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RES 2001-2099 - Agmt with Charles Drew Health Center for primary health care for the homeless Ze#20Z„AAHA,A,U�4 . ; RECEIVED Planning Depent � I ..f� Omaha/Douglas Civic Center EEP C.'J�'� n 1819 Farnam Street,Suite 1100 zc+®.1' f 1 .�1 � 01 AUG t 3 PP 12* I _ Omaha,Nebraska 68183-0110 °yAI ry (402)444-5200 °q�rFo FeBR�r�� (402)444-5150 CITY CLERK E R K Telefax(402)444-6140 City of Omaha OMAHA, NEB. RASKA RobertC.Peters Mike Fahey,Mayor August 21, 2001 Acting Director Honorable President and Members of the City Council, The attached proposed Resolution approves a subrecipient Agreement between the City of Omaha and the Charles Drew Health Center, a Nebraska Non-Profit Corporation, 2915 Grant Street, Omaha, NE 68111, for funding under HUD's 2000 Continuum of Care - Supportive �r•. Housing Program (Fiscal Year 2000, Fund Number 190, Agency Number 200, Organization Number 8018). This funding, in the amount of$625,778, is for the Charles Drew Health Center project entitled, "Primary Health Care for the Homeless". In February of 2000, the Department of Housing and Urban Development (HUD) advertised its competition for the new round of Continuum of Care for the Homeless Assistance designed to help communities develop "continuum of care" systems for combating homelessness. Upon learning of the available funding, the Planning Department undertook an inclusive effort to develop proposals from members of the Omaha Area Continuum of Care for the Homeless and to establish project priorities. All "continuum" agencies and programs were invited to participate in this process. Nine projects were conditionally selected by HUD for funding. The total amount of supportive housing funding for all nine projects is $2,337,423. The Charles Drew Health Center project and the other Continuum of Care Programs considered for funding will help provide a comprehensive approach to the development and implementation of housing and service delivery programs designed to help homeless individuals and families move to permanent housing and self-sufficiency. This Resolution authorizes the Mayor to approve all revisions to this Supportive Housing Program Grant Agreement, as approved by HUD, except that revisions involving a change in the subrecipient, a change in the project site, or a change in the category of participants to be served shall require the prior approval of the City Council. Honorable President and Members of the City Council Page 2 The Contractor Compliance Ordinance requires that the Human Relations Director conduct a pre-award review of the employment practices of a contractor and its proposed subcontractors with a City contract over $500,000.00. The Human Relations Director will review the affirmative action plans, required by Ordinance to be submitted by the Charles Drew Health Center and its subcontractors, and make its determination and recommendations to the Mayor prior to the disbursement of funds. We urge your favorable consideration of this Resolution. Sincerely, Referred to City Cou cil for Consideration: 7•/s •o/ /, 2- o/ Robert C. Peters Date ayor's Offic /Title Date Planning Director Approved as to Funding: Approv-.: 7//b/0/ Stanley P. T Date r Red./ald L. oun_ff Date �(j� Finance Director VIA Human Relatio VII ire or P:\PLN1\5788pjm.doc t AGREEMENT ' THIS AGREEMENT is entered into by and between the City of Omaha, a Municipal Corporation in Douglas County, Nebraska (sometimes hereinafter referred to as "City") and the Charles Drew Health Center, a Nebraska Non-Profit Corporation, 2915 Grant Street, Omaha, Nebraska 68111 (sometimes hereinafter referred to as "Contractor") on the terms, conditions and provisions as set forth below: RECITALS: WHEREAS, the City of Omaha is a municipal corporation located in Douglas County, Nebraska, and is organized and exists 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, on February 24, 2000, the U. S. Department of Housing and Urban Development published in the Federal Register a Notice of Funding Availability for Continuum of Care Homeless Assistance designed to help communities develop Continuum of Care systems to assist homeless persons; and WHEREAS, the Omaha Area Continuum of Care for the Homeless is comprised of organizations providing shelter and services to homeless individuals and families on an area- wide basis; and, WHEREAS, the City of Omaha undertook an inclusive community process for developing and implementing a Continuum of Care strategy which included'participation of the membership of the Omaha Area Continuum of Care for the Homeless; and, WHEREAS, the City of Omaha developed and submitted to the U.S. Department of Housing and Urban Development a consolidated application with, among others, Siena/Francis House, Family Housing Advisory Services, the Charles Drew Health Center, Community Alliance Rehabilitation Services, the YWCA, Family Service of Omaha, the Salvation Army, the Stephen Center for Continuum of Care - Supportive Housing Assistance; and, WHEREAS, on March 13, 2001, the U. S. Department of Housing and Urban Development notified the City of Omaha of the final selection of the Charles Drew Health Center project entitled, "Primary Health Care for the Homeless" for funding under Fiscal Year 2000 Supportive Housing Program; and, WHEREAS, the U. S. Department of Housing and Urban Development has awarded the Charles Drew Health Center Supportive Housing funds in the amount of $625,778, and has assigned the grant number NE26B001010 for the Charles Drew Health Center project; and, ., 0 WHEREAS, the Charles Drew Health Center will use the Supportive Housing Program funds to provide primary health care to homeless persons; and, WHEREAS, Supportive Housing Assistance for Omaha's Continuum of Care programs will help provide a much needed comprehensive approach to develop and implement housing and service delivery programs to help homeless individuals and families move to permanent living and self-sufficiency; and, WHEREAS, from time to time it is necessary for HUD and the City to make revisions to such Supportive Housing Program grant agreements including the shifting of funds among categories and additions or deletions in the line items within Support Services and Operations Budgets which additions and deletions do not change the original contract amount; and, WHEREAS, it is in the best interest of the City for the City Council to authorize the Mayor to approve all revisions to this Supportive Housing Program Grant Agreement, as approved by HUD; except that all revisions involving a change in the subrecipient, a change in the project site, or a change in the category of participants to be served, are considered substantial changes requiring the prior approval of the City Council. NOW, THEREFORE, in consideration of these mutual covenants, the Charles Drew Health Center and the City of Omaha do hereby agree as follows: SECTION 1. DEFINITIONS -ABBREVIATIONS 1.1 "City" shall mean- the City of Omaha, a Nebraska Municipal Corporation. 1.2 "Contractor" shall mean - the Charles Drew Health Center, a non-profit corporation, 2915 Grant Street, Omaha, Nebraska 68111. (See Exhibit"A") 1.3 "Director" shall mean - the Planning Department Director of the City of Omaha. 1.4 "Recipient" shall mean- the City of Omaha. 1.5 "Subrecipient" shall mean - a public or private non-profit agency, authority or organization receiving Continuum of Care Homeless Assistance Supportive Housing funds to undertake eligible activities. In this Agreement, the subrecipient is the Charles Drew Health Center. 1.6 "HUD" shall mean- the U. S. Department of Housing and Urban Development. 1.7 "Supportive Housing Program (SHP)" shall mean - the program conducted under the provisions of Title IV, Subtitle C, of the Stewart B. McKinney Homeless Assistance Act (McKinney Act) as amended, (42 USC 11381) and the Code of Federal Regulations (24 CFR Part 583). (See Exhibit"B") • 6/0 ,‘ - 2 - 1.8 "SHP Funds" shall mean - that portion of the Supportive Housing Program Grant (Fund Number 190) awarded to the City (Agency Number 200, Organization Number 8018) as may be available during Program year 2001 (Fiscal Year 2000) for the use specified herein, in an amount not to exceed$625,778.00 subject to the terms, conditions, and requirements of said Grant. 1.9 "Homeless Person" shall mean - an individual or family who lacks a fixed, regular, and adequate nighttime residence; and an individual or family who has a primary nighttime residence that is: 1) a supervised publicly or privately operated shelter designed to provide temporary living accommodations (including welfare hotels, congregate shelters, and transitional housing for the mentally ill), 2) an. institution that provides a temporary residence for individuals intended to be institutionalized, or 3) a public or private place not designed for, or ordinarily use as, a regular sleeping accommodation for human beings. 1.10 "MAACLink" shall mean -the Mid America Assistance Coalition Client Tracking Database, an information management system developed by the Mid America Assistance Coalition in Kansas City, Missouri, permitting social service agencies to share data about clients, resources, and services. 1.11 "Application" shall mean - the Charles Drew Health Center application submission, on the basis of which the SHP Funds were approved by HUD, including any certifications and assurances and any information or documentation required to meet any SHP Funds conditions. A copy of the Application is maintained as part of the SHP application by the City of Omaha Planning Department and incorporated herein by this reference. 1.12 "Omaha Area Continuum of Care for the Homeless" or "OACCH" shall mean - the coordinated and responsive network of programs and services providing emergency, transitional, and supportive shelter and supportive services to the. Omaha area's homeless individuals and families, or near homeless individuals and families. SECTION 2. DUTIES AND CONDITIONS OF CITY FINANCING 2.1 Subject to and conditioned upon actual receipt of same, the City agrees to make available to the Contractor, in the form of a grant, Six Hundred Twenty-Five Thousand Seven Hundred Seventy-Eight Dollars ($625,778.00) in SHP Funds, HUD Grant No. NE26B001010, for the purposes set forth in this Agreement and as detailed in Exhibit"C" Scope of Work, incorporated herein by this reference. 2.1.1 City funding pursuant to this Section shall be contingent upon receipt of and subject to the availability of SHP funds in amounts adequate to meet any contractual obligations in force upon the date of execution of the Agreement as well as this proposed obligation. Should adequate funding 0 - 3 - not be available, the City shall notify the Contractor as soon as reasonably possible. At this time, the responsibilities of the Contractor under Section 3 of this Agreement shall be released, the provisions of Section 5, Paragraph 5.10 will be exercised and the Agreement will be terminated. 2.1.2 Reimbursement shall be on a monthly basis for the attached budget line item expenditures. Payments shall be made on the basis of monthly requests for payment and shall be reimbursements for actual expenditures. The Annual Operating Budget is attached as Exhibit"D". 2.1.3 Monthly billing shall be submitted to the Director by Contractor with the monthly progress report. The monthly bill and monthly progress report is due not later than fifteen (15) days following each monthly reporting period. 2.1.4 The City shall review and monitor the required monthly reports that identify the progress/accomplishments of Contractor on the activities included in this Agreement and on contracts entered into with third parties pursuant thereto. 2.1.5 The City shall prepare monthly payment vouchers for Contractor based upon the Contractor's monthly progress report and request for payment. 2.1.6 The City shall retain Fourteen Thousand Four Hundred Seventy Dollars ($14,470.00) of the SHP Funds to pay the cost of eligible administrative activities it may incur and pass on Fourteen Thousand Four Hundred Seventy Dollars ($14,470.00) of SHP Funds to the Charles Drew Health Center to pay the cost of eligible administrative activities it may incur. 2.1.7 The Charles Drew Health Center shall use the remaining Five Hundred Ninety-Six Thousand Eight Hundred Thirty-Eight Dollars ($596,838.00) in SHP Funds for the purposes set forth in this Agreement (See Exhibit "C" Scope of Work). 2.1.8 No financial assistance provided pursuant to this Agreement may be used to replace State or local funds previously used, or designated for use, to assist homeless persons. 5.17.1 The City may deobligate the remaining amounts for services in any year if the actual cost of services for that year is less than the total cost anticipated in the Application. 2.1.10 Prior to the disbursement of SHP funds, the Human Relations Director shall review the affirmative action plans, required by ordinance to be submitted by the Contractor and its contractors and make its determination., A copy 0 \ - 4 - of the determination by the Contract Compliance Officer is to be submitted to the Director for his review and approval. SECTION 3. DUTIES AND RESPONSIBILITIES OF THE CONTRACTOR 3.1 The Contractor shall use the SHP Funds to assist homeless individuals and families in the Omaha Area Continuum of Care for the Homeless. This shall be accomplished by: 3.1.1 Providing primary health care services to homeless individuals residing in shelters and transitional living programs participating in the Omaha Area Continuum of Care for the Homeless. Such primary health care services shall be based on individual needs and shall be related to, among other things, eye care, dental work, medication needs, lab services, X-ray services, standard office visits and mental health care. (See Exhibit "C") 3.2 The Contractor shall submit an operating budget by line item indicating all proposed expenditures and sources of revenue for the 2001 program year (See Exhibit"D"). 3.3 The Contractor shall submit monthly progress report to the Director delineating Contractor's accomplishments for the previous 30 day period on the specific activities undertaken pursuant to this Agreement. 3.4 The Contractor shall submit monthly financial reports to the Director delineating the revenue and line item expenditures for Contractor's services undertaken pursuant to this Agreement. In addition, a monthly check register is to be. submitted listing each expenditure by check number,payee, date and amount. 3.5 The Contractor shall comply with all provisions and regulations of the Supportive Housing Program and have an annual audit completed in compliance with OMB Circular A-133. A copy of the audit shall be provided to the Director. OMB Circular A-133 is attached to this Agreement as Exhibit "E". The auditor shall determine the appropriate type of audit to be conducted; i.e., limited scope or full compliance. A single audit is not an allowable expense unless the subrecipient expends total Federal funds over$300,000.00 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 subrecipient expense less than $300,000.00 in each fiscal year. 3.6 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 - 5 4a1 • - information released shall be used solely for the limited purpose 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. 3.7 The Contractor 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 of America or any duly authorized representatives, or any duly authorized representatives of the City of Omaha, as approved by the.Planning Director, shall have access to any books, documents, papers, records and accounts of the Contractor or subcontractors which are directly pertinent to this undertaking for the purpose of making audit, examination, excerpts and transcriptions. Such records and accounts shall be retained for five years from the contract period completion. Any contract entered into by the Contractor with any Subcontractors shall include this Section to ensure said access. 3.7.1 The Contractor shall keep any records and make any reports (including those pertaining to race, ethnicity, gender, and disability status data) that HUD may require within the time frame required. 3.8 The Contractor shall provide an annual assurance, in writing to the Director, for each year SHP Funds are received that the project will be operated for the purpose specified in the Application. 3.9 The Contractor shall conduct an ongoing assessment of the supportive services required by the residents of projects and the availability of such services, and make adjustments as appropriate. 3.10 The Contractor shall provide for the consultation and participation of not less than one homeless person or formerly homeless person on the board of directors or an equivalent policy making entity of the Contractor, to the extent that such entity considers and makes policies and decisions regarding any project, services, or assistance provided pursuant to this Agreement. 3.10.1 This requirement may be waived, in writing by HUD, if the Contractor is unable to meet it and presents an acceptable plan to otherwise consult with homeless or formerly homeless persons in considering and making such policies and decisions. 3.11 The Contractor must, to the maximum extent practicable, involve homeless individuals and families, through employment, volunteer services, or otherwise, in constructing, rehabilitating, maintaining, and operating the project and in providing supportive services for the project. - 6 - 3.12 The Contractor must comply with Section 504 of the Rehabilitation Act of 1973 in the provision of reasonable accommodation to perspective clients and must adopt procedures to make available information on the existence and locations of facilities and services that are accessible to persons with a handicap and maintain evidence of implementation of the procedures. 3.13 The Contractor shall regularly and reliably attend Omaha Area Continuum of Care for the Homeless (OACCH) monthly meetings, ensure that all program information is listed in the OACCH Directory, participate in the OACCH colleague feedback process, install and implement the MAACLink System as defined in Section 1.10., participate in the OACCH monthly housing count (as applicable) and attend the annual State of Nebraska "Affordable Housing and Homelessness Conference". SECTION 4. TERM OF THE AGREEMENT This Agreement shall be in full force and effect from July 1, 2001, through and including June 30, 2003. The Director may extend the term of this Agreement or adjust the term to coincide with actual expenditure start dates to facilitate the complete expenditure of funds. In no event shall the term be extended beyond September 30, 2003. SECTION 5. PROVISIONS OF THE AGREEMENT 5.1 Equal Employment.Opportunity/Section 3 Clause. Attached hereto as Exhibits "F" and "G", and made a part hereof by this reference, are the equal employment provisions of this Agreement. 5.2 Non-Discrimination. The Contractor shall not, in the performance of this Agreement, discriminate or permit discrimination in violation of federal or state laws or local ordinances because of race, color, handicap, familial status, sex, age, political or religious opinions, affiliations or national origin. 5.3 Captions. Captions used in this Agreement are for convenience and are not used in the construction of this Agreement. 5.4 Applicable Law. Parties to this Agreement shall conform with all existing and applicable City ordinances, resolutions, state laws, federal laws, and all existing and applicable rules and regulations. Nebraska law will govern the terms and the performance under this Agreement. 5.5 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. - a. . 7 - 5.6 Merger. This Agreement shall not be merged into any other oral or written agreement, lease or deed of any type. 5.7 Modification. This Agreement contains 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. 5.8 Assignment. The Contractor may not assign its rights or obligations under this Agreement without the express prior written consent of the City. 5.9 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 except upon written direction from authorized representatives of the parties. 5.9.1 In accordance with Section 5.7 Modification, above, such authorized representative may revise the Support Services and Operations Budgets, Exhibit C, as may be necessary, provided such revisions are deemed by the Director to be non-substantial. Substantial changes shall be defined as those which include a change in the subrecipient, a change in the project site, or a change in the category of participants to be served. All other changes are considered to be non-substantial, including the shifting of funds among categories and additions or deletions in the Support Services and Operations Budgets, Exhibit C. In any event, HUD shall be notified in writing of all such changes. If HUD elects to amend its SHP Agreement with the City of Omaha pursuant to such revisions, the Mayor is authorized to effect such amendment. 5.10 Termination. This Agreement may be terminated by either party upon thirty (30) days written notice to the other party. Said notice shall be given when received by certified mail at the other party's usual place of business. This Agreement may also be suspended or terminated in accordance with 24 CFR 85.43, Enforcement or 24 CFR 85.44, Termination for Convenience (Exhibit "H"). 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. 5.11 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 - 5.12 Nebraska Law. This Agreement shall be a contract made under and governed by the laws of the State of Nebraska. 5.13 Unenforceable Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition of enforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 5.14 Disclosure of Lobbying. The Contractor shall certify and disclose, to the best of its knowledge and belief, that: (a) No Federal appropriated funds have been paid or will be paid, by or on behalf of the undersigned, 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. (b) 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 undersigned shall complete and submit Standard Form-LLL, "Disclosure Form to Report Lobbying", in accordance with its instructions. (c) 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. 5.15 Subrecipients. The Contractor shall comply with the requirements and the standards of OMB Circular No. A-122, "Cost Principles for the Nonprofit Organizations" (Exhibit "I"), and with the requirements of OMB Circular A-110 (Exhibit"J"). 5.16 Drug-Free Workplace. The Contractor is subject to the requirements of Sections 5151-5160 of the Drug-Free Workplace act of 1988 and HUD's implementing regulations at 24 CFR Part 24 (See Exhibit"K"). 5.17 Use of Debarred, Suspended, or Ineligible Contractors. The provisions of 24 CFR Part 24 shall apply to the employment, engagement of services, awarding of - 911)- contracts, or funding of any contractors or subcontractors during any period of debarment, suspension, or placement in ineligibility status (See Exhibit"L"). 5.18 Living Wage Contract Clause. The Contractor and its contractors acknowledge that if this contract is over $75,000.00 it may be subject to the Living Wage Ordinance of the City of Omaha. The Ordinance requires that, unless specific exemptions apply or a waiver is granted, all employers under certain contracts shall provide payment of a minimum living wage to employees. Included among exemptions set out in Section 10-319 of the Omaha Municipal Code are nonprofit corporations, governmental entities, contracts funded by community development block grant funds and others. Under the provisions of the Omaha Living Wage Ordinance, the City has the authority, under appropriate circumstances, to terminate a contract and to seek other remedies as set forth therein, for violations of the Ordinance. The Contractor and its contractors further acknowledge that a copy of the Ordinance and the Interpretive Regulations is available upon request from the City of Omaha, Living Wage Compliance Officer, Room 1003, 1819 Farnam Street, Omaha, Nebraska 68183, Attention: Joe Couch, Phone Number (402) 444-5409. SECTION 6 AUTHORIZED REPRESENTATIVES In further consideration of the mutual covenants herein contained, the parties hereto expressly agree that for purposes of notice, including legal service of process, during the term of this Agreement, and for the period of any applicable statute or limitations thereafter, the following named individuals shall be authorized representatives of the parties. (1) City of Omaha Director, Planning Department Omaha/Douglas Civic Center 1819 Farnam Street Omaha,NE 68183 (2) Charles Drew Health Center Ms. JoAnn Cooper, Acting CEO 2915 Grant Street Omaha,NE 68111 - 10 - • IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates indicated below. ATTEST: CITY OF OMAHA: )th,e;ta—t -- ./Z, 3 CIT.: ° ERK OF'THE CITY OF OMAHA MAYOR OF THE C OF OM CHARLES DREW HEALTH CENTER: 'Ann Cooper, Acting C O April 10, 2001 Date APPROVED AS TO FORM: K_.?)11. `ASSISTANT CITY ATTORNEY P:\PLN1\5790pjm.DOC - 11 - • SCHEDULE OF EXHIBITS Agreement Exhibit Location Description A 1.2 Articles of Incorporation; Board of Directors; Corporate Resolution B 1.7 HUD24CFRPart583 C 2.1, 2.1.7, 3.1 Scope of Work D 2.1.2, 3.2 Annual Operating Budget E 3.5 OMB Circular A-133 F 5.1 Equal Employment Opportunity Clause G 5.1 Section 3 Clause H 5.10 Termination- CFR 85.43 and CFR 85.44 I 5.15 OMB Circular A-122 J 5.15 OMB Circular A-110 K 5.16 Drug-Free Workplace L 5.17 Use of Debarred, Suspended or Ineligible Contractors 41)- 12 - i, ♦ '•i •�: - . EXHIBIT "A" • 'T11£j•p.��i ryas STATE OF ',V.-4-6- ` �f t NEBRASKA 4. orh#llRl(" Now s\t, ile4ttrtment of fttttr I. Allett J. lirermtttnt, 'errrtttrg of Otate of the 'tttte of Neltrttsktt 1)errltli rertifg tlittt the attached is a true and correct copy of Articles of Amendment to the Articles of Incorporation of CHARLES DREW HEALTH CENTER, INC. with registered office located in Omaha, • Nebraska, as filed and recorded in this office on June 7, 1984. in arstanontj IN'land, I huit llrrtuntn srt inn tomb and Whitt' tilt ( rrat 'ral of Or 'lair fir _ .t of Nebraska. • ' - t.; s.�, Dnnr at IQ tondo slits seventh day of June ..r ; , t , z� 5,P , t • �N ,�� r � * in rllt gray of nor Lark tint iiinu- 1` t tr roc ; • sand Hint llundrrd and eighty-four. (IAA. q . gie,444,14,0,z i, t:.•^': , SECRETARRY OF STATE ' 4 .Z /�O ✓ DEPUTY JUN "r 19b4 STATE OF NEBRASKA SECRETARY'S OFFICE 5 SS Received and file for record AMENDMENT OF ARTICLE THREE OF THE an recorded on film roll No. CHARLES DREW HEALTH CENTER, INC. " --- at page126� ARTICLES OF INCORPORATION Secretary of State By � //.�_/ FIRST: ARTICLE III, the PURPOSE of the Charles Drew Health Center, Inc., Articles of Incorporation is as follows: ARTICLE III PURPOSE The primary purpose for which this corporation is organized is to engage in the acquisition, establishment, or construction, and maintenance and opera- tion of a physician's medial building' located in the Omaha metropolitan area, and to search out, interview and recruit through its efforts an adequate number of h sicians and medicalpersonnel to servethe p y residents of the Omaha metropolitan area, all for the improvement of the medical care' and health services, and for the protection and betterment of the social welfare and health of the residents of the Omaha metropolitan area, and to do and to perform all things necessary and incidental thereto. SECOND: The Amendment is to change ARTICLE III, the PURPOSE of the Charles Drew Health Center, Articles of Incorporation to the following: ARTICLE III PURPOSE The corporation is organized exclusively for charitable, religious, education- al, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501 (c) (3) of the Internal Revenue Code of 1954 (or the correspond- ing provision of any future United States Internal Revenue Law). RECEIVED JUN 8 1984 CHARLES DREW MEDICAL CLINIC THIRD: The above Amendment changing ARTICLE III, the PURPOSE of the Charles Drew Health Center, Inc., Articles of Incorporation, was adopted at a meeting of the Board of Directors, there being no members or no mem- bers having voting rights, which was held on the 5 day of June,- 1984. That a quorum of the Board of Directors of the corporation were present at said meeting and the adoption of such Amendment changing ARTICLE III, the PURPOSE of the 'Articles of Incorporation of corporation received the affirmation vote of a majority of the Directors in office. IN WITNESS WHEREOF, we have hereunto set o d this day of June 1984. _ 4117 Vice-President /Att Secr STATE OF NEBRASKA ) ss. COUNTY OF DOUGLAS ) On the day of June, 1984, before me, the undersigned, a Notary Public, in and for said County, personally appeared Elwin Taylor and Marjorie Gunn, Vice-President and Secre tary of the Charles Drew Health Center, Inc., respectively and they acknowledged the execution thereof to be their volun- tary act and deed of said nonprofit corporation. WITNESS my hand and notarial seal at Omaha, Nebraska on the day . and year last above written. N1011~7pu.M ` 7RtN�L' Nota_ I, Marjorie Gunn, Secretary of Charles Drew Health Center, Inc., do hereby certify that the above and foregoing is a true and correct copy of the Amendment to the Articles of Incorporation adopted at a meeting of the Board of Directors of said corporation held on June 5 , 1984, at which a quorum of Directors were present and that said Amendment was adopt d by a majority vote of the Directors in office. II Sear les Drew Health RECEIVED Center, Inc' JUN 8 1984 0 + VARIES DREW MEDICAL CLINIC -2- • ARTICLES OF INCORPORATION OF CHARLES DREW MEDICAL CLINIC, INC. The undersigned, acting as incorporators of a corporation under the Nebraska Non-Profit Corporation Act, Nebraska Revised Statutes, 1943 (Reissue of 1977) , SS21-1901 to 21-1991 , adopt the following Articles of Incorporation: ARTICLE I NAME The name of the corporation shall be CHARLES DREW MEDICAL CLINIC, INC. • ARTICLE II DURATION The period of its duration is perpetual. ARTICLE III PURPOSE The primary purpose for which this corporation is organized is to engage in the acquisition, establishment, or construction, and maintenance and operation of a physician's medical building located in the Omaha metropolitan area, and to search out, interview and recruit through its efforts an adequate number of physicians and medical personnel to serve the residents of the Omaha metropolitan area, all for the improvement of the medical care and health services, and for the protection and betterment of the social welfare and health of the residents of- the Omaha metropolitan area, and to do and to perform all things necessary and incidental thereto. ARTICLE IV POWERS The corporation shall have the power to engage in any and all activities that may be directly or indirectly calculated to affect the objects and purposes of this corporation, or any of them, and, in general , to have and exercise all powers conferred by the Nebraska Non-Profit Corporation Act of the State of Nebraska. The corporation shall also have the following powers: (a) To the same extent as natural persons could do, to acquire, construct, maintain, develop, improve, rent, use, mortgage and dispose of real property and interests , estates and rights therein; (b) The corporation shall have power to receive contributions, grants, donations and loans of all types from individuals, organizations, profit and non-profit, private and public corporations , government agencies and others, to support and achieve the -2- • purposes set- out in these Articles of Incorporation; (c) The corporation shall have the power to take any other action necessary and incidental to the purposes set forth in these Articles of Incorporation; provided, however, that no part of the funds , property, income or net earnings of the corporation shall inure to the benefit of any private member or individual or shall b e devoted to any purposes other than those specified herein above, except that this corporation may pay reasonable compensation for services rendered and make payments and dis- tributions of monies in furtherance of the purposes set out herein; (d) Notwithstanding any of the provisions of these Articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under Section 501(c) (3) of -3- • the Internal Revenue Code of 1954 (or the corresponding provisions of any future United States Internal Revenue law) or (b) by a corporation, contri- butions to which are deductible under Section 170 (c) (2) of the Internal Revenue Code of 1954 (or the corres- ponding provisions of any future United States Internal Revenue law) . ARTICLE V DISSOLUTION Upon the dissolution of the corporation, the Board of Directors shall, after paying or making provision for the payment of all the liabilities of the corporation, dispose of all of the assets of the corporation exclusively for the purposes of the corporation in such manner, or to such organization or organizations organized and operated exclusively for charitable, educational, religious or scientific purposes as shall at the time qualify as an exempt organization or organizations under Section 501(c) (3) of the Internal Revenue Code of 1954 (or the corresponding provisions of any future United States Internal Revenue law) , as the Board of Directors shall determine. Any such assets not so disposed of shall be disposed of by the district court of the county in which the principal office of the corporation is then located, exclusively for such purposes or lib -4- to such organization or organizations as the court shall determine, which are organized and operated exclusively for such purposes. ARTICLE VI OWNERSHIP AND AFFAIRS This corporation is not authorized to issue stock and shall declare no dividends. The affairs of the corporation shall be conducted by a Board of Directors, consisting of at least nine (9) members. The number of Directors shall be fixed by the By-Laws, except as to the number of the initial Board of Directors which number is fixed by these Articles of Incorporation. ARTICLE VII ... REGISTERED OFFICE AND REGISTERED AGENT The street address of the initial registered office is 1502 North 24th Street, Omaha, Nebraska, and the name of the registered agent at said address is Mr. Carl Christian. ARTICLE VIII MEMBERSHIP The qualifications for membership in this organization are as provided in the By-Laws. ARTICLE IX ELECTION OF DIRECTORS Election of the Directors shall be as provided in the By-Laws of the corporation. -5- • ARETICLE X • INITIAL BOARD OF DIRECTORS The number of Directors constituting the initial Board of Directors is five (5) , and the names and addresses and numbers of persons who are to serve as the initial Board of Directors until the first annual meeting, or until their successors have been elected and qualified, are: Carl M. Christian 1502 North 24th Street, Omaha, Nebraska 68111 Marjorie Gunn 2211 Paul, Omaha, Nebraska 68102 Robert Patterson 2001 North 35th Street, Omaha, Nebraska 68111 Carl L. Tyler 3741 North 39th Street, Omaha, Nebraska 68111 Andy Wright 3910 North 26th Street, Omaha, Nebraska 68111 ARTICLE XI INCORPORATORS The names and addresses of the incorporators of this corporation are as follows: Carl M. Christian 1502 North 24th Street, Omaha, Nebraska 68111 Marjorie Gunn 2211 Paul, Omaha, Nebraska 68102 Robert Patterson 2001 North 35th Street, Omaha, Nebraska 68111 Carl L. Tyler 3741 North 39th Street, Omaha, Nebraska 68111 Andy Wright 3910 North 26th Street, Omaha, Nebraska 68111 411 -6- ARTICLE XII • AMENDMENTS Amendments to these Articles shall be submitted to the Board of Directors in writing and shall have first reading at the next regular meeting of the membership. The second reading of the proposed amendments shall require a two-thirds vote of the membership. Amendments will become effective immediately. DATED this 3 day of /V1 A C.M , 1983, at Omaha, Nebraska. C M. .CHRISTIA N/ MAC RIE GU `,�K•�.✓�14 (-1- 2..to ROBERT PATTERSON CARL L. T/LER ANDY W$r2 GHT /f r�- -7- Charles Drew Health Center 2001 Board Officers A'Jamal Byndon, Chairperson Annice Russell, Vice Chairperson Virgie Louis, Secretary Bob Beehler, Treasurer 1 2001 Board Members Rev. George Garrett Malaby Byrd. Jr. John J. Ekeh John Lindsey Calvin McGruder Florence Nelson Glenn Freeman Dr. Harry Jenkins Russell Pierce Fred Salzinger Bruce Williams 1 � Charles Drew Health Center,Inc. 2915 Grant Street,Omaha,Nebraska 68111 CORPORATE RESOLUTION I,Virgie L.Louis,do hereby certify that I am the duly elected Secretary of The Board of Directors of the Charles Drew Health Center,Inc.,a Nebraska 501 (c)(3)corporation authorized to do business in the State of Nebraska,and that the following is a copy of the Resolution adopted at a meeting of the Board of Directors of said corporation,held on May 22,2001. WHEREAS,the Charles Drew Health Center,Inc.,is committed to providing comprehensive quality health care to the indigent,low-income and homeless patients and families living in Douglas County. WHEREAS,the Charles Drew Health Center,Inc.,and the City of Omaha have negotiated an Agreement for the provision of comprehensive health care services;and, NOW,THEREFORE,BE IT RESOLVED that the Charles Drew Health Center,Inc.,does hereby agree to enter into an Agreement with the City of Omaha as a sub-contractor for the provision of health care services to homeless individuals and families living in transitional housing. IT IS FURTHER RESOLVED that Joeann Cooper Interim CEO of the Charles Drew Health Center,Inc.,be,and hereby is authorized to take all such actions,including the execution of an Agreement and any security documents in favor of the City of Omaha to carry out the purpose of this Resolution. I do hereby further certify that since the adoption of said Resolution,it has been neither revoked nor amended;and, I do hereby further certify that on,January 1,2000,A'Jamal Byndon was elected President,and that on August 22,2000,Virgie L.Louis was elected Secretary,and that they have been since that date and are now,respectively,President and Secretary of Charles Drew Health Center,Inc. Board of Directors. Witness my hand and the seal of Virgie L.Louis this 22nd day of May,2001. ) 0 ec> 13:5-2 ..1-41ifnature of the Secretary, Board of Directors,Charles Drew Health Center,Inc. +s' Attachment A EXHIBIT "B" DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of the Assistant Secretary for Community Planning and Development 24 CFR Part 583 Supportive Housing Program PART 583--SUPPORTIVE HOUSING PROGRAM Subpart A--General Sec. 583.1 Purpose and scope. 583.5 Definitions. Subpart B--Assistance Provided 583.100 Types and uses of assistance. 583.105 Grants for acquisition and rehabilitation. 583.110 Grants for new construction. 583.115 Grants for leasing. 583.120 Grants for supportive service costs. 583.125 Grants for operating costs. 583.130 Commitment of grant amounts for leasing,supportive services, and operating costs. 583.135 Administrative costs. 583.140 Technical assistance. 583.145 Matching requirements. 583.150 Limitations on use of assistance. 583.155 Consolidated plan. Subpart C--Application and Grant Award Process 583.200 Application and grant award. 583.230 Environmental review. 583.235 Renewal grants. Subpart D--Program Requirements 583.300 General operation. 583.305 Term of commitment;repayment of grants;prevention of undue • benefits. 583.310 Displacement,relocation,and acquisition. 583.315 Resident rent. 583.320 Site control. 583.325 Nondiscrimination and equal opportunity requirements. 583.330 Applicability of other Federal requirements. Subpart E--Administration 583.400 Grant agreement. 583.405 Program changes. 583.410 Obligation and deobligation of funds. AUTHORITY: 42 U.S.C. 11389 and 3535(d). Subpart A--General § 583.1 Purpose and scope. (a) General. The Supportive Housing Program is authorized by title IV of the Stewart B. McKinney Homeless Assistance Act (the McKinney Act)(42 U.S.C. 11381-11389). The Supportive Housing program is designed to promote the development of supportive housing and supportive services, } including innovative approaches to assist homeless persons in the transition from homelessness, and to promote the provision of supportive housing to homeless persons to enable them to live as independently as possible. (b) Components. Funds under this part may be used for: (1) Transitional housing to facilitate the movement of homeless individuals and families to permanent housing; (2) Permanent housing that provides long-term housing for homeless persons with disabilities; (3) Housing that is, or is part of, a particularly innovative project for, or alternative methods of, meeting the immediate and long-term needs of homeless persons; or (4) Supportive services for homeless persons not provided in conjunction with supportive housing. § 583.5 Definitions. As used in this part: Applicant is defined in section 422(1)of the McKinney Act(42 U.S.C. 11382(1)). For purposes of this definition, governmental entities include those that have general governmental powers (such as a city or county), as well as those that have limited or special powers (such as public housing agencies). Consolidated plan means the plan that a jurisdiction prepares and submits to HUD in accordance with 24 CFR part 91. Date of initial occupancy means the date that the supportive housing is initially occupied by a homeless person for whom HUD provides assistance under this part. If the assistance is for an existing homeless facility, the 'date of initial occupancy' is the date that services are first provided to the residents of supportive housing with funding under this part. Date of initial service provision means the date that supportive services are initially provided with funds under this part to homeless persons who do not reside in supportive housing. This definition applies only to projects funded under this part that do not provide supportive housing. Disability is defined in section 422(2) of the McKinney Act(42 U.S.C. 11382(2)). Homeless person means an individual or family that is described in section103 of the McKinney Act(42 U.S.C. 11302). Metropolitan city is defined in section 102(a)(4) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(4)). In general, metropolitan cities are those cities that are eligible for an entitlement grant under 24 CFR part 570, subpart D. New construction means the building of a structure where none existed or an addition to an existing structure that increases the floor area by more than 100 percent. Operating costs is defined in section 422(5) of the McKinney Act(42 U.S.C. 11382(5)). Outpatient health services is defined in section 422(6)of the McKinney Act(42 U.S.C. 11382(6)). 1 { 3 Permanent housing for homeless persons with disabilities is defined in section 424(c) of the McKinney Act(42 U.S.C. 11384(c)). Private nonprofit organization is defined in section 422(7) (A), (B), and (D) of the McKinney Act(42 U.S.C. 11382(7) (A), (B),and (D)). The organization must also have a functioning accounting system that is operated in accordance with generally accepted accounting principles, or designate an entity that will maintain a functioning accounting system for the organization in accordance with generally accepted accounting principles. • Project is defined in sections 422(8) and 424(d) of the McKinney Act(42 U.S.C. 11382(8), 11384(d)). Recipient is defined in section 422(9) of the McKinney Act (42 U.S.C. 11382(9)). Rehabilitation means the improvement or repair of an existing structure or an addition to an existing structure that does not increase the floor area by more than 100 percent. Rehabilitation does not include minor or routine repairs. _ State is defined in section 422(11) of the McKinney Act(42 U.S.C. 11382(11)). Supportive housing is defined in section 424(a)of the McKinney Act(42 U.S.C. 11384(a)). Supportive services is defined in section 425 of the McKinney Act(42 U.S.C. 11385). Transitional housing is defined in section 424(b) of the McKinney Act(42 U.S.C. 11384(b)). See also § 583.300(j). Tribe is defined in section 102 of the Housing and Community Development Act of 1974(42 U.S.C. 5302). Urban county is defined in section 102(a)(6) of the Housing and Community Development Act of 1974 (42 U.S.C. 5302(a)(6)). In general, urban counties are those counties that are eligible for an entitlement grant under 24 CFR part 570, subpart D. Subpart B--Assistance Provided § 583.100 Types and uses of assistance. (a) Grant assistance. Assistance in the form of grants is available for acquisition of structures, rehabilitation of structures, acquisition and rehabilitation of structures, new construction, leasing, operating costs for supportive housing, and supportive services, as described in Secs. 583.105 through 583.125. Applicants may apply for more than one type of assistance. (b) Uses of grant assistance. Grant assistance may be used to: (1) Establish new supportive housing facilities or new facilities to provide supportive services; (2) Expand existing facilities in order to increase the number of homeless persons served; (3) Bring existing facilities up to a level that meets State and local government health and safety standards; (4) Provide additional supportive services for residents of supportive housing or for homeless persons not residing in supportive housing; f . 4 (5) Purchase HUD-owned single family properties currently leased by the applicant for use as a homeless facility under 24 CFR part 291; and (6) Continue funding supportive housing where the recipient has received funding under this part for leasing, supportive services, or operating costs. (c) Structures used for multiple purposes. Structures used to provide supportive housing or supportive services may also be used for other purposes, except that assistance under this part will be available only in proportion to the use of the structure for supportive housing or supportive services. (d) Technical assistance. HUD may offer technical assistance, as described in § 583.140. § 583.105 Grants for acquisition and rehabilitation. (a) Use. HUD will grant funds to recipients to: (1) Pay a portion of the cost of the acquisition of real property selected by the recipients for use in the provision of supportive housing or supportive services, including the repayment of any outstanding debt on a loan made to purchase property that has not been used previously as supportive housing or for supportive services; (2).Pay a portion of the cost of rehabilitation of structures, including cost-effective energy measures, selected by the recipients to provide supportive housing or supportive services; or (3) Pay a portion of the cost of acquisition and rehabilitation of structures, as described in paragraphs (a)(1) and(2) of this section. (b)Amount. The maximum grant available for acquisition, rehabilitation, or acquisition and rehabilitation is the lower of: (1) $200,000; or (2)The total cost of the acquisition, rehabilitation, or acquisition and rehabilitation minus the applicant's contribution toward the cost. (c) Increased amounts. In areas determined by HUD to have high acquisition and rehabilitation costs, grants of more than$200,000, but not more than $400,000, may be available. § 583.110 Grants for new construction. (a)Use. HUD will grant funds to recipients to pay a portion of the cost of new construction, including cost-effective energy measures and the cost of land associated with that construction,for use in the provision of supportive housing. If the grant funds are used for new construction,the applicant must demonstrate that the costs associated with new construction are substantially less than the costs associated with rehabilitation or that there is a lack of available appropriate units that could be rehabilitated at a cost less than new construction. For purposes of this cost comparison, costs associated with rehabilitation or new construction may include the cost of real property acquisition. (b) Amount. The maximum grant available for new construction is the lower of: (1) $400,000; or (2) The total cost of the new construction, including the cost of land associated with that construction, minus the applicant's contribution toward the cost of same. § 583.115 Grants for leasing. (a) General. HUD will provide grants to pay(as described in § 583.130 of this part) for the actual costs of leasing a structure or structures, or portions thereof, used to provide supportive housing or supportive services for up to five years. L.. 5 (b) (1) Leasing structures. Where grants are used to pay rent for all or part of structures, the rent paid must be reasonable in relation to rents being charged in the area for comparable space. In addition, the rent paid may not exceed rents currently being charged by the same owner for comparable space. (2) Leasing individual units. Where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents being charged for comparable units, taking into account the location, size, type, quality, amenities, facilities, and management services. In addition,the rents may not exceed rents currently being charged by the same owner for comparable unassisted units, and the portion of rents paid with grant funds may not exceed HUD-determined fair market rents. Recipients may use grant funds in an amount up to one month's rent to pay the non-recipient landlord for any damages to leased units by homeless participants. § 583.120 Grants for supportive services costs. (a) General. HUD will provide grants to pay(as described in § 583.130 of this part)for the actual costs of supportive services for homeless persons for up to five years. All or part of the supportive services may be provided directly by the recipient or by arrangement with public or private service providers. (b) Supportive services costs. Costs associated with providing supportive services include salaries paid to providers of supportive services and any other costs directly associated with providing such services. For a transitional housing project, supportive services costs also include the costs of services provided to former residents of transitional housing to assist their adjustment to independent living. Such services may be provided for up to six months after they leave the transitional housing facility. § 583.125 Grants for operating costs. (a) General. HUD will provide grants to pay a portion (as described in § 583.130)of the actual operating costs of supportive housing for up to five years. (b) Operating costs. Operating costs are those associated with the day-to-day operation of the supportive housing. They also include the actual expenses that a recipient incurs for conducting on-going assessments of the supportive services needed by residents and the availability of such services; relocation assistance under§ 583.310, including payments and services; and insurance. (c) Recipient share of operating costs. Assistance for operating costs will be initially available for up to 75 percent of the total cost for two years and up to 50 percent of the total cost for the next three years. The recipient must pay the percentage of the actual operating costs not funded by HUD. At the end of each operating year, the recipient must demonstrate that it has met its share of the costs for that year. § 583.130 Commitment of grant amounts for leasing,supportive services, and operating costs. Upon execution of a grant agreement covering assistance for leasing, supportive services,or operating costs, HUD will obligate amounts for a period not to exceed five operating years.The total amount obligated will be equal to an amount necessary for the specified years of operation, less the recipient's share of operating costs. (Approved by the Office of Management and Budget under OMB control number 2506-0112) § 583.135 Administrative costs. (a) General. Up to five percent of any grant awarded under this part may be used for the purpose of paying costs of administering the assistance. 