Units for five years following the affordability period: • Copies of Affirmative Marketing Plans and Policies written by the City and subrecipients • Copies of advertisements and program materials promoting housing-related programs and services, including those produced by the City and subrecipients. • Trainings and technical assistance provided to staff, subrecipients, and the public related Federal, State, and local civil rights laws and fair housing laws. • Assessments of affirmative marketing efforts for City activities and housing-related services provided by subrecipients. • Correspondence related to corrective actions taken to resolve affirmative marketing issues and evidence used to verify compliance. Owners will retain the following records in an "Affirmative Fair Marketing" file to document efforts furthering affirmative marketing for five years following the period of affordability: • Advertisements for vacant units and housing-related services • Contact dates and correspondence with outreach agencies and Omaha Housing Authority • Annual assessments of affirmative marketing efforts • Race and other demographic data of occupants and persons inquiring about availability of units through the City's Demographic Form for Applicants • Dates and types of trainings provided to project management/staff on Federal, State, and local civil rights laws and fair housing laws • Written records of how all applicants and tenants can file complaints regarding fair marketing and/or allege discriminatory practices, evidence of investigating all applicant or tenant complaints and corrective actions taken, and correspondence notifying the City of complaints. • Examples of documents that should be maintained include: • Copies of newspaper advertisements and flyers or other printed material used • Copies of mailing lists to organizations hat were sent flyers and other materials • Photographs of site signs • Racial, ethnic, and gender characteristics of tenants • List the names and addresses of groups or organization identified as serving least likely to apply populations and those serving special populations who may be served by the project, including those with disabilities. 5. Description of how the City will assess success of affirmative marketing actions and what corrective actions will be taken when requirements are not met. Assessment responsibilities of the City: • Annually review Owners' affirmative marketing records for compliance and progress towards soliciting applications and participants from individuals who normally might not apply and/or who represent target demographics. • Annually review demographic data of housing-related programs and services administered by the City to identify underrepresented populations in both applications and participation. • Update the City's Affirmative Marketing Plan every five years,publish updated Plans,and provide Plans to Owners utilizing the City's Plan in housing-related services, sales, and/or rental transactions. • Evaluate effectiveness of affirmative marketing and fair housing trainings. • Assess the affirmative marketing procedures to determine whether