6 (b) Administrative costs. Administrative costs include the costs associated with accounting for the use of grant funds, preparing reports for submission to HUD, obtaining program audits, similar costs related to administering the grant after the award, and staff salaries associated with these administrative costs. They do not include the costs of carrying out eligible activities under § § 583.105 through 583.125. § 583.140 Technical assistance. (a)General. HUD may set aside funds annually to provide technical assistance, either directly by HUD staff or indirectly through third-party providers, for any supportive housing project.This technical assistance is for the purpose of promoting the development of supportive housing and supportive services as part of a continuum of care approach, including innovative approaches to assist homeless persons in the transition from homelessness, and promoting the provision of supportive housing to homeless persons to enable them to live as independently as possible. (b)Uses of technical assistance.HUD may use these funds to provide technical assistance to prospective applicants, applicants, recipients, or other providers of supportive housing or services for homeless persons, for supportive housing projects. The assistance may include, but is not limited to, written information such as papers, monographs, manuals, guides, and brochures; person-to-person exchanges;and training and related costs. (c) Selection of providers. From time to time, as HUD determines the need, HUD may advertise and competitively select providers to deliver technical assistance. HUD may enter into contracts, grants, or cooperative agreements,when necessary, to implement the technical assistance. § 583.145 Matching requirements. (a)General. The recipient must match the funds provided by HUD for grants for acquisition, rehabilitation, and new construction with an equal amount of funds from other sources. (b) Cash resources. The matching funds must be cash resources provided to the project by one or more of the following:the recipient,the Federal government, State and local governments, and private resources. (c)Maintenance of effort. State or local government funds used in the matching contribution are subject to the maintenance of effort requirements described at § 583.150(a). § 583.150 Limitations on use of assistance. (a) Maintenance of effort.No assistance provided under this part(or any State or local government funds used to supplement this assistance) may be used to replace State or local funds previously used, or designated for use, to assist homeless persons. (b) Primarily religious organizations-- (1)Provision of assistance. (i) HUD will provide assistance to a recipient that is a primarily religious organization if the organization agrees to provide housing and supportive services in a manner that is free from religious influences and in accordance with the following principles: (A) It will not discriminate against any employee or applicant for employment on the basis of religion and will not limit employment or give preference in employment to persons on the basis of religion; 7 (B) It will not discriminate against any person applying for housing or supportive services on the basis of religion and will not limit such housing or services or give preference to persons on the basis of religion; (C) It will provide no religious instruction or counseling, conduct no religious worship or services, engage in no religious proselytizing, and exert no other religious influence in the provision of housing and supportive services. (ii) HUD will provide assistance to a recipient that is a primarily religious organization if the assistance will not be used by the organization to construct a structure, acquire a structure or to rehabilitate a structure owned by the organization, except as described in paragraph (c)(2) of this section. (2) Rehabilitation of structures owned by a primarily religious organization. Rehabilitation grants may be used to rehabilitate a structure owned by a primarily religious organization, if the following conditions are met: (i)The structure (or portion of the structure)that is to be rehabilitated with HUD assistance has been leased to a recipient that is an existing or newly established wholly secular organization (which may be established by the primarily religious organization under the provisions of paragraph (c)(3) of this section); (ii) The HUD assistance is provided to the wholly secular organization(and not the primarily religious organization)to make the improvements; (iii) The leased structure will be used exclusively for secular purposes available to all persons regardless of religion; (iv) The lease payments paid to the primarily religious organization do not exceed the fair market rent of the structure before the rehabilitation was done; (v) The portion of the cost of any improvements that benefit any unleased portion of the structure will be allocated to,and paid for by,the primarily religious organization; (vi) The primarily religious organization agrees that, if the recipient does not retain the use of the leased premises for wholly secular purposes for the useful life of the improvements, the primarily religious organization will pay an amount equal to the residual value of the improvements to the secular organization, and the secular organization will remit the amount to HUD. (3) Assistance to a wholly secular private nonprofit organization established by a primarily religious organization. (i) A primarily religious organization may establish a wholly secular private nonprofit organization to serve as a recipient. The wholly secular organization may be eligible to receive other forms of assistance available under this part. (A) The wholly secular organization must agree to provide housing and supportive services in a manner that is free from religious influences and in accordance with the principles set forth in paragraph (c)(1)(i)of this section. (B) The wholly secular organization may enter into a contract with the primarily religious organization to operate the supportive housing or to provide supportive services for the residents. In such a case, the primarily religious organization must agree in the contract to carry out its contractual responsibilities in a manner free from religious influences and in accordance with the principles set forth in paragraph (c)(1)(i)of this section. (C) The rehabilitation grants are subject to the requirements of paragraph (c)(2)of this section. (ii) HUD will not require the primarily religious organization to establish the wholly secular organization before the selection of its application. In such a case, the primarily religious organization may apply on behalf of the wholly secular organization. The application will be reviewed on the basis of the primarily religious organization's financial responsibility and capacity, and its commitment to provide appropriate resources to the wholly secular organization after formation. The requirement with regard to site control, described in § 583.320, may be satisfied if the primarily religious organization demonstrates site control and a commitment to transfer control of the site to the wholly secular organization after its formation. If such an application is selected for funding, the obligation of funds will 8 be conditioned upon the establishment of a wholly secular organization that meets the definition of private nonprofit organization in § 583.5. (c) Participant control of site. Where an applicant does not propose to have control of a site or sites but rather proposes to assist a homeless family or individual in obtaining a lease, which may include assistance with rent payments and receiving supportive services, after which time the family or individual remains in the same housing without further assistance under this part, that applicant may not request assistance for acquisition, rehabilitation, or new construction. § 583.155 Consolidated plan. (a) Applicants that are States or units of general local government. The applicant must have a HUD-approved complete or abbreviated consolidated plan, in accordance with 24 CFR part 91, and must submit a certification that the application for funding is consistent with the HUD-approved consolidated plan. Funded applicants must certify in a grant agreement that they are following the HUD-approved consolidated plan. (b) Applicants that are not States or units of general local government. The applicant must submit a certification by the jurisdiction in which the proposed project will be located that the applicant's application for funding is consistent with the jurisdiction's HUD-approved consolidated plan. The _ certification must be made by the unit of general local government or the State, in accordance with the consistency certification provisions of the consolidated plan regulations, 24 CFR part 91, subpart F. (c) Indian tribes and the Insular Areas of Guam. the U.S. Virgin Islands. American Samoa, and the Northern Mariana Islands. These entities are not required to have a consolidated plan or to make consolidated plan certifications. An application by an Indian tribe or other applicant for a project that will be located on a reservation of an Indian tribe will not require a certification by the tribe or the State. However, where an Indian tribe is the applicant for a project that will not be located on a reservation,the , requirement for a certification under paragraph(b) of this section will apply. (d) Timing of consolidated plan certification submissions. Unless otherwise set forth in the NOFA,the required certification that the application for funding is consistent with the HUD-approved consolidated plan must be submitted by the funding application submission deadline announced in the NOFA. Subpart C—Application and Grant Award Process § 583.200 Application and grant award. When funds are made available for assistance, HUD will publish a notice of funding availability (NOFA) in the Federal Register, in accordance with the requirements of 24 CFR part 4. HUD will review and screen applications in accordance with the requirements in section 426 of the McKinney Act(42 U.S.C. 11386) and the guidelines, rating criteria, and procedures published in the NOFA. § 583.230 Environmental review. (a) Generally. Project selection is subject to completion of an environmental review of the proposed site, and the project may be modified or the site rejected as a result of that review. The environmental effects must be assessed in accordance with the provisions of the National Environmental Policy Act of 1969 (42 U.S.C. 4320) (NEPA) and the related environmental laws and authorities listed in HUD's implementing regulations at 24 CFR part 50 or 58, depending on who is responsible for environmental review. 9 (b) Environmental review by HUD. HUD will perform an environmental review, in accordance with part 50 of this title,before approval of conditionally selected applications received directly from private nonprofit organizations and governmental entities with special or limited purpose powers. Any application subject to environmental review by HUD that requires an Environmental Impact Statement (EIS) in accordance with the procedures in 24 CFR part 50, subpart E,will not be eligible for assistance under this part. (c) Environmental review by applicants. Applicants that are States, metropolitan cities, urban counties,tribes, or other governmental entities with general purpose powers must assume responsibility for environmental review, decisionmaking, and action for each application for assistance in accordance with part 58 of this title.These applicants must include in their applications an assurance that they will assume all the environmental review responsibility that would otherwise be performed by HUD as the responsible Federal official under NEPA and related authorities listed in 24 CFR part 58. The grant award is subject to completion of the environmental responsibilities set out in 24 CFR part 58 within a reasonable time period after notification of the award. Applicants may, however, enclose an • environmental certification and Request for Release of Funds with their applications. grants. Renewal b rants. (a) General. Grants made under this part, and grants made under subtitles C and D (the Supportive Housing Demonstration and SAFAH, respectively) of the Stewart B. McKinney Homeless • Assistance Act as in effect before October 28, 1992, may be renewed on a noncompetitive basis to continue ongoing leasing, operations, and supportive services for additional years beyond the initial funding period. To be considered for renewal funding for leasing,operating costs, or supportive services, recipients must submit a request for such funding in the form specified by HUD, must meet the requirements of this part, and must submit requests within the time period established by HUD. (b) Assistance available. The first renewal will be for a period of time not to exceed the difference between the end of the initial funding period and ten years from the date of initial occupancy or the date of initial service provision, as applicable. Any subsequent renewal will be for a period of time not to exceed five years.Assistance during each year of the renewal period, subject to maintenance of effort requirements under § 583.150(a) may be for: (1) Up to 50 percent of the actual operating and leasing costs in the final year of the initial funding period; (2)Up to the amount of HUD assistance for supportive services in the final year of the initial funding period; and(3) An allowance for cost increases. (c) HUD review. (1) HUD will review the request for renewal and will evaluate the recipient's performance in previous years against the plans and goals established in the initial application for assistance, as amended.HUD will approve the request for renewal unless the recipient proposes to serve a population that is not homeless, or the recipient has not shown adequate progress as evidenced by an unacceptably slow expenditure of funds, or the recipient has been unsuccessful in assisting participants in achieving and maintaining independent living. In determining the recipient's success in assisting participants to achieve and maintain independent living, consideration will be given to the level and type of problems of participants. For recipients with a poor record of success, HUD willalso consider the recipient's willingness to accept technical assistance and to make changes suggested by technical assistance providers. Other factors which will affect HUD's decision to approve a renewal request include the following: a continuing history of inadequate financial management accounting practices, indications of mismanagement on the part of the recipient, a drastic reduction in the population served by the recipient, program changes made by the recipient without prior HUD approval, and loss of project site. 10 (2) HUD reserves the right to reject a request from any organization with an outstanding obligation to HUD that is in arrears or for which a payment schedule has not been agreed to, or whose response to an audit finding is overdue or unsatisfactory. (3) HUD will notify the recipient in writing that the request has been approved or disapproved. (Approved by the Office of Management and Budget under control number 2506-0112) Subpart D--Program.Requirements § 583.300 General operation. (a) State and local requirements. Each recipient of assistance under this part must provide housing or services that are in compliance with all applicable State and local housing codes, licensing requirements, and any other requirements in the jurisdiction in which the project is located regarding the condition of the structure and the operation of the housing or services. • (b) Habitability standards. Except for such variations as are proposed by the recipient and approved by HUD, supportive housing must meet the following requirements: (1) Structure and materials. The structures must be structurally sound so as not to pose any threat to the health and safety of the occupants and so as to protect the residents from the elements. (2) Access. The housing must be accessible and capable of being utilized without unauthorized use of other private properties. Structures must provide alternate means of egress in case of fire. (3) Space and security. Each resident must be afforded adequate space and security for themselves and their belongings. Each resident must be provided an acceptable place to sleep. (4) Interior air quality. Every room or space must be provided with natural or mechanical ventilation. Structures must be free of pollutants in the air at levels that threaten the health of residents.., (5) Water supply. The water supply must be free from contamination. (6) Sanitary facilities. Residents must have access to sufficient sanitary facilities that are in proper operating condition,may be used in privacy, and are adequate for personal cleanliness and the disposal of human waste. (7) Thermal environment. The housing must have adequate heating and/or cooling facilities in proper operating condition. (8) Illumination and electricity. The housing must have adequate natural or artificial illumination to permit normal indoor activities and to support the health and safety of residents. Sufficient electrical sources must be provided to permit use of essential electrical appliances while assuring safety from fire. (9) Food preparation and refuse disposal. All food preparation areas must contain suitable space and equipment to store, prepare, and serve food in a sanitary manner. (10) Sanitary condition. The housing and any equipment must be maintained in sanitary condition. (11) Fire safety. (i) Each unit must include at least one battery-operated or hard-wired smoke detector, in proper working condition, on each occupied level of the unit. Smoke detectors must be located, to the extent practicable, in a hallway adjacent to a bedroom. If the unit is occupied by hearing- impaired persons. smoke detectors must have an alarm system designed for hearing-impaired persons in each bedroom occupied by a hearing-impaired person. (ii) The public areas of all housing must be equipped with a sufficient number, but not less than one for each area, of battery-operated or hard-wired smoke detectors. Public areas include, but are not limited to, laundry rooms, community rooms, day care centers, hallways, stairwells, and other common areas. (c) Meals. Each recipient of assistance under this part who provides supportive housing for homeless persons with disabilities must provide meals or meal preparation facilities for residents. 11 (d) Ongoing assessment of supportive services. Each recipient of assistance under this part must conduct an ongoing assessment of the supportive services required by the residents of the project and the availability of such services, and make adjustments as appropriate. (e) Residential supervision. Each recipient of assistance under this part must provide residential supervision as necessary to facilitate the adequate provision of supportive services to the residents of the housing throughout the term of the commitment to operate supportive housing. Residential supervision may include the employment of a full- or part-time residential supervisor with sufficient knowledge to provide or to supervise the provision of supportive services to the residents. (f) Participation of homeless persons. (1)Each recipient must provide for the participation of homeless persons as required in section 426(g)of the McKinney Act(42 U.S.C. 11386(g)). This requirement is waived if an applicant is unable to meet it and presents a plan for HUD approval to otherwise consult with homeless or formerly homeless persons in considering and making policies and decisions. See also § 583.330(e). (2) Each recipient of assistance under this part must,to the maximum extent practicable, involve homeless.individuals and families,through employment, volunteer services, or otherwise, in constructing, rehabilitating, maintaining, and operating the project and in providing supportive services for the project. (g) Records and reports. Each recipient of assistance under this part must keep any records and make any reports(including those pertaining to race, ethnicity, gender, and disability status data)that HUD may require within the timeframe required. (h) Confidentiality. Each recipient that provides family violence prevention or treatment services must develop and implement procedures to ensure: (1) The confidentiality of records pertaining to any individual services; and (2) That the address or location of any project assisted will not be made public, except with written authorization of the person or persons responsible for the operation of the project. • (i) Termination of housing assistance. The recipient may terminate assistance to a participant who violates program requirements. Recipients should terminate assistance only in the most severe cases. Recipients may resume assistance to a participant whose assistance was previously terminated. In terminating assistance to a participant, the recipient must provide a formal process that recognizes the rights of individuals receiving assistance to due process of law. This process, at a minimum, must consist of: (1) Written notice to the participant containing a clear statement of the reasons for termination; (2) A review of the decision, in which the participant is given the opportunity to present written or oral objections before a person other than the person (or a subordinate of that person)who made or approved the termination decision; and (3) Prompt written notice of the final decision to the participant. (j) Limitation of stay in transitional housing. A homeless individual or family may remain in transitional housing for a period longer than 24 months, if permanent housing for the individual or family has not been located or if the individual or family requires additional time to prepare for independent living. However, HUD may discontinue assistance for a transitional housing project if more than half of the homeless individuals or families remain in that project longer than 24 months. 12 (k) Outpatient health services. Outpatient health services provided by the recipient must be approved as appropriate by HUD and the Department of Health and Human Services (HHS).Upon receipt of an application that proposes the provision of outpatient health services, HUD will consult with HHS with respect to the appropriateness of the proposed services. (1) Annual assurances. Recipients who receive assistance only for leasing, operating costs or supportive services costs must provide an annual assurance for each year such assistance is received that the project will be operated for the purpose specified in the application. (Approved by the Office of Management and Budget under control number 2506-0112) § 583.305 Term of commitment; repayment of grants; prevention of undue benefits. (a) Term of commitment and conversion. Recipients must agree to operate the housing or provide supportive services in accordance with this part and with sections 423 (b)(1) and(b)(3)of the McKinney Act(42 U.S.C. 11383(b)(1), 11383(b)(3)). (b) Repayment of grant and prevention of undue benefits. In accordance with section 423(c) of the McKinney Act(42 U.S.C. 11383(c)), HUD will require recipients to repay the grant unless HUD has authorized,conversion of the project under section 423(b)(3)of the McKinney Act(42 U.S.C. 11383(b)(3)). § 583.310 Displacement, relocation,and acquisition. (a) Minimizing displacement. Consistent with the other goals and objectives of this part, recipients must assure that they have taken all reasonable steps to minimize the displacement of persons (families, individuals, businesses, nonprofit organizations, and farms) as a result of supportive housing assisted under this part. (b) Relocation assistance for displaced persons. A displaced person (defined in paragraph(f) of this section)must be provided relocation assistance at the levels described in, and in accordance with,the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and implementing regulations at 49 CFR part 24. (c) Real property acquisition requirements. The acquisition of real property for supportive housing is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (d) Responsibility of recipient. (1) The recipient must certify(i.e., provide assurance of compliance)that it will comply with the URA,the regulations at 49 CFR part 24, and the requirements of this section, and must ensure such compliance notwithstanding any third party's contractual obligation to the recipient to comply with these provisions. (2)The cost of required relocation assistance is an eligible project cost in the same manner and to the same extent as other project costs. Such costs also may be paid for with local public funds or funds available from other sources. (3) The recipient must maintain records in sufficient detail to demonstrate compliance with provisions of this section. (e) Appeals. A person who disagrees with the recipient's determination concerning whether the person qualifies as a "displaced person," or the amount of relocation assistance for which the person is eligible, may file a written appeal of that determination with the recipient. A low-income person who is dissatisfied with the recipient's determination on his or her appeal may submit a written request for review of that determination to the HUD field office. 13 (f) Definition of displaced person. (I) For purposes of this section, the term "displaced person" means a person (family, individual, business, nonprofit organization, or farm) that moves from real property, or moves personal property from real property permanently as a direct result of acquisition, rehabilitation, or demolition for supportive housing projects assisted under this part. The term "displaced person" includes, but may not be limited to: (i) A person that moves permanently from the real property after the property owner(or person in control of the site) issues a vacate notice, or refuses to renew an expiring lease in order to evade the responsibility to provide relocation assistance, if the move occurs on or after the date the recipient submits to HUD the application or application amendment designating the project site. (ii) Any person, including a person who moves before the date described in paragraph (f)(l)(i) of this section, if the recipient or HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the assisted project. (iii) A tenant-occupant of a dwelling unit who moves permanently from the building/complex on or after the date of the "initiation of negotiations" (see paragraph (g)of this section) if the move occurs before the tenant has been provided written notice offering him or her the opportunity to lease and occupy a suitable, decent, safe and sanitary dwelling in the same building/complex, under reasonable terms and conditions, upon completion of the project. Such reasonable terms and conditions must include a monthly rent and estimated average monthly utility costs that do not exceed the greater of: (A) The tenant's monthly rent before the initiation of negotiations and estimated average utility costs, or (B) 30 percent of gross household income. If the initial rent is at or near the maximum,there must be a reasonable basis for concluding at the time the project is initiated that future rent increases will be modest. (iv) A tenant of a dwelling who is required to relocate temporarily, but does not return to the building/complex, if either: (A) A tenant is not offered payment for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation, or (B) Other conditions of the temporary relocation are not reasonable. (v) A tenant of a dwelling who moves from the building/complex permanently after he or she has been required.to move to another unit in the same building/complex, if either: (A) The tenant is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move; or (B) Other conditions of the move are not reasonable. (2)Notwithstanding the provisions of paragraph (f)(1) of this section,a person does not qualify as a "displaced person" (and is not eligible for relocation assistance under the URA or this section), if: (i) The person has been evicted for serious or repeated violation of the terms and conditions of the lease or occupancy agreement, violation of applicable Federal, State, or local or tribal law, or other good cause, and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance; (ii) The person moved into the property after the submission of the application and, before signing a lease and commencing occupancy, was provided written notice of the project, its possible impact on the person (e.g.,the person may be displaced, temporarily relocated, or suffer a rent increase) and the fact that the person would not qualify as a "displaced person" (or for any assistance provided under this section), if the project is approved; (iii) The person is ineligible under 49 CFR 24.2(g)(2); or (iv) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project. 14 (3)The recipient may request, at any time, HUD's determination of whether a displacement is or would be covered under this section. (g) Definition of initiation of negotiations. For purposes of determining the formula for computing the replacement housing assistance to be provided to a residential tenant displaced as a direct result of privately undertaken rehabilitation, demolition, or acquisition of the real property, the term 'initiation of negotiations"means the execution of the agreement between the recipient and HUD. (h) Definition of project. For purposes of this section, the term "project" means an undertaking paid for in whole or in part with assistance under this part.Two or more activities that are integrally related, each essential to the others, are considered a single project,whether or not all component activities receive assistance under this part. § 583.315 Resident rent. (a) Calculation of resident rent. Each resident of supportive housing may be required to pay as rent an amount determined by the recipient which may not exceed the highest of: (1) 30 percent of the family's monthly adjusted income(adjustment factors include the number of people in the family, age of family members, medical expenses, and child care expenses); (2) 10 percent of the family's monthly income; or (3) If the family is receiving payments for welfare assistance from a public agency and a part of the payments, adjusted in accordance with the family's actual housing costs, is specifically designated by the agency to meet the family's housing costs,the portion of the payments that is designated. (b)Use of rent. Resident rent may be used in the operation of the project or may be reserved, in whole or in part,to assist residents of transitional housing in moving to permanent housing.. (c) Fees. In addition to resident rent, recipients may charge residents reasonable fees for services not paid with grant funds. c"' § 583.320 Site control. (a) Site control. (1) Where grant funds will be used for acquisition, rehabilitation, or new construction to provide supportive housing or supportive services, or where grant funds will be used for operating costs of supportive housing, or where grant funds will be used to provide supportive services except where an applicant will provide services at sites not operated by the applicant, an applicant must demonstrate site control before HUD will execute a grant agreement(e.g.,through a deed, lease, executed contract of sale). If such site control is not demonstrated within one year after initial notification of the award of assistance under this part,the grant will be deobligated as provided in paragraph (c) of this section. (2) Where grant funds will be used to lease all or part of a structure to provide supportive housing or supportive services, or where grant funds will be used to lease individual housing units for homeless persons who will eventually control the units, site control need not be demonstrated. (b) Site change. (1)A recipient may obtain ownership or control of a suitable site different from the one specified in its application. Retention of an assistance award is subject to the new site's meeting all requirements under this part for suitable sites. (2) If the acquisition, rehabilitation, acquisition and rehabilitation, or new construction costs for the substitute site are greater than the amount of the grant awarded for the site specified in the application, the recipient must provide for all additional costs. If the recipient is unable to demonstrate to HUD that it is able to provide for the difference in costs, HUD may deobligate the award of assistance. 15 (c) Failure to obtain site control within one year. HUD will recapture or anyaward for P deobligate assistance under this part if the recipient is not in control of a suitable site before the expiration of one year after initial notification of an award. § 583.325 Nondiscrimination and equal opportunity requirements. (a) General.Notwithstanding the permissibility of proposals that serve designated populations of disabled homeless persons, recipients serving a designated population of disabled homeless persons are required, within the designated population, to comply with these requirements for nondiscrimination on the basis of race, color, religion,sex, national origin, age, familial status, and disability. (b) Nondiscrimination and equal opportunity requirements. The nondiscrimination and equal opportunity requirements set forth at part 5 of this title apply to this program. The Indian Civil Rights Act(25 U.S.C. 1301 et seq.) applies to tribes when they exercise their powers of self-government, and to Indian housing authorities (IHAs)when established by the exercise of such powers. When an IHA is established under State law,the applicability of the Indian Civil Rights Act will be determined on a case- by-case basis. Projects subject to the Indian Civil Rights Act must be developed and operated in compliance with its provisions and all implementing HUD requirements, instead of title VI and the Fair Housing Act and their implementing regulations. (c) Procedures. (1) If the procedures that the recipient intends to use to make known the availability of the supportive housing are unlikely to reach persons of any particular race, color, religion, sex, age, national origin, familial status, or handicap who may qualify for admission to the housing,the recipient must establish additional procedures that will ensure that such persons can obtain information concerning availability of the housing. (2) The recipient must adopt procedures to make available information on the existence and locations of facilities and services that are accessible to persons with a handicap and maintain evidence of implementation of the procedures. (d) Accessibility requirements. The recipient must comply with the new construction accessibility requirements of the Fair Housing Act and section 504 of the Rehabilitation Act of 1973, and the reasonable accommodation and rehabilitation accessibility requirements of section 504 as follows: (1) All new construction must meet the accessibility requirements of 24 CFR 8.22 and, as applicable, 24 CFR 100.205. (2) Projects in which costs of rehabilitation are 75 percent or more of the replacement cost of the building must meet the requirements of 24 CFR 8.23(a). Other rehabilitation must meet the requirements of 24 CFR 8.23(b). § 583.330 Applicability of other Federal requirements. In addition to the requirements set forth in 24 CFR part 5, use of assistance provided under this part must comply with the following Federal requirements: (a) Flood insurance. (1)The Flood Disaster Protection Act of 1973 (42 U.S.C. 4001-4128) prohibits the approval of applications for assistance for acquisition or construction (including rehabilitation) for supportive housing located in an area identified by the Federal Emergency Management Agency (FEMA) as having special flood hazards, unless: (i) The community in which the area is situated is participating in the National Flood Insurance Program (see 44 CFR parts 59 through 79), or less than a year has passed since FEMA notification regarding such hazards; and 16 (ii) Flood insurance is obtained as a condition of approval of the application. (2)Applicants with supportive housing located in an area identified by FEMA as having special flood hazards and receiving assistance for acquisition or construction (including rehabilitation)are responsible for assuring that flood insurance under the National Flood Insurance Program is obtained and maintained. (b)The Coastal Barrier Resources Act of 1982 (16 U.S.C. 3501 et seq.) may apply to proposals under this part, depending on the assistance requested. (c) Applicability of OMB Circulars. The policies, guidelines, and requirements of OMB Circular No. A-87 (Cost Principles Applicable to Grants, Contracts and Other Agreements with State and Local Governments) and 24 CFR part 85 apply to the award, acceptance, and use of assistance under the program by governmental entities, and OMB Circular Nos.A-110 (Grants and Cooperative Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations) and A-122(Cost Principles Applicable to Grants, Contracts and Other Agreements with Nonprofit Institutions)apply to the acceptance and use of assistance by private nonprofit organizations, except where inconsistent with the provisions of the McKinney Act, other Federal statutes, or this part. (Copies of OMB Circulars may be obtained from E.O.P. Publications, room 2200,New Executive Office Building, Washington,DC 20503,telephone(202) 395-7332. (This is not a toll-free number.)There is a limit of two free copies. (d) Lead-based paint. The Lead-Based Paint Poisoning Prevention Act(42 U.S.C. 4821-4846), __ the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 35, subparts A,B, J, K, and R of this title apply to activities under this program. (e) Conflicts of interest. (1)In addition to the conflict of interest requirements in 24 CFR part 85, no person who is an employee, agent, consultant,officer, or elected or appointed official of the recipient and who exercises or has exercised any functions or responsibilities with respect to assisted activities, or who is in a position to participate in a decisionmaking process or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subcontract, or agreement with respect thereto, or the proceeds thereunder, either for himself or herself or for those with whom he or she has family or business ties, during his or her tenure or for one year thereafter. Participation by homeless individuals who also are participants under the program in policy or decisionmaking under § 583.300(f)does not constitute a conflict of interest. (2) Upon the written request of the recipient, HUD may grant an exception to the provisions of paragraph (e)(1)of this section on a case-by-case basis when it determines that the exception will serve to further the purposes of the program and the effective and efficient administration of the recipient's project. An exception may be considered only after the recipient has provided the following: (i) For States and other governmental entities, a disclosure of the nature of the conflict, accompanied by an assurance that there has been public disclosure of the conflict and a description of how the public disclosure was made; and (ii) For all recipients, an opinion of the recipient's attorney that the interest for which the exception is sought would not violate State or local law. (3) In determining whether to grant a requested exception after the recipient has satisfactorily met the requirement of paragraph (e)(2) of this section, 1-IUD will consider the cumulative effect of the following factors, where applicable: (i) Whether the exception would provide a significant cost benefit or an essential degree of expertise to the project which would otherwise not be available; 17 (ii) Whether the person affected is a member of a group or class of eligible persons and the exception will permit such person to receive generally the same interests or benefits as are being made available or provided to the group or class; (iii) Whether the affected person has withdrawn from his or her functions or responsibilities, or the decisionmaking process with respect to the specific assisted activity in question; (iv) Whether the interest or benefit was present before the affected person was in a position as described in paragraph(e)(1) of this section; (v) Whether undue hardship will result either to the recipient or the person affected when weighed against the public interest served by avoiding the prohibited conflict; and (vi) Any other relevant considerations. (f) Audit. The financial management systems used by recipients under this program must provide for audits in accordance with 24 CFR part 44 or part 45, as applicable. HUD may perform or require additional audits as it finds necessary or appropriate. (g) Davis-Bacon Act. The provisions of the Davis-Bacon Act do not apply to this program. Subpart E—Administration § 583.400 Grant agreement. (a) General.The duty to provide supportive housing or supportive services in accordance with the requirements of this part will be incorporated in a grant agreement executed by HUD and the recipient. (b) Enforcement. HUD will enforce the obligations in the grant agreement through such action as may be appropriate, including repayment of funds that have already been disbursed to the recipient. § 583.405 Program changes. (a) HUD approval. (1) A recipient may not make any significant changes to an approved program without prior HUD approval. Significant changes include, but are not limited to, a change in the recipient, a change in the project site, additions or deletions in the types of activities listed in § 583.100 of this part approved for the program or a shift of more than 10 percent of funds from one approved type of activity to another, and a change in the category of participants to be served. Depending on the nature of the change, HUD may require a new certification of consistency with the consolidated plan(see § 583.155). (2) Approval for changes is contingent upon the application ranking remaining high enough after the approved change to have been competitively selected for funding in the year the application was selected. (b) Documentation of other changes. Any changes to an approved program that do not require prior HUD approval must be fully documented in the recipient's records. § 583.410 Obligation and deobligation of funds. (a) Obligation of funds. When HUD and the applicant execute a grant agreement, funds are obligated to cover the amount of the approved assistance under subpart B of this part. The recipient will be expected to carry out the supportive housing or supportive services activities as proposed in the application. • 18 (b) Increases. After the initial obligation of funds,HUD will not make revisions to increase the amount obligated. (c)Deoblisation. (1)HUD may deobligate all or parts of grants for acquisition,rehabilitation, acquisition and rehabilitation, or new construction: (i) If the actual total cost of acquisition, rehabilitation, acquisition and rehabilitation, or new construction is less than the total cost anticipated in the application; or (ii) If proposed activities for which funding was approved are not begun within three months or residents do not begin to occupy the facility within nine months after grant execution. 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I1 —r••1 r n O �• -r C 0 • •-1 U I :J • U c9 C) • N = ,I (c5Y- 0,0 RECO,Q� a...1ml Friday, fi� May 12, 2000 y li ii '. ,%y 17 � ;::y, O rumml •.10 ;44) • , Part V C--q,... i 7 Department of Housing and Urban Development 24 CFR Part 583 Supportive Housing Program—Increasing Operating Cost Percentage; Interim Rule 30822 Federal Resister/Vol. 65, No. 93/Friday, May 12, 2000/Rules and Regulations DEPARTMENT OF HOUSING AND implement the program are found at 24 prior notice and public comment may URBAN DEVELOPMENT CFR part 583. be omitted "if the Department Among the types of housing funded determines in a particular case . . , that 24 CFR Part 583 under the Supportive Housing Program notice and public procedure are (Docket No.FR-4576 101] (SHP) are transitional housing, impracticable,unnecessary or contrary permanent housing for homeless to the public interest."(24 CFR 10.1). RIN 2506-AC05 persons with disabilities, innovative This interim rule implements a change Supportive Housing Program— housing projects (or part of project) for, in the provisions for a match by the Increasing Operating Cost Percentage or alternative methods of, meeting the grantee,consistent with the statute and immediate and long-term needs of Congressional intent,that will have an AGENCY: Office of the Assistant homeless individuals and families in impact on the applications for the next Secretary for Community Planning and the transition to permanent housing. round of funding under the Supportive Development.HUD. Also funded under the program are Housing Program.That round of ACTION: Interim rule. supportive services. funding will take place shortly, in The authorizing statute permits the accordance with the Notice of Funding SUMMARY: This document amends the • grant recipient's match for operating Availability for Fiscal Year 2000 funds. Supportive Housing Program costs for housing to be no more than 25 As a result.to make this change in regulations by changing the number of percent in any year. However,when the policy effective for Fiscal Year 2000 years for which the grant can cover 75 program was developed,the rule funding applications, it is necessary to percent of operating costs from the first (§583.125(c)) required a 25 percent make the change quickly.There is not two years to all years of the grant term. match of HUD funds with local funds time to solicit public comments on the This amendment will provide the full for the first two years,and a 50 percent change before making it effective if it is statutory flexibility allowed for this match thereafter.The authorizing to affect this fiscal year. Accordingly, activity. Providing greater assurance of statute contains no comparable match HUD determines that it is unnecessary a funding source for operating housing' requirement for use of the program to to solicit public comments before under the program will promote more provide services. As a result,the making the policy effective, and it is use of the program for housing. program has favored the use of services, issuing this interim rule for effect DATES: Effective-date:June 12. 2000. to a large degree. without prior notice and comment. Comments Due Date:July 11. 