the Owner has affirmatively marketed the vacant units by monitoring the Owner's performance in carrying out the Duties and Responsibilities of the Owner as outlined in Section 2. • The City shall assess the affirmative marketing efforts of the Owner to determine whether a sufficient number of racial and ethnic families have applied for vacant units. This determination will be made by reviewing the information provided on the Demographics Form for Applicant and Tenant Survey Forms to compare the proportions of protected class participation (e.g. disability, family status,English language proficiency, race and/or ethnicity)versus overall participation. Assessment responsibilities of owners: • Review affirmative marketing plans at least every five years and update as needed to ensure compliance. • Annually assess the success of affirmative marketing actions for each project. If the demographic data of the applicants and resident vary significantly from the jurisdiction's population data for the target income group, advertising efforts and outreach should be targeted to underrepresented groups in an attempt to balance the applicants and residents with the demographics of the jurisdiction. The City shall take the following corrective action if it is found that the Owner is not carrying out established procedures of affirmatively marketing units: • Notify the Owner in writing of any violations of the Owner's Duties and Responsibilities. • The Owner will be given thirty (30) days upon receipt of written notification to provide evidence of compliance. Upon the Owner's request, the City will provide technical assistance. • If the Owner fails to comply with the Affirmative Marketing Policy and Monitoring Procedures, the City may declare the loan/grant in default. ai „ , , , , , ,,, , , , , , , „ , , ,, , . . , , . , , , .".. .,_,- (,), : , , : . -,, : . , ..4._ . , . . Cl) i N ' ' — ' ' •-cs' 1 .—, cyj ,p4, , • ! ; ' , ! , , . , .4.-.< . ;7:3,..,• ; ; ! ; : ; ; , tf) : • , : : ; i ' a): • ' ; i ' , . o! a); • , , c..), , 1, $=1 ,--"li ce,, ri) i"„; (-) '-sR: ci) ' ' ,A., 10- ;Ho! • 'a',), cr., o, 0; Qz! Q.,, ,,i; ,l_u„ (a) ---, ler '•9•Ig . : 0, ,;,....,z, , ,, 1 ,,. , , .)' . 7,-, 1i,1 ,...)' .1 ! (1',. ! P-!! ; ; '0-,! Hncill 01.e. + +4,4 ..„, ,B r:4 . ,1=2,!-, !'lii, g:81, (,)4,-.), M: d 'i, "', o, ,.-it 5; (1.)E,s4'-, 0!---'i7411 "pi., w , H. ,u, w, '..i,c . „).,.0,-2, 0-c-9. 0— 'p! g:-6- ,,,J,...) . . p: : ! : : : „::, : c,d, ,, 0, : „,: up'..,4 ' C,..) , , C.) , '....,1 ,-, ,,,, 4!...,!,==l''''' --,111 •CM): 0! _.,:.. .C.)i .•F•Y V! -..., =,i.i.=41• , .• I ! C); 0.:0 ,._ 0 •Er0.:Q i . :;.1 •. ;IQA1/21 a4-1:Q,!•, !,4 ›, CZ:: 0 ! '7:i: ! , li! Cd V ! V ! : ! !) : f d; 4..4' '›..;; - la,' el' 11-,.) ,S-,;)1 . . °' 1 ,g, i',z, .5 ,Q: , : ,,._, .....0 ,..n. -,• : ,,s,, 1 -i! ; ; 11 ,,,: 0 ..Q I i ' aj I 1 g. ' :4 1.4:-0 -,,t: ;.4 ; '›-ii ° ' ' • • ,-Tzi ' ; ' 'Oil i ; • c•-t. cd .4 •. . 0 . . , •-•I 0 t474 czt ',-- ' : ! ! : " i !•(') ' ' i ; i i . (.41 bo ,.0. . . . •-4 t.' . . . " . . f:,-,-a. ,-,, . . . -- ,..0 00! ,V:), -0'v.)'0,0,co'0,,:::N i a,'N!N,cr, ,—,,N,VD 00 1 S V.)!,in i 0 o N ;.., kn'0;oo'N 0N;S't.r);1,-);vp:9 E tki-)'-Icq, .(S) :-'2,(t.--.' .,(J, Pitt---.0 ,t.'(-1 1-ic);,-ncn't---, 1/40*-); ,—, °-' E 0 H0 en a •,,t.',,c,;—,! '(..,,Ir-,!N,0.,,r)' N!,.o,0,01,-,1!0 N c; ,-) ;'chi 0");tr) 1 $-, ,.. N-iw ,-,.. 4,. [ , , , , , 1 , 1 , 1 . 1 . 1 , 1 .; 1 , 11 : e 1 , 1 ] 1 . 1 . 1 [ e • I , 1 . bl) coi00;71-• kr")' f en N;en ,—;•,—;1,n'.71-;,--;;1/40;in c;n1,.0;,—,,,.o!,-, 0;en,,r), 0' 'v-);0,en',n;.1-',r);.,1-,,,),,t-'0 N!!0'.1-i,oren,N'(r);,t' 0 t ,!,g14...!(,1. i : 1 . ; i • i , , f , , _._! it.r1,11.):N.in,en i,I-,.,1--,r),en in cr,;(1,c,,,,d-,N,en,-....- en, x e",' IH I , II , I 1 , 1 : 1 , 1 , i , Il if II I II II el 11 If I , 111 VD;N;N;N' ;N;NI N;N;NI N;N;Ni N•N 0;N N!,—;;N'N;N;N •,-. 0 '.01 0 I 0 1 0 1 1 0;0 1 0 1 0 I 0;0 1 0 0,0 1 0 1 N I 0 0 i en 0 i(:: 0 0 1 '73 -5 in „o 001.71-1,71-,7ri H-.1tHri..7t.,,:f-r7r. -.L7t-Hr.1,1-,71-1.1- ,7,u ir) .71-1,71-1.,:i- .7r., .1g, ,..., ---, lii 1 ; 11 , i , I I -o •,, kr) , . : , : . , , N , . , , , , ; s al (.,-, -i..1 .N %0. ,, ,,- ,-,,,-.4{t--.,—,,n 1.1,o,—,, ,.,,,r.IN in,,--,, 7r, ;--,,,—.; —C> 0 71- c,c, ,- , en 0 - 0 N 0 ,c,i i ,,-,i 1 i ,, 0 en O —,! ; i en 4 0 0 0 ,-.' 'en, I n;--,1 en; 0 ,n ..,j 4,, ,-,1,-, en,--,1,-,,,-,,,-,,,-,,,-,1,-.1,-,i,-,1,-,! -, --,1,-,,,-, ,--, ,-, ,--, , ,,,,,-,1 ..--' crj I Q -0 oo.oo.co!oo 1 oo i oo!oo I co i oo 1 oo 1 co 1 oo 1 oo oo I oo i co oo i oo:oo'.0oo 1 co i co 1 (1) N 0 0 k‘:: 1/40 v:,1 1/40!1/4.0 1'Or 0\i VD 1'.0!'0 i 1/40, 1'-0;1/40 1/40 1 I I V:. V.:,I !1/40;VD', .0 v) 0 • „ ; c;z3 ---; ;-; ' • ; ' , , ! ,, . _ , I 1 ; . , , i E IA ° 5 . , . . , . I ; 1 . ; , ; i , — •1 • . 11 , , • ; ;(:), , •; .• . , ; i ; ; ; , . , . 0.) cti W n__,; ! v:; I ; ;,--4, ; ; 0 at cd_. ca V ci) N. ; ; ; —-v); ' --5; ' ' -; • - r : ' , ; , ...I ›, 0 0 0 (.. 4 ' . -Cn' •A N; ' : , : , „; -.0 i ; t',)• ! ; , ; a) Cip 1 4-• i i .N .—, A *: ' • ' '-0' ''''' 'Z' : a): : ;<-,-1! i > ! a); 8 I ! <1.): . a' -,-- • -(4;5 . .>, pi! ,.), 1 -.--; o ,-, -ir ij Ho'i 1:t i< -I-,! ›li lii i >H1-.; g ,,_, 4., .- 0 0iv)1<L) -ci',4H)!°L:::)1 '1810 ' Ci! P4;44141' L ') N; ;en, III; 01; '51;•7t1,4), ct;N, 0,"d; ierr;7r; kir; ": ,'1';i•-•"''—'; a.); 0; 0; ;C"); , 01 ; (1), 0., a,,,., ,: cn, ,,s: : 0 I 0 4) too WZL/“..)117-)!C4; !ZL.41Z;O:Q1 -)1,_; 41 iC441.4i4 .1., 1 0;en;\01,—;;,—,i;—;!0;,--oN;tn'cz);<D,,,, .,c);•71-? .c)IN! !v:);,--;; I 0 at M:W ,--10) C0!(01N0'0N:7h,--I! ,,,,0 alniNp ,--1 ,—,,t7 l ; 'plpi , 0 ;..( • p.(..0 , N N.kn!N -,,..71-.co c,.en'oi ,in,q-_) m--i, ,0'0,71-!v:,' ;.1-!oo' ' 0 ,--;:7t!'71-,kr);00;N:N;,:tIc'n!.7t-Jenkn'en;N;00P-4;71-i,—, N;t---; N' ier11 ;; S:L, al •- ; •• • • ! ; :,-,-.); ; • ; ; ; • ; ; ' ; ; - ; , ; ; I ; ; I (1) 03 , , rn rACCt gi.,, ; . . . , , , ! : , : ... 1.)z. ' 1 ! . . , , , ' ' . . , J ..g , • -> -0 (L) ,.k., . :, ' : - . ,. , , , . ' (IDii.) ,..,_, ' • , ; - ; • , ! ' 1 : 1 • , , ; , , 0 a..) o ,...., o' , ' , , - ! ! ! ' , ! 0 0!,,:j Z ' (-)'•E, ' ! ' ' ! ; ' ; ' !C.) ' 0..); ; :`48,-0 El fa, 0 0 0 gr „ , . ,,,, 0: 0: :,-- :"d' l'td t 0;P:1 tA 0 Cri ,,., • I-1, . ct a_,) cd. ' •r4 4:4: 1 , , 1 izI •,--, V) , ,.