2000. The HUD Appropriations Acts for Nevertheless, the Department solicits ADDRESSES: Submit written comments Fiscal Years 1999 (112 Stat. 2479) and comments from the public on the rule regarding this interim rule to the 2000 (113 Stat. 1063) included two and will consider comments received . Regulations Division. Office of General provisions to encourage the use of before issuing a final rule. • Counsel. Room 10276. Department of homeless assistance program funds for Housing and Urban Development.451 supportive housing as opposed to Impact on Small Entities • 7th Street. SW. Washington.DC 20410- services for homeless persons.These The Secretary, in accordance with the 050ri Comments should refer to the provisions were the requirements that at Regulatory Flexibility Act(5 U.S.C. interim rule by title and docket number, least 30 percent of the funds be used for 605(b)),has reviewed and approved this as shown above. Facsimile (FAX) permanent housing and that funding for rule, and in so doing certifies that this comments will not he accepted. services be required to have at least a 25 rule will not have a significant FOR FURTHER INFORMATION CONTACT:John percent match. economic impact on a substantial Garrity. Office of Special Needs This Rule number of small entities.This rule will .Assistance Programs. Room 7262, provide greater flexibility to local Department of IIousing and Urban To encourage production of housing governments in the way they administer Development.451 7th Street.SW, with SHP funds, in accordance with the their Supportive Housing Programs. It Washington. DC 204'10; telephone (202) Congressional intent expressed in the will have no measurable economic 708-4300 (this is not a toll-free Appropriations Acu, this amendment is impact on small businesses. being made to give applicants the full number). Persons with hearing or speech impairments may access the McKinney Act flexibility allowed for Environmental Impact above telephone number via TTY by this activity.This interim rule revises A Finding of No Significant Impact calling the Federal Information Relay §583.125 so that SHP funds may be with respect to the environment has Servi�•�- at 1-8titi-877-8339 used to pay for up to 75 percent of the been ma :e in accordance with HUD SUPPLEMENTARY INFORMATION: operating costs in all years of the grant regular' .ns at 24 CFR part 50, which term, making the recipient provide 25 implement section 102(2)(C) of the Background percent of the operating costs of National Environmental Policy Act of The Department's Supportive Housing supportive housing for homeless 1969 (42 U.S.C. 4223).That Finding is Program provides assistance for housing persons for each year of the grant term. available for public inspection between and supportive services for homeless Operating costs include actual expenses the hours of 7:30 a.m. and 5:30 p.m. persons. as authorized byTitle IV, for supportive housing. such as maintenance. repair. security, utilities, weekdays in the Regulations Division. subtitle C of the Stewart B. McKinney POffice of General Counsel,Room 10276, Homeless Assistance Act of 1987, as furnishings, and equipment. U.S. Department of Housing and Urban amended (the McKinney Act) (42 U.S.C. Findings and Certifications Development, 451 Seventh Street,SW, 11381-11389). Grants are available for Washington, DC 20410. acquisition. rehabilitation, new Justification for Interim Rule 1 c:onstr.iction. and leasing of supportive HUD generally publishes a rule for Executive Order 13132, Federalism housing. operating costs p o in connection public comment before issuinga rule for This interimv,�,itli rule does not have supportive housing, and effect, in accordance with its own fe deralism implications. II does not supportive services provided to regulations on rulemaking in 24 CFR impose substantial direct costs on States homeless persons. The regulations that part 10. Part 10,however, provides that and local governments or preempt State Federal Register/Vol. 65, No. 93/Friday, May 12, 2000/Rules and Regulations , �i"" 0 30823 law within the meaning of Executive 24 of the Code of Federal Regulations as costs will be available for up to 75� Order 13132. follows: percent of the total cost in each Catalog of Federal Domestic Assistance the grant term.The recipient musttpf PART 583—SUPPORTIVE HOUSING pay The Catalog of Federal Domestic PROGRAM the percentage of the actual operating costs not funded by HUD.At the end of Assistance number for the program 1. The authority citation for part 583 each operating year,the recipient must affected by this interim rule is 14.235. continues to read as follows: demonstrate that it has met its match List of Subjects in 24 CFR Part 583 requirement of the costs for that year. Authority:42 U.S.0 3535(d)and 11389. Homeless,Rent subsidies,Reporting 2. Revise paragraph(c)of§583.125 to Dated:April 21.2000. and recordkeeping requirements, read as follows: I Supportive housing programs—housing Carden Cooper, and community development. §583.125 Grants for operating costs. Assistant Secretary for Community Planning Supportive services. and Development. Accordingly, for reasons stated in the (c) Recipient match requirement for (FR Doc.00-11894 Filed 5-11-00;8:45 am) preamble, HUD amend. part 583 of title operating costs.Assistance for operating BILLING CODE 4210-29-P Exhibit 2 Tier 1 Supportive Housing Program (SHP) P"``bri ` 1° EXHIBIT "C" PRIMARY HEALTH CARE FOR THE HOMELESS Community Health Care Consortium: Charles Drew, Indian Chicano, Council Bluffs Community Health Centers 2000 501(c) (3) Applicant: Charles Drew Health Center, Inc. 2915 Grant Street Omaha, NE 68111 Contact person: Robert R. Sams, CEO ,g2- SECTION A: PROJECT NARRATIVE 1. The Project Summary This project is a collaborative effort among Charles Drew Health Center(CDHC), the Council Bluffs Community Health Center(CBCHC), and the Indian Chicano Health Center (ICHC), Hope Medical Outreach, ten Emergency Shelters, and sixteen Transitional Housing Living Facilities for the provision of primary health care to homeless persons in the Omaha Area Continuum of Care for the Homeless (OACCH). Services are provided at each of the three community health centers, onsite at one of the emergency shelters, the Siena Francis House, and at several of the transitional housing living facilities. The goal of this project is to provide medical and supportive services to homeless individuals residing in the sixteen transitional housing facilities and ten emergency shelters, many of whom do not qualify for the reduced-cost health care services currently provided at the three community health centers. Project participants will receive primary health care service including treatment for minor illnesses and injuries, management of chronic diseases, health education and counseling, and treatment for mental illness. Examples of such services are physical examinations, immunizations, children's health care, family planning, pap smears, treatment for sexually- transmitted diseases (STDs), prescription drugs, eye examinations,,and corrective treatment, dental examinations, dental care, and radiological diagnostic services. As the homeless populations continue to increase (especially families), CDHC is requesting renewal of its Supportive Housing Program Funds. The $895,257 that we are requesting will he used to supplement the $1,119,072 needed to provide primary health care to approximately 18,900 homeless individuals over a three- year period. The goal of this project is to provide medical and supportive services to homeless individuals residing in the sixteen transitional housing facilities and ten emergency shelters, many of whom do not qualify for the reduced-cost health care services currently provided at the three community health centers. Project participants will receive primary health care service including treatment of minor illnesses and injuries, management of chronic diseases, health education and counseling, and treatment for mental illness. Examples of such services are physical examinations, immunizations, children's health care, family planning, pap smears, treatment for sexually-transmitted diseases (STDs), prescription drugs, eye examinations and corrective treatment, dental examinations, dental care, and radiological diagnostic services. 2. Homeless Population To Be Served a. The homeless population to be served includes single men, single women, veterans, single parents with children, intact families individuals with mental illness, individuals who are physically disabled, individuals living in shelters for abused women, individuals with HIV/AIDs, individuals. with substance abuse problems, and individuals with duo-diagnosis. I ' I i' 3 Project Number NE26B001010 Technical Submission Exhibit 1: Project Summary EXHIBIT "D" A. Selectee and Project Sponsor Information - Fill in the information requested below. When the selectee is the same organization as the project sponsor,complete only the selectee information. Selectee Name City of Omaha Contact Person Mike Saklar Telephone Number (402)444-5200 FAX Number (402)444-6140 Selectee Address 1819 Farnam Street.,Suite 1100 (street,city, state,zip) Omaha,Nebraska 68183-0110 Project Sponsor Name Charles Drew Health Center, Inc. Contact Person Marilyn McGary Telephone Number (402)453-1433 FAX Number (402)453-1970 Project Sponsor Address 2915 Grant Street (street,city, state,zip) Omaha,Nebraska 68111 B. Project Budget and Milestones-This section must be completed by all selectees, including renewals. • 1. Chart 1 - Summary Project Budget To complete Chart 1,Summary Project Budget,enter the amount of SHP funds requested by line-item in the first column. For leasing,supportive services,and operations,the amount entered should be for the SHP grant term selected(1,2,or 3 years). In the second column,enter the amount of other cash that will be contributed to the project. This amount plus the SHP request must equal the total budget amount for the project. Note that match requirements for supportive services and operating costs apply to both new and renewal projects. Column 2 is new to the application. The amounts you enter are for all structures in your project. Each line-item amount in this chart should match the amounts shown in Exhibits 2 through 6,as appropriate. Requested grant term(1,2,or 3 years): 2 Chart 1 -Summa Pro'ect Bud et .4;..; ,:: SHP Applicant Total Project Request Cash Budget 1. Acquisition 2. Rehabilitation 3. New Construction 4. Subtotal(lines 1 thru 3)* 5. Real Property Leasing 6. Supportive Services** $596,838 $149,248 $746,086 7. Operations*** 8. SHP Request(subtotal lines 4 thru 7) $596,838 9. Administration (up to 5%of line 8) 28,940 10. Total SHP Request(total lines 8 and 9) $625,778 * The SHP request for these activities cannot be more than 50%of the total acquisition,rehabilitation,and new construction budget. ** By law,SHP funds can be no more than 80%of the total supportive services budget. ***By law,SHP can pay no more than 75%of the total operating budget. Please note change in operating match OMB Approval No.2506-0112(exp. 6/30/2003) HUD-40076-2 (02/2001) Page no:2 Project Number NE26B001010 Technical Submission Exhibit 4: Supportive Services (con't) A. SHP Request Please complete the chart below for your project's supportive services budget. If you need additional space for more services,you may reproduce this chart and label it Exhibit 4A. In the first column,fill in the supportive service expenses. For staff positions,.please include the job title and quantity(or FTE-full time equivalent);for supportive services, such as transportation services,please include the type(e.g.,bus tokens)and quantity. In the Year 1 column, enter the amount needed to pay for the service in the first year. If the grant is multi-year,enter the funds needed for Year 2,and if applicable,Year 3. In the last column,total the amount of funds needed for the full grant term. Please ensure that the total supportive services request on Line 5,column(d)below,matches the amount you entered in your project's Summary Budget in Exhibit 1. Please note that the selectee's match for the first year of the grant term [i.e.,Line 6, column(a)]must be documented as described in the introduction to this Exhibit on the previous page; for projects with grant terms exceeding one year,the certification at Section E of this Exhibit must be completed for Year 2 and Year 3 of the grant term. Example: Year 1 Year 2 Year 3 Total Supportive Service Expense (a) (b) (c) (d) .Service Activity: Mental Health Counseling $10,000 $10,300 $10,609 $30,909 • Quantity: 0.25 FTE Service Activity: Transportation(Bus Tokens) 12,000 12,360 12,731 37,091 Quantity: 500/mo. @$2.00 ea. Total Supportive Services Budget 22,000 22,660 23,340 68,000 SHP Request $17,600 $18,128 $18,672 $54,400 • Chart 4A: Year 1 Year 2 Year 3 Total Supportive Service Expense • (a) (b) (c) (d) • 1. Service Activity: Patient Care Vaits • CDHC 3,042®74.50=$226,629 Quantity: CBCHC 352®74.50=$26,224 $172,393 $172,393 $344,786 ICHC 1,234 Q 74.50=$91,933 2. Service Activity: Medication Filling CDHC 3,360 Q 35.00=$117,565 Quantity: CBCHC 5000a 35.00=$17,500 $71,907.50 $71,907.50 $143,815 ICHC 250Q35.00=$ 8,750 3. Service Activity: Dental visits CDHC 858 @ 74.50=$63,921 Quantity: CBCHC 70@74.50=$5,215 $41,273 $41,273 $ 82,546 ICHC 90 @ 74.50=$13,410 4. Service Activity: Eye Exams CDHC 436®74.50=$32,482 Quantity: CBCHC 124Q74.50=$9,238 $23,169.50 $23,169.50 $ 46,339 ICHC 62®74.50=$4,619 5. Service Activity: Lab Services CDHC 1,338 lab procedures to Quantity: support outpatient card$25.00 $ 16,725 $ 16,725 $ 33,450 per procedure 6. Service Activity: Radiology Services Quantity: CDHC to provide 220 exams at$60.00 each $6,600 $6,600 $ 13,200 7. Service Activity: Mental Health Services Quantity: CDHC to provide 550 visits at$74.50 each _ \� $40,975 $40,975 $81,950 4. Total Supportive Services Budget $373,043 $373,043 $746,086 5. SHP REQUEST* $298,419 $298,419 $596,838 6. Selectee's Match(Line 5 minus Line 4) $74,624 $74,624 $149,248 *The SHP request cannot be more than 80%of the total supportive services budget in Line 4. OMB Approval No.2506-0112(exp. 6/30/2003) HUD-40076-2 (02/2001) Page no:12 OMB Circular No. A-133 Page 1 of 33 EXHIBIT"E" Circular No. A-133 - Revised June 24, 1997 Audits of States, Local Governments, and Non-Profit Organizations (Accompanying Federal Register Materials--Audits of States,Local Governments, and Non- Profit Organizations June 30, 1997) TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Audits of States, Local Governments, and Non-Profit Organizations 1. Purpose. This Circular is issued pursuant to the Single Audit Act of 1984,P.L. 98-502, and the Single Audit Act Amendments of 1996,P.L. 104-156. It sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of States, local governments, and non-profit organizations expending Federal awards. 2. Authority. Circular A-133 is issued under the authority of sections 503, 1111, and 7501 et seq. of ' title 31,United States Code, and Executive Orders 8248 and 11541. 3. Rescission and Supersession. This Circular rescinds Circular A-128, "Audits of State and Local Governments," issued April 12, 1985, and supersedes the prior Circular A-133, "Audits of Institutions of Higher Education and Other Non-Profit Institutions," issued April 22, 1996. For effective dates, see paragraph 10. 4. Policy. Except as provided herein, the standards set forth in this Circular shall be applied by all Federal agencies. If any statute specifically prescribes policies or specific requirements that differ from the standards provided herein,the provisions of the subsequent statute shall govern. Federal agencies shall apply the provisions of the sections of this Circular to non-Federal entities, whether they are recipients expending Federal awards received directly from Federal awarding agencies, or are subrecipients expending Federal awards received from a pass-through entity(a recipient or another subrecipient). This Circular does not apply to non-U.S. based entities expending Federal awards received either directly as a recipient or indirectly as a subrecipient. 5. Definitions. The definitions of key terms used in this Circular are contained in § .105 in the Attachment to this Circular. 6. Required Action. The specific requirements and responsibilities of Federal agencies and non- Federal entities are set forth in the Attachment to this Circular. Federal agencies making awards to non-Federal entities, either directly or indirectly, shall adopt the language in the Circular in codified regulations as provided in Section 10(below), unless different provisions are required by Federal statute or are approved by the Office of Management and Budget(OMB). 7. OMB Responsibilities. OMB will review Federal agency regulations and implementation of this Circular, and will provide interpretations of policy requirements and assistance to ensure uniform, http://www.whitehouse.gov/omb/circulars/a133/a133.html , 6/21/00 OMB Circular No. A-133 Page 2 of 33 effective and efficient implementation. 8. Information Contact. Further information concerning Circular A-133 may be obtained by contacting the Financial Standards and Reporting Branch, Office of Federal Financial Management, Office of Management and Budget, Washington,DC 20503, telephone (202) 395-3993. 9. Review Date. This Circular will have a policy review three years from the date of issuance. 10. Effective Dates. The standards set forth in § .400 of the Attachment to this Circular,which apply directly to Federal agencies, shall be effective July 1, 1996, and shall apply to audits of fiscal years beginning after June 30, 1996, except as otherwise specified in § .400(a). The standards set forth in this Circular that Federal agencies shall apply to non-Federal entities shall be adopted by Federal agencies in codified regulations not later than 60 days after publication of this final revision in the Federal Register, so that they will apply to audits of fiscal years beginning after June 30, 1996, with the exception that § .305(b) of the Attachment applies to audits of fiscal years beginning after June 30, 1998. The requirements of Circular A-128, although the Circular is rescinded, and the 1990 version of Circular A-133 remain in effect for audits of fiscal years beginning on or before June 30, 1996. Franklin D. Raines Director Attachment PART --AUDITS OF STATES, LOCAL GOVERNMENTS,AND NON-PROFIT ORGANIZATIONS Subpart A--General. Sec. _.100 Purpose. .105 Definitions. Subpart B Audits .200 Audit requirements. _.205 Basis for determining Federal awards expended. _.210 Subrecipient and vendor determinations. _.215 Relation to other audit requirements. .220 Frequency of audits. .225 Sanctions. .230 Audit costs. _.235 Program-specific audits. SuhpartC--Aud:itees .300 Auditee responsibilities. .305 Auditor selection. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 3 of 33 .310 Financial statements. _.315 Audit findings follow-up. _.320 Report submission. Subpart D--Federal.._Agencies and Pass-Through Entities _.400 Responsibilities. .405 Management decision. Subpart E--Auditors _.500 Scope of audit. _.505 Audit reporting. _.510 Audit findings. .515 Audit working papers. .520 Major program determination. .525 Criteria for Federal program risk. _.530 Criteria for a low-risk auditee. Appendix A to Part—-Data Collection Form(Form SF-SAC). Appendix B to Part - Circular A-133 Compliance Supplement. Subpart A--General § .100 Purpose. This part sets forth standards for obtaining consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal awards. §_.105 Definitions. Auditee means any non-Federal entity that expends Federal awards which must be audited under this part. Auditor means an auditor, that is a public accountant or a Federal, State or local government audit organization,which meets the general standards specified in generally accepted government auditing standards(GAGAS). The term auditor does not include internal auditors of non-profit organizations. Audit finding means deficiencies which the auditor is required by§_.510(a)to report in the schedule of findings and questioned costs. CFDA number means the number assigned to a Federal program in the Catalog of Federal Domestic Assistance(CFDA). Cluster of programs means a grouping of closely related programs that share common compliance requirements. The types of clusters of programs are research and development(R&D), student financial aid(SFA), and other clusters. "Other clusters" are as defined by the Office of Management and Budget(OMB) in the compliance supplement or as designated by a State for Federal awards the http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 4 of 33 State provides to its subrecipients that meet the definition of a cluster of programs. When designating an"other cluster," a State shall identify the Federal awards included in the cluster and advise the subrecipients of compliance requirements applicable to the cluster, consistent with§_.400(d)(1) and§_.400(d)(2),respectively. A cluster of programs shall be considered as one program for determining major programs, as described in§ .520,and,with the exception of R&D as described in§_.200(c),whether a program-specific audit may be elected. Cognizant agency for audit means the Federal agency designated to carry out the responsibilities described in§_.400(a). Compliance supplement refers to the Circular A-133 Compliance Supplement, included as Appendix B to Circular A-133, or such documents as OMB or its designee may issue to replace it. This document is available from the Government Printing Office, Superintendent of Documents, Washington,DC 20402-9325. Corrective action means action taken by the auditee that: (1) Corrects identified deficiencies; (2)Produces recommended improvements; or (3)Demonstrates that audit findings are either invalid or do not warrant auditee action. Federal agency has the same meaning as the term agency in Section 551(1)of title 5,United States Code. Federal award means Federal financial assistance and Federal cost-reimbursement contracts that non-Federal entities receive directly from Federal awarding agencies or indirectly from pass-through entities. It does not include procurement contracts,under grants or contracts,used to buy goods or services from vendors. Any audits of such vendors shall be covered by the terms and conditions of the contract. Contracts to operate Federal Government owned, contractor operated facilities(GOCOs) are excluded from the requirements of this part. Federal awarding agency means the Federal agency that provides an award directly to the recipient. Federal financial assistance means assistance that non-Federal entities receive or administer in the form of grants, loans, loan guarantees,property(including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other assistance,but does not include amounts received as reimbursement for services rendered to individuals as described in§_.205(h)and §_.205(i). Federal program means: (1)All Federal awards to a non-Federal entity assigned a single number in the CFDA. (2)When no CFDA number is assigned, all Federal awards from the same agency made for the same purpose should be combined and considered one program. (3)Notwithstanding paragraphs (1) and(2) of this definition, a cluster of programs. The types of http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 5 of 33 clusters of programs are: (i)Research and development(R&D); (ii) Student financial aid(SFA); and (iii) "Other clusters," as described in the definition of cluster of programs in this section. GAGAS means generally accepted government auditing standards issued by the Comptroller General of the United States,which are applicable to financial audits. Generally accepted accounting principles has the meaning specified in generally accepted auditing standards issued by the American Institute of Certified Public Accountants (AICPA). Indian tribe means any Indian tribe,band, nation, or other organized group or community, including any Alaskan Native village or regional or village corporation(as defined in, or established under, the Alaskan Native Claims Settlement Act)that is recognized by the United States as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. Internal control means a process, effected by an entity's management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (1) Effectiveness and efficiency of operations; (2)Reliability of financial reporting; and (3) Compliance with applicable laws and regulations. Internal control pertaining to the compliance requirements for Federal programs (Internal control over Federal programs)means a process--effected by an entity's management and other personnel--designed to provide reasonable assurance regarding the achievement of the following objectives for Federal programs: (1)Transactions are properly recorded and accounted for to: (i)Permit the preparation of reliable financial statements and Federal reports; (ii)Maintain accountability over assets; and (iii)Demonstrate compliance with laws, regulations, and other compliance requirements; (2)Transactions are executed in compliance with: (i) Laws,regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on a Federal program; and (ii)Any other laws and regulations that are identified in the compliance supplement; and http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 6 of 33 • (3)Funds,property, and other assets are safeguarded against loss from unauthorized use or disposition. Loan means a Federal loan or loan guarantee received or administered by a non-Federal entity. Local government means any unit of local government within a State, including a county,borough, municipality, city, town,township,parish, local public authority, special district, school district, intrastate district, council of governments, and any other instrumentality of local government. Major program means a Federal program determined by the auditor to be a major program in accordance with§_.520 or a program identified as a major program by a Federal agency or pass- through entity in accordance with§_.215(c). Management decision means the evaluation by the Federal awarding agency or pass-through entity of the audit findings and corrective action plan and the issuance of a written decision as to what corrective action is necessary. Non-Federal entity means a State, local government,or non-profit organization. Non-profit organization means: (1) any corporation,trust, association, cooperative, or other organization that: (i)Is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest; (ii) Is not organized primarily for profit; and (iii)Uses its net proceeds to maintain, improve, or expand its operations; and (2)The term non-profit organization includes non-profit institutions of higher education and hospitals. OMB means the Executive Office of the President, Office of Management and Budget. Oversight agency for audit means the Federal awarding agency that provides the predominant amount of direct funding to a recipient not assigned a cognizant agency for audit. When there is no direct funding,the Federal agency with the predominant indirect funding shall assume the oversight responsibilities. The duties of the oversight agency for audit are described in §_.400(b). Pass-through entity means a non-Federal entity that provides a Federal award to a subrecipient to carry out a Federal program. Program-specific audit means an audit of one Federal program as provided for in§_.200(c)and § .235. Questioned cost means a cost that is questioned by the auditor because of an audit finding: http://www.whitehouse.gov/omb/circulars/a133/al33.html 6/21/00 OMB Circular. No. A-133 Page 7 of 33 (1)Which resulted from a violation or possible violation of a provision of a law,regulation, contract, grant, cooperative agreement, or other agreement or document governing the use of Federal funds, including funds used to match Federal funds; (2) Where the costs, at the time of the audit, are not supported by adequate documentation; or (3)Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. Recipient means a non-Federal entity that expends Federal awards received directly from a Federal awarding agency to carry out a Federal program. Research and development(R&D)means all research activities,both basic and applied, and all development activities that are performed by a non-Federal entity. Research is defined as a systematic study directed toward fuller scientific knowledge or understanding of the subject studied. The term research also includes activities involving the training of individuals in research techniques where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function. Development is the systematic use of knowledge and understanding gained from research directed toward the production of useful materials, devices, systems, or methods, including design and development of prototypes and processes. Single audit means an audit which includes both the entity's financial statements and the Federal • awards as described in§ .500. State means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the Trust Territory of the Pacific Islands, any instrumentality thereof, any multi-State, regional, or interstate entity which has governmental functions, and any Indian tribe as defined in this • section. Student Financial Aid(SFA) includes those programs of general student assistance, such as those authorized by Title IV of the Higher Education Act of 1965, as amended, (20 U.S.C. 1070 et seq.) which is administered by the U.S. Department of Education, and similar programs provided by other Federal agencies. It does not include programs which provide fellowships or similar Federal awards to students on a competitive basis, or for specified studies or research. Subrecipient means a non-Federal entity that expends Federal awards received from a pass-through entity to carry out a Federal program,but does not include an individual that is a beneficiary of such a program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency. Guidance on distinguishing between a subrecipient and a vendor is provided in §_.210. Types of compliance requirements refers to the types of compliance requirements listed in the compliance supplement. Examples include: activities allowed or unallowed; allowable costs/cost principles; cash management; eligibility; matching, level of effort, earmarking; and,reporting. Vendor means a dealer, distributor,merchant, or other seller providing goods or services that are 0 http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 8 of 33 required for the conduct of a Federal program. These goods or services may be for an organization's own use or for the use of beneficiaries of the Federal program. Additional guidance on distinguishing between a subrecipient and a vendor is provided in§_.210. Subpart B--Audits §_.200 Audit requirements. (a)Audit required. Non-Federal entities that expend$300,000 or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part. Guidance on determining Federal awards expended is provided in§_.205. (b) Single audit. Non-Federal entities that expend$300,000 or more in a year in Federal awards shall have a single audit conducted in accordance with §_.500 except when they elect to have a program- specific audit conducted in accordance with paragraph(c)of this section. (c) Program-specific audit election. When an auditee expends Federal awards under only one Federal program (excluding R&D) and the Federal program's laws, regulations, or grant agreements do not require a financial statement audit of the auditee, the auditee may elect to have a program- specific audit conducted in accordance with§ .235. A program-specific audit may not be elected for R&D unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity in the case of a subrecipient, approves in advance a program-specific audit. (d)Exemption when Federal awards expended are less than $300,000. Non-Federal entities that expend less than$300,000 a year in Federal awards are exempt from Federal audit requirements for that year, except as noted in § .215(a),but records must be available for review or audit by appropriate officials of the Federal agency,pass-through entity, and General Accounting Office (GAO). (e) Federally Funded Research and Development Centers (FFRDC). Management of an auditee that owns or operates a FFRDC may elect to treat the FFRDC as a separate entity for purposes of this part. § .205 Basis for determining Federal awards expended. (a) Determining Federal awards expended. The determination of when an award is expended should be based on when the activity related to the award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with laws, regulations, and the provisions of contracts or grant agreements, such as: expenditure/expense transactions associated with grants, cost- reimbursement contracts, cooperative agreements, and direct appropriations; the disbursement of funds passed through to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or consumption of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and, the period when insurance is in force. (b)Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines shall be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and(d) of this section: http://www.whitehouse.gov/omb/circulars/al33/al33.html 6/21/00 OMB Circular No. A-133 Page 9 of 33 (1)Value of new loans made or received during the fiscal year; plus (2)Balance of loans from previous years for which the Federal Government imposes continuing compliance requirements;plus (3)Any interest subsidy, cash, or administrative cost allowance received. (c) Loan and loan guarantees (loans) at institutions of higher education. When loans are made to students of an institution of higher education but the institution does not make the loans,then only the value of loans made during the year shall be considered Federal awards expended in that year. The balance of loans for previous years is not included as Federal awards expended because the lender accounts for the prior balances. (d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior-years, are not considered Federal awards expended under this part when the laws, regulations, and the provisions of contracts or grant agreements pertaining to such loans impose no continuing compliance requirements other than to repay the loans. (e) Endowment funds. The cumulative balance of Federal awards for endowment funds which are federally restricted are considered awards expended in each year in which the funds are still restricted. (f) Free rent. Free rent received by itself is not considered a Federal award expended under this part. However, free rent received as part of an award to carry out a Federal program shall be included in determining Federal awards expended and subject to audit under this part. (g)Valuing non-cash assistance. Federal non-cash assistance, such as free rent, food stamps, food commodities, donated property, or donated surplus property, shall be valued at fair market value at the time of receipt or the assessed value provided by the Federal agency. (h)Medicare. Medicare payments to a non-Federal entity for providing patient care services to Medicare eligible individuals are not considered Federal awards expended under this part. (i)Medicaid. Medicaid payments to a subrecipient for providing patient care services to Medicaid eligible individuals are not considered Federal awards expended under this part unless a State requires the funds to be treated as Federal awards expended because reimbursement is on a cost- reimbursement basis. (j) Certain loans provided by the National Credit Union Administration. For purposes of this part, loans made from the National Credit Union Share Insurance Fund and the Central Liquidity Facility that are funded by contributions from insured institutions are not considered Federal awards expended. §_.210 Subrecipient and vendor determinations. (a) General. An auditee may be a recipient, a subrecipient, and a vendor. Federal awards expended as a recipient or a subrecipient would be subject to audit under this part. The payments received for goods or services provided as a vendor would not be considered Federal awards. The guidance in http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 10 of 33 paragraphs (b) and(c)of this section should be considered in determining whether payments constitute a Federal award or a payment for goods and services. (b) Federal award. Characteristics indicative of a Federal award received by a subrecipient are when the organization: (1)Determines who is eligible to receive what Federal financial assistance; (2)Has its performance measured against whether the objectives of the Federal program are met; (3) Has responsibility for programmatic decision making; (4)Has responsibility for adherence to applicable Federal program compliance requirements; and (5)Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity. (c) Payment for goods and services. Characteristics indicative of a payment for goods and services received by a vendor are when the organization: (1)Provides the goods and services within normal business operations; (2)Provides similar goods or services to many different purchasers; (3) Operates in a competitive environment; (4) Provides goods or services that are ancillary to the operation of the Federal program; and (5) Is not subject to compliance requirements of the Federal program. (d)Use of judgment in making determination. There may be unusual circumstances or exceptions to the listed characteristics. In making the determination of whether a subrecipient or vendor relationship exists,the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present and judgment should be used in determining whether an entity is a subrecipient or vendor. (e) For-profit subrecipient. Since this part does not apply to for-profit subrecipients, the pass- through entity is responsible for establishing requirements, as necessary,to ensure compliance by for- profit subrecipients. The contract with the for-profit subrecipient should describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring during the contract, and post-award audits. (f) Compliance responsibility for vendors. In most cases, the auditee's compliance responsibility for vendors is only to ensure that the procurement, receipt, and payment for goods and services comply with laws, regulations, and the provisions of contracts or grant agreements. Program compliance requirements normally do not pass through to vendors. However,the auditee is responsible for ensuring compliance for vendor transactions which are structured such that the vendor is responsible for program compliance or the vendor's records must be reviewed to determine http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 1 OMB Circular No. A-133 Page 11 of 33 program compliance. Also,when these vendor transactions relate to a major program, the scope of the audit shall include determining whether these transactions are in compliance with laws, regulations, and the provisions of contracts or grant agreements. §_.215 Relation to other audit requirements.; (a)Audit under this part in lieu of other audits. An audit made in accordance with this part shall be in lieu of any financial audit required under individual Federal awards. To the extent this audit meets a Federal agency's needs, it shall rely upon and use such audits. The provisions of this part neither limit the authority of Federal agencies, including their Inspectors General, or GAO to conduct or arrange for additional audits (e.g., financial audits,performance audits, evaluations, inspections, or reviews)nor authorize any auditee to constrain Federal agencies from carrying out additional audits. Any additional audits shall be planned and performed in such a way as to build upon work performed by other auditors. (b)Federal agency to pay for additional audits. A Federal agency that conducts or contracts for additional audits shall, consistent with other applicable laws and regulations, arrange for funding the full cost of such additional audits. (c)Request for a program to be audited as a major program. A Federal agency may request an auditee to have a particular Federal program audited as a major program in lieu of the Federal agency conducting or arranging for the additional audits. To allow for planning, such requests should be made at least 180 days prior to the end of the fiscal year to be audited. The auditee, after consultation with its auditor, should promptly respond to such request by informing the Federal agency whether the program would otherwise be audited as a major program using the risk-based audit approach described in §_.520 and, if not, the estimated incremental cost. The Federal agency shall then promptly confirm to the auditee whether it wants the program audited as a major program. If the program is to be audited as a major program based upon this Federal agency request, and the Federal agency agrees to pay the full incremental costs,then the auditee shall have the program audited as a major program. A pass-through entity may use the provisions of this paragraph for a subrecipient. §_.220 Frequency of audits. Except for the provisions for biennial audits provided in paragraphs (a) and(b) of this section, audits required by this part shall be performed annually. Any biennial audit shall cover both years within the biennial period. (a)A State or local government that is required by constitution or statute, in effect on January 1, 1987,to undergo its audits less frequently than annually, is permitted to undergo its audits pursuant to this part biennially. This requirement must still be in effect for the biennial period under audit. (b)Any non-profit organization that had biennial audits for all biennial periods ending between July 1, 1992, and January 1, 1995, is permitted to undergo its audits pursuant to this part biennially. §_.225 Sanctions. No audit costs may be charged to Federal awards when audits required by this part have not been (.0 made or have been made but not in accordance with this part. In cases of continued inability or unwillingness to have an audit conducted in accordance with this part,Federal agencies and pass- hap://www.whitehouse.gov/omb/circulars/a133/a 1 33.html 6/21/00 OMB Circular No. A-133 Page 12 of 33 through entities shall take appropriate action using sanctions such as: (a) Withholding a percentage of Federal awards until the audit is completed satisfactorily; (b) Withholding or disallowing overhead costs; (c) Suspending Federal awards until the audit is conducted; or (d)Terminating the Federal award. §_.230 Audit costs. (a) Allowable costs. Unless prohibited by law,the cost of audits made in accordance with the provisions of this part are allowable charges to Federal awards. The charges may be considered a direct cost or an allocated indirect cost, as determined in accordance with the provisions of applicable OMB cost principles circulars, the Federal Acquisition Regulation(FAR) (48 CFR parts 30 and 31), or other applicable cost principles or regulations. (b) Unallowable costs. A non-Federal entity shall not charge the following to a Federal award: (1) The cost of any audit under the Single Audit Act Amendments of 1996 (31 U.S.C. 7501 et seq.) not conducted in accordance with this part. (2)The cost of auditing a non-Federal entity which has Federal awards expended of less than $300,000 per year and is thereby exempted under§ .200(d) from having an audit conducted under this part. However, this does not prohibit a pass-through entity from charging Federal awards for the cost of limited scope audits to monitor its subrecipients in accordance with §_.400(d)(3),provided the subrecipient does not have a single audit. For purposes of this part, limited scope audits only include agreed-upon procedures engagements conducted in accordance with either the AICPA's generally accepted auditing standards or attestation standards, that are paid for and arranged by a pass-through entity and address only one or more of the following types of compliance requirements: activities allowed or unallowed; allowable costs/cost principles; eligibility;matching, level of effort, earmarking; and, reporting. § .235 Program-specific audits. (a) Program-specific audit guide available. In many cases, a program-specific audit guide will be available to provide specific guidance to the auditor with respect to internal control, compliance requirements, suggested audit procedures, and audit reporting requirements. The auditor should contact the Office of Inspector General of the Federal agency to determine whether such a guide is available. When a current program-specific audit guide is available, the auditor shall follow GAGAS and the guide when performing a program-specific audit. (b) Program-specific audit guide not available. (1) When a program-specific audit guide is not available, the auditee and auditor shall have basically the same responsibilities for the Federal program as they would have for an audit of a major program in a single audit. (2) The auditee shall prepare the financial statement(s) for the Federal program that includes, at a minimum, a schedule of expenditures of Federal awards for the program and notes that describe the http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 13 of 33 significant accounting policies used in preparing the schedule, a summary schedule of prior audit findings consistent with the requirements of§ .315(b), and a corrective action plan consistent with the requirements of§_.315(c). (3)The auditor shall: (i)Perform an audit of the financial statement(s) for the Federal program in accordance with GAGAS; (ii)Obtain an understanding of internal control and perform tests of internal control over the Federal program consistent with the requirements of§_.500(c) for a major program; (iii)Perform procedures to determine whether the auditee has complied with laws,regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on the Federal program consistent with the requirements of§_.500(d) for a major program; and (iv)Follow up on prior audit findings,perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee, and report, as a current year audit finding,when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding in accordance with the requirements of§ .500 (e). (4) The auditor's report(s)may be in the form of either combined or separate reports and may be organized differently from the manner presented in this section. The auditor's report(s) shall state that the audit was conducted in accordance with this part and include the following: (i)An opinion(or disclaimer of opinion) as to whether the financial statement(s) of the Federal program is presented fairly in all material respects in conformity with the stated accounting policies; (ii) A report on internal control related to the Federal program, which shall describe the scope of testing of internal control and the results of the tests; (iii)A report on compliance which includes an opinion(or disclaimer of opinion) as to whether the auditee complied with laws,regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on the Federal program; and (iv)A schedule of findings and questioned costs for the Federal program that includes a summary of the auditor's results relative to the Federal program in a format consistent with § .505(d)(1) and findings and questioned costs consistent with the requirements of§ .505(d)(3). (c)Report submission for program-specific audits. • (1)The audit shall be completed and the reporting required by paragraph(c)(2)or(c)(3) of this section submitted within the earlier of 30 days after receipt of the auditor's report(s), or nine months after the end of the audit period,unless a longer period is agreed to in advance by the Federal agency that provided the funding or a different period is specified in a program-specific audit guide. (However, for fiscal years beginning on or before June 30, 1998, the audit shall be completed and the required reporting shall be submitted within the earlier of 30 days after receipt of the auditor's report (s), or 13 months after the end of the audit period,unless a different period is specified in a program- eil http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 14 of 33 specific audit guide.)Unless restricted by law or regulation,the auditee shall make report copies available for public inspection. (2) When a program-specific audit guide is available, the auditee shall submit to the Federal clearinghouse designated by OMB the data collection form prepared in accordance with§_.320(b), as applicable to a program-specific audit, and the reporting required by the program-specific audit guide to be retained as an archival copy. Also, the auditee shall submit to the Federal awarding agency or pass-through entity the reporting required by the program-specific audit guide. (3) When a program-specific audit guide is not available, the reporting package for a program- specific audit shall consist of the financial statement(s) of the Federal program, a summary schedule of prior audit findings, and a corrective action plan as described in paragraph(b)(2)of this section, and the auditor's report(s) described in paragraph(b)(4) of this section. The data collection form prepared in accordance with §_.320(b), as applicable to a program-specific audit, and one copy of this reporting package shall be submitted to the Federal clearinghouse designated by OMB to be retained as an archival copy. Also,when the schedule of findings and questioned costs disclosed audit findings or the summary schedule of prior audit findings reported the status of any audit findings, the auditee shall submit one copy,of the reporting package to the Federal clearinghouse on behalf of the Federal awarding agency,or directly to the pass-through entity in the case of a subrecipient. Instead of submitting the reporting package to the pass-through entity,when a subrecipient is not required to submit a reporting package to the pass-through entity, the subrecipient shall provide written notification to the pass-through entity, consistent with the requirements of§ .320(e)(2). A subrecipient may submit a copy of the reporting package to the pass-through entity to comply with this notification requirement. (d) Other sections of this part may apply. Program-specific audits are subject to § .100 through §_.215(b), §_.220 through§_.230, § .300 through§_.305, § .315, § .320(f) through§_.320(j), § .400 through §_.405, §_.510 through § .515, and other referenced provisions of this part unless contrary to the provisions of this section, a program-specific audit guide, or program laws and regulations. Subpart C--Auditees § .300 Auditee responsibilities. The auditee shall: (a) Identify, in its accounts, all Federal awards received and expended and the Federal programs under which they were received. Federal program and award identification shall include, as applicable,the CFDA title and number, award number and year,name of the Federal agency, and name of the pass-through entity. (b)Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. (c) Comply with laws, regulations, and the provisions of contracts or grant agreements related to each of its Federal programs. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 15 of 33 (d)Prepare appropriate financial statements, including the schedule of expenditures of Federal awards in accordance with § .310. (e)Ensure that the audits required by this part are,properly performed and submitted when due. When extensions to the report submission due date required by§_.320(a)are granted by the cognizant or oversight agency for audit,promptly notify the Federal clearinghouse designated by OMB and each pass-through entity providing Federal awards of the extension. (f)Follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a corrective action plan in accordance with§_.315(b)and § .315(c),respectively. § .305 Auditor selection. (a)Auditor procurement. In procuring audit services, auditees shall follow the procurement standards prescribed by the Grants Management Common Rule(hereinafter referred to as the "A-102 Common Rule")published March 11, 1988 and amended April 19, 1995 [insert appropriate CFR citation], Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations," or the FAR(48 CFR part 42), as applicable(OMB Circulars are available from the Office of Administration, Publications Office, room 2200,New Executive Office Building, Washington, DC 20503). Whenever possible, auditees shall make positive efforts to utilize small businesses,minority-owned firms, and women's business enterprises, in procuring audit services as stated in the A-102 Common Rule, OMB Circular A-110, or the FAR(48 CFR part 42), as applicable. In requesting proposals for audit services,the objectives and scope of the audit should be made clear. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant experience, availability of staff with professional qualifications and technical abilities, the results of external quality control reviews, and price. (b) Restriction on auditor preparing indirect cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may not also be selected to perform the audit required by this part when the indirect costs recovered by the auditee during the prior year exceeded$1 million. This restriction applies to the base year used in the preparation of the indirect cost proposal or cost allocation plan and any subsequent years in which the resulting indirect cost agreement or cost allocation plan is used to recover costs. To minimize any disruption in existing contracts for audit services,this paragraph applies to audits of fiscal years beginning after June 30, 1998. (c)Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they comply fully with the requirements of this part. §_.310 Financial statements. (a) Financial statements. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The financial statements shall be for the same organizational unit and fiscal year that is chosen to meet the requirements of this part. However, organization-wide financial statements may also include departments, agencies, and other organizational units that have separate audits in accordance with§ .500(a)and prepare separate financial statements. • http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 16 of 33 (b) Schedule of expenditures of Federal awards. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. While not required,the auditee may choose to provide information requested by Federal awarding agencies and pass-through entities to make the schedule easier to use. For example,when a Federal program has multiple award years, the auditee may list the amount of Federal awards expended for each award year separately. At a minimum, the schedule shall: (1)List individual Federal programs by Federal agency. For Federal programs included in a cluster of programs, list individual Federal programs within a cluster of programs. For R&D, total Federal awards expended shall be shown either by individual award or by Federal agency and major subdivision within the Federal agency. For example, the National Institutes of Health is a major subdivision in the Department of Health and Human Services. (2)For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity shall be included. (3)Provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available. (4) Include notes that describe the significant accounting policies used in preparing the schedule. (5) To the extent practical,pass-through entities should identify in the schedule the total amount provided to subrecipients from each Federal program. (6)Include, in either the schedule or a note to the schedule,the value of the Federal awards expended in the form of non-cash assistance, the amount of insurance in effect during the year, and loans or loan guarantees outstanding at year end. While not required, it is preferable to present this information in the schedule. §_.315 Audit findings follow-up. (a) General. The auditee is responsible for follow-up and corrective action on all audit findings. As part of this responsibility, the auditee shall prepare a summary schedule of prior audit findings. The auditee shall also prepare a corrective action plan for current year audit findings. The summary schedule of prior audit findings and the corrective action plan shall include the reference numbers the auditor assigns to audit findings under§ .510(c). Since the summary schedule may include audit findings from multiple years, it shall include the fiscal year in which the finding initially occurred. (b) Summary schedule of prior audit findings. The summary schedule of prior audit findings shall report the status of all audit findings included in the prior audit's schedule of findings and questioned costs relative to Federal awards. The summary schedule shall also include audit findings reported in the prior audit's summary schedule of prior audit findings except audit findings listed as corrected in accordance with paragraph(b)(1)of this section, or no longer valid or not warranting further action in accordance with paragraph(b)(4) of this section. (1) When audit findings were fully corrected, the summary schedule need only list the audit findings and state that corrective action was taken. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 _ Page 17 of 33 (2)When audit findings were not corrected or were only partially corrected, the summary schedule shall describe the planned corrective action as well as any partial corrective action taken. (3) When corrective action taken is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency's or pass-through entity's management decision, the summary schedule shall provide an explanation. (4) When the auditee believes the audit findings are no longer valid or do not warrant further action, the reasons for this position shall be described in the summary schedule. A valid reason for considering an audit finding as not warranting further action is that all of the following have occurred: (i)Two years have passed since the audit report in which the finding occurred was submitted to the Federal clearinghouse; (ii) The Federal agency or pass-through entity is not currently following up with the auditee on the audit finding; and (iii)A management decision was not issued. (c) Corrective action plan. At the completion of the audit, the auditee shall prepare a corrective action plan to address each audit finding included in the current year auditor's reports. The corrective action plan shall provide the name(s) of the contact person(s)responsible for corrective action, the corrective action planned, and the anticipated completion date. If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan shall include an explanation and specific reasons. §_.320 Report submission. (a) General. The audit shall be completed and the data collection form described in paragraph(b) of this section and reporting package described in paragraph(c)of this section shall be submitted within the earlier of 30 days after receipt of the auditor's report(s), or nine months after the end of the audit period,unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. (However, for fiscal years beginning on or before June 30, 1998, the audit shall be completed and the data collection form and reporting package shall be submitted within the earlier of 30 days after receipt of the auditor's report(s), or 13 months after the end of the audit period.)Unless restricted by law or regulation, the auditee shall make copies available for public inspection. (b) Data Collection. (1) The auditee shall submit a data collection form which states whether the audit was completed in accordance with this part and provides information about the auditee, its Federal programs, and the results of the audit. The form shall be approved by OMB, available from the Federal clearinghouse designated by OMB, and include data elements similar to those presented in this paragraph. A senior level representative of the auditee(e.g., State controller, director of finance, chief executive officer, or chief financial officer) shall sign a statement to be included as part of the form certifying that: the auditee complied with the requirements of this part, the form was prepared in accordance with this part(and the instructions accompanying the form), and the • information included in the form, in its entirety, are accurate and complete. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 18 of 33 (2) The data collection form shall include the following data elements: (i)The type of report the auditor issued on the financial statements of the auditee(i.e.,unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion). (ii) Where applicable, a statement that reportable conditions in internal control were disclosed by the audit of the financial statements and whether any such conditions were material weaknesses. (iii)A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the auditee. (iv) Where applicable, a statement that reportable conditions in internal control over major programs were disclosed by the audit and whether any such conditions were material weaknesses. (v) The type of report the auditor issued on compliance for major programs (i.e.,unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion). (vi)A list of the Federal awarding agencies which will receive a copy of the reporting package pursuant to §_.320(d)(2) of OMB Circular A-133. (vii)A yes or no statement as to whether the auditee qualified as a low-risk auditee under§ .530 of OMB Circular A-133. (viii)The dollar threshold used to distinguish between Type A and Type B programs as defined in § .520(b)of OMB Circular A-133. (ix) The Catalog of Federal Domestic Assistance(CFDA)number for each Federal program, as applicable. (x) The name of each Federal program and identification of each major program. Individual programs within a cluster of programs should be listed in the same level of detail as they are listed in the schedule of expenditures of Federal awards. (xi) The amount of expenditures in the schedule of expenditures of Federal awards associated with each Federal program. (xii)For each Federal program, a yes or no statement as to whether there are audit findings in each of the following types of compliance requirements and the total amount of any questioned costs: (A)Activities allowed or unallowed. (B)Allowable costs/cost principles. (C)Cash management. (D)Davis-Bacon Act. (E) Eligibility. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 ' OMB Circular No. A-133 Page 19 of 33 (F)Equipment and real property management. (G)Matching, level of effort, earmarking. (H) Period of availability of Federal funds. (I)Procurement and suspension and debarment. (J)Program income. (K)Real property acquisition and relocation assistance. (L)Reporting. (M) Subrecipient monitoring. (N) Special tests and provisions. (xiii)Auditee Name, Employer Identification Number(s),Name and Title of Certifying Official, Telephone Number, Signature, and Date. (xiv)Auditor Name,Name and Title of Contact Person, Auditor Address, Auditor Telephone Number, Signature, and Date. (xv) Whether the auditee has either a cognizant or oversight agency for audit. (xvi)The name of the cognizant or oversight agency for audit determined in accordance with § .400(a) and §_.400(b),respectively. (3)Using the information included in the reporting package described in paragraph(c)of this section, the auditor shall complete the applicable sections of the form. The auditor shall sign a statement to be included as part of the data collection form that indicates, at a minimum, the source of the information included in the form, the auditor's responsibility for the information, that the form is not a substitute for the reporting package described in paragraph(c)of this section, and that the content of the form is limited to the data elements prescribed by OMB. (c)Reporting package. The reporting package shall include the: (1)Financial statements and schedule of expenditures of Federal awards discussed in § .310(a) and§_.310(b),respectively; (2) Summary schedule of prior audit findings discussed in§_.315(b); (3)Auditor's report(s)discussed in§_.505; and (4) Corrective action plan discussed in§ .315(c). (11 http://www.whitehouse.gov/omb/circulars/a133/al33.html 6/21/00 OMB Circular No. A-133 Page 20 of 33 ` (d) Submission to clearinghouse. All auditees shall submit to the Federal clearinghouse designated by OMB the data collection form described in paragraph(b)of this section and one copy of the reporting package described in paragraph(c)of this section for: (1)The Federal clearinghouse to retain as an archival copy; and (2) Each Federal awarding agency when the schedule of findings and questioned costs disclosed audit findings relating to Federal awards that the Federal awarding agency provided directly or the summary schedule of prior audit findings reported the status of any audit findings relating to Federal awards that the Federal awarding agency provided directly. (e)Additional submission by subrecipients. (1)In addition to the requirements discussed in paragraph(d) of this section, auditees that are also subrecipients shall submit to each pass-through entity one copy of the reporting package described in paragraph(c) of this section for each pass- through entity when the schedule of findings and questioned costs disclosed audit findings relating to Federal awards that the pass-through entity provided or the summary schedule of prior audit findings reported the status of any audit findings relating to Federal awards that the pass-through entity provided. (2) Instead of submitting the reporting package to a pass-through entity, when a subrecipient is not required to submit a reporting package to a pass-through entity pursuant to paragraph(e)(1)of this section,the subrecipient shall provide written notification to the pass-through entity that: an audit of the subrecipient was conducted in accordance with this part(including the period covered by the audit and the name, amount, and CFDA number of the Federal award(s)provided by the pass-through entity); the schedule of findings and questioned costs disclosed no audit findings relating to the Federal award(s) that the pass-through entity provided; and, the summary schedule of prior audit findings did not report on the status of any audit findings relating to the Federal award(s)that the pass-through entity provided. A subrecipient may submit a copy of the reporting package described in paragraph(c) of this section to a pass-through entity to comply with this notification requirement. (f)Requests for report copies. In response to requests by a Federal agency or pass-through entity, auditees shall submit the appropriate copies of the reporting package described in paragraph(c)of this section and, if requested, a copy of any management letters issued by the auditor. (g) Report retention requirements. Auditees shall keep one copy of the data collection form described in paragraph(b)of this section and one copy of the reporting package described in paragraph(c)of this section on file for three years from the date of submission to the Federal clearinghouse designated by OMB. Pass-through entities shall keep subrecipients' submissions on file for three years from date of receipt. (h) Clearinghouse responsibilities. The Federal clearinghouse designated by OMB shall distribute the reporting packages received in accordance with paragraph(d)(2) of this section and §_.235(c) (3)to applicable Federal awarding agencies,maintain a data base of completed audits,provide appropriate information to Federal agencies, and follow up with known auditees which have not submitted the required data collection forms and reporting packages. • (i) Clearinghouse address. The address of the Federal clearinghouse currently designated by OMB is Federal Audit Clearinghouse,Bureau of the Census, 1201 E. 10th Street, Jeffersonville, 1N 47132. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 21 of 33 (j)Electronic filing. Nothing in this part shall preclude electronic submissions to the Federal clearinghouse in such manner as may be approved by OMB. With OMB approval, the Federal clearinghouse may pilot test methods of electronic submissions. Subpart D--Federal Agencies and Pass-Through Entities §_.400 Responsibilities. (a) Cognizant agency for audit responsibilities. Recipients expending more than $25 million a year in Federal awards shall have a cognizant agency for audit. The designated cognizant agency for audit shall be the Federal awarding agency that provides the predominant amount of direct funding to a recipient unless OMB makes a specific cognizant agency for audit assignment. To provide for continuity of cognizance, the determination of the predominant amount of direct funding shall be based upon direct Federal awards expended in the recipient's fiscal years ending in 1995,2000, 2005, and every fifth year thereafter. For example, audit cognizance for periods ending in 1997 through 2000 will be determined based on Federal awards expended in 1995. (However, for States and local governments that expend more than$25 million a year in Federal awards and have previously assigned cognizant agencies for audit,the requirements of this paragraph are not effective until fiscal years beginning after June 30, 2000.)Notwithstanding the manner in which audit cognizance is determined, a Federal awarding agency with cognizance for an auditee may reassign cognizance to another Federal awarding agency which provides substantial direct funding and agrees to be the cognizant agency for audit. Within 30 days after any reassignment,both the old and the new cognizant agency for audit shall notify the auditee, and, if known, the auditor of the reassignment. The cognizant agency for audit shall: (1)Provide technical audit advice and liaison to auditees and auditors. (2) Consider auditee requests for extensions to the report submission due date required by§_.320 (a). The cognizant agency for audit may grant extensions for good cause. • (3) Obtain or conduct quality control reviews of selected audits made by non-Federal auditors, and provide the results,when appropriate, to other interested organizations. (4)Promptly inform other affected Federal agencies and appropriate Federal law enforcement officials of any direct reporting by the auditee or its auditor of irregularities or illegal acts, as required by GAGAS or laws and regulations. (5)Advise the auditor and, where appropriate,the auditee of any deficiencies found in the audits when the deficiencies require corrective action by the auditor. When advised of deficiencies,the auditee shall work with the auditor to take corrective action. If corrective action is not taken,the cognizant agency for audit shall notify the auditor,the auditee, and applicable Federal awarding agencies and pass-through entities of the facts and make recommendations for follow-up action. Major inadequacies or repetitive substandard performance by auditors shall be referred to appropriate State licensing agencies and professional bodies for disciplinary action. (6) Coordinate, to the extent practical, audits or reviews made by or for Federal agencies that are in addition to the audits made pursuant to this part, so that the additional audits or reviews build upon audits performed in accordance with this part. http://www.whitehouse.gov/omb/circulars/a133/al 33.html 6/21/00 OMB Circular No. A-133 Page 22 of 33 (7) Coordinate a management decision for audit findings that affect the Federal programs of more than one agency. (8)Coordinate the audit work and reporting responsibilities among auditors to achieve the most cost- effective audit. (9)For biennial audits permitted under§_.220, consider auditee requests to qualify as a low-risk auditee under§_.530(a). (b) Oversight agency for audit responsibilities. An auditee which does not have a designated cognizant agency for audit will be under the general oversight of the Federal agency determined in accordance with §_.105. The oversight agency for audit: (1) Shall provide technical advice to auditees and auditors as requested. (2) May assume all or some of the responsibilities normally performed by a cognizant agency for audit. (c) Federal awarding agency responsibilities. The Federal awarding agency shall perform the following for the Federal awards it makes: (1) Identify Federal awards made by informing each recipient of the CFDA title and number, award name and number, award year, and if the award is for R&D. When some of this information is not available, the Federal agency shall provide information necessary to clearly describe the Federal award. (2)Advise recipients of requirements imposed on them by Federal laws, regulations, and the provisions of contracts or grant agreements. (3)Ensure that audits are completed and reports are received in a timely manner and in accordance with the requirements of this part. (4)Provide technical advice and counsel to auditees and auditors as requested. (5)Issue a management decision on audit findings within six months after receipt of the audit report and ensure that the recipient takes appropriate and timely corrective action. (6)Assign a person responsible for providing annual updates of the compliance supplement to OMB. (d) Pass-through entity responsibilities. A pass-through entity shall perform the following for the Federal awards it makes: (1) Identify Federal awards made by informing each subrecipient of CFDA title and number, award name and number, award year, if the award is R&D, and name of Federal agency. When some of this information is not available, the pass-through entity shall provide the best information available to describe the Federal award. (2) Advise subrecipients of requirements imposed on them by Federal laws, regulations, and the http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 23 of 33 provisions of contracts or grant agreements as well as any supplemental requirements imposed by the pass-through entity. (3)Monitor the activities of subrecipients as necessary to ensure that Federal awards are used for authorized purposes in compliance with laws,regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. (4)Ensure that subrecipients expending$300,000 or more in Federal awards during the subrecipient's fiscal year have met the audit requirements of this part for that fiscal year. (5)Issue a management decision on audit findings within six months after receipt of the subrecipient's audit report and ensure that the subrecipient takes appropriate and timely corrective action. (6) Consider whether subrecipient audits necessitate adjustment of the pass-through entity's own records. (7)Require each subrecipient to permit the pass-through entity and auditors to have access to the records and financial statements as necessary for the pass-through entity to comply with this part. §-`.405 Management decision. (a) General. The management decision shall clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action. If the auditee has not completed corrective action, a timetable for follow-up should be given. Prior to issuing the management decision, the Federal agency or pass-through entity may request additional information or documentation from the auditee, including a request for auditor assurance related to the documentation, as a way of mitigating disallowed costs. The management decision should describe any appeal process available to the auditee. (b) Federal agency. As provided in §_.400(a)(7),the cognizant agency for audit shall be responsible for coordinating a management decision for audit findings that affect the programs of more than one Federal agency. As provided in §_.400(c)(5), a Federal awarding agency is responsible for issuing a management decision for findings that relate to Federal awards it makes to recipients. Alternate arrangements may be made on a case-by-case basis by agreement among the Federal agencies concerned. (c) Pass-through entity. As provided in §_.400(d)(5), the pass-through entity shall be responsible for making the management decision for audit findings that relate to Federal awards it makes to subrecipients. (d)Time requirements. The entity responsible for making the management decision shall do so within six months of receipt of the audit report. Corrective action should be initiated within six months after receipt of the audit report and proceed as rapidly as possible. (e) Reference numbers. Management decisions shall include the reference numbers the auditor assigned to each audit finding in accordance with§ .510(c). 111 http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 24 of 33 Subpart E--Auditors • §_.500 Scope of audit. (a) General. The audit shall be conducted in accordance with GAGAS. The audit shall cover the entire operations of the auditee; or, at the option of the auditee, such audit shall include a series of audits that cover departments, agencies, and other organizational units which expended or otherwise administered Federal awards during such fiscal year,provided that each such audit shall encompass the financial statements and schedule of expenditures of Federal awards for each such department, agency, and other organizational unit, which shall be considered to be a non-Federal entity. The g Y� gY financial statements and schedule of expenditures of Federal awards shall be for the same fiscal year. (b) Financial statements. The auditor shall determine whether the financial statements of the auditee are presented fairly in all material respects in conformity with generally accepted accounting principles. The auditor shall also determine whether the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the auditee's financial statements taken as a whole. (c)Internal control. (1)In addition to the requirements of GAGAS, the auditor shall perform procedures to obtain an understanding of internal control over Federal programs sufficient to plan the audit to support a low assessed level of control risk for major programs. (2)Except as provided in paragraph(c)(3) of this section,the auditor shall: (i) Plan the testing of internal control over major programs to support a low assessed level of control risk for the assertions relevant to the compliance requirements for each major program; and (ii)Perform testing of internal control as planned in paragraph(c)(2)(i)of this section. (3) When internal control over some or all of the compliance requirements for a major program are likely to be ineffective in preventing or detecting noncompliance, the planning and performing of testing described in paragraph(c)(2)of this section are not required for those compliance requirements. However,the auditor shall report a reportable condition(including whether any such condition is a material weakness) in accordance with §_.510, assess the related control risk at the maximum, and consider whether additional compliance tests are required because of ineffective internal control. (d) Compliance. (1)In addition to the requirements of GAGAS, the auditor shall determine whether the auditee has complied with laws,regulations, and the provisions of contracts or grant agreements that may have a direct and material effect on each of its major programs. (2)The principal compliance requirements applicable to most Federal programs and the compliance requirements of the largest Federal programs are included in the compliance supplement. (3) For the compliance requirements related to Federal programs contained in the compliance supplement, an audit of these compliance requirements will meet the requirements of this part. Where there have been changes to the compliance requirements and the changes are not reflected in the compliance supplement, the auditor shall determine the current compliance requirements and modify http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 ` OMB Circular No. A-133 Page 25 of 33 the audit procedures accordingly. For those Federal programs not covered in the compliance supplement, the auditor should use the types of compliance requirements contained in the compliance supplement as guidance for identifying the types of compliance requirements to test, and determine the requirements governing the Federal program by reviewing the provisions of contracts and grant agreements and the laws and regulations referred to in such contracts and grant agreements. (4)The compliance testing shall include tests of transactions and such other auditing procedures necessary to provide the auditor sufficient evidence to support an opinion on compliance.. (e)Audit follow-up. The auditor shall follow-up on prior audit findings,perform procedures to assess the reasonableness of the summary schedule of prior audit findings prepared by the auditee in accordance with§ .315(b), and report, as a current year audit finding,when the auditor concludes that the summary schedule of prior audit findings materially misrepresents the status of any prior audit finding. The auditor shall perform audit follow-up procedures regardless of whether a prior audit finding relates to a major program in the current year. (f) Data Collection Form. As required in§ .320(b)(3), the auditor shall complete and sign specified sections of the data collection form. § .505 Audit reporting. The auditor's report(s)may be in the form of either combined or separate reports and may be organized differently from the manner presented in this section. The auditor's report(s) shall state that the audit was conducted in accordance with this part and include the following: (a)An opinion(or disclaimer of opinion) as to whether the financial statements are presented fairly in all material respects in conformity with generally accepted accounting principles and an opinion(or disclaimer of opinion) as to whether the schedule of expenditures of Federal awards is presented fairly in all material respects in relation to the financial statements taken as a whole. (b)A report on internal control related to the financial statements and major programs. This report shall describe the scope of testing of internal control and the results of the tests, and,where applicable,refer to the separate schedule of findings and questioned costs described in paragraph(d) of this section. (c)A report on compliance with laws,regulations, and the provisions of contracts or grant agreements,noncompliance with which could have a material effect on the financial statements. This report shall also include an opinion(or disclaimer of opinion) as to whether the auditee complied with laws,regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program, and,where applicable, refer to the separate schedule of findings and questioned costs described in paragraph(d)of this section. (d)A schedule of findings and questioned costs which shall include the following three components: (1)A summary of the auditor's results which shall include: (i) The type of report the auditor issued on the financial statements of the auditee (i.e.,unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion); 10- http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 26 of 33 (ii) Where applicable, a statement that reportable conditions in internal control were disclosed by the audit of the financial statements and whether any such conditions were material weaknesses; (iii)A statement as to whether the audit disclosed any noncompliance which is material to the financial statements of the auditee; (iv) Where applicable, a statement that reportable conditions in internal control over major programs were disclosed by the audit and whether any such conditions were material weaknesses; (v)The type of report the auditor issued on compliance for major programs (i.e., unqualified opinion, qualified opinion, adverse opinion, or disclaimer of opinion); (vi)A statement as to whether the audit disclosed any audit findings which the auditor is required to report under§_.510(a); (vii) An identification of major programs; (viii)The dollar threshold used to distinguish between Type A and Type B programs, as described in §_.520(b); and (ix)A statement as to whether the auditee qualified as a low-risk auditee under§_.530. (2)Findings relating to the financial statements which are required to be reported in accordance with GAGAS. (3)Findings and questioned costs for Federal awards which shall include audit findings as defined in § .510(a). (i)Audit findings (e.g., internal control findings, compliance findings, questioned costs, or fraud) which relate to the same issue should be presented as a single audit finding. Where practical, audit findings should be organized by Federal agency or pass-through entity. (ii)Audit findings which relate to both the financial statements and Federal awards, as reported under paragraphs(d)(2) and (d)(3) of this section, respectively, should be reported in both sections of the schedule. However, the reporting in one section of the schedule may be in summary form with a reference to a detailed reporting in the other section of the schedule. § .510 Audit findings. (a)Audit findings reported. The auditor shall report the following as audit findings in a schedule of findings and questioned costs: (1) Reportable conditions in internal control over major programs. The auditor's determination of whether a deficiency in internal control is a reportable condition for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement. The auditor shall identify reportable conditions which are individually or cumulatively material weaknesses. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 ` OMB Circular No. A-133 • Page 27 of 33 (2)Material noncompliance with the provisions of laws,regulations, contracts, or grant agreements related to a major program. The auditor's determination of whether a noncompliance with the provisions of laws,regulations, contracts, or grant agreements is material for the purpose of reporting an audit finding is in relation to a type of compliance requirement for a major program or an audit objective identified in the compliance supplement. (3)Known questioned costs which are greater than$10,000 for a type of compliance requirement for a major program. Known questioned costs are those specifically identified by the auditor. In evaluating the effect of questioned costs on the opinion on compliance, the auditor considers the best estimate of total costs questioned(likely questioned costs),not just the questioned costs specifically identified(known questioned costs). The auditor shall also report known questioned costs when likely questioned costs are greater than$10,000 for a type of compliance requirement for a major program. In reporting questioned costs, the auditor shall include information to provide proper perspective for judging the prevalence and consequences of the questioned costs. (4)Known questioned costs which are greater than$10,000 for a Federal program which is not audited as a major program. Except for audit follow-up,the auditor is not required under this part to perform audit procedures for such a Federal program; therefore, the auditor will normally not find questioned costs for a program which is not audited as a major program. However, if the auditor does become aware of questioned costs for a Federal program which is not audited as a major program (e.g., as part of audit follow-up or other audit procedures) and the known questioned costs are greater than$10,000, then the auditor shall report this as an audit finding. (5) The circumstances concerning why the auditor's report on compliance for major programs is other than an unqualified opinion, unless such circumstances are otherwise reported as audit findings in the schedule of findings and questioned costs for Federal awards. (6)Known fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards. This paragraph does not require the auditor to make an additional reporting when the auditor confirms that the fraud was reported outside of the auditor's reports under the direct reporting requirements of GAGAS. (7)Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee in accordance with§_.315(b)materially misrepresents the status of any prior audit finding. (b)Audit finding detail. Audit findings shall be presented in sufficient detail for the auditee to prepare a corrective action plan and take corrective action and for Federal agencies and pass-through entities to arrive at a management decision. The following specific information shall be included, as applicable, in audit findings: (1)Federal program and specific Federal award identification including the CFDA title and number, Federal award number and year,name of Federal agency, and name of the applicable pass-through entity. When information, such as the CFDA title and number or Federal award number, is not available,the auditor shall provide the best information available to describe the Federal award. (2) The criteria or specific requirement upon which the audit finding is based, including statutory, regulatory, or other citation. http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 28 of 33 (3)The condition found, including facts that support the deficiency identified in the audit finding. (4) Identification of questioned costs and how they were computed. (5)Information to provide proper perspective for judging the prevalence and consequences of the audit findings, such as whether the audit findings represent an isolated instance or a systemic problem. Where appropriate, instances identified shall be related to the universe and the number of cases examined and be quantified in terms of dollar value. (6)The possible asserted effect to provide sufficient information to the auditee and Federal agency,or pass-through entity in the case of a subrecipient, to permit them to determine the cause and effect to facilitate prompt and proper corrective action. (7)Recommendations to prevent future occurrences of the deficiency identified in the audit finding. (8) Views of responsible officials of the auditee when there is disagreement with the audit findings,to the extent practical. (c) Reference numbers. Each audit finding in the schedule of findings and questioned costs shall include a reference number to allow for easy referencing of the audit findings during follow-up. § .515 Audit working papers. (a) Retention of working papers. The auditor shall retain working papers and reports for a minimum of three years after the date of issuance of the auditor's report(s)to the auditee,unless the auditor is notified in writing by the cognizant agency for audit, oversight agency for audit, or pass-through entity to extend the retention period. When the auditor is aware that the Federal awarding agency, pass-through entity, or auditee is contesting an audit finding, the auditor shall contact the parties contesting the audit finding for guidance prior to destruction of the working papers and reports. (b)Access to working papers. Audit working papers shall be made available upon request to the cognizant or oversight agency for audit or its designee, a Federal agency providing direct or indirect funding, or GAO at the completion of the audit, as part of a quality review,to resolve audit findings, or to carry out oversight responsibilities consistent with the purposes of this part. Access to working papers includes the right of Federal agencies to obtain copies of working papers, as is reasonable and necessary. § .520 Major program determination. (a) General. The auditor shall use a risk-based approach to determine which Federal programs are major programs. This risk-based approach shall include consideration of: Current and prior audit experience, oversight by Federal agencies and pass-through entities, and the inherent risk of the Federal program. The process in paragraphs (b)through(i) of this section shall be followed. (b) Step 1. (1) The auditor shall identify the larger Federal programs,which shall be labeled Type A programs. Type A programs are defined as Federal programs with Federal awards expended during the audit period exceeding the larger of: http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 29 of 33 (i) $300,000 or three percent(.03) of total Federal awards expended in the case of an auditee for which total Federal awards expended equal or exceed$300,000 but are less than or equal to $100 million. (ii) $3 million or three-tenths of one percent(.003) of total Federal awards expended in the case of an auditee for which total Federal awards expended exceed$100 million but are less than or equal to $10 billion. (iii) $30 million or 15 hundredths of one percent(.0015)of total Federal awards expended in the case of an auditee for which total Federal awards expended exceed $10 billion. (2)Federal programs not labeled Type A under paragraph(b)(1)of this section shall be labeled Type B programs. (3)The inclusion of large loan and loan guarantees (loans) should not result in the exclusion of other programs as Type A programs. When a Federal program providing loans significantly affects the number or size of Type A programs, the auditor shall consider this Federal program as a Type A program and exclude its values in determining other Type A programs. (4)For biennial audits permitted under§_.220,the determination of Type A and Type B programs shall be based upon the Federal awards expended during the two-year period. (c) Step 2. (1)The auditor shall identify Type A programs which are low-risk. For a Type A program to be considered low-risk, it shall have been audited as a major program in at least one of the two most recent audit periods(in the most recent audit period in the case of a biennial audit), and, in the most recent audit period, it shall have had no audit findings under§ .510(a). However, the auditor may use judgment and consider that audit findings from questioned costs under§_.510(a)(3) and §_.510(a)(4), fraud under§ .510(a)(6), and audit follow-up for the summary schedule of prior audit findings under§_.510(a)(7) do not preclude the Type A program from being low-risk. The auditor shall consider: the criteria in §,.525(c), § .525(d)(1), §_.525(d)(2), and § .525(d) (3); the results of audit follow-up;whether any changes in personnel or systems affecting a Type A program have significantly increased risk; and apply professional judgment in determining whether a Type A program is low-risk. (2)Notwithstanding paragraph(c)(1)of this section, OMB may approve a Federal awarding agency's request that a Type A program at certain recipients may not be considered low-risk. For example, it may be necessary for a large Type A program to be audited as major each year at particular recipients to allow the Federal agency to comply with the Government Management Reform Act of 1994 (31 U.S.C. 3515). The Federal agency shall notify the recipient and,if known,the auditor at least 180 days prior to the end of the fiscal year to be audited of OMB's approval. (d) Step 3. (1)The auditor shall identify Type B programs which are high-risk using professional judgment and the criteria in§_.525. However, should the auditor select Option 2 under Step 4 (paragraph(e)(2)(i)(B) of this section),the auditor is not required to identify more high-risk Type B programs than the number of low-risk Type A programs. Except for known reportable conditions in internal control or compliance problems as discussed in § .525(b)(1), § .525(b)(2), and §_.525(c)(1), a single criteria in§ .525 would seldom cause a Type B program to be considered high-risk. • http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 30 of 33 .. (2)The auditor is not expected to perform risk assessments on relatively small Federal programs. Therefore, the auditor is only required to perform risk assessments on Type B programs that exceed the larger of: (i) $100,000 or three-tenths of one percent(.003) of total Federal awards expended when the auditee has less than or equal to $100 million in total Federal awards expended. (ii) $300,000 or three-hundredths of one percent(.0003) of total Federal awards expended when the auditee has more than$100 million in total Federal awards expended. (e) Step 4. At a minimum, the auditor shall audit all of the following as major programs: (1)All Type A programs, except the auditor may exclude any Type A programs identified as low-risk under Step 2 (paragraph(c)(1) of this section). (2) (i)High-risk Type B programs as identified under either of the following two options: (A) Option 1. At least one half of the Type B programs identified as high-risk under Step 3 (paragraph(d) of this section), except this paragraph(e)(2)(i)(A)does not require the auditor to audit more high-risk Type B programs than the number of low-risk Type A programs identified as low-risk under Step 2. (B) Option 2. One high-risk Type B program for each Type A program identified as low-risk under Step 2. (ii) When identifying which high-risk Type B programs to audit as major under either Option 1 or 2 in paragraph(e)(2)(i)(A) or(B), the auditor is encouraged to use an approach which provides an opportunity for different high-risk Type B programs to be audited as major over a period of time. (3) Such additional programs as may be necessary to comply with the percentage of coverage rule discussed in paragraph (f) of this section. This paragraph(e)(3)may require the auditor to audit more programs as major than the number of Type A programs. (f) Percentage of coverage rule. The auditor shall audit as major programs Federal programs with Federal awards expended that, in the aggregate, encompass at least 50 percent of total Federal awards expended. If the auditee meets the criteria in§ .530 for a low-risk auditee, the auditor need only audit as major programs Federal programs with Federal awards expended that, in the aggregate, encompass at least 25 percent of total Federal awards expended. (g) Documentation of risk. The auditor shall document in the working papers the risk analysis process used in determining major programs. (h)Auditor's judgment. When the major program determination was performed and documented in accordance with this part,the auditor's judgment in applying the risk-based approach to determine major programs shall be presumed correct. Challenges by Federal agencies and pass-through entities shall only be for clearly improper use of the guidance in this part. However, Federal agencies and pass-through entities may provide auditors guidance about the risk of a particular Federal program and the auditor shall consider this guidance in determining major programs in audits not yet http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 31 of 33 completed. (i)Deviation from use of risk criteria. For first-year audits, the auditor may elect to determine major programs as all Type A programs plus any Type B programs as necessary to meet the percentage of coverage rule discussed in paragraph(f) of this section. Under this option,the auditor would not be required to perform the procedures discussed in paragraphs (c), (d), and(e) of this section. (1)A first-year audit is the first year the entity is audited under this part or the first year of a change of auditors. (2) To ensure that a frequent change of auditors would not preclude audit of high-risk Type B programs, this election for first-year audits may not be used by an auditee more than once in every three years. § .525 Criteria for Federal program risk. (a) General. The auditor's determination should be based on an overall evaluation of the risk of noncompliance occurring which could be material to the Federal program. The auditor shall use auditor judgment and consider criteria, such as described in paragraphs(b), (c), and(d)of this section, to identify risk in Federal programs. Also, as part of the risk analysis, the auditor may wish to discuss a particular Federal program with auditee management and the Federal agency or pass- through entity. (b) Current and prior audit experience. (1)Weaknesses in internal control over Federal programs would indicate higher risk. Consideration should be given to the control environment over Federal programs and such factors as the expectation of management's adherence to applicable laws and regulations and the provisions of contracts and grant agreements and the competence and experience of personnel who administer the Federal programs. (i)A Federal program administered under multiple internal control structures may have higher risk. When assessing risk in a large single audit, the auditor shall consider whether weaknesses are isolated in a single operating unit(e.g., one college campus)or pervasive throughout the entity. (ii) When significant parts of a Federal program are passed through to subrecipients, a weak system for monitoring subrecipients would indicate higher risk. (iii) The extent to which computer processing is used to administer Federal programs, as well as the complexity of that processing, should be considered by the auditor in assessing risk.New and recently modified computer systems may also indicate risk. (2)Prior audit findings would indicate higher risk,particularly when the situations identified in the audit findings could have a significant impact on a Federal program or have not been corrected. (3)Federal programs not recently audited as major programs may be of higher risk than Federal programs recently audited as major programs without audit findings. (c) Oversight exercised by Federal agencies and pass-through entities. (1) Oversight exercised by ve Federal agencies or pass-through entities could indicate risk. For example, recent monitoring or oth- http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 OMB Circular No. A-133 Page 32 of 33 reviews performed by an oversight entity which disclosed no significant problems would indicate lower risk. However, monitoring which disclosed significant problems would indicate higher risk. (2)Federal agencies, with the concurrence of OMB,may identify Federal programs which are higher risk. OMB plans to provide.this identification in the compliance supplement. (d)Inherent risk of the Federal program. (1)The nature of a Federal program may indicate risk. Consideration should be given to the complexity of the program and the extent to which the Federal program contracts for goods and services. For example,Federal programs that disburse funds through third party contracts or have eligibility criteria may be of higher risk. Federal programs primarily involving staff payroll costs may have a high-risk for time and effort reporting,but otherwise be at low-risk. (2)The phase of a Federal program in its life cycle at the Federal agency may indicate risk. For example, a new Federal program with new or interim regulations may have higher risk than an established program with time-tested regulations. Also, significant changes in Federal programs, laws, regulations, or the provisions of contracts or grant agreements may increase risk. (3)The phase of a Federal program in its life cycle at the auditee may indicate risk. For example, during the first and last years that an auditee participates in a Federal program, the risk may be higher due to start-up or closeout of program activities and staff. (4) Type B programs with larger Federal awards expended would be of higher risk than programs with substantially smaller Federal awards expended. §_.530 Criteria for a low-risk auditee. An auditee which meets all of the following conditions for each of the preceding two years (or, in the case of biennial audits,preceding two audit periods) shall qualify as a low-risk auditee and be eligible for reduced audit coverage in accordance with§ .520: (a) Single audits were performed on an annual basis in accordance with the provisions of this part. A non-Federal entity that has biennial audits does not qualify as a low-risk auditee,unless agreed to in advance by the cognizant or oversight agency for audit. (b) The auditor's opinions on the financial statements and the schedule of expenditures of Federal awards were unqualified. However,the cognizant or oversight agency for audit may judge that an opinion qualification does not affect the management of Federal awards and provide a waiver. (c) There were no deficiencies in internal control which were identified as material weaknesses under the requirements of GAGAS. However, the cognizant or oversight agency for audit may judge that any identified material weaknesses do not affect the management of Federal awards and provide a waiver. (d)None of the Federal programs had audit findings from any of the following in either of the preceding two years (or, in the case of biennial audits,preceding two audit periods) in which they were classified as Type A programs: r► (1)Internal control deficiencies which were identified as material weaknesses; http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 • OMB Circular No. A-133 Page 33 of 33 (2)Noncompliance with the provisions of laws,regulations, contracts, or grant agreements which have a material effect on the Type A program; or(3)Known or likely questioned costs that exceed five percent of the total Federal awards expended for a Type A program during the year. Appendix A to Part_-Data Collection Form(Form SF-SAC) OA (56KB) Appendix B to Part_- Circular A-133 Compliance Supplement Note: Provisional OMB Circular A-133 Compliance Supplement is available from the Office of Administration,Publications Office,room 2200,New Executive Office Building, Washington,DC 20503. Billing Code 3110-01-P OMB Home Page I Budget Information I Legislative Information I Management Reform/GPRA I Grants Management I Financial Management I Procurement Policy Information&Regulatory Policy I Special Topics Read our Privacy Policy rik http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 EXHIBIT F & G 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 135, 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 135 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 135, an agrees to take appropriate action, as provided in an applicable provision of the subcontract or in this Section 3 clause, upon a finding that the subcontractor is in violation of the regulations in 24 CFR part 135. 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 r. CFR part 135. 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 135 require employment opportunities to be directed were not filled to circumvent the contractor's obligations under 24 CFR part 135. F. Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions, termination of this contract for default, and debarment or suspension from future HUD- assisted contracts. f, ., Effective August 1, 1994 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 8 and 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- inconie 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 oppor- tunities 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 the formation of Section 3 joint ventures, financial support for affiliating with franchise development, use of labor only contracts for building trades, purchase of supplies an 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 bb 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 "H" 24 ant 85.43 ENFORCINENT (a) Remedies for noncompliance. If a grantee or subgrantee 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 subgrantee 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 subgrantee '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 subgrantee an opportunity for such hearing, appeal, or other administrative proceeding to which the grantee or subgrantee is entitled under any statute or regulation applicable to the action involved. (c) Effects of suspension and termination. Costs of grantee or subgrantee resulting from obligations incurred by the grantee or subgrantee 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 subgrantee 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 subgrantee before the effective date of suspension or termination, are not in anticipation of it, and, in the case of a termination, are noncancellable, 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 subgrantee from being subject to "Debarment and Suspension" under E.O. 12549 (see § 85.35). s. 24 CFR 85.44 TERMINATION FOR CONVENIENCE Except as provided in § 85.43 awards may be terminated in whole or in part only as follows: (a) By the awarding agency with the consent of the grantee or subgrantee 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 subgrantee 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 § 85.43 or paragraph (a) of this section. 9124u OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html EXHIBIT"I" OFFICE OF MANAGEMENT AND BUDGET Cost Principles for Non-Profit Organizations AGENCY: Office of Management and Budget ACTION:Final revision of OMB Circular A-122, "Cost Principles for Non-Profit Organizations" SUMMARY: The Office of Management and Budget(OMB)revises OMB Circular A-122 by amending the definition for equipment; requiring the breakout of indirect costs into two categories(facilities and administration) for certain non-profit organizations; modifying the multiple allocation basis; and, clarifying the treatment of certain cost items. DATES: The revision is effective on June 1, 1998. FOR FURTHER INFORMATION CONTACT: Federal agencies should contact Gilbert Tran, Office of Federal Financial Management, Office of Management and Budget, (202) 395-3993. Non-Federal organizations should contact the organization's Federal cognizant agency. SUPPLEMENTARY INFORMATION: A. Background On October 6, 1995;the Office of Management and Budget(OMB) issued a final revision to OMB Circular A-122, "Cost Principles for Non-Profit Organizations," in the Federal Register(60 FR 52516) regarding interest allowability. The revision was made in a continuing effort to increase consistency across OMB's cost principles circulars A-122, A-21, "Cost Principles for Educational Institutions," and A-87, "Cost Principles for State,Local and Indian Tribal Governments." To further the goals of consistency, OMB proposed on the same date(60 FR 52522)to revise the definition of equipment, to clarify the treatment of certain types of costs, to modify the multiple allocation base method for computing indirect cost rate(s), and to place an upper-limit on payments of administrative expenses for certain non-profit organizations. With this final revision, Circular A-122 consists of the Circular as issued in 1980 (45 FR 46022; July 8, 1980), as amended in 1984(49 FR 18260; April 27, 1984), in 1987 (52 FR 19788; May 27, 1987), in 1995 (60 FR 52516; October 6, 1995), in 1997 (62 FR 45934; August 29, 1997), and in this notice. A recompilation of the entire Circular A-122,with all its amendments, accompanies the notice and is available in electronic form on the OMB Home Page at http://www.whitehouse.gov/OMB. B. Current Revisions Circular A-122 is revised in this notice to: 1. Amend the definition of equipment by increasing the capitalization threshold to the lesser amount used for financial statement purposes or$5,000(see paragraph 15). 2. Require major non-profit organizations(those receiving more than$10 million in direct Federal funding) to report indirect cost rates by two major component categories: facilities and administration(see paragraph 441111 D,Attachment A). 411111 1 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 3. Modify the multiple allocation base method(MAB)to be consistent with OMB Circular A-21 (see paragraph D.3). However,major non-profit organizations are not required to use the multiple allocation base method. MAB remains one of the three available methodologies for computing indirect costs. 4. Clarify the treatment of the following cost items to provide consistency across OMB's cost principles circulars (A-21 and A-87) and the Federal Acquisition Regulations,where applicable: • Alcoholic beverages • Advertising and public relations costs • Organization-furnished automobiles • Defense and prosecution of criminal and civil proceedings,claims, appeals and patent infringements • Housing and living expenses • Insurance • Memberships • Selling or marketing of goods and services • Severance pay for foreign nationals OMB is not implementing the proposed restrictions on trustees'travel expenses at non-profit organizations. In line with this decision, and to further consistency between cost circulars, OMB will be amending Circular A-21 to allow trustees'travel expenses. OMB defers considering an upper-limit on payment of administrative expenses until better data on indirect costs at non-profit organizations are collected. C. Comments and Responses OMB received about 185 comments from non-profit organizations,Federal agencies,professional organizations and accounting firms. A summary of comments and OMB's responses are included in this notice. Several comments resulted in modifications to OMB's original proposal. The comments and OMB's responses are summarized by section as follow. Equipment Definition Comment: Clarification is needed on the treatment of depreciation of those assets which had costs between the old$500 threshold and the new$5,000. Response: In order to clarify the accounting for the undepreciated portion of any equipment costs as a result of a change in capitalization levels,paragraph 15 has been added to explain that the undepreciated amount may be recovered by continuing to claim otherwise allowable use allowances or depreciation on the equipment, or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. Comment: Clarification is needed on whether equipment under the$5,000 threshold, as established by the non-profit organizations'policy, requires Federal approval prior to acquisition. Response: Equipment under the$5,000 threshold, as established by the non-profit organization's policy, can be directly charged to sponsored agreements (subparagraph 15.b)without prior Federal approval. Comment: Current subparagraph 13.b requires prior approval for special purpose equipment, as direct 2 of 63 6/21/00 2:34 PM OMB Ciroular A-122 http://www.whrtehouse.gov/omb/circulars/a122/al22.html costs,with a unit cost of$1,000 or more. This requirement is not consistent with the higher threshold of $5,000 allowed in the proposed revision. This requirement should be revised to be consistent with the proposed revision. Response: OMB agrees. The Circular is revised to require prior Federal approval only for special purpose equipment with a unit cost of$5,000 or more. Unallowable Cost Items These ten revised cost items are already unallowable under OMB Circulars A-21, "Cost Principles for Educational Institutions," and A-87, "Cost Principles for State, Local and Indian Tribal Governments," and/or the Federal Acquisition Regulations. OMB addressed the issue of trustees'travel in response to the comments received. For the other items, consistency across Federal cost regulations was a more significant issue than most of the commenters'concerns. Comments related to specific cost items are presented below, followed by OMB's responses. Advertising and Public Relations Costs Comment: Current paragraph 37, Public information service costs, should be combined with the "Advertising" paragraph to be consistent with other OMB cost principles in Circulars A-21 and A-87. Response: The commenter is correct. The treatment of public information service costs is now addressed in revised paragraph 1, Advertising and public relations costs. Current paragraph 37 is deleted. Comment: Clarify the types of activities that are allowable as public relations costs. Public relations costs to carry out certain functions, such as legitimate program outreach, that are required under sponsored programs and contracts should be allowable. Response: The Circular is revised to clarify that certain public relations costs for the purpose of communicating specific activities related to the sponsored programs to the public or the press are allowable costs. When they are necessary for program outreach effort as required by sponsored programs,public relations costs are allowable. Costs of advertising and public relations incurred solely to promote the organization are unallowable. Comment: Clarify whether advertising media costs such as radio and television are allowable. Response: As long as the public relations costs are specifically required by the sponsored programs or are related to the promotion of sponsored programs, any reasonable advertising media, including magazines, newspapers,radio, television, direct mail, exhibits, and the like,can be used and its costs are allowable. See paragraph l.a. Comment: Community relation costs should be allowable as part of program outreach effort for Federal sponsored programs. Response: Community relations are defined in subparagraph 1.b as "those activities dedicated to maintain the image of the organization or promoting understanding and favorable relations with the community or public at large or any segment of the public." Costs related to community relations are allowable when the costs are required or necessary to the performance of the sponsored programs. " Organization-furnished automobiles for personal use L 3 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html Comment: For security and economic reasons,non-profit organizations often furnish automobiles and housing for its personnel working on Federal projects (e.g., overseas projects sponsored by the U.S. Agency for International Development or the U.S. State Department). These costs should be allowable as direct costs. Response: The Circular is revised to allow these costs when they are necessary to perform the Federal projects,particularly the overseas sponsored projects with prior approval by the Federal awarding agency. These costs are allowable only as direct costs to the Federal projects, and not as fringe benefit or indirect costs. Comment: The Circular should specify which types of automobiles are allowable or unallowable(e.g., cars, vans, trucks and buses). Response: The types of automobiles are irrelevant for the purpose of determining the allowability of automobile costs. Rather, the determinant factors should be whether the automobile costs are reasonable and necessary for the performance of the Federal projects and authorized by the Federal awarding agency. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements Comment: Current paragraph 35.d,Professional service costs, should be combined with new paragraph 10. Response: OMB agrees. Current paragraph 35.d is deleted. Professional service costs related to defense of antitrust suits, prosecution of claims against the Federal Government and patent infringement litigation are discussed in new paragraph 10. Professional service costs incurred for organization and reorganization are discussed in paragraph 31, Organization costs. Comment: Clarification is needed as to when legal costs related to claims, appeals or proceeding become unallowable. Commenters noted that Federal agencies are inconsistent in the determination of the allowability of legal costs as one agency would allow legal costs up to the point where the case goes out of the Federal agency appeal process and to the courts, whereas other agencies would only allow legal costs through the first phase of appeals within the Federal agency. Response: The policy makes unallowable legal and related costs for either defending against claims made by the Federal Government or prosecuting claims against the Government. As such, once a final . management decision letter is issued by the agency(for example, a disallowance letter), all legal and related costs are unallowable from that point forward. Unallowable costs would include claims and defenses pursued through agencies' formal appeal procedures such as administrative law judges and agency appeal boards. Note that legal and related costs may be allowable if the non-profit organization's position is sustained by the administrative appeal process or an agreement is reached between the organization and the Federal Government(see subparagraghs 10.b, 10.c, 10.d and 10.e). This revision is consistent with the language contained in OMB Circular A-21, "Cost Principles for Educational Institutions." Comment: Some commenters objected to the proposed 80 percent limitation on reimbursement when the institution is found innocent. Response: The proposed revision was retained because it provides consistency with procurement contracts. ,This limitation is based on the statutory language of Public Law 100-700, Major Fraud Act of 1988, November 19, 1988 (41 U.S.C., 256(k)(5)),which only allows recovery of 80 percent of the legal costs. 4 of 63 6/21/00 2:34 PM QMB Circular A-122 http://www.wmrenuuse.gov/omb/circulars/a122/a122.html Comment: Legal expenses to defend against lawsuits brought by a foreign government for violation of that country's law should be allowable. Response: The Circular is revised in subparagraph 10.d to authorize Federal agencies to allow legal expenses to defend against lawsuits brought by a foreign government for violation of its law when such costs were necessary or were direct results of the performance of Federal sponsored programs. The same authorizations apply for legal costs for defense against lawsuits brought by state or local governments. Comment: Legal fees to defend against lawsuits filed by former employees for termination or by subrecipients should be allowable. Response: Legal fees incurred in defense of lawsuits not brought by a Federal, State, local or foreign government, except when the suits are brought by former employees under Section 2 of the Major Fraud Act of 1988 (Pub. L. 100-700), are allowable. Housing and living expenses Comment: For security and economic reasons, non-profit organizations often furnish automobiles and housing for its personnel working on overseas Federal projects (e.g., overseas projects sponsored by the U.S. Agency for International Development). These costs should be allowable as direct costs. Response: As previously noted(in the discussion of automobiles),the Circular is revised to allow these costs when they are necessary to perform the Federal projects and when they are approved by the Federal awarding agency. These costs are allowable only as direct costs to the Federal projects, and not as fringe benefit or indirect costs. Insurance Comment: General and casualty liability insurance costs for organization's directors and administrators should be allowable. Response: General and casualty liability insurance costs for organization's directors and administrators are allowable, subject to limitations, as described in subparagraph 22.a.(2).New subparagraph 22.a.(2).f, Insurance against defects,prohibits the reimbursement of costs against Federally sponsored awards for product(or services) liability insurance costs. Comment: Medical liability insurance costs for participants in Federal training programs should be allowable. Response: Medical liability insurance costs associated with participants in Federal training programs are allowable to Federal programs as direct costs. Comment: Malpractice insurance costs for physicians should be direct charged to Federal programs while malpractice insurance costs for nurses or laboratory assistants,which are immaterial in most cases, should be charged as indirect costs. Response: Subparagraph B.2 of Attachment A provides that when a direct cost is of minor amounts, it may be treated as an indirect cost for reasons of practicality and efficiency,provided that the accounting treatment for such cost is consistently applied to all final cost objectives. Therefore,when malpractice • +- insurance costs for nurses or lab technicians are immaterial in relation to its effect on the overall indirect 0 5 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.11tmi cost rates of the organization, they may be treated as indirect costs. Memberships Comment: Membership costs in civic and community organizations should be allowable. Response: Membership costs are allowable for business and professional organizations. The Circular is further revised to allow membership costs in civic and community organizations when associations with these organizations are essential to the performance of the Federal programs (as an outreach function). These membership costs must be approved by the Federal cognizant agency. Comment: Costs of membershipin organizations that lobbyshould be unallowable. g Response: Paragraph 25 of the Circular disallows lobbying cos ts. Membership dues to lobbying organizations are therefore unallowable. The unallowable portion of membership dues is determined by the percentage of lobbying activities versus other allowable activities of the lobbying organization. Selling or Marketing of Goods and Services Comment: Clarification is needed for what types of activities are considered to be the selling or marketing of goods and services. Response: Selling or marketing of goods and services generally include an organization's efforts to market the organization's products or services such as through advertising, organizational image enhancement, market planning and direct selling. Direct selling efforts are those acts or actions used to induce particular customers to purchase particular products or services of the organization. The allowability provisions for advertising costs are described in paragraph 1. Comment: The guidelines for selling or marketing of goods and services should be consistent with those in FAR 31.205.38(c)(1). Response: FAR 31.2O5.38(c)(1) allows direct selling costs at commercial contractors if they are reasonable in amount. By contrast to the commercial contract context, direct selling costs are generally not considered to be necessary costs for the performance of Federal sponsored programs by non-profit organizations. In those cases where they are essential for certain Federal sponsored programs, these costs can be charged as direct costs to the Federal sponsored programs if they are approved by the Federal awarding agency. Comment: Given that the Bayh-Dole Act encouraged technology transfer, selling or marketing costs of goods or services should be allowable costs. At the minimum,these costs should be allowable as direct costs to the Federal projects. Response: The Circular is revised to allow selling or marketing costs as direct costs to some Federal sponsored programs when approved by the Federal awarding agency. Severance Pay Comment: Early retirement benefits should be allowable costs. Response: Early retirement benefit costs are allowable costs, subject to limitations, and are discussed in subparagraph 6.f, Fringe.Benefits, along with other forms of fringe benefits. Paragraph 49, Severance Pay, 6 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whltehouse.gov/omb/circulars/a122/a122.html deals only with severance policy, i.e., dismissal, and the reimbursement of its costs. Comment: Guidelines for costs of severance pay to foreign nationals in excess of customary or prevailing practices should be consistent with section 2151 of the Federal Acquisition Streamlining Act of 1994 (FASA). Response: OMB agrees. The Circular is revised to be consistent with FASA guidelines for severance pay to foreign nationals in excess of customary or prevailing practices. As a result, the Federal awarding agency may allow these costs when they are necessary for the performance of the Federal sponsored programs. Trustees' Travel Comment: Several commenters opposed the proposal to disallow trustees'travel costs citing the difficulty of retaining or obtaining members to serve voluntarily on the Board of Trustees (or Directors) of a non-profit organization, if Board members have to pay for their own travel expenses to attend Board meetings. The commenters added that since serving on a non-profit organization's Board is often not as prestigious and desirable as serving on a University's Board(where trustees'travel costs are unallowable under Circular A-21), non-reimbursement of the travel costs would inhibit the recruitment of Board members. Response: OMB concurs that disallowing the reimbursement of trustees'travel costs could inhibit the recruitment of qualified Board members(particularly at smaller non-profit organizations), thereby hampering the operations of a non-profit organization. OMB also recognizes that trustees'travel costs are reasonable and necessary business costs. As a result, trustees'travel costs remain allowable. Comment: Trustees'travel costs should be allowable if they are reasonable. Some suggested tests for reasonableness of trustees'travel costs are: limit number of allowed trips per year,restriction of trips to organization's principal place of business or reasonable surroundings, distinction between scheduled Board meetings and emergency Board meetings, and disallowance of first-class airfare travels. Response: All costs charged to Federal projects must satisfy a reasonableness test. Although some of the suggested reasonableness tests appear to be good, OMB does not believe it is necessary at this time to impose specific restrictions on trustees'travel expenses. The reasonableness of a particular travel expense remains at the judgement of Federal negotiators. Comment: At Head Start organizations, some Trustee members are first sent for training in the operations of a Head Start program. These travel costs related to training should be allowable. Response: Travel costs related to training and education are allowable, subject to limitations, and are addressed in paragraph 53 of the Circular, Training and education costs. Comment: At Head Start organizations, there often are several advisory boards in addition to the Board of Trustees (or Directors). These advisory boards are involved in day-to-day operations of the organizations and often incur travel costs. Are these costs subject to the same restrictions as trustees'travel? Response: Travel costs for members of advisory groups are allowable, subject to the limitations in paragraph 55, Travel costs. Multiple Allocation Basis (MAB) watt 7 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.html Comment: The multiple allocation method for calculating indirect costs rates is much more complicated and burdensome than the simplified method and it will cost non-profit organizations much more to prepare the indirect cost proposal. Several commenters recommended the flexibility of using one of the three different allocation methods as they are currently described in the Circular. The multiple allocation basis (MAB) should remain an optional allocation methodology rather than a required methodology for certain organizations. Response: The use of MAB for major non-profit organizations promotes consistency in the calculation and the reporting of indirect costs. It would facilitate the accumulation of indirect cost data by cost components (i.e., facilities and administration) and provide comparable rates between major research non-profit organizations and universities. However, OMB recognizes that a conversion to MAB may require some substantial changes in the organization's accounting system and that MAB is not practical for. single-function organizations. Therefore,the Circular continues to allow non-profit organizations to use any of the current three allocation methodologies. Comment: Several commenters suggested raising the threshold for the requirement to $25 million in direct Federal funding. Several commenters also suggested an exemption from this requirement for single-function organizations regardless of Federal funding levels. Response: The Circular is revised to allow the use of the current three allocation methodologies for all non-profit organizations. For organizations that receive more than$10 million in direct Federal funding, a breakout of indirect costs into two components, facilities and administration, is required regardless of the selected allocation methodology. Comment: The allocation methodology for general administration under MAB on the basis of modified total direct costs conflicts with the required methodology under Cost Accounting Standard(CAS)410 applicable to contracts using the salaries and wages basis. One commenter suggested that a fully CAS-covered non-profit organization be exempted from the MAB requirement. Response: MAB is not a requirement for non-profit organizations and remains one of the three available methodologies in the Circular for computing indirect costs. In addition, CAS-covered non-profit organizations should continue to follow CAS with respect to the measurement, assignment and allocation of costs. Comment: The revision should clarify that the modified total direct cost base should only include the first $25,000 of a subcontract regardless of the period during which the project is started(consistent with OMB Circular A-21). Response: The modified total direct cost base, described in subparagraph D.3.f of the Circular, includes the first$25,000 of each subgrant or subcontract regardless of the period covered by the subgrant or subcontract. Subgrant or subcontract costs above$25,000 shall be excluded from the modified total direct cost base. For example, for a$300,000 subgrant that lasts three years,only the first$25,000 incurred on the award should be included in the modified total direct cost base. Administrative Cap of 26 percent Comment: Most commenters strongly opposed the 26 percent administrative cap stating that such limitation on cost reimbursement is arbitrary, capricious, and unnecessary. Some argued that a cap would be financially disastrous to non-profit organizations because they receive most of their funding from Federal sources (unlike universities). A detailed analysis is urged to determine the average administrative 8 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html costs applicable to non-profit organizations, if an administrative cap is to be implemented at non-profit organizations. Response: Based on the comments against the implementation of an administrative cap at non-profit • organizations, OMB defers the consideration of establishing any administrative cap until better data on indirect costs at non-profit organizations can be collected. If OMB believes that an administrative cap should be implemented, it would be proposed in a subsequent notice. Other Comment: Attachment C of the Circular should be updated since a few listed organizations no longer exist. Response: OMB agrees. Attachment C is updated to delete those organizations that no longer exist or are no longer exempted from OMB Circular A-122. Franklin D. Raines Director Attachments A,B and C of Circular A-122 are revised as follows: A.Attachment A 1. Add subparagraph 3 to paragraph C ("Indirect Costs"). 3. Indirect costs shall be classified within two broad categories: "Facilities" and "Administration." "Facilities" is defined as depreciation and use allowances on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office, accounting,personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories of"Facilities" (including cross allocations from other pools,where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g. 2. Add subparagraph 2.e to paragraph D. e. For an organization that receives more than$10 million in Federal funding of direct costs in a fiscal year, a breakout of the indirect cost component into two broad categories,Facilities and Administration as defined in subparagraph C.3, is required. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category(i.e., Facilities or Administration) is of the distribution base identified with that category. 3. Replace subparagraph D.3 with the following: 3. Multiple allocation base method. a. General. Where an organization's indirect costs benefit its major functions in varying degrees, indirect costs shall be accumulated into separate cost groupings, as described in subparagraph b. Each grouping shall then be allocated individually to benefitting functions by means of a base which best measures the relative benefits. The default allocation bases by cost pool are described in subparagraph c. mob 9 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html b. Identification of indirect costs. Cost groupings shall be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. Each grouping shall constitute a pool of expenses that are of like character in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The groupings are classified within the two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the organization's buildings, capital improvements to land and buildings, and equipment which are computed in accordance with paragraph 11 of Attachment B ("Depreciation and use allowances"). (2) Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in accordance with paragraph 23 of Attachment B ("Interest, fund raising, and investment management costs"). (3) Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration, operation,maintenance,preservation, and protection of the organization's physical plant. They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal;property, liability and other insurance relating to property; space and capital leasing; facility planning and management; and, central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs, depreciation and use allowances, and interest costs. (4) General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category shall also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation and use allowances, and interest costs. Examples of this category include central offices, such as the director's office, the office of finance, business services,budget and planning,personnel, safety and risk management, general counsel, management information systems, and library costs. In developing this cost pool, special care should be exercised to ensure that costs incurred for the same purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff,project supplies,project publication, telephone toll charges, computer costs, travel costs, and specialized services costs shall be treated as direct costs wherever identifiable to a particular program. The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity. Items such as office.supplies,postage, local telephone costs, periodicals and memberships should normally be treated as indirect costs. c. Allocation bases. Actual conditions shall be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason,where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assignment of a cost grouping directly to the function benefited, the allocation shall be made in that manner. When the expenses in a cost grouping are more general in nature, the allocation shall be made 10 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.wnaenouse.gov/ombicirculars/a122/a122.html • through the use of a selected base which produces results that are equitable to both the Federal Government and the organization. The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards. The results of special cost studies (such as an engineering utility study) shall not be used to determine and allocate the indirect costs to sponsored awards. (1)Depreciation and use allowances. Depreciation and use allowances expenses shall be allocated in the following manner: (a)Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings, shall be assigned to that function. (b)Depreciation or use allowances on buildings used for more than one function, and on capital improvements and equipment used in such buildings, shall be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding common areas, such as hallways, stairwells, and restrooms. (c) Depreciation or use allowances on buildings,capital improvements and equipment related space(e.g., individual rooms, and laboratories)used jointly by more than one function(as determined by the users of the space) shall be treated as follows. The cost of each jointly used unit of space shall be allocated to the benefitting functions on the basis of: (i)the employees and other users on a full-time equivalent(FTE)basis or salaries and wages of those individual functions benefitting from the use of that space; or (ii)organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the organization. (d)Depreciation or use allowances on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like,not included in the cost of buildings, shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions. (2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on the buildings, equipment and capital equipments to which the interest relates. (3) Operation and maintenance expenses. Operation and maintenance expenses shall be allocated in the same manner as the depreciation and use allowances. (4) General administration and general expenses. General administration and general expenses shall be allocated to benefitting functions based on modified total direct costs (MTDC), as described in subparagraph D.3.f. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group shall then be allocated to benefitting functions based on MTDC. d. Order of distribution. (1)Indirect cost categories consisting of depreciation and use allowances, interest, operation and maintenance, and general administration and general expenses shall be allocated in that order to the 11 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at22.htinl remaining indirect cost categories as well as to the major functions of the organization. Other cost categories could be allocated in the order determined to be most appropriate by the organization. When cross allocation of costs is made as provided in subparagraph(2), this order of allocation does not apply. (2)Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required. e. Application of indirect cost rate or rates. Except where a special indirect cost rate(s)is required in accordance with subparagraph D.5,the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual awards included in that function by use of a single indirect cost rate. f. Distribution basis. Indirect costs shall be distributed to applicable sponsored awards and other benefitting activities within each major function on the basis of MTDC. MTDC consists of all salaries and wages, fringe benefits, materials and supplies, services,travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care,rental costs and the portion in excess of$25,000 shall be excluded from MTDC. Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g. Individual Rate Components. An indirect cost rate shall be determined for each separate indirect cost pool developed. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. B. Attachment B Revise the following cost items in Attachment B to Circular A-122("Selected Items of Cost"). 1. Revise the Table of Contents for Attachment B to read: 1. Advertising and public relations costs 2. Alcoholic beverages 3. Bad debts 4. Bid and proposal costs(reserved) 5. Bonding costs 6. Communication costs 7. Compensation for personal services 8. Contingency provisions 9. Contributions 10. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement I1. Depreciation and use allowances 12. Donations 13. Employee morale, health, and welfare costs and credits 12 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 14. Entertainment costs 15. Equipment and other capital expenditures 16. Fines and penalties 17. Fringe benefits 18. Goods or services for personal use 19. Housing and personal living expenses 20. Idle facilities and idle capacity 21. Independent research and development(reserved) 22. Insurance and indemnification 23. Interest, fund raising, and investment management costs 24. Labor relations costs 25. Lobbying costs 26. Losses on other awards 27. Maintenance and repair costs 28. Materials and supplies 29. Meetings and conferences 30. Memberships, subscriptions, and professional activity costs 31. Organization costs 32. Overtime, extra-pay shift, and multi-shift premiums 33. Page charges in professional journals 34. Participant support costs 35. Patent costs 36. Pension plans 37. Plant security costs 38. Pre-award costs 39. Professional service costs 40. Profits and losses on disposition of depreciable property or other capital assets 41. Publication and printing costs 42. Rearrangement and alteration costs 43. Reconversion costs 44. Recruiting costs 45. Relocation costs 46. Rental costs 47. Royalties and other costs for use of patents and copyrights 48. Selling and marketing 49. Severance pay 50. Specialized service facilities 51. Taxes 52. Termination costs 53. Training and education costs 54. Transportation costs 55. Travel costs 56. Trustees 2. Revise and retitle paragraph 1 to read: 1. Advertising and public relations costs. a. The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines, newspapers,radio and television programs, direct mail, exhibits, 13 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html and the like. b. The term public relations includes community relations and means those activities dedicated to maintaining the image of the organization or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. c. The only allowable advertising costs are those which are solely for: (1)The recruitment of personnel required for the performance by the organization of obligations arising under a sponsored award,when considered in conjunction with all other recruitment costs, as set forth in paragraph 44 ("Recruiting costs"); (2)The procurement of goods and services for the performance of a sponsored award; (3) The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at a predetermined amount in accordance with OMB Circular A-110, Sec. .34, "Equipment"; or (4) Other specific purposes necessary to meet the requirements of the sponsored award. d. The only allowable public relations costs are: (1) Costs specifically required by sponsored awards; (2) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of sponsored awards (these costs are considered necessary as part of the outreach effort for the sponsored awards); or (3) Costs of conducting general liaison with news media and government public relations officers,to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of contract/grant awards, financial matters, etc. e. Costs identified in subparagraphs c and d if incurred for more than one sponsored award or for both sponsored work and other work of the organization, are allowable to the extent that the principles in paragraphs B ("Direct Costs") and C ("Indirect Costs") of Attachment A are observed. f. Unallowable advertising and public relations costs include the following: (1) All advertising and public relations costs other than as specified in subparagraphs c, d, and e; (2) Costs of meetings or other events related to fund raising or other organizational activities including: (i) Costs of displays, demonstrations, and exhibits; (ii) Costs of meeting rooms,hospitality suites, and other special facilities used in conjunction with shows and other special events; and j'i) Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; 14 of 63 6/21/00 2:34 PM •M13 CircularA-122 http://www.wnuc,iuuse.gov/omb/circulars/a122/a122.html (3)Costs of promotional items and memorabilia, including models, gifts, and souvenirs; (4) Costs of advertising and public relations designed solely to promote the organization. 3. Renumber current paragraphs 2 through 8 as paragraphs 3 through 9,respectively. 4. Add the following new paragraph 2: 2. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 5. In paragraph 7 ("Compensation for personal services"), as renumbered above in item 3,rename the current subparagraph g("Pension costs"), as subparagraph h. Add a new subparagraph g: g. Organization-furnished automobiles. That portion of the cost of organization-furnished automobiles that relates to personal use by employees (including transportation to and from work)is unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. 6. Renumber current paragraphs 9 through 15 as paragraphs 11 through 17,respectively. 7. Add new paragraph 10: 10. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement. a. Definitions. (1) Conviction, as used herein,means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a plea, including a conviction due to a plea of nolo contendere. (2)Costs include,but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; and the costs of the services of accountants, consultants, or others retained by the organization to assist it; costs of employees, officers and trustees, and any similar costs incurred before,during, and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings. (3)Fraud, as used herein,means (i) acts of fraud corruption or attempts to defraud the Federal Government or to corrupt its agents, (ii) acts that constitute a cause for debarment or suspension(as specified in agency regulations), and(iii) acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731, or the Anti-Kickback Act,41 U.S.C., sections 51 and 54. (4)Penalty does not include restitution, reimbursement, or compensatory damages. (5)Proceeding includes an investigation. b. (1)Except as otherwise described herein, costs incurred in connection with any criminal, civil or administrative proceeding(including filing of a false certification) commenced by the Federal Government, or a State, local or foreign government, are not allowable if the proceeding: (1)relates to a violation of, or 15 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htinl failure to comply with, a Federal, State, local or foreign statute or regulation by the organization(including its agents and employees), and(2)results in any of the following dispositions: (a)In a criminal proceeding, a conviction. (b)In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of organizational liability. (c)In the case of any civil or administrative proceeding, the imposition of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or suspend the organization,to rescind or void an award, or to terminate an award for default by reason of a violation or failure to comply with a law or regulation. (e) A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in(a), (b), (c) or(d). (2) If more than one proceeding involves the same alleged misconduct, the costs of all such proceedings shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(1). c. If a proceeding referred to in subparagraph b is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement entered into by the organization and the Federal . Government, then the costs incurred by the organization in connection with such proceedings that are otherwise not allowable under subparagraph b may be allowed to the extent specifically provided in such agreement. d. If a proceeding referred to in subparagraph b is commenced by a State, local or foreign government,the authorized Federal official may allow the costs incurred by the organization for such proceedings, if such authorized official determines that the costs were incurred as a result of(1) a specific term or condition of a federally-sponsored award, or(2) specific written direction of an authorized official of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b, but which are not made unallowable by that subparagraph,may be allowed by the Federal Government,but only to the extent that: (1) The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action; (2)Payment of the costs incurred, as allowable and allocable costs, is not prohibited by any other provision(s) of the sponsored award; (3)The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and, (4) The percentage of costs allowed does not exceed the percentage determined by an authorized Federal official to be appropriate, considering the complexity of the litigation, generally accepted principles 'governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage,then the full amount of costs resulting from that agreement shall be allowable. 