„ , ,,, , .,. .,,• , , . ,. -- , , , 0 , , — c . , O' 4-'' i 1 s•-, ' 1 i,.0 4)' °11',-0' op(31 cl : $2,-;' •• '.. i ,u'Z: ! ! a) C.)• 'I'l 1 <1.) •`- ,1 0! • •C) ' ;.., ,-c: %,--• czt c'd 0: (1),,-7.! ; 10, 0:,, i 01 -C-)i,, ,0 <4, V) +4 o .. ,,,, ; ,),,,,, , 0,,, 6., ..,_.„,, . 0, 0;41 i . ,,,,-- ,1 ›,:4, 4 ril CD 1 C.,..,f r46' H.I •", CD I (..1'tkI 4 '.•0 ° 4 4)i ' '.(1)'. , 0, por al 01 ; , , ..., , : , „.., '• i A.)! E , 0; : : 011. , to 0! i 5,, 0,.01.0,, , a),• ; ,,Q: ..., ; ,_s Q , ! 1. . ; ! ,..,• , , a),c4; ,,.0, , 0, ,...), ,..):. , -,-;,, ' i 0 .h.'',.0 a.) 0 , , ,-0; ; a) 0! =! I ;.: 4'. .1' 0' 0' i'l- (1)'• '-' 0 ! 8 ,-0 m F— .1> A1-8,C.) aa . cr3 0 "0.°144-8 c7,1 °' c'!)1(') • 1 81 1 1 (11 (e3 th'<ri. -01-0 tv i4 .) +, a) '1) 1 : - ,- ,i1,c_ c.); :a' .:,.)]- ,v)i.Ei 1 ! gi ,q;, g• '-0 "cy p 0 .I._ a-, 2'-' .. 0-;It, ct iu..!w,a,Z1ZiE-i,)=1o,up4iZI4v)i0l0Jciaigl-,1c4ialc- Zla 'ai .g a 0 = - - o °? x� a) � � 0 CI ° w w 4-4Win▪ ° . �'' o cl 0 0 wo ° a a ,4 � x x w x w x a z ° z ° z .� • •7 rza pa as 0 5 o L7 L7 0 o00, a ° a ° a ° o `� w O O O O cs oA m x Ate) x 0 x r+i oA.° .0 .,-. 0 .--, 0 ,--� 0 0 cip cat cd � "t3 Q E •oA o L o O 0 a z ° `� � W W �, W a ) 0 + ° + + O0 0 •,_ .- W O W O W O ro fz' O 0 , O I 0 0 pf� ›, 0 0 0 0 0 0 N- r— O 0d 'd x c -0 +, as a acn cd p on �+- 0 0 cad 0 0 • 0 0 ct czt o • 0 o O 0 0 0 0 0 •flh � 0)a o •5 o 7,4 a 0 Pa o < 0 0.1 0 < 0 Pa o ' v y ° 0 0 0 � 0 0 En k al a o, 5 � 0 0 0 bp t nF � • a) A t a a yak 0 w ., -N 1 al al cs E1 42 U o" � Z Q a w Q Z Q w Q Z Q P4 w Q H � o~ 5 5 5 cd w w w w o o o 0 a a a a o a 0 a 0 0 x a x a x w a z ° z ° z o z o 0 + 0 + o + o a a H H PO t24 = ail C.7 C.7 ,a o a o a o ,� o o - 0 — 0 0 a) a) a) o 0 O O .$) — Q Q Q Q Eo E o 5 0 •E 0 w w �;' — w w o + 9-, + $.4 + .V + i-� Lei in i4 .y �O \D (p W 0 ..c W o W o •-o W o Q Q. Q Q O o O o . O o a` O o 0 o 0 0 0 o Cd CI hi a)+, hi > +, hi 0 hi N a� o a) 0 .� o a) o an 0 a) o .� a o a a o a a-, o a a o p., �. o cl o � O o � o o xx Z °' a� .8 hi oo 0 00 g 0 0 g 0 E g 0 0 ,- O U -d O 0 - O 0 'l7 0 O 0 0 0 +' ,6 v T3 0 hi a.; 0 ai a) 0 ai a), 0 hi ., 0 �, O � 0-4 N U ' N C) ' hi L) › Q () Q czt �Z a w at a w Q z a w Z w w AFFIRMATIVE MARKETING POLICY PLAN The Undersigned does/do hereby agree to comply with all terms and conditions of and adopt the City of Omaha's Affirmative Marketing Policy(attached hereto and incorporated herein by this reference as though fully set forth) for the Project located at as approved by the City of Omaha on October 1, 1999 and revised on August 1, 2021. Date: Name of Business or Corporation: (if applicable) By: Signature Printed Name: Exhibit Q Certification for U.S. Department of Housing and Urban Development a Drug-Free Workplace Applicant Name Program/Activity Receiving Federal Grant Funding Acting on behalf of the above named Applicant as its Authorized Official, I make the following certifications and agreements to the Department of Housing and Urban Development (HUD) regarding the sites listed below: I certify that the above named Applicant will or will continue (I) Abide by the terms of the statement;and to provide a drug-free workplace by: (2) Notify the employer in writing of his or her convic- a. Publishing