16 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html f. Costs incurred by the organization in connection with the defense of suits brought by its employees or ex-employees under section 2 of the Major Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief necessary to make such employee whole,where the organization was found liable or settled, are unallowable. g. Costs of legal, accounting, and consultant services, and related costs, incurred in connection with defense against Federal Government claims or appeals, antitrust suits, or the prosecution of claims or appeals against the Federal Government, are unallowable. h. Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent infringement litigation, are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph, including directly associated costs, shall be segregated and accounted for by the organization separately. During the pendency of any proceeding covered by subparagraphs b and f, the Federal Government shall generally withhold payment of such costs. However, if in the best interests of the Federal Government, the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreements by the organization to repay all unallowable costs,plus interest, if the costs are subsequently determined to be unallowable. 8. In paragraph 15 ("Equipment and other capital expenditures"), as renumbered in item 6 above,replace subparagraphs 15.a.(1) and 15.b.(2)to read: 15.a.(1) "Equipment" means an article of nonexpendable,tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization level established by the organization for the financial statement purposes, or(b) $5000. The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on the equipment, or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. 15.b.(2) Capital expenditures for special purpose equipment are allowable as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of awarding agency. 9. Renumber current paragraphs 16 through 36 as paragraphs 20 through 40, respectively. 10. Add new paragraph 18: 18. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 11. Add new paragraph 19: 19. Housing and personal living expenses. a. Costs of housing(e.g., depreciation, maintenance,utilities, furnishings,rent, etc.), housing allowances and personal living expenses for/of the organization's officers are unallowable as fringe benefit or indirect a costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored awards when necessary for the performance of the sponsored award and approved by awarding agencies. 17 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at22.html b. The term"officers" includes current and past officers and employees. 12. Add to paragraph 22.a.(2) ("Insurance and indemnification"), as renumbered in item 9, subparagraphs (f)and(g): (f)Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the organization's materials or workmanship are unallowable. (g) Medical liability(malpractice) insurance. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. 13. Revise paragraph 30, as renumbered in item 9, to read: 30. Memberships,subscriptions and professional activity costs. a. Costs of the organization's membership in business, technical, and professional organizations are allowable. b. Costs of the organization's subscriptions to business,professional, and technical periodicals are allowable. c. Costs of meetings and conferences,when the primary purpose is the dissemination of technical information, are allowable. This includes costs of meals,transportation,rental of facilities, and other items incidental to such meetings or conferences. d. Costs of membership in any civic or community organization are allowable with prior approval by Federal cognizant agency. e. Costs of membership in any country club or social or dining club or organization are unallowable. 14. Delete subparagraph 39.d, as renumbered in item 9. 15. Delete current paragraph 37 ("Public service costs"). 16. Renumber current paragraphs 38 through 44 as paragraphs 41 through 47, respectively. 17. Revise paragraph 44, as renumbered in item 16,to read: 44. Recruiting costs. a. Subject to subparagraphs b, c, and d, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of"help wanted" advertising, operating costs of an employment ,office necessary to secure and maintain an adequate staff, costs of operating an aptitude and educational testing program, travel costs of employees while engaged in recruiting personnel, travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment 18 of 63 6/21/00 2:34 PM .OMB Circular A-122 - http://www.wmucuouse.gov/omb/circulars/a122/a122.htm1 program. Where the organization uses employment agencies, costs that are not in excess of standard commercial rates for such services are allowable. b. In publications, costs of help wanted advertising that includes color, includes advertising material for other than recruitment purposes,or is excessive in size(taking into consideration recruitment purposes for which intended and normal organizational practices in this respect), are unallowable. c. Costs of help wanted advertising, special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization, are unallowable. d. Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost, and the newly hired employee resigns for reasons within his control within twelve months after being hired,the organization will be required to refund or credit such relocation costs to the Federal Government. 18. Renumber current paragraphs 45 through 51 as paragraphs 49 through 55,respectively. 19. Add new paragraph 48: 48. Selling and marketing. Costs of selling and marketing any products or services of the organization (unless allowed under paragraph 1 as allowable public relations costs) are unallowable. These costs, however, are allowable as direct costs,with prior approval by awarding agencies, when they are necessary for the performance of Federal programs. 20. Add new subparagraphs c, d and e to paragraph 49 ("Severance pay"), as renumbered in item 18, as follow: c. Costs incurred in certain severance pay packages(commonly known as "a golden parachute"payment) which are in an amount in excess of the normal severance pay paid by the organization to an employee upon termination of employment and are paid to the employee contingent upon a change in management control over, or ownership of,the organization's assets are unallowable. d. Severance payments to foreign nationals employed by the organization outside the United States, to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies. e. Severance payments to foreign nationals employed by the organization outside the United States due to the termination of the foreign national as a result of the closing of, or curtailment of activities by, the organization in that country, are unallowable,unless they are necessary for the performance of Federal programs and approved by awarding agencies. 21. Add new paragraph 56: 56. Trustees. Travel and subsistence costs of trustees (or directors) are allowable. The costs are subject to restrictions regarding lodging, subsistence and air travel costs provided in paragraph 55. tl0 C.Attachment C (:\De 19 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at'22.html 1. Delete the following organizations from Attachment C. These organizations either no longer exist or are no longer exempted from complying with Circular A-122. • Associated Universities, Incorporated,Washington, D.C. • Associated Universities for Research and Astronomy, Tucson, Arizona • Center for Energy and Environmental Research(CEER), (University of Puerto Rico), Commonwealth of Puerto Rico • Comparative Animal Research Laboratory(CARL), (University of Tennessee), Oak Ridge, Tennessee • Institute of Gas Technology, Chicago, Illinois • Montana Energy Research and Development Institute, Inc., (MERDI), Butte, Montana • Project Management Corporation, Oak Ridge, Tennessee • Sandia Corporation, Albuquerque,New Mexico • Universities Corporation for Atmospheric Research, Boulder, Colorado 2. Change Argonne Universities Association, Chicago, Illinois to Argonne National Laboratory, Chicago, Illinois. 3. Change the location of the Institute for Defense Analysis in Virginia from Arlington to Alexandria. 4. Replace Midwest Research Institute, Headquartered in Kansas City, Missouri to National Renewable Energy Laboratory, Golden, Colorado. D. A recompilation of the entire Circular A-122,with all its amendments, follows: CIRCULAR NO. A-122 Revised TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Cost Principles for Non-Profit Organizations 1. Purpose. This Circular establishes principles for determining costs of grants, contracts and other agreements with non-profit organizations. It does not apply to colleges and universities which are covered by Office of Management and Budget(OMB) Circular A-21, "Cost Principles for Educational Institutions"; State, local, and federally-recognized Indian tribal governments which are covered by OMB Circular A-87, ".Cost Principles for State, Local, and Indian Tribal Governments"; or hospitals. The principles are designed ,io provide that the Federal Government bear its fair share of costs except where restricted or prohibited by law. The principles do not attempt to prescribe the extent of cost sharing or matching on grants, contracts, or other agreements. However, such cost sharing or matching shall not be accomplished through arbitrary limitations on individual cost elements by Federal agencies. Provision for profit or other increment above 20 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.wnitenouse.gov/omb/circulars/a122/a122.htnit cost is outside the scope of this Circular. 2. Supersession. This Circular supersedes cost principles issued by individual agencies for non-profit organizations. 3. Applicability. a. These principles shall be used by all Federal agencies in determining the costs of work performed by non-profit organizations under grants, cooperative agreements, cost reimbursement contracts, and other contracts in which costs are used in pricing, administration, or settlement. All of these instruments are hereafter referred to as awards. The principles do not apply to awards under which an organization is not required to account to the Federal Government for actual costs incurred. b. All cost reimbursement subawards(subgrants, subcontracts, etc.) are subject to those Federal cost principles applicable to the particular organization concerned. Thus, if a subaward is to a non-profit organization, this Circular shall apply; if a subaward is to a commercial organization,the cost principles applicable to commercial concerns shall apply; if a subaward is to a college or university, Circular A-21 shall apply; if a subaward is to a State, local, or federally-recognized Indian tribal government, Circular A-87 shall apply. 4. Definitions. a. Non-profit organization means any corporation, trust, association, cooperative, or other organization which: (1) is operated primarily for scientific, educational, service, charitable, or similar purposes in the public interest; (2) is not organized primarily for profit; and (3)uses its net proceeds to maintain, improve, and/or expand its operations. For this purpose,the term "non-profit organization" excludes(i) colleges and universities; (ii)hospitals; (iii) State, local, and federally-recognized Indian tribal governments; and(iv)those non-profit organizations which are excluded from coverage of this Circular in accordance with paragraph 5. b. Prior approval means securing the awarding agency's permission in advance to incur cost for those items that are designated as requiring prior approval by the Circular. Generally this permission will be in writing. Where an item of cost requiring prior approval is specified in the budget of an award, approval of the budget constitutes approval of that cost. 5.Exclusion of some non-profit organizations. Some non-profit organizations,because of their size and nature of operations, can be considered to be similar to commercial concerns for purpose of applicability of cost principles. Such non-profit organizations shall operate under Federal cost principles applicable to commercial concerns. A listing of these organizations is contained in Attachment C. Other organizations may be added from time to time. 6. Responsibilities. Agencies responsible for administering programs that involve awards to non-profit Mb organizations shall implement the provisions of this Circular. Upon request, implementing instruction shall be furnished to OMB. Agencies shall designate a liaison official to serve as the agency representative on matters relating to the implementation of this Circular. The name and title of such representative shall be 21 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at22.html furnished to OMB within 30 days of the date of this Circular. 7. Attachments. The principles and related policy guides are set forth in the following Attachments: Attachment A- General Principles Attachment B - Selected Items of Cost Attachment C -Non-Profit Organizations Not Subject To This Circular 8. Requests for exceptions. OMB may grant exceptions to the requirements of this Circular when permissible under existing law. However, in the interest of achieving maximum uniformity, exceptions will be permitted only in highly unusual circumstances. 9. Effective Date. The provisions of this Circular are effective immediately. Implementation shall be phased in by incorporating the provisions into new awards made after the start of the organization's next fiscal year. For existing awards,the new principles may be applied if an organization and the cognizant Federal agency agree. Earlier implementation, or a delay in implementation of individual provisions, is also permitted by mutual agreement between an organization and the cognizant Federal agency. 10. Inquiries. Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, OMB, Washington,DC 20503, telephone (202) 395-3993. Attachments ATTACHMENT A Circular No. A-122 GENERAL PRINCIPLES Table of Contents A. Basic Considerations 1. Composition of total costs 2. Factors affecting allowability of costs 3. Reasonable costs 4. Allocable costs • 5. Applicable credits 6. Advance understandings 7. Conditional exemptions B. Direct Costs C. Indirect Costs 4. Allocation of Indirect Costs and Determination of Indirect Cost Rates 1. General 2. Simplified allocation method 22 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.wnucuuuse.gov/omb/circulars/a122/a122.htm1 3. Multiple allocation base method 4. Direct allocation method 5. Special indirect cost rates E.Negotiation and Approval of Indirect Cost Rates 1. Definitions 2.Negotiation and approval of rates ATTACHMENT A Circular No. A-122 GENERAL PRINCIPLES A. Basic Considerations 1. Composition of total costs. The total cost of an award is the sum of the allowable direct and allocable indirect costs less any applicable credits. 2.Factors affecting allowability of costs. To be allowable under an award, costs must meet the following general criteria: a. Be reasonable for the performance of the award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the award as to types or amount of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization. d. Be accorded consistent treatment. e. Be determined in accordance with generally accepted accounting principles (GAAP). f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. g. Be adequately documented. 3. Reasonable costs. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or separate divisions thereof which receive the preponderance of their support from awards made by Federal agencies. In determining the reasonableness of a given cost, consideration shall be given to: ,414k a. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award. 7/D 23 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html ' b. The restraints or requirements imposed by such factors as generally accepted sound business practices, arms length bargaining,Federal and State laws and regulations, and terms and conditions of the award. c. Whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the organization, its members, employees, and clients, the public at large, and the Federal Government. d. Significant deviations from the established practices of the organization which may unjustifiably increase the award costs. 4.Allocable costs. a. A cost is allocable to a particular cost objective, such as a grant,contract,project, service, or other activity, in accordance with the relative benefits received. A cost is allocable to a Federal award if it is treated consistently with other costs incurred for the same purpose in like circumstances and if it: (1) Is incurred specifically for the award. (2)Benefits both the award and other work and can be distributed in reasonable proportion to the benefits received, or (3) Is necessary to the overall operation of the organization, although a direct relationship to any particular cost objective cannot be shown. b. Any cost allocable to a particular award or other cost objective under these principles may not be shifted to other Federal awards to overcome funding deficiencies, or to avoid restrictions imposed by law or by the terms of the award. 5.Applicable credits. a. The term applicable credits refers to those receipts, or reduction of expenditures which operate to offset or reduce expense items that are allocable to awards as direct or indirect costs. Typical examples of such transactions are: purchase discounts, rebates or allowances,recoveries or indemnities on losses, insurance refunds, and adjustments of overpayments or erroneous charges.To the extent that such credits accruing or received by the organization relate to allowable cost, they shall be credited to the Federal Government either as a cost reduction or cash refund, as appropriate. b. In some instances, the amounts received from the Federal Government to finance organizational activities or service operations should be treated as applicable credits. Specifically, the concept of netting such credit items against related expenditures should be applied by the organization in determining the rates or amounts to be charged to Federal awards for services rendered whenever the facilities or other resources used in providing such services have been financed directly, in whole or in part,by Federal funds. • c. For rules covering program income(i.e.,gross income earned from federally-supported activities) see Sec. _.24 of Office of Management and Budget(OMB) Circular A-110, "Uniform Administrative 4'' Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals, and Other Non-Profit Organizations." 24 of 63 6/21/00 2:34 PM OMrs LircularA-itt http://www.wnnenouse.gov/omb/circulars/a122/a122.html 6.Advance understandings. Under any given award, the reasonableness and allocability of certain items of costs may be difficult to determine. This is particularly true in connection with organizations that receive a preponderance of their support from Federal agencies. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, it is often desirable to seek a written agreement with the cognizant or awarding agency in advance of the incurrence of special or unusual costs. The absence of an advance agreement on any element of cost will not, in itself, affect the reasonableness or allocability of that element. 7. Conditional exemptions. a. OMB authorizes conditional exemption from OMB administrative requirements and cost principles circulars for certain Federal programs with statutorily-authorized consolidated planning and consolidated administrative funding, that are identified by a Federal agency and approved by the head of the Executive department or establishment. A Federal agency shall consult with OMB during its consideration of whether to grant such an exemption. • b. To promote efficiency in State and local program administration,when Federal non-entitlement programs with common purposes have specific statutorily-authorized consolidated planning and consolidated administrative funding and where most of the State agency's resources come from non-Federal sources, Federal agencies may exempt these covered State-administered,non-entitlement grant programs from certain OMB grants management requirements. The exemptions would be from all but the allocability of costs provisions of OMB Circulars A-87 (Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for Educational Institutions," and A-122 (Attachment A, subsection A.4), "Cost Principles for Non-Profit Organizations," and from all of the administrative requirements provisions of OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations," and the agencies'grants management common rule. c. When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this option, a State must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of OMB Circular A-87, and extend such policies to all subrecipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions,costs are reasonable and necessary for operating these programs, and funds are not be used for general expenses required to carry out other responsibilities of a State or its subrecipients. B. Direct Costs 1. Direct costs are those that can be identified specifically with a particular final cost objective, i.e., a particular award, project, service, or other direct activity of an organization. However, a cost may not be assigned to an award as a direct cost if any other cost incurred for the same purpose, in like circumstance, has been allocated to an award as an indirect cost. Costs identified specifically with awards are direct costs of the awards and are to be assigned directly thereto. Costs identified specifically with other final cost objectives of the organization are direct costs of those cost objectives and are not to be assigned to other awards directly or indirectly. 2. Any direct cost of a minor amount may be treated as an indirect cost for reasons of practicality where the accounting treatment for such cost is consistently applied to all final cost objectives. boo, 3. The cost of certain activities are not allowable as charges to Federal awards (see, for example, (111 25 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html fundraising costs in paragraph 23 of Attachment B). However, even though these costs are unallowable for purposes of computing charges to Federal awards, they nonetheless must be treated as direct costs for purposes of determining indirect cost rates and be allocated their share of the organization's indirect costs if they represent activities which(1) include the salaries of personnel, (2) occupy space, and(3)benefit from the organization's indirect costs. 4. The costs of activities performed primarily as a service to members, clients, or the general public when significant and necessary to the organization's mission must be treated as direct costs whether or not allowable and be allocated an equitable share of indirect costs. Some examples of these types of activities include: a. Maintenance of membership rolls, subscriptions,publications, and related functions. b. Providing services and information to members, legislative or administrative bodies, or the public. c. Promotion, lobbying, and other forms of public relations. d. Meetings and conferences except those held to conduct the general administration of the organization. e. Maintenance, protection, and investment of special funds not used in operation of the organization. f. Administration ofgroupbenefits on behalf of members or clients, including hospital and hos ital insurance, annuity or retirement plans, financial aid, etc. C. Indirect Costs 1. Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective. Direct cost of minor amounts may be treated as indirect costs under the conditions described in subparagraph B.2. After direct costs have been determined and assigned directly to awards or other work as appropriate, indirect costs are those remaining to be allocated to benefiting cost objectives. A cost may not be allocated to an award as an indirect cost if any other cost incurred for the same purpose, in like circumstances,has been assigned to an award as a direct cost. 2. Because of the diverse characteristics and accounting practices of non-profit organizations, it is not possible to specify the types of cost which may be classified as indirect cost in all situations. However, typical examples of indirect cost for many non-profit organizations may include depreciation or use allowances on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers,personnel administration, and accounting. 3. Indirect costs shall be classified within two broad categories: "Facilities" and "Administration." "Facilities" is defined as depreciation and use allowances on buildings, equipment and capital improvement, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses. "Administration" is defined as general administration and general expenses such as the director's office, accounting,personnel, library expenses and all other types of expenditures not listed specifically under one of the subcategories of"Facilities" (including cross 0` allocations from other pools,where applicable). See indirect cost rate reporting requirements in subparagraphs D.2.e and D.3.g. D. Allocation of Indirect Costs and Determination of Indirect Cost Rates 26 of 63 6/21/00 2:27 PM OMti Circular A-122 http://www.wmienouse.gov/omb/circulars/a122/a122.html 1. General. a. Where a non-profit organization has only one major function,or where all its major functions benefit from its indirect costs to approximately the same degree, the allocation of indirect costs and the computation of an indirect cost rate may be accomplished through simplified allocation procedures, as described in subparagraph 2. b. Where an organization has several major functions which benefit from its indirect costs in varying degrees, allocation of indirect costs may require the accumulation of such costs into separate cost groupings which then are allocated individually to benefiting functions by means of a base which best measures the relative degree of benefit. The indirect costs allocated to each function are then distributed to • individual awards and other activities included in that function by means of an indirect cost rate(s). c. The determination of what constitutes an organization's major functions will depend on its purpose in being; the types of services it renders to the public, its clients, and its members; and the amount of effort it devotes to such activities as fundraising,public information and membership activities. d. Specific methods for allocating indirect costs and computing indirect cost rates along with the conditions under which each method should be used are described in subparagraphs 2 through 5. e. The base period for the allocation of indirect costs is the period in which such costs are incurred and accumulated for allocation to work performed in that period. The base period normally should coincide with the organization's fiscal year but, in any event, shall be so selected as to avoid inequities in the allocation of the costs. 2. Simplified allocation method. a. Where an organization's major functions benefit from its indirect costs to approximately the same degree, the allocation of indirect costs may be accomplished by(i) separating the organization's total costs for the base period as either direct or indirect, and(ii)dividing the total allowable indirect costs(net of applicable credits)by an equitable distribution base. The result Of this process is an indirect cost rate which is used to distribute indirect costs to individual awards. The rate should be expressed as the percentage which the total amount of allowable indirect costs bears to the base selected. This method should also be used where an organization has only one major function encompassing a number of individual projects or activities, and may be used where the level of Federal awards to an organization is relatively small. b. Both the direct costs and the indirect costs shall exclude capital expenditures and unallowable costs. However, unallowable costs which represent activities must be included in the direct costs under the conditions described in subparagraph B.3. c. The distribution base may be total direct costs (excluding capital expenditures and other distorting items, such as major subcontracts or subgrants), direct salaries and wages, or other base which results in an equitable distribution.The distribution base shall generally exclude participant support costs as defined in paragraph 34 of Attachment B. d. Except where a special rate(s)is required in accordance with subparagraph 5,the indirect cost rate developed under the above principles is applicable to all awards at the organization. If a special rate(s) is 0" required, appropriate modifications shall be made in order to develop the special rate(s). '`► 27 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html e. For an organization that receives more than $10 million in Federal funding of direct costs in a fiscal year, a breakout of the indirect cost component into two broad categories, Facilities and Administration as defined in subparagraph C.3, is required. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost category(i.e., Facilities or Administration) is of the distribution base identified with that category. 3. Multiple allocation base method a. General. Where an organization's indirect costs benefit its varying major functions in va n degrees, indirect t�' costs shall be accumulated into separate cost groupings, as described in subparagraph b. Each grouping shall then be allocated individually to benefitting functions by means of a base which best measures the relative benefits. The default allocation bases by cost pool are described in subparagraph c. b. Identification of indirect costs. Cost groupings shall be established so as to permit the allocation of each grouping on the basis of benefits provided to the major functions. Each grouping shall constitute a pool of expenses that are of like character in terms of functions they benefit and in terms of the allocation base which best measures the relative benefits provided to each function. The groupings are classified within the two broad categories: "Facilities" and"Administration," as described in subparagraph C.3. The indirect cost pools are defined as follows: (1)Depreciation and use allowances. The expenses under this heading are the portion of the costs of the organization's buildings, capital improvements to land and buildings, and equipment which are computed in accordance with paragraph 11 of Attachment B ("Depreciation and use allowances"). (2) Interest. Interest on debt associated with certain buildings, equipment and capital improvements are computed in accordance with paragraph 23 of Attachment B ("Interest, fundraising, and investment management costs"). (3) Operation and maintenance expenses. The expenses under this heading are those that have been incurred for the administration, operation, maintenance,preservation, and protection of the organization's physical plant. They include expenses normally incurred for such items as:janitorial and utility services; repairs and ordinary or normal alterations of buildings, furniture and equipment; care of grounds; maintenance and operation of buildings and other plant facilities; security; earthquake and disaster preparedness; environmental safety; hazardous waste disposal; property, liability and other insurance relating to property; space and capital leasing; facility planning and management; and, central receiving. The operation and maintenance expenses category shall also include its allocable share of fringe benefit costs, depreciation and use allowances, and interest costs. (4) General administration and general expenses. The expenses under this heading are those that have been incurred for the overall general executive and administrative offices of the organization and other expenses of a general nature which do not relate solely to any major function of the organization. This category shall also include its allocable share of fringe benefit costs, operation and maintenance expense, depreciation and use allowances, and interest costs. Examples of this category include central offices, such as the director's office,the office of finance,business services,budget and planning,personnel, safety and risk management, general counsel, management information systems, and library costs. Ireveloping this cost pool, special care should be exercised to ensure that costs incurred for the same ,purpose in like circumstances are treated consistently as either direct or indirect costs. For example, salaries of technical staff,project supplies,project publication,telephone toll charges, computer costs, travel costs, and specialized services costs shall be treated as direct costs wherever identifiable to a 28 of 63 6/21/00 2:27 PM vivid Circularw-122 http://www.wmtenouse.gov/omb/circulars/a122/a122.hhnl particular program. The salaries and wages of administrative and pooled clerical staff should normally be treated as indirect costs. Direct charging of these costs may be appropriate where a major project or activity explicitly requires and budgets for administrative or clerical services and other individuals involved can be identified with the program or activity. Items such as office supplies,postage, local telephone costs, periodicals and memberships should normally be treated as indirect costs. c. Allocation bases. Actual conditions shall be taken into account in selecting the base to be used in allocating the expenses in each grouping to benefitting functions. The essential consideration in selecting a method or a base is that it is the one best suited for assigning the pool of costs to cost objectives in accordance with benefits derived; a traceable cause and effect relationship; or logic and reason,where neither the cause nor the effect of the relationship is determinable. When an allocation can be made by assignment of a cost grouping directly to the function benefited,the allocation shall be made in that manner. When the expenses in a cost grouping are more general in nature, the allocation shall be made through the use of a selected base which produces results that are equitable to both the Federal Government and the organization. The distribution shall be made in accordance with the bases described herein unless it can be demonstrated that the use of a different base would result in a more equitable allocation of the costs, or that a more readily available base would not increase the costs charged to sponsored awards. The results of special cost studies (such as an engineering utility study) shall not be used to determine and allocate the indirect costs to sponsored awards. (1)Depreciation and use allowances. Depreciation and use allowances expenses shall be allocated in the following manner: (a)Depreciation or use allowances on buildings used exclusively in the conduct of a single function, and on capital improvements and equipment used in such buildings, shall be assigned to that function. (b)Depreciation or use allowances on buildings used for more than one function, and on capital improvements and equipment used in such buildings, shall be allocated to the individual functions performed in each building on the basis of usable square feet of space, excluding common areas, such as hallways, stairwells, and restrooms. (c)Depreciation or use allowances on buildings, capital improvements and equipment related space(e.g., individual rooms, and laboratories)used jointly by more than one function(as determined by the users of the space) shall be treated as follows. The cost of each jointly used unit of space shall be allocated to the benefitting functions on the basis of: (i)the employees and other users on a full-time equivalent(FTE)basis or salaries and wages of those individual functions benefitting from the use of that space; or (ii)organization-wide employee FTEs or salaries and wages applicable to the benefitting functions of the organization. (d)Depreciation or use allowances on certain capital improvements to land, such as paved parking areas, fences, sidewalks, and the like, not included in the cost of buildings, shall be allocated to user categories on a FTE basis and distributed to major functions in proportion to the salaries and wages of all employees applicable to the functions. (2)Interest. Interest costs shall be allocated in the same manner as the depreciation or use allowances on i*► the buildings, equipment and capital equipments to which the interest relates. 29 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html • (3) Operation and maintenance expenses. Operation and maintenance expenses shall be allocated in the same manner as the depreciation and use allowances. (4) General administration and general expenses. General administration and general expenses shall be allocated to benefitting functions based on modified total direct costs (MTDC), as described in subparagraph D.3.f. The expenses included in this category could be grouped first according to major functions of the organization to which they render services or provide benefits. The aggregate expenses of each group shall then be allocated to benefitting functions based on MTDC. d. Order of distribution. (1) Indirect cost categories consisting of depreciation and use allowances, interest, operation and maintenance, and general administration and general expenses shall be allocated in that order to the remaining indirect cost categories as well as to the major functions of the organization. Other cost categories could be allocated in the order determined to be most appropriate by the organization. When cross allocation of costs is made as provided in subparagraph (2), this order of allocation does not apply. (2)Normally, an indirect cost category will be considered closed once it has been allocated to other cost objectives, and costs shall not be subsequently allocated to it. However, a cross allocation of costs between two or more indirect costs categories could be used if such allocation will result in a more equitable allocation of costs. If a cross allocation is used, an appropriate modification to the composition of the indirect cost categories is required. e. Application of indirect cost rate or rates. Except where a special indirect cost rate(s) is required in accordance with subparagraph D.5, the separate groupings of indirect costs allocated to each major function shall be aggregated and treated as a common pool for that function. The costs in the common pool shall then be distributed to individual awards included in that function by use of a single indirect cost rate. f. Distribution basis. Indirect costs shall be distributed to applicable sponsored awards and other benefitting activities within each major function on the basis of MTDC. MTDC consists of all salaries and wages, fringe,benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract(regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care, rental costs and the portion in excess of$25,000 shall be excluded from MTDC. Participant support costs shall generally be excluded from MTDC. Other items may only be excluded when the Federal cost cognizant agency determines that an exclusion is necessary to avoid a serious inequity in the distribution of indirect costs. g. Individual Rate Components. An indirect cost rate shall be determined for each separate indirect cost pool developed. The rate in each case shall be stated as the percentage which the amount of the particular indirect cost pool is of the distribution base identified with that pool. Each indirect cost rate negotiation or determination agreement shall include development of the rate for each indirect cost pool as well as the overall indirect cost rate. The indirect cost pools shall be classified within two broad categories: "Facilities" and "Administration," as described in subparagraph C.3. 4. Direct allocation method. Nakt non-profit organizations treat all costs as direct costs except general administration and general expenses. These organizations generally separate their costs into three basic categories: (i) General administration and general expenses, (ii) fundraising, and(iii) other direct functions (including projects performed under Federal awards). Joint costs, such as depreciation,rental costs, operation and maintenance 30 of 63 6/21/00 2:27 PM VMts Circular A-122 http://www.w.„..:..ouse.gowomb/circulars/a 122/a I 22.htm1 of facilities, telephone expenses, and the like are prorated individually as direct costs to each category and to each award or other activity using a base most appropriate to the particular cost being prorated. b. This method is acceptable,provided each joint cost is prorated using a base which accurately measures the benefits provided to each award or other activity. The bases must be established in accordance with reasonable criteria, and be supported by current data.;This method is compatible with the Standards of Accounting and Financial Reporting for Voluntary Health and Welfare Organizations issued jointly by the National Health Council, Inc., the National Assembly of Voluntary Health and Social Welfare Organizations, and the United Way of America. c. Under this method, indirect costs consist exclusively of general administration and general expenses. In all other respects, the organization's indirect cost rates shall be computed in the same manner as that described in subparagraph 2. 5. Special indirect cost rates. In some instances, a single indirect cost rate for all activities of an organization or for each major function of the organization may not be appropriate, since it would not take into account those different factors which may substantially affect the indirect costs applicable to a particular segment of work. For this purpose, a particular segment of work may be that performed under a single award or it may consist of work under a group of awards performed in a common environment. These factors may include the physical location of the work, the level of administrative support required, the nature of the facilities or other resources employed,the scientific disciplines or technical skills involved, the organizational arrangements used, or any combination thereof. When a particular segment of work is performed in an environment which appears to generate a significantly different level of indirect costs,provisions should be made for a separate indirect cost pool applicable to such work. The separate indirect cost pool should be developed during the course of the regular allocation process, and the separate indirect cost rate resulting therefrom should be used,provided it is determined that(i)the rate differs significantly from that which would have been obtained under subparagraphs 2,3, and 4, and(ii)the volume of work to which the rate would apply is material. E. Negotiation and Approval of Indirect Cost Rates 1. Definitions. As used in this section,the following terms have the meanings set forth below: a. Cognizant agency means the Federal agency responsible for negotiating and approving indirect cost • rates for a non-profit organization on behalf of all Federal agencies. b. Predetermined rate means an indirect cost rate, applicable to a specified current or future period, usually the organization's fiscal year. The rate is based on an estimate of the costs to be incurred during the period. A predetermined rate is not subject to adjustment. c. Fixed rate means an indirect cost rate which has the same characteristics as a predetermined rate, except that the difference between the estimated costs and the actual costs of the period covered by the rate is carried forward as an adjustment to the rate computation of a subsequent period. d. Final rate means an indirect cost rate applicable to a specified past period which is based on the actual costs of the period. A final rate is not subject to adjustment. e. Provisional rate or billing rate means a temporary indirect cost rate applicable to a specified period �tr which is used for funding, interim reimbursement, and reporting indirect costs on awards pending the establishment of a final rate for the period. 4110 31 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html f. Indirect cost proposal means the documentation prepared by an organization to substantiate its claim for the reimbursement of indirect costs. This proposal provides the basis for the review and negotiation leading to the establishment of an organization's indirect cost rate. g. Cost objective means a function, organizational subdivision, contract, grant, or other work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes,projects,jobs and capitalized projects. 2. Negotiation and approval of rates. a. Unless different arrangements are agreed to by the agencies concerned, the Federal agency with the largest dollar value of awards with an organization will be designated as the cognizant agency for the negotiation and approval of the indirect cost rates and,where necessary, other rates such as fringe benefit and computer charge-out rates. Once an agency is assigned cognizance for a particular non-profit organization, the assignment will not be changed unless there is a major long-term shift in the dollar volume of the Federal awards to the organization. All concerned Federal agencies shall be given the opportunity to participate in the negotiation process but, after a rate has been agreed upon, it will be accepted by all Federal agencies. When a Federal agency has reason to believe that special operating factors affecting its awards necessitate special indirect cost rates in accordance with subparagraph D.5, it will,prior to the time the rates are negotiated,notify the cognizant agency. b. A non-profit organization which has not previously established an indirect cost rate with a Federal agency shall submit its initial indirect cost proposal immediately after the organization is advised that an award will be made and, in no event, later than three months after the effective date of the award. c. Organizations that have previously established indirect cost rates must submit a new indirect cost proposal to the cognizant agency within six months after the close of each fiscal year. d. A predetermined rate may be negotiated for use on awards where there is reasonable assurance,based on past experience and reliable projection of the organization's costs, that the rate is not likely to exceed a rate based on the organization's actual costs. e. Fixed rates may be negotiated where predetermined rates are not considered appropriate. A fixed rate, however, shall not be negotiated if(i) all or a substantial portion of the organization's awards are expected to expire before the carry-forward adjustment can be made; (ii)the mix of Federal and non-Federal work at the organization is too erratic to permit an equitable carry-forward adjustment; or(iii)the organization's operations fluctuate significantly from year to year. f. Provisional and final rates shall be negotiated where neither predetermined nor fixed rates are appropriate. g. The results of each negotiation shall be formalized in a written agreement between the cognizant agency and the non-profit organization. The cognizant agency shall distribute copies of the agreement to all concerned Federal agencies. If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency and the tenon-profit organization, the dispute shall be resolved in accordance with the appeals procedures of the cognizant agency. 32 of 63 6/21/00 2:27 PM QMB Circular A-122 nttp://www.wi„«,,uuse.gov/ombicuculars/al22/al22.ntrnl i. To the extent that problems are encountered among the Federal agencies in connection with the negotiation and approval process, OMB will lend assistance as required to resolve such problems in a timely manner. ATTACHMENT B Circular No. A-122 SELECTED ITEMS OF COST Table of Contents 1. Advertising and public relations costs 2. Alcoholic beverages 3. Bad debts 4. Bid and proposal costs (reserved) 5. Bonding costs 6. Communication costs 7. Compensation for personal services 8. Contingency provisions 9. Contributions 10. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement 11. Depreciation and use allowances 12. Donations 13. Employee morale,health, and welfare costs and credits 14. Entertainment costs 15. Equipment and other capital expenditures 16. Fines and penalties 17. Fringe benefits 18. Goods or services for personal use 19. Housing and personal living expenses 20. Idle facilities and idle capacity 21. Independent research and development(reserved) 22. Insurance and indemnification 23. Interest, fund raising, and investment management costs 24. Labor relations costs 25. Lobbying 26. Losses on other awards 27. Maintenance and repair costs 28. Materials and supplies 29. Meetings and conferences 30. Memberships, subscriptions, and professional activity costs 31. Organization costs 32. Overtime, extra-pay shift, and multi-shift premiums 33. Page charges in professional journals 34. Participant support costs 35. Patent costs 36. Pension plans • 37. Plant security costs r 38. Pre-award costs 33 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 39. Professional service costs 40. Profits and losses on disposition of depreciable property or other capital assets 41. Publication and printing costs 42. Rearrangement and alteration costs 43. Reconversion costs 44. Recruiting costs 45. Relocation costs • 46. Rental costs 47. Royalties and other costs for use of patents and copyrights 48. Selling and marketing 49. Severance pay 50. Specialized service facilities 51. Taxes 52. Termination costs 53. Training and education costs 54. Transportation costs 55. Travel costs 56. Trustees ATTACHMENT B Circular No. A-122 SELECTED ITEMS OF COST Paragraphs 1 through 56 provide principles to be applied in establishing the allowability of certain items of cost. These principles apply whether a cost is treated as direct or indirect. Failure to mention a particular item of cost is not intended to imply that it is unallowable; rather, determination as to allowability in each case should be based on the treatment or principles provided for similar or related items of cost. 1. Advertising and public relations costs. a. The term advertising costs means the costs of advertising media and corollary administrative costs. Advertising media include magazines,newspapers,radio and television programs, direct mail, exhibits, and the like. b. The term public relations includes community relations and means those activities dedicated to maintaining the image of the organization or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. c. The only allowable advertising costs are those which are solely for: (1) The recruitment of personnel required for the performance by the organization of obligations arising under a sponsored award,when considered in conjunction with all other recruitment costs, as set forth in paragraph 44 ("Recruiting costs"); (2)The procurement of goods and services for the performance of a sponsored award; ( .The disposal of scrap or surplus materials acquired in the performance of a sponsored award except when organizations are reimbursed for disposal costs at a predetermined amount in accordance with OMB Circular A-110, Sec. .34, "Equipment"; or • 34 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.wtntenouse.gov/omb/circulars/a122/a122.html (4) Other specific purposes necessary to meet the requirements of the sponsored award. d. The only allowable public relations costs are: (1) Costs specifically required by sponsored awards; (2) Costs of communicating with the public and press pertaining to specific activities or accomplishments which result from performance of sponsored awards(these costs are considered necessary as part of the outreach effort for the sponsored awards); or (3)Costs of conducting general liaison with news media and government public relations officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notices of contract/grant awards, financial matters, etc. e. Costs identified in subparagraphs c and d if incurred for more than one sponsored award or for both sponsored work and other work of the organization, are allowable to the extent that the principles in paragraphs B ("Direct Costs")and C ("Indirect Costs") of Attachment A are observed. f. Unallowable advertising and public relations costs include the following: (1)All advertising and public relations costs other than as specified in subparagraphs c, d, and e; (2) Costs of meetings or other events related to fund raising or other organizational activities including: (i) Costs of displays,demonstrations, and exhibits; (ii) Costs of meeting rooms,hospitality suites, and other special facilities used in conjunction with shows and other special events; and (iii) Salaries and wages of employees or cost of services engaged in setting up and displaying exhibits, making demonstrations, and providing briefings; (3) Costs of promotional items and memorabilia, including models,gifts, and souvenirs; (4) Costs of advertising and public relations designed solely to promote the organization. 2. Alcoholic beverages. Costs of alcoholic beverages are unallowable. 3. Bad debts. Bad debts, including losses(whether actual or estimated) arising from uncollectible accounts and other claims,related collection costs, and related legal costs, are unallowable. 4. Bid and proposal costs. (reserved) 5. Bonding costs. a. Bonding costs arise when the Federal Government requires assurance against financial loss to itself or others by reason of the act or default of the organization. They arise also in instances where the organization requires similar assurance. Included are such bonds as bid,performance,payment, advance payment, infringement, and fidelity bonds. 35 of 63 6/21/00 2:27 PM OMB CircularA-122 http://www.whitehouse.gov/omb/circulars/a122/ai22.html b. Costs of bonding required pursuant to the terms of the award are allowable. c. Costs of bonding required by the organization in the general conduct of its operations are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances. 6. Communication costs. Costs incurred for telephone services, local and long distance telephone calls, telegrams, radiograms,postage and the like are allowable. 7. Compensation for personal services. a. Definition. Compensation for personal services includes all compensation paid currently or accrued by the organization for services of employees rendered during the period of the award(except as otherwise provided in subparagraph h). It includes,but is not limited to, salaries,wages, director's and executive committee member's fees, incentive awards, fringe benefits,pension plan costs,allowances for off-site pay, incentive pay, location allowances,hardship pay, and cost of living differentials. b. Allowability. Except as otherwise specifically provided in this paragraph, the costs of such compensation are allowable to the extent that: (1)Total compensation to individual employees is reasonable for the services rendered and conforms to the established policy of the organization consistently applied to both Federal and non-Federal activities; and (2) Charges to awards whether treated as direct or indirect costs are determined and supported as required in this paragraph. c. Reasonableness. (1) When the organization is predominantly engaged in activities other than those sponsored by the Federal Government, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is consistent with that paid for similar work in the organization's other activities. (2)When the organization is predominantly engaged in federally-sponsored activities and in cases where the kind of employees required for the Federal activities are not found in the organization's other activities, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved. d. Special considerations in determining allowability. Certain conditions require special consideration and possible limitations in determining costs under Federal awards where amounts or types of compensation appear unreasonable. Among such conditions are the following: (1) Compensation to members of non-profit organizations, trustees, directors, associates, officers, or the immediate families thereof. Determination should be made that such compensation is reasonable for the actual personal services rendered rather than a distribution of earnings in excess of costs. �.0 (2)Any change in an organization's compensation policy resulting in a substantial increase in the organization's level of compensation, particularly when it was concurrent with an increase in the ratio of Federal awards to other activities of the organization or any change in the treatment of allowability of 36 of 63 6/21/00 2:27 PM VN1ti Circular A-122 http://www.wI,uc„oUSe.gov/omb/circulars/a122/a122.html specific types of compensation due to changes in Federal policy. e. Unallowable costs. Costs which are unallowable under other paragraphs of this Attachment shall not be allowable under this paragraph solely on the basis that they constitute personal compensation. f. Fringe benefits. (1)Fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as vacation leave, sick leave,military leave, and the like, are allowable, provided such costs are absorbed by all organization activities in proportion to the relative amount of time or effort actually devoted to each. (2)Fringe benefits in the form of employer contributions or expenses for social security, employee insurance,workmen's compensation insurance,pension plan costs(see subparagraph h), and the like, are allowable,provided such benefits are granted in accordance with established written organization policies. Such benefits whether treated as indirect costs or as direct costs, shall be distributed to particular awards and other activities in a manner consistent with the pattern of benefits accruing to the individuals or group of employees whose salaries and wages are chargeable to such awards and other activities. (3) (a)Provisions for a reserve under a self-insurance program for unemployment compensation or workers'compensation are allowable to the extent that the provisions represent reasonable estimates of the liabilities for such compensation, and the types of coverage, extent of coverage, and rates and premiums would have been allowable had insurance been purchased to cover the risks. However,provisions for self-insured liabilities which do not become payable for more than one year after the provision is made shall not exceed the present value of the liability. (b)Where an organization follows a consistent policy of expensing actual payments to, or on behalf of, employees or former employees for unemployment compensation or workers'compensation, such payments are allowable in the year of payment with the prior approval of the awarding agency,provided they are allocated to all activities of the organization. (4) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibility are allowable only to the extent that the insurance represents additional compensation. The costs of such insurance when the organization is named as beneficiary are unallowable. g. Organization-furnished automobiles. That portion of the cost of organization-furnished automobiles that relates to personal use by employees(including transportation to and from work) is unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. h. Pension plan costs. (1) Costs of the organization's pension plan which are incurred in accordance with the established policies of the organization are allowable,provided: (a) Such policies meet the test of reasonableness; (b) The methods of cost allocation are not discriminatory; 37 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html (c) The cost assigned to each fiscal year is determined in accordance with generally accepted accounting principles(GAAP), as prescribed in Accounting Principles Board Opinion No. 8 issued by the American Institute of Certified Public Accountants; and (d)The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However, increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 days after each quarter of the year to which such costs are assignable are unallowable. (2)Pension plan termination insurance premiums paid pursuant to the Employee Retirement Income Security Act(ERISA)of 1974 (Pub. L. 93-406) are allowable. Late payment charges on such premiums are unallowable. (3)Excise taxes on accumulated funding deficiencies and other penalties imposed under ERISA are unallowable. i. Incentive compensation. Incentive compensation to employees based on cost reduction, or efficient performance, suggestion awards, safety awards, etc., are allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement entered into in good faith between the organization and the employees before the services were rendered, or pursuant to an established plan followed by the organization so consistently as to imply, in effect, an agreement to make such payment. j. Overtime, extra-pay shift, and multi-shift premiums. See paragraph 32. k. Severance pay. See paragraph 49. 1. Training and education costs. See paragraph 53. m. Support of salaries and wages. (1) Charges to awards for salaries and wages, whether treated as direct costs or indirect costs,will be based on documented payrolls approved by a responsible official(s)of the organization. The distribution of salaries and wages to awards must be supported by personnel activity reports, as prescribed in subparagraph (2), except when a substitute system has been approved in writing by the cognizant agency. (See subparagraph E.2 of Attachment A.) • (2)Reports reflecting the distribution of activity of each employee must be maintained for all staff members (professionals and nonprofessionals)whose compensation is charged, in whole or in part, directly to awards. In addition, in order to support the allocation of indirect costs, such reports must also be maintained for other employees whose work involves two or more functions or activities if a distribution of their compensation between such functions or activities is needed in the determination of the organization's indirect cost rate(s) (e.g., an employee engaged part-time in indirect cost activities and part-time in a direct function). Reports maintained by non-profit organizations to satisfy these requirements must meet the following standards: (a) The reports must reflect an after-the-fact determination of the actual activity of each employee. Budget estimates (i.e., estimates determined before the services are performed)do not qualify as support for charges to awards. 38 of 63 A/91 inn 9,79 PM ll,r1D\.i.w1.11 Pt-«c nitp:aw vw.w,........,use.gowombicirculars/a122/a122.httnl (b)Each report must account for the total activity for which employees are compensated and which is required in fulfillment of their obligations to the organization. (c)The reports must be signed by the individual employee, or by a responsible supervisory official having first hand knowledge of the activities performed by the employee, that the distribution of activity represents a reasonable estimate of the actual work performed by the employee during the periods covered by the reports. (d) The reports must be prepared at least monthly and must coincide with one or more pay periods. (3) Charges for the salaries and wages of nonprofessional employees, in addition to the supporting documentation described in subparagraphs(1) and(2), must also be supported by records indicating the total number of hours worked each day maintained in conformance with Department of Labor regulations implementing the Fair Labor Standards Act(FLSA) (29 CFR Part 516). For this purpose,the term "nonprofessional employee" shall have the same meaning as "nonexempt employee," under FLSA. (4) Salaries and wages of employees used in meeting cost sharing or matching requirements on awards must be supported in the same manner as salaries and wages claimed for reimbursement from awarding agencies. 8. Contingency provisions. Contributions to a contingency reserve or any similar provision made for events the occurrence of which cannot be foretold with certainty as to time, intensity, or with an assurance of their happening, are unallowable. The term"contingency reserve" excludes self-insurance reserves(see subparagraphs 7.f(3) and 22.a(2)(d); pension funds (see subparagraph 7.h); and reserves for normal severance pay(see subparagraph 49.b(1)). 9. Contributions. Contributions and donations by the organization to others are unallowable. 10. Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringement. a. Definitions. (1) Conviction, as used herein, means a judgment or a conviction of a criminal offense by any court of competent jurisdiction,whether entered upon as a verdict or a plea, including a conviction due to a plea of nolo contendere. (2) Costs include,but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; and the costs of the services of accountants, consultants, or others retained by the organization to assist it; costs of employees, officers and trustees, and any similar costs incurred before, during, and after commencement of a judicial or administrative proceeding that bears a direct relationship to the proceedings. (3)Fraud, as used herein,means (i) acts of fraud corruption or attempts to defraud the Federal Government or to corrupt its agents, (ii) acts that constitute a cause for debarment or suspension(as specified in agency regulations), and(iii) acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54. ._. a. (4)Penalty does not include restitution,reimbursement, or compensatory damages. eb 39 of 63 6/21/00 2:27 PM • OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html (5)Proceeding includes an investigation. b. (1) Except as otherwise described herein, costs incurred in connection with any criminal, civil or administrative proceeding(including filing of a false certification)commenced by the Federal Government, or a State, local or foreign government, are not allowable if the proceeding: (1)relates to a violation of, or failure to comply with, a Federal, State, local or foreign statute or regulation by the organization(including its agents and employees), and(2)results in any of the following dispositions: (a) In a criminal proceeding, a conviction. (b) In a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of organizational liability. (c) In the case of any civil or administrative proceeding, the imposition of a monetary penalty. (d)A final decision by an appropriate Federal official to debar or suspend the organization, to rescind or void an award,or to terminate an award for default by reason of a violation or failure to comply with a law or regulation. (e)A disposition by consent or compromise, if the action could have resulted in any of the dispositions described in(a), (b), (c)or(d). (2) If more than one proceeding involves the same alleged misconduct,the costs-of all such proceedings shall be unallowable if any one of them results in one of the dispositions shown in subparagraph b.(1). c. If a proceeding referred to in subparagraph b is commenced by the Federal Government and is resolved by consent or compromise pursuant to an agreement entered into by the organization and the Federal Government, then the costs incurred by the organization in connection with such proceedings that are otherwise not allowable under subparagraph b may be allowed to the extent specifically provided in such agreement. d. If a proceeding referred to in subparagraph b is commenced by a State, local or foreign government, the authorized Federal official may allow the costs incurred by the organization for such proceedings, if such authorized official determines that the costs were incurred as a result of(1) a specific term or condition of a federally-sponsored award, or(2) specific written direction of an authorized official of the sponsoring agency. e. Costs incurred in connection with proceedings described in subparagraph b,but which are not made unallowable by that subparagraph, may be allowed by the Federal Government,but only to the extent that: (1) The costs are reasonable in relation to the activities required to deal with the proceeding and the underlying cause of action; (2)Payment of the costs incurred, as allowable and allocable costs, is not prohibited by any other provision(s) of the sponsored award; (3) The costs are not otherwise recovered from the Federal Government or a third party, either directly as a result of the proceeding or otherwise; and, (4) The percentage of costs allowed does not exceed the percentage determined by an authorized Federal 40 of 63 601/On 77 PM OMi3 Circular A-122 http://www.wnuc,nouse.gov/omb/circulars/a122/a122.html official to be appropriate, considering the complexity of the litigation, generally accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80 percent. However, if an agreement reached under subparagraph c has explicitly considered this 80 percent limitation and permitted a higher percentage,then the full amount of costs resulting from that agreement shall be allowable. f. Costs incurred by the organization in connection with the defense of suits brought by its employees or ex-employees under section 2 of the Major Fraud Act of 1988 (Pub. L. 100-700), including the cost of all relief necessary to make such employee whole,where the organization was found liable or settled, are unallowable. g. Costs of legal, accounting,.and consultant services, and related costs, incurred in connection with defense against Federal Government claims or appeals, antitrust suits, or the prosecution of claims or appeals against the Federal Government, are unallowable. h. Costs of legal, accounting, and consultant services, and related costs, incurred in connection with patent infringement litigation, are unallowable unless otherwise provided for in the sponsored awards. i. Costs which may be unallowable under this paragraph, including directly associated costs, shall be segregated and accounted for by the organization separately. During the pendency of any proceeding covered by subparagraphs b and f,the Federal Government shall generally withhold payment of such costs. However, if in the best interests of the Federal Government, the Federal Government may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreements by the organization to repay all unallowable costs,plus interest, if the costs are subsequently determined to be unallowable. 11. Depreciation and use allowances. a. Compensation for the use of buildings, other capital improvements, and equipment on hand maybe made through use allowances or depreciation. However, except as provided in subparagraph f, a combination of the two methods may not be used in connection with a single class of fixed assets(e.g., buildings, office equipment,computer equipment, etc.). b. The computation of use allowances or depreciation shall be based on the acquisition cost of the assets involved. The acquisition cost of an asset donated to the organization by a third party shall be its fair market value at the time of the donation. c. The computation of use allowances or depreciation will exclude: (1) The cost of land; (2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government irrespective of where title was originally vested or where it presently resides; and (3)Any portion of the cost of buildings and equipment contributed by or for the organization in satisfaction of a statutory matching requirement. d. Where the use allowance method is followed,the use allowance for buildings and improvement (including land improvements, such as paved parking areas, fences, and sidewalks)will be computed at an annual rate not exceeding two percent of acquisition cost. The use allowance for equipment will be110 41 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html computed at an annual rate not exceeding six and two-thirds percent of acquisition cost. When the use allowance method is used for buildings,the entire building must be treated as a single asset; the building's components(e.g.,plumbing system,heating and air conditioning, etc.)cannot be segregated from the building's shell. The two percent limitation,however,need not be applied to equipment which is merely attached or fastened to the building but not permanently fixed to it and which is used as furnishings or decorations or for specialized purposes (e.g., dentist chairs and dental treatment units, counters, laboratory benches bolted to the floor, dishwashers, carpeting, etc.). Such equipment will be considered as not being permanently fixed to the building if it can be removed without the need for costly or extensive alterations or repairs to the building or the equipment. Equipment that meets these criteria will be subject to the six and two-thirds percent equipment use allowance limitation. e. Where depreciation method is followed, the period of useful service(useful life) established in each case for usable capital assets must take into consideration such factors as type of construction,nature of the equipment used, technological developments in the particular program area, and the renewal and replacement policies followed for the individual items or classes of assets involved. The method of depreciation used to assign the cost of an asset(or group of assets) to accounting periods shall reflect the pattern of consumption of the asset during its useful life. In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life than in the later portions, the straight-line method shall be presumed to be the appropriate method. Depreciation methods once used shall not be changed unless approved in advance by the cognizant Federal agency. When the depreciation method is introduced for application to assets previously subject to a use allowance, the combination of use allowances and depreciation applicable to such assets must not exceed the total acquisition cost of the assets. When the depreciation method is used for buildings, a building's shell may be segregated from each building component(e.g.,plumbing system,heating, and air conditioning system, etc.) and each item depreciated over its estimated useful life; or the entire building (i.e.,the shell and all components)may be treated as a single asset and depreciated over a single useful life. f. When the depreciation method is used for a particular class of assets,no depreciation may be allowed on any such assets that,under subparagraph e,would be viewed as fully depreciated. However, a reasonable use allowance may be negotiated for such assets if warranted after taking into consideration the amount of depreciation previously charged to the Federal Government, the estimated useful life remaining at time of negotiation, the effect of any increased maintenance charges or decreased efficiency due to age, and any other factors pertinent to the utilization of the asset for the purpose contemplated. g. Charges for use allowances or depreciation must be supported by adequate property records and physical inventories must be taken at least once every two years (a statistical sampling basis is acceptable) to ensure that assets exist and are usable and needed. When the depreciation method is followed, adequate depreciation records indicating the amount of depreciation taken each period must also be maintained. 12. Donations. a. Services received. (1) Donated or volunteer services may be furnished to an organization by professional and technical personnel, consultants, and other skilled and unskilled labor. The value of these services is not reimbursable either as a direct or indirect cost. op. - (2)The value of donated services utilized in the performance of a direct cost activity shall be considered in the determination of the organization's indirect cost rate(s) and, accordingly, shall be allocated a proportionate share of applicable indirect costs when the following circumstances exist: 42 of 63 6/21/00 2:27 PM V lvl li urcular A-1 zL http://www.w,,,,,..ouse.goviomoicircutarsia 122/a l LL.httnl (a)The aggregate value of the services is material; (b)The services are supported by a significant amount of the indirect costs incurred by the organization; (c)The direct cost activity is not pursued primarily for the benefit of the Federal Government, (3)In those instances where there is no basis for determining the fair market value of the services rendered, the recipient and the cognizant agency shall negotiate an appropriate allocation of indirect cost to the services. (4) Where donated services directly benefit a project supported by an award,the indirect costs allocated to the services will be considered as a part of the total costs of the project. Such indirect costs may be reimbursed under the award or used to meet cost sharing or matching requirements. (5) The value of the donated services may be used to meet cost sharing or matching requirements under conditions described in Sec._.23 of Circular A-110. Where donated services are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. (6)Fair market value of donated services shall be computed as follows: (a)Rates for volunteer services. Rates for volunteers shall be consistent with those regular rates paid for similar work in other activities of the organization. In cases where the kinds of skills involved are not found in other activities of the organization, the rates used shall be consistent with those paid for similar work in the labor market in which the organization competes for such skills. (b) Services donated by other organizations. When an employer donates the services of an employee, these services shall be valued at the employee's regular rate of pay(exclusive of fringe benefits and indirect costs),provided the services are in the same skill for which the employee is normally paid. If the services are not in the same skill for which the employee is normally paid, fair market value shall be computed in accordance with subparagraph (a). b. Goods and space. (1)Donated goods; i.e., expendable personal property/supplies, and donated use of space may be furnished to an organization. The value of the goods and space is not reimbursable either as a direct or indirect cost. (2)The value of the donations may be used to meet cost sharing or matching share requirements under the conditions described in Sec._.23 of Circular A-110. The value of the donations shall be determined in accordance with Sec._.23 of Circular A-110. Where donations are treated as indirect costs, indirect cost rates will separate the value of the donations so that reimbursement will not be made. 13. Employee morale,health, and welfare costs and credits.The costs of house publications,health or first-aid clinics, and/or infirmaries,recreational activities, employees'counseling services, and other expenses incurred in accordance with the organization's established practice or custom for the improvement of working conditions, employer-employee relations, employee morale, and employee performance are allowable. Such costs will be equitably apportioned to all activities of the organization. Income generated from any of these activities will be credited to the cost thereof unless such income has been irrevocably set over to employee welfare organizations. 43 of 63 6/21/00 2:27 PM • OMB Circular A-I22 http://www.whitehouse.gov/omb/circulars/a122/a122.html 14. Entertainment costs. Costs of amusement, diversion, social activities, ceremonials, and costs relating thereto, such as meals, lodging,rentals, transportation, and gratuities are unallowable(but see paragraphs 13 and 30). 15. Equipment and other capital expenditures. a. As used in this paragraph, the following terms have the meanings set forth below: (1) "Equipment" means an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost which equals or exceeds the lesser of(a)the capitalization level established by the organization for the financial statement purposes,or(b) $5000. The unamortized portion of any equipment written off as a result of a change in capitalization levels may be recovered by continuing to claim the otherwise allowable use allowances or depreciation on the equipment, or by amortizing the amount to be written off over a period of years as negotiated with the Federal cognizant agency. (2) Acquisition cost means the net invoice unit price of an item of equipment, including the cost of any modifications, attachments, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it is acquired. Ancillary charges, such as taxes, duty,protective in-transit insurance, freight, and installation shall be included in or excluded from acquisition cost in accordance with the organization's regular written accounting practices. (3) Special purpose equipment means equipment which is usable only for research, medical, scientific, or technical activities. Examples of special purpose equipment include microscopes,x-ray machines, surgical instruments, and spectrometers. (4) General purpose equipment means equipment which is usable for other than research,medical, scientific,or technical activities,whether or not special modifications are needed to make them suitable for a particular purpose. Examples of general purpose equipment include office equipment and furnishings, air conditioning equipment,reproduction and printing equipment,motor vehicles, and automatic data processing equipment. b. (1) Capital expenditures for general purpose equipment are unallowable as a direct cost except with the prior approval of the awarding agency. R• (2) Capital expenditures for special purpose equipment are allowable as direct costs,provided that items with a unit cost of$5000 or more have the prior approval of awarding agency. c. Capital expenditures for land or buildings are unallowable as a direct cost except with the prior approval of the awarding agency. d. Capital expenditures for improvements to land,buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior approval of the awarding agency. e. Equipment and other capital expenditures are unallowable as indirect costs. However, see paragraph 11 for allowability of use allowances or depreciation on buildings, capital improvements, and equipment. Also, see paragraph 46 for allowability of rental costs for land,buildings, and equipment. 16. Fines and penalties. Costs of fines and penalties resulting from violations of, or failure of the organization to comply with Federal, State, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the 44 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.wnnenouse.gov/omb/circulars/a122/a122.html awarding agency. 17. Fringe benefits. See subparagraph 7.f. 18. Goods or services for personal use. Costs of goods or services for personal use of the organization's employees are unallowable regardless of whether the cost is reported as taxable income to the employees. 19. Housing and personal living expenses. a. Costs of housing(e.g., depreciation,maintenance,utilities, furnishings,rent, etc.),housing allowances and personal living expenses for/of the organization's officers are unallowable as fringe benefit or indirect costs regardless of whether the cost is reported as taxable income to the employees. These costs are allowable as direct costs to sponsored award when necessary for the performance of the sponsored award and approved by awarding agencies. b. The term"officers" includes current and past officers and employees. 20. Idle facilities and idle capacity. a. As used in this paragraph,the following terms have the meanings set forth below: (1) Facilities means land and buildings or any portion thereof, equipment individually or collectively, or any other tangible capital asset,wherever located, and whether owned or leased by the organization. (2) Idle facilities means completely unused facilities that are excess to the organization's current needs. (3) Idle capacity means the unused capacity of partially used facilities. It is the difference between that which a facility could achieve under 100 percent operating time on a one-shift basis less operating interruptions resulting from time lost for repairs, setups,unsatisfactory materials, and other normal delays, and the extent to which the facility was actually used to meet demands during the accounting period. A multi-shift basis may be used if it can be shown that this amount of usage could normally be expected for the type of facility involved. (4) Costs of idle facilities or idle capacity means costs such as maintenance,repair,housing,rent, and other related costs, e.g.,property taxes, insurance, and depreciation or use allowances. b. The costs of idle facilities are unallowable except to the extent that: (1) They are necessary to meet fluctuations in workload; or (2)Although not necessary to meet fluctuations in workload, they were necessary when acquired and are now idle because of changes in program requirements, efforts to achieve more economical operations, reorganization, termination, or other causes which could not have been reasonably foreseen. Under the exception stated in this subparagraph, costs of idle facilities are allowable for a reasonable period of time, ordinarily not to exceed one year, depending upon the initiative taken to use, lease, or dispose of such facilities (but see subparagraphs 48.b and d). c. The costs of idle capacity are normal costs of doing business and are a factor in the normal fluctuations of usage or indirect cost rates from period to period. Such costs are allowable,provided the capacity is reasonably anticipated to be necessary or was originally reasonable and is not subject to reduction or 45 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/al22.htinl elimination by subletting, renting, or sale, in accordance with sound business, economics, or security practices. Widespread idle capacity throughout an entire facility or among a group of assets having substantially the same function may be idle facilities. 21. Independent research and development. [Reserved] 22. Insurance and indemnification. a. Insurance includes insurance which the organization is required to carry, or which is approved, under the terms of the award and anyother insurance su ance which the organization maintains in connection with the general conduct of its operations. This paragraph does not apply to insurance which represents fringe benefits for employees (see subparagraphs 7.f and 7.h(2)). (1) Costs of insurance required or approved, and maintained,pursuant to the award are allowable. (2) Costs of other insurance maintained by the organization in connection with the general conduct of its operations are allowable subject to the following limitations: (a)Types and extent of coverage shall be in accordance with sound business practice and the rates and premiums shall be reasonable under the circumstances. (b) Costs allowed for business interruption or other similar insurance shall be limited to exclude coverage of management fees. (c) Costs of insurance or of any provisions for a reserve covering the risk of loss or damage to Federal property are allowable only to the extent that the organization is liable for such loss or damage. • (d)Provisions for a reserve under a self-insurance program are allowable to the extent that types of coverage, extent of coverage,rates, and premiums would have been allowed had insurance been purchased to cover the risks. However,provision for known or reasonably estimated self-insured liabilities,which do not become payable for more than one year after the provision is made, shall not exceed the present value of the liability. (e) Costs of insurance on the lives of trustees, officers, or other employees holding positions of similar responsibilities are allowable only to the extent that the insurance represents additional compensation(see subparagraph 7.f(4)). The cost of such insurance when the organization is identified as the beneficiary is unallowable. (f) Insurance against defects. Costs of insurance with respect to any costs incurred to correct defects in the organizations materials or workmanship are unallowable. (g)Medical liability(malpractice) insurance. Medical liability insurance is an allowable cost of Federal research programs only to the extent that the Federal research programs involve human subjects or training of participants in research techniques. Medical liability insurance costs shall be treated as a direct cost and shall be assigned to individual projects based on the manner in which the insurer allocates the risk to the population covered by the insurance. • (3)Actual losses which could have been covered by permissible insurance(through the purchase of insurance or a self-insurance program) are unallowable unless expressly provided for in the award, except: 46 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html (a) Costs incurred because of losses not covered under nominal deductible insurance coverage provided in keeping with sound business practice are allowable. (b)Minor losses not covered by insurance, such as spoilage,breakage, and disappearance of supplies, which occur in the ordinary course of operations, are allowable. b. Indemnification includes securing the organization against liabilities to third persons and any other loss or damage, not compensated by insurance or otherwise. The Federal Government is obligated to indemnify the organization only to the extent expressly provided in the award. 23. Interest, fundraising, and investment management costs. a. Interest. (1) Costs incurred for interest on borrowed capital or temporary use of endowment funds,however represented, are unallowable. However, interest on debt incurred after the effective date of this revision to acquire or replace capital assets (including renovations, alterations, equipment, land, and capital assets acquired through capital leases), acquired after the effective date of this revision and used in support of sponsored agreements is allowable,provided that: (a)For facilities acquisitions (excluding renovations and alterations) costing over$10 million where the Federal Government's reimbursement is expected to equal or exceed 40 percent of an asset's cost,the non-profit organization prepares,prior to the acquisition or replacement of the capital asset(s), a justification that demonstrates the need for the facility in the conduct of federally-sponsored activities. Upon request, the needs justification must be provided to the Federal agency with cost cognizance authority as a prerequisite to the continued allowability of interest on debt and depreciation related to the facility. The needs justification for the acquisition of a facility should include, at a minimum, the following: A statement of purpose and justification for facility acquisition or replacement A statement as to why current facilities are not adequate A statement of planned future use of the facility A description of the financing agreement to be arranged for the facility A summary of the building contract with estimated cost information and statement of source and use of funds A schedule of planned occupancy dates (b)For facilities costing over$500,000,the non-profit organization prepares,prior to the acquisition or, replacement of the facility, a lease/purchase analysis in accordance with the provisions of Sec._.30 through_.37 of Circular A-110, which shows that a financed purchase or capital lease is less costly to the organization than other leasing alternatives, on a net present value basis. Discount rates used should be equal to the non-profit organization's anticipated interest rates and should be no higher than the fair market rate available to the non-profit organization from an unrelated("arm's length")third-party. The lease/purchase analysis shall include a comparison of the net present value of the projected total cost comparisons of both alternatives over the period the asset is expected to be used by the non-profit 47 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html organization. The cost comparisons associated with purchasing the facility shall include the estimated purchase price, anticipated operating and maintenance costs(including property taxes, if applicable)not included in the debt financing, less any estimated asset salvage value at the end of the period defined above. The cost comparison for a capital lease shall include the estimated total lease payments, any estimated bargain purchase option, operating and maintenance costs, and taxes not included in the capital leasing arrangement, less any estimated credits due under the lease at the end of the period defined above. Projected operating lease costs shall be based on the anticipated cost of leasing comparable facilities at fair market rates under rental agreements that would be renewed or reestablished over the period defined above, and any expected maintenance costs and allowable property taxes to be borne by the non-profit organization directly or as part of the lease arrangement. (c) The actual interest cost claimed is predicated upon interest rates that are no higher than the fair market rate available to the non-profit organization from an unrelated("arm's length") third party. (d) Investment earnings, including interest income, on bond or loan principal,pending payment of the construction or acquisition costs, are used to offset allowable interest cost. Arbitrage earnings reportable to the Internal Revenue Service are not required to be offset against allowable interest costs. (e)Reimbursements are limited to the least costly alternative based on the total cost analysis required under subparagraph (b). For example, if an operating lease is determined to be less costly than purchasing through debt financing, then reimbursement is limited to the amount determined if leasing had been used. In all cases where a lease/purchase analysis is performed,Federal reimbursement shall be based upon the least expensive alternative. (f)Non-profit organizations are also subject to the following conditions: (i)Interest on debt incurred to finance or refinance assets acquired before or reacquired after the effective date of this Circular is not allowable. (ii)For debt arrangements over$1 million,unless the non-profit organization makes an initial equity contribution to the asset purchase of 25 percent or more, non-profit organizations shall reduce claims for interest expense by an amount equal to imputed interest earnings on excess cash flow,which is to be calculated as follows. Annually, non-profit organizations shall prepare a cumulative(from the inception of the project)report of monthly cash flows that includes inflows and outflows, regardless of the funding source. Inflows consist of depreciation expense, amortization of capitalized construction interest, and annual interest expense. For cash flow calculations,the annual inflow figures shall be divided by the number of months in the year(usually 12)that the building is in service for monthly amounts. Outflows consist of initial equity contributions, debt principal payments (less the pro rata share attributable to the unallowable costs of land) and interest payments. Where cumulative inflows exceed cumulative outflows, interest shall be calculated on the excess inflows for that period and be treated as a reduction to allowable interest expense. The rate of interest to be used to compute earnings on excess cash flows shall be the three month Treasury Bill closing rate as of the last business day of that month. (iii) Substantial relocation of federally-sponsored activities from a facility financed by indebtedness, the cost of which was funded in whole or part through Federal reimbursements, to another facility prior to the expiration of a period of 20 years requires notice to the Federal cognizant agency. The extent of the relocation, the amount of the Federal participation in the financing, and the depreciation and interest charged to date may require negotiation and/or downward adjustments of replacement space charged to Federal programs in the future. 48 of 63 6/21/00 2:27 PM VIVID Lncuiar http://www.w.,,......,use.govtomb/circulars/a122/a122.htrnl (iv)The allowable costs to acquire facilities and equipment are limited to a fair market value available to the non-profit organization from an unrelated("arm's length") third party. (2)For non-profit organizations subject to "full coverage"'under the Cost Accounting Standards(CAS) as defined at 48 CFR 9903.201,the interest allowability provisions of subparagraph a do not apply. Instead, these organizations' sponsored agreements are subject to CAS 414 (48 CFR 9903.414), cost of money as an element of the cost of facilities capital, and CAS 417 (48 CFR 9903.417), cost of money as an element of the cost of capital assets under construction. (3) The following definitions are to be used for purposes of paragraph 23: (a) Re-acquired assets means assets held by the non-profit organization prior to the effective date of this revision that have again come to be held by the organization,whether through repurchase or refinancing. It does not include assets acquired to replace older assets. (b)Initial equity contribution means the amount or value of contributions made by non-Federal entities for the acquisition of the asset or prior to occupancy of facilities. (c)Asset costs means the capitalizable costs of an asset, including construction costs, acquisition costs, and other such costs capitalized in accordance with GAAP. b. Costs of organized fundraising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions are unallowable. c. Costs of investment counsel and staff and similar expenses incurred solely to enhance income from investments are unallowable. d. Fundraising and investment activities shall be allocated an appropriate share of indirect costs under the conditions described in subparagraph B.3 of Attachment A. 24. Labor relations costs. Costs incurred in maintaining satisfactory relations between the organization and its employees, including costs of labor management committees, employee publications, and other related activities are allowable. 