a statement notifying employees that the un- tion for a violation of a criminal drug statute occurring in the lawful manufacture,distribution,dispensing,possession,or use workplace no later than five calendar days after such conviction; of a controlled substance is prohibited in the Applicant's work- e. Notifying the agency in writing,within ten calendar days place and specifying the actions that will be taken against • employees for violation of such prohibition. after receiving notice under subparagraph d.(2) from an em- ployee or otherwise receiving actual notice of such conviction. b. Establishing an on-going drug-free awareness program to Employers of convicted employees must provide notice,includ- inform employees --- ing position title, to every grant officer or other designee on (1) The dangers of drug abuse in the workplace; whose grant activity the convicted employee was working, unless the Federalagency has designated a central point for the (2) The Applicant's policy of maintaining a drug-free receipt of such notices. Notice shall include the identification workplace; number(s) of each affected grant; (3) Any available drug counseling, rehabilitation, and f. Taking one of the following actions, within 30 calendar employee assistance programs; and days of receiving notice under subparagraph d.(2),with respect (4) The penalties that may be imposed upon employees to any employee who is so convicted--- for drug abuse violations occurring in the workplace. (1) Taking appropriate personnel action against such an c. Making it a requirement that each employee to be engaged employee,up to and including termination, consistent with the in the performance of the grant be given a copy of the statement requirements of the Rehabilitation Act of 1973,as amended; or required by paragraph a.; (2) Requiring such employee to participate satisfacto- d. Notifying the employee in the statement required by pars- rily in a drug abuse assistance or rehabilitation program ap- graph a.that,as a condition of employment under the grant,the proved for such purposes by a Federal,State,or local health,law employee will --- i enforcement, or other appropriate agency; g. Making a good faith effort to continue to maintain a drug- free workplace through implementation of paragraphs a.thru'f. 2. Sites for Work Performance, The Applicant shall list(on separate pages)the site(s)for the performance of work done in connection with the HUD funding of the program/activity shown above: Place of Performance shall include the street address, city, county,State, and zip code. Identify each sheet with the Applicant name and address and the program/activity receiving grant funding.) Check hereri if there are workplaces on file that are not identified on the attached sheets. I hereby certify that all the information stated herein,as well as any information provided in the accompaniment herewith,is true and accurate. Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties. (18 U.S.C.1001,1010,1012; 31 U.S.C.3729,3802) Name of Authorized Official 7111a Signature Date X form HUD-50070(3/98) ref.Handbooks 7417.1,7475.13,7485.1&.3