25. Lobbying. a. Notwithstanding other provisions of this Circular, costs associated with the following activities are unallowable: (1)Attempts to influence the outcomes of any Federal, State, or local election,referendum, initiative, or similar procedure,through in kind or cash contributions, endorsements,publicity, or similar activity; (2)Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee, or other organization established for the purpose of influencing the outcomes of elections; (3)Any attempt to influence: (i)The introduction of Federal or State legislation; or(ii)the enactment or modification of any pending Federal or State legislation through communication with any member or Aft employee of the Congress or State legislature(including efforts to influence State or local officials to engage in similar lobbying activity), or with any Government official or employee in connection with a 49 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html decision to sign or veto enrolled legislation; (4)Any attempt to influence: (i) The introduction of Federal or State legislation; or(ii)the enactment or modification of any pending Federal or State legislation by preparing, distributing or using publicity or propaganda, or by urging members of the general public or any segment thereof to contribute to or participate in any mass demonstration,march, rally, fundraising drive, lobbying campaign or letter writing or telephone campaign; or (5)Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation,when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable lobbying. b. The following activities are excepted from the coverage of subparagraph a: (1)Providing a technical and factual presentation of information on a topic directly related to the performance of a grant, contract or other agreement through hearing testimony, statements or letters to the Congress or a State legislature, or subdivision,member, or cognizant staff member thereof, in response to a documented request(including a Congressional Record notice requesting testimony or statements for the record at a regularly scheduled hearing)made by the recipient member, legislative body or subdivision,or a cognizant staff member thereof;provided such information is readily obtainable and can be readily put in deliverable form; and further provided that costs under this section for travel, lodging or meals are unallowable unless incurred to offer testimony at a regularly scheduled Congressional hearing pursuant to a written request for such presentation made by the Chairman or Ranking Minority Member of the Committee or Subcommittee conducting such hearing. (2)Any lobbying made unallowable by subparagraph a(3)to influence State legislation in order to directly reduce the cost, or to avoid material impairment of the organization's authority to perform the grant, contract, or other agreement. (3) Any activity specifically authorized by statute to be undertaken with funds from the grant, contract, or other agreement. c. (1) When an organization seeks reimbursement for indirect costs, total lobbying costs shall be separately identified in the indirect cost rate proposal, and thereafter treated as other unallowable activity costs in accordance with the procedures of subparagraph B.3 of Attachment A. (2) Organizations shall submit, as part of the annual indirect cost rate proposal, a certification that the requirements and standards of this paragraph have been complied with. (3) Organizations shall maintain adequate records to demonstrate that the determination of costs as being allowable or unallowable pursuant to paragraph 25 complies with the requirements of this Circular. (4) Time logs, calendars, or similar records shall not be required to be created for purposes of complying with this paragraph during any particular calendar month when: (1) the employee engages in lobbying(as defined in subparagraphs (a) and (b)) 25 percent or less of the employee's compensated hours of employment during that calendar month, and(2)within'the preceding five-year period, the organization has dot materially misstated allowable or unallowable costs of any nature, including legislative lobbying costs. When conditions (1) and (2) are met, organizations are not required to establish records to support the allowabliliy of claimed costs in addition to records already required or maintained. Also,when conditions (1) and(2) are met, the absence of time logs, calendars, or similar records will not serve as a basis for 50 of 63 601 mn'7•'77 PM QM13 Circular A-122 http://www.wnitenouse.gov/omb/circulars/a122/a122.htm1 disallowing costs by contesting estimates of lobbying time spent by employees during a calendar month. (5)Agencies shall establish procedures for resolving in advance, in consultation with OMB, any significant questions or disagreements concerning the interpretation or application of paragraph 25. Any such advance resolution shall be binding in any subsequent settlements, audits or investigations with respect to that grant or contract for purposes of interpretation of this Circular; provided,however, that this shall not be construed to prevent a contractor or grantee from contesting the lawfulness of such a determination. 26. Losses on other awards. Any excess of costs over income on any award is unallowable as a cost of any other award. This includes,but is not limited to,the organization's contributed portion by reason of cost sharing agreements or any under-recoveries through negotiation of lump sums for, or ceilings on, indirect costs. 27. Maintenance and repair costs. Costs incurred for necessary maintenance,repair, or upkeep of buildings and equipment(including Federal property unless otherwise provided for)which neither add to the permanent value of the property nor appreciably prolong its intended life,but keep it in an efficient operating condition, are allowable. Costs incurred for improvements which add to the permanent value of the buildings and equipment or appreciably prolong their intended life shall be treated as capital expenditures (see paragraph 15). 28. Materials and supplies. The costs of materials and supplies necessary to carry out an award are allowable. Such costs should be charged at their actual prices after deducting all cash discounts, trade discounts,rebates, and allowances received by the organization. Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing consistently applied. Incoming transportation charges may be a proper part of material cost. Materials and supplies charged as a direct cost should include only the materials and supplies actually used for the performance of the contract or grant, and due credit should be given for any excess materials or supplies retained, or returned to vendors. 29. Meetings and conferences. a. Costs associated with the conduct of meetings and conferences include the cost of renting facilities, meals, speakers' fees, and the like. But see paragraph 14, Entertainment costs, and paragraph 34, Participant support costs. b. To the extent that these costs are identifiable with a particular cost objective,they should be charged to that objective(see paragraph B of Attachment A). These costs are allowable,provided that they meet the general tests of allowability, shown in paragraph A of Attachment A to this Circular. c. Costs of meetings and conferences held to conduct the general administration of the organization are allowable. 30. Memberships, subscriptions, and professional activity costs. a. Costs of the organization's membership in business, technical, and professional organizations are allowable. b. Costs of the organization's subscriptions to business,professional, and technical periodicals are allowable. 51 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html C. Costs of meetings and conferences,when the primary purpose is the dissemination of technical information, are allowable. This includes costs of meals, transportation,rental of facilities, and other items incidental to such meetings or conferences. d. Costs of membership in any civic or community organization are allowable with prior approval by Federal cognizant agency. e. Costs of membership in any country club or social or dining club or organization are unallowable. 31. Organization costs. Expenditures, such as incorporation fees,brokers' fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment counselors,whether or not employees of the organization, in connection with establishment or reorganization of an organization, are unallowable except with prior approval of the awarding agency. 32. Overtime, extra-pay shift, and multi-shift premiums. Premiums for overtime, extra-pay shifts, and multi-shift work are allowable only with the prior approval of the awarding agency except: a. When necessary to cope with emergencies, such as those resulting from accidents,natural disasters, breakdowns of equipment, or occasional operational bottlenecks of a sporadic nature. b. When employees are performing indirect functions, such as administration,maintenance, or accounting. c. In the performance of tests, laboratory procedures, or other similar operations which are continuous in nature and cannot reasonably be interrupted or otherwise completed. d. When lower overall cost to the Federal Government will result. 33. Page charges in professional journals. Page charges for professional journal publications are allowable as a necessary part of research costs,where: a. The research papers report work supported by the Federal Government; and b. The charges are levied impartially on all research papers published by the journal,whether or not by federally-sponsored authors. 34. Participant support costs. Participant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia, or training projects. These costs are allowable with the prior approval of the awarding agency. 35. Patent costs. a. Costs of(i)preparing disclosures,reports, and other documents required by the award and of searching the art to the extent necessary to make such disclosures, (ii)preparing documents and any other patent costs in connection with the filing and prosecution of a United States patent application where title or royalty-free license is required by the Federal Government to be conveyed to the Federal Government, and / (iii) general counseling services relating to patent and copyright matters, such as advice on patent and copyright laws,regulations, clauses, and employee agreements are allowable (but see paragraph 39). b. Cost of preparing disclosures, reports, and other documents and of searching the art to the extent 52 of 63 6/21/00 2:27 PM VMt3 Circular A-122 http://www.wii'LCIcause.gov/omb/circulars/al22/al22.html necessary to make disclosures, if not required by the award, are unallowable. Costs in connection with(i) filing and prosecuting any foreign patent application, or(ii) any United States patent application,where the award does not require conveying title or a royalty-free license to the Federal Government, are unallowable (also see paragraph 47). 36. Pension plans. See subparagraph 7.h. 37. Plant security costs. Necessary expenses incurred to comply with Federal security requirements or for facilities protection, including wages,uniforms, and equipment of personnel are allowable. 38. Pre-award costs. Pre-award costs are those incurred prior to the effective date of the award directly pursuant to the negotiation and in anticipation of the award where such costs are necessary to comply with the proposed delivery schedule or period of performance. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the award and only with the written approval of the awarding agency. 39. Professional service costs. a. Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the organization, are allowable, subject to subparagraphs b and c when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. b. In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant: (1)The nature and scope of the service rendered in relation to the service required. (2) The necessity of contracting for the service, considering the organization's capability in the particular area. (3)The past pattern of such costs,particularly in the years prior to Federal awards. (4)The impact of Federal awards on the organization's business (i.e.,what new problems have arisen). (5)Whether the proportion of Federal work to the organization's total business is such as to influence the organization in favor of incurring the cost,particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal grants and contracts. (6)Whether the service can be performed more economically by direct employment rather than contracting. (7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-Federal awards. (8)Adequacy of the contractual agreement for the service(e.g., description of the service, estimate of time required,rate of compensation, and termination provisions). c. In addition to the factors in subparagraph b,retainer fees to be allowable must be supported by evidence of bona fide services available or rendered. 0 53 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html 40. Profits and losses on disposition of depreciable property or other capital assets. a. (1) Gains and losses on sale, retirement, or other disposition of depreciable property shall be included in the year in which they occur as credits or charges to cost grouping(s) in which the depreciation applicable to such property was included. The amount of the gain or loss to be included as a credit or charge to the appropriate cost grouping(s) shall be the difference between the amount realized on the property and the undepreciated basis of the property. (2) Gains and losses on the disposition of depreciable property shall not be recognized as a separate credit or charge under the following conditions: (a)The gain or loss is processed through a depreciation reserve account and is reflected in the depreciation allowable under paragraph 11. (b) The property is given in exchange as part of the purchase price of a similar item and the gain or loss is taken into account in determining the depreciation cost basis of the new item. (c)A loss results from the failure to maintain permissible insurance, except as otherwise provided in subparagraph 22.a(3). (d) Compensation for the use of the property was provided through use allowances in lieu of depreciation in accordance with paragraph 11. (e) Gains and losses arising from mass or extraordinary sales,retirements, or other dispositions shall be considered on a case-by-case basis. b. Gains or losses of any nature arising from the sale or exchange of property other than the property covered in subparagraph a shall be excluded in computing award costs. 41. Publication and printing costs. a. Publication costs include the costs of printing(including the processes of composition,plate-making, press work,binding, and the end products produced by such processes), distribution,promotion,mailing, and general handling. b. If these costs are not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the organization. c. Publication and printing costs are unallowable as direct costs except with the prior approval of the awarding agency. d. The cost of page charges in journals is addressed paragraph 33. 42. Rearrangement and alteration costs. Costs incurred for ordinary or normal rearrangement and alteration of facilities are allowable. Special arrangement and alteration costs incurred specifically for the project are allowable with the prior approval of the awarding agency. if 43. Reconversion costs. Costs incurred in the restoration or rehabilitation of the organization's facilities to approximately the same condition existing immediately prior to commencement of Federal awards, fair wear and tear excepted, are allowable. 54 of 63 6/21/00 2:27 PM UNil3 Circular A-12Z nup:uwww........,....use.govrombicirculars/a122/a122.htm.l 44. Recruiting costs. , a. Subject to subparagraphs b, c, and d, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, costs of"help wanted" advertising, operating costs of an employment office necessary to secure and maintain an adequate staff, costs of operating an aptitude and educational testing program, travel costs of employees while engaged in recruiting personnel, travel costs of applicants for interviews for prospective employment, and relocation costs incurred incident to recruitment of new employees, are allowable to the extent that such costs are incurred pursuant to a well-managed recruitment program. Where the organization uses employment agencies, costs that are not in excess of standard commercial rates for such services are allowable. b. In publications, costs of help wanted advertising that includes color, includes advertising material for other than recruitment purposes, or is excessive in size(taking into consideration recruitment purposes for which intended and normal organizational practices in this respect), are unallowable. c. Costs of help wanted advertising, special emoluments, fringe benefits, and salary allowances incurred to attract professional personnel from other organizations that do not meet the test of reasonableness or do not conform with the established practices of the organization, are unallowable. d. Where relocation costs incurred incident to recruitment of a new employee have been allowed either as an allocable direct or indirect cost, and the newly hired employee resigns for reasons within his control within twelve months after being hired, the organization will be required to refund or credit such relocation costs to the Federal Government. 45. Relocation costs. a. Relocation costs are costs incident to the permanent change of duty assignment(for an indefinite period or for a stated period of not less than 12 months) of an existing employee or upon recruitment of a new employee. Relocation costs are allowable, subject to the limitation described in subparagraphs b, c, and d,provided that: (1) The move is for the benefit of the employer. (2)Reimbursement to the employee is in accordance with an established written policy consistently followed by the employer. (3)The reimbursement does not exceed the employee's actual (or reasonably estimated) expenses. b. Allowable relocation costs for current employees are limited to the following: (1) The costs of transportation of the employee,members of his immediate family and his household, and personal effects to the new location. • (2)The costs of finding a new home, such as advance trips by employees and spouses to locate living quarters and temporary lodging during the transition period, up to maximum period of 30 days, including advance trip time. (3) Closing costs, such as brokerage, legal, and appraisal fees, incident to the disposition of the employee's 111`a former home. These costs,together with those described in(4), are limited to 8 per cent of the sales price0 55 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html of the employee's former home. (4) The continuing costs of ownership of the vacant former home after the settlement or lease date of the employee's new permanent home, such as maintenance of buildings and grounds(exclusive of fixing up expenses),utilities, taxes, and property insurance. (5) Other necessary and reasonable expenses normally incident to relocation, such as the costs of canceling an unexpired lease, disconnecting and reinstalling household appliances, and purchasing insurance against loss of or damages to personal property. The cost of canceling an unexpired lease is limited to three times the monthly rental. c. Allowable relocation costs for new employees are limited to those described in(1) and (2) of subparagraph b. When relocation costs incurred incident to the recruitment of new employees have been allowed either as a direct or indirect cost and the employee resigns for reasons within his control within 12 months after hire, the organization shall refund or credit the Federal Government for its share of the cost. However, the costs of travel to an overseas location shall be considered travel costs in accordance with paragraph 55 and not relocation costs for the purpose of this paragraph if dependents are not permitted at the location for any reason and the costs do not include costs of transporting household goods. d. The following costs related to relocation are unallowable: (1)Fees and other costs associated with acquiring a new home. (2)A loss on the sale of a former home. (3) Continuing mortgage principal and interest payments on a home being sold. (4) Income taxes paid by an employee related to reimbursed relocation costs. 46. Rental costs. a. Subject to the limitations described in subparagraphs b through d, rental costs are allowable to the extent that the rates are reasonable in light of such factors as: rental costs of comparable property, if any; market conditions in the area; alternatives available; and the type, life expectancy, condition, and value of the property leased. b. Rental costs under sale and leaseback arrangements are allowable only up to the amount that would be allowed had the organization continued to own the property. - c. Rental costs under less-than-arms-length leases are allowable only up to the amount that would be allowed had title to the property vested in the organization. For this purpose, a less-than-arms-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other. Such leases include,but are not limited to those between(i) divisions of an organization; (ii) organizations under common control through common officers, directors, or members; and(iii) an organization and a director, trustee, officer, or key employee of the organization or his immediate family either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest. d. Rental costs under leases which are required to be treated as capital leases under GAAP, are allowable only up to the amount that would be allowed had the organization purchased the property on the date the 56 of 63 6/21/00 2:27 PM 0M13iarcularA-izz http://www.wmicuouse.gov/omb/circulars/a122/a122.html lease agreement was executed, i.e., to the amount that minimally would pay for depreciation or use allowances,maintenance, taxes, and insurance. Interest costs related to capitalized leases are allowable to the extent they meet criteria in subparagraph 23.a. Unallowable costs include amounts paid for profit, management fees, and taxes that would not have been incurred had the organization purchased the facility. 47. Royalties and other costs for use of patents and copyrights. a. Royalties on a patent or copyright or amortization of the cost of acquiring by purchase a copyright, patent, or rights thereto,necessary for the proper performance of the award are allowable unless: ' (1) The Federal Government has a license or the right to free use of the patent or copyright. (2)The patent or copyright has been adjudicated to be invalid, or has been administratively determined to be invalid. (3)The patent or copyright is considered to be unenforceable. (4)The patent or copyright is expired. b. Special care should be exercised in determining reasonableness where the royalties may have arrived at as a result of less-than-arm's-length bargaining, e.g.: (1)Royalties paid to persons, including corporations, affiliated with the organization. (2)Royalties paid to unaffiliated parties, including corporations,under an agreement entered into in contemplation that a Federal award would be made. (3)Royalties paid under an agreement entered into after an award is made to an organization. c. In any case involving a patent or copyright formerly owned by the organization, the amount of royalty allowed should not exceed the cost which would have been allowed had the organization retained title thereto. 48. Selling and marketing. Costs of selling and marketing any products or services of the organization (unless allowed under paragraph 1 as allowable public relations costs) are unallowable. These costs, however, are allowable as direct costs, with prior approval by awarding agencies,when they are necessary for the performance of Federal programs. 49. Severance pay. a. Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular salaries and wages,by organizations to workers whose employment is being terminated. Costs of severance pay are allowable only to the extent that in each case, it is required by(i) law, (ii) employer-employee agreement, (iii) established policy that constitutes, in effect, an implied agreement on the organization's part, or(iv) circumstances of the particular employment. b. Costs of severance payments are divided into two categories as follows: (1) Actual normal turnover severance payments shall be allocated to all activities; or,where the organization provides for a reserve for normal severances, such method will be acceptable if the charge to 57 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 current operations is reasonable in light of payments actually made for normal severances over a representative past period, and if amounts charged are allocated to all activities of the organization. (2)Abnormal or mass severance pay is of such a conjectural nature that measurement of costs by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the Federal Government recognizes its obligation to participate, to the extent of its fair share, in any specific payment. Thus, allowability will be considered on a case-by-case basis in the event or occurrence. c. Costs incurred in certain severance pay packages(commonly known as "a golden parachute"payment) which are in an amount in excess of the normal severance pay paid by the organization to an employee upon termination of employment and are paid to the employee contingent upon a change in management control over, or ownership of, the organization's assets are unallowable. d. Severance payments to foreign nationals employed by the organization outside the United States, to the extent that the amount exceeds the customary or prevailing practices for the organization in the United States are unallowable,unless they are necessary for the performance of Federal programs and approved by awarding agencies. e. Severance payments to foreign nationals employed by the organization outside the United States due to the termination of the foreign national as a result of the closing of, or curtailment of activities by, the organization in that country, are unallowable, unless they are necessary for the performance of Federal programs and approved by awarding agencies. 50. Specialized service facilities. a. The costs of services provided by highly complex or specialized facilities operated by the organization, such as electronic computers and wind tunnels, are allowable,provided the charges for the services meet the conditions of either subparagraph b or c and, in addition, take into account any items of income or Federal financing that qualify as applicable credits under subparagraph A.5 of Attachment A. b. The costs of such services,when material,must be charged directly to applicable awards based on actual usage of the services on the basis of a schedule of rates or established methodology that(i)does not discriminate against federally-supported activities of the organization, including usage by the organization for internal purposes, and (ii) is designed to recover only the aggregate costs of the services. The costs of each service shall consist normally of both its direct costs and its allocable share of all indirect costs. Advance agreements pursuant to subparagraph A.6 of Attachment A are particularly important in this situation. c. Where the costs incurred for a service are not material, they may be allocated as indirect costs. 51. Taxes. a. In general, taxes which the organization is required to pay and which are paid or accrued in accordance with GAAP, and payments made to local governments in lieu of taxes which are commensurate with the local government services received are allowable, except for(i)taxes from which exemptions are available to the organization directly or which are available to the organization based on an exemption afforded the of °Federal Government and in the latter case when the awarding agency makes available the necessary exemption certificates, (ii) special assessments on land which represent capital improvements, and(iii) Federal income taxes. 58 of 63 6/21/00 2:27 PM Vi ms two:,iw�.w......._.._.ao.guviiiino,'irculars,ai22fa122.hin,I b. Any refund of taxes, and any payment to the organization of interest thereon,which were allowed as award costs,will be credited either as a cost reduction or cash refund, as appropriate, to the Federal Government. 52. Termination costs. Termination of awards generally give rise to the incurrence of costs, or the need for special treatment of costs,which would not have arisen had the award not been terminated. Cost principles covering these items are set forth below. They are to be used in conjunction with the other provisions of this Circular in termination situations. a. Common items. The cost of items reasonably usable on the organization's other work shall not be allowable unless the organization submits evidence that it would not retain such items at cost without sustaining a loss. In deciding whether such items are reasonably usable on other work of the organization, the awarding agency should consider the organization's plans and orders for current and scheduled activity. Contemporaneous purchases of common items by the organization shall be regarded as evidence that such items are reasonably usable on the organization's other work. Any acceptance of common items as allocable to the terminated portion of the award shall be limited to the extent that the quantities of such items on hand, in transit, and on order are in excess of the reasonable quantitative requirements of other work. b. Costs continuing after termination. If in a particular case, despite all reasonable efforts by the organization, certain costs cannot be discontinued immediately after the effective date of termination, such costs are generally allowable within the limitations set forth in this Circular, except that any such costs continuing after termination due to the negligent or willful failure of the organization to discontinue such costs shall be unallowable. c. Loss of useful value. Loss of useful value of special tooling,machinery and equipment which was not charged to the award as a capital expenditure is generally allowable if: (1) Such special tooling,machinery, or equipment is not reasonably capable of use in the other work of the organization. (2) The interest of the Federal Government is protected by transfer of title or by other means deemed appropriate by the awarding agency; d. Rental costs. Rental costs under unexpired leases are generally allowable where clearly shown to have been reasonably necessary for the performance of the terminated award less the residual value of such leases, if(i)the amount of such rental claimed does not exceed the reasonable use value of the property leased for the period of the award and such further period as may be reasonable, and(ii)the organization makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease. There also may be included the cost of alterations of such leased property,provided such alterations were necessary for the performarice of the award, and of reasonable restoration required by the provisions of the lease. e. Settlement expenses. Settlement expenses including the following are generally allowable: (1)Accounting, legal, clerical, and similar costs reasonably necessary for: (a)The preparation and presentation to awarding agency of settlement claims and supporting data with respect to the terminated portion of the award, unless the termination is for default(see Sec. _.61 of 59 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html Circular A-110); and (b)The termination and settlement of subawards. (2)Reasonable costs for the storage, transportation,protection, and disposition of property provided by the Federal Government or acquired or produced for the award, except when grantees or contractors are reimbursed for disposals at a predetermined amount in accordance with Sec._.30 through_.37 of Circular A-110. (3)Indirect costs related to salaries and wages incurred as settlement expenses in subparagraphs (1) and (2).Normally, such indirect costs shall be limited to fringe benefits, occupancy cost, and immediate supervision. f. Claims under subawards. Claims under subawards, including the allocable portion of claims which are common to the award, and to other work of the organization are generally allowable. An appropriate share of the organization's indirect expense may be allocated to the amount of settlements with subcontractors and/or subgrantees, provided that the amount allocated is otherwise consistent with the basic guidelines contained in Attachment A. The indirect expense so allocated shall exclude the same and similar costs claimed directly or indirectly as settlement expenses. 53. Training and education costs. a. Costs of preparation and maintenance of a program of instruction including but not limited to on-the-job, classroom, and apprenticeship training, designed to increase the vocational effectiveness of employees, including training materials, textbooks, salaries or wages of trainees(excluding overtime compensation which might arise therefrom), and(i) salaries of the director of training and staff when the training program is conducted by the organization; or(ii) tuition and fees when the training is in an institution not operated by the organization, are allowable. b. Costs of part-time education, at an undergraduate or post-graduate college level, including that provided at the organization's own facilities, are allowable only when the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work, and are limited to: (1) Training materials. (2) Textbooks. (3)Fees charges by the educational institution. (4) Tuition charged by the educational institution or, in lieu of tuition, instructors' salaries and the related share of indirect costs of the educational institution to the extent that the sum thereof is not in excess of the tuition which would have been paid to the participating educational institution. (5) Salaries and related costs of instructors who are employees of the organization. (6) Straight-time compensation of each employee for time spent attending classes during working hours not 00 in excess of 156 hours per year and only to the extent that circumstances do not permit the operation of classes or attendance at classes after regular working hours; otherwise, such compensation is unallowable. c. Costs of tuition, fees, training materials, and textbooks (but not subsistence, salary, or any other 60 of 63 6/21/00 2:27 PM ts Lircwar w-1ZZ http://www.wnncuouse.gov/omb/circulars/a122/a122.html emoluments) in connection with full-time education, including that provided at the organization's own facilities, at a post-graduate(but not undergraduate) college level, are allowable only when the course or degree pursued is related to the field in which the employee is now working or may reasonably be expected to work, and only where the costs receive the prior approval of the awarding agency. Such costs are limited to the costs attributable to a total period not to exceed one school year for each employee so trained. In unusual cases the period may be extended. d. Costs of attendance of up to.16 weeks per employee per year at specialized programs specifically designed to enhance the effectiveness of executives or managers or to prepare employees for such positions are allowable. Such costs include enrollment fees, training materials, textbooks and related charges, employees' salaries, subsistence, and travel. Costs allowable under this paragraph do not include those for courses that are part of a degree-oriented curriculum, which are allowable only to the extent set forth in subparagraphs b and c. e. Maintenance expense, and normal depreciation or fair rental, on facilities owned or leased by the organization for training purposes are allowable to the extent set forth in paragraphs 11,27, and 46. f. Contributions or donations to educational or training institutions, including the donation of facilities or other properties, and scholarships or fellowships, are unallowable. g. Training and education costs in excess of those otherwise allowable under subparagraphs b and c may be allowed with prior approval of the awarding agency. To be considered for approval, the organization must demonstrate that such costs are consistently incurred pursuant to an established training and education program, and that the course or degree pursued is relative to the field in which the employee is now working or may reasonably be expected to work. 54. Transportation costs. Transportation costs include freight, express, cartage, and postage charges relating either to goods purchased, in process, or delivered. These costs are allowable. When such costs can readily be identified with the items involved,they may be directly charged as transportation costs or added to the cost of such items (see paragraph 28). Where identification with the materials received cannot readily be made, transportation costs may be charged to the appropriate indirect cost accounts if the organization follows a consistent, equitable procedure in this respect. 55. Travel costs. a. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the organization. Travel costs are allowable subject to subparagraphs b through e,when they are directly attributable to specific work under an award or are incurred in the normal course of administration of the organization. b. Such costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs incurred,or on a combination of the two,provided the method used results in charges consistent with those normally allowed by the organization in its regular operations. c. The difference in cost between first-class air accommodations and less than first-class air . accommodations is unallowable except when less than first-class air accommodations are not reasonably available to meet necessary mission requirements, such as where less than first-class accommodations „q would(i)require circuitous routing, (ii)require travel during unreasonable hours, (iii) greatly increase the duration of the flight, (iv)result in additional costs which would offset the transportation savings, or(v) offer accommodations which are not reasonably adequate for the medical needs of the traveler. 61 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.html d.Necessary and reasonable costs of family movements and personnel movements of a special or mass nature are allowable, pursuant to paragraphs 44 and 45, subject to allocation on the basis of work or time period benefited when appropriate. Advance agreements are particularly important. e. Direct charges for foreign travel costs are allowable only when the travel has received prior approval of the awarding agency. Each separate foreign trip must be approved. For purposes of this provision, foreign travel is defined as any travel outside of Canada and the United States and its territories and possessions. However, for an organization located in foreign countries, the term "foreign travel" means travel outside that country. 56. Trustees. Travel and subsistence costs of trustees (or directors) are allowable. The costs are subject to restrictions regarding lodging, subsistence and air travel costs provided in paragraph 55. ATTACHMENT C Circular No. A-122 NON-PROFIT ORGANIZATIONS NOT SUBJECT TO THIS CIRCULAR Aerospace Corporation, El Segundo, California Argonne National Laboratory, Chicago, Illinois Atomic Casualty Commission, Washington,D.C. Battelle Memorial Institute, Headquartered in Columbus, Ohio Brookhaven National Laboratory,Upton,New York Charles Stark Draper Laboratory, Incorporated, Cambridge, Massachusetts Environmental Institute of Michigan, Ann Arbor,Michigan Hanford Environmental Health Foundation, Richland, Washington IIT Research Institute, Chicago, Illinois Institute for Defense Analysis, Alexandria, Virginia Mitre Corporation,Bedford,Massachusetts National Radiological Astronomy Observatory, Green Bank, West Virginia National Renewable Energy Laboratory, Golden, Colorado Oak Ridge Associated Universities, Oak Ridge, Tennessee Rand Corporation, Santa Monica, California Research Triangle Institute, Research Triangle Park,North Carolina Riverside Research Institute,New York,New York Southern Research Institute,Birmingham,Alabama Southwest Research Institute, San Antonio, Texas SRI International,Menlo Park, California Syracuse Research Corporation, Syracuse,New York Universities Research Association, Incorporated(National Acceleration Lab), Argonne, Illinois Non-profit insurance companies, such as Blue Cross and Blue Shield Organizations Other non-profit organizations as negotiated with awarding agencies BILLING CODE 3110-01 I OMB Home Page I Budget Information I Legislative Information I Management Reform/GPRA I Grants Management I Financial Management I Procurement Policy ^f 61 6/21/00 227 PM QM/3 Circular A-122 nnp:nwww........ ..fuse.goviornoicircutarsral2i/aihl.hfnl I Information&Regulatory Policy I Special Topics Read our Privacy Policy q-D 63 of 63 6/21/00 2:27 PM i r OMB Circular A-110 Page 1 of 41 EXHIBIT "J" CIRCULAR A-110 (REVISED 11/19/93,As Further Amended 9/30/99) CIRCULAR NO. A-1 10 Revised TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS SUBJECT: Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education,Hospitals, and Other Non-Profit Organizations 1. Purpose. This Circular sets forth standards for obtaining consistency and uniformity among Federal agencies in the administration of grants to and agreements with institutions of higher education,hospitals, and other non-profit organizations. 2. Authority. Circular A-110 is issued under the authority of 31 U.S.C. 503 (the Chief Financial Officers Act), 31 U.S.C. 1111, 41 U.S.C. 405 (the Office of Federal Procurement Policy Act), Reorganization Plan No. 2 of 1970, and E.O. 11541 ("Prescribing the Duties of the Office of Management and Budget and the Domestic Policy Council in the Executive Office of the President"). 3, Policy. Except as provided herein,the standards set forth in this Circular are applicable to all Federal agencies. If any statute specifically prescribes policies or specific requirements that differ from the standards provided herein, the provisions of the statute shall govern. The provisions of the sections of this Circular shall be applied by Federal agencies to recipients. Recipients shall apply the provisions of this Circular to subrecipients performing substantive work under grants and agreements that are passed through or awarded by the primary recipient, if such subrecipients are organizations described in paragraph 1. This Circular does not apply to grants, contracts, or other agreements between the Federal Government and units of State or local governments covered by OMB Circular A-102, "Grants and Cooperative Agreements with State and Local Governments," and the Federal agencies' grants management common rule which standardized and codified the administrative requirements Federal agencies impose on State and local grantees. In addition, subawards and contracts to State or local governments are not covered by this Circular. However, this Circular applies to subawards made by State and local governments to organizations covered by this Circular. Federal agencies may apply the provisions of this Circular to commercial organizations, foreign governments, organizations under the jurisdiction of foreign governments, and international organizations. 4.Definitions. Definitions of key terms used in this Circular are contained in Section .2 in the Attachment. 5. Required Action. The specific requirements and responsibilities of Federal agencies and institutions of higher education,hospitals, and other non-profit organizations are set forth in this Circular. Federal agencies responsible for awarding and administering grants to and other agreements with organizations described in paragraph 1 shall adopt the language in the Circular unless different provisions are required by Federal statute or are approved by OMB. (111 http://www.whitehouse.gov/OMB/circulars/al 10/all 0.html 6/20/00 OMB Circular A-110 • Page 2 of 41 6. OMB Responsibilities. OMB will review agency regulations and implementation of this Circular, and will provide interpretations of policy requirements and assistance to insure effective and efficient implementation. Any exceptions will be subject to approval by OMB, as indicated in Section .4 in the Attachment. Exceptions will only be made in particular cases where adequate justification is presented. 7. Information Contact. Further information concerning this Circular may be obtained by contacting the Office of Federal Financial Management, Office of Management and Budget, Washington,DC 20503, telephone (202) 395-3993. 8. Termination Review Date. This Circular will have a policy review three years from date of issuance. 9. Effective Date. The standards set forth in this Circular which affect Federal agencies will be effective 30 days after publication of the final revision in the Federal Register. Those standards which Federal agencies impose on grantees will be adopted by agencies in codified regulations within six months after publication in the Federal Register. Earlier implementation is encouraged. Attachment Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations SUBPART A- GENERAL Sec. .1 Purpose. .2 Definitions. .3 Effect on other issuances. .4 Deviations. .5 Subawards. SUBPART B -PRE-AWARD REQUIREMENTS .10 Purpose. .11 Pre-award policies. .12 Forms for applying for Federal assistance. .13_Debarment and suspension. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 • - OMB Circular A-110 Page 3 of 41 .14 Special award conditions. .15 Metric system of measurement. .16 Resource Conservation and Recovery Act: .17 Certifications and representations. SUBPART C-POST-AWARD REQUIREMENTS Financial and Program Management .20 Purpose of financial and program management. .21 Standards...for financial management systems. .22 Payment. .23 Cost sharing or matching. .24 Program income. .25 Revision of budget and.program_plans. .26 Non-Federal audits. .27 Allowable costs. .28 Period of availability of funds. .29 Conditional exemptions. Property Standards .30 Purpose of property standards. .31 Insurance coverage. .32 Real property. .33 Federally-owned and exempt property. .34 Equipment. .35 Supplies and other_expendable_property. .36 Intangible property. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 4 of 41 .37 Property_trust..,relationship. Procurement Standards .40 Purpose o f procurement,standards. .41 Recipient responsibilities. .42 Codes of conduct. .43 Competition. .44 Procurement procedures. .45 Cost and price analysis. .46 Procurement records. .47 Contract administration. .48 Contract provisions. Reports and Records .50 Purpose of reports and records. .51 Monitoring and reporting program_performance. .52 Financial._reporting. .53 Retention and access requirements for records. Termination and Enforcement. .60 Purpose of termination and enforcement. .61 Termination. .62 Enforcement. SUBPART D-AFTER-THE-AWARD REQUIREMENTS .70 Purpose. .71 Closeout procedures. .72 Subsequent adjustments and continuing responsibilities. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 • , OMB Circular A-110 Page 5 of 41 .73 Collection of amounts due. • APPENDIX A- CONTRACT PROVISIONS * * * * * SUBPART A- General .1 Purpose. This Circular establishes uniform administrative requirements for Federal grants and agreements awarded to institutions of higher education,hospitals, and other non-profit organizations. Federal awarding agencies shall not impose additional or inconsistent requirements, except as provided in Sections_.4, and .14 or unless specifically required by Federal statute or executive order.Non-profit organizations that implement Federal programs for the States are also subject to State requirements. .2 Definitions. (a)Accrued expenditures means the charges incurred by the recipient during a given period requiring the provision of funds for: (1) goods and other tangible property received; (2) services performed by employees, contractors, subrecipients, and other payees; and, (3) other amounts becoming owed under programs for which no current services or performance is required. (b)Accrued income means the sum of: (1)earnings during a given period from (i) services performed by the recipient, and(ii) goods and other tangible property delivered to purchasers, and(2) amounts becoming owed to the recipient for which no current services or performance is required by the recipient. (c)Acquisition cost of equipment means the net invoice price of the equipment, including the cost of modifications, attachments, accessories,or auxiliary apparatus necessary to make the property usable for the purpose for which it was acquired. Other charges, such as the cost of installation, transportation,taxes, duty or protective in-transit insurance, shall be included or excluded from the unit acquisition cost in accordance with the recipient's regular accounting practices. (d)Advance means a payment made by Treasury check or other appropriate payment mechanism to a recipient upon its request either before outlays are made by the recipient or through the use of predetermined payment schedules. (e)Award means financial assistance that provides support or stimulation to accomplish a public purpose. Awards include grants and other agreements in the form of money or property in lieu of money,by the Federal Government to an eligible recipient. The term does not include: technical assistance,which provides services instead of money; other assistance in the form of loans, loan guarantees, interest subsidies, or insurance; direct payments of any kind to individuals; and, contracts which are required to be entered into and administered under procurement laws and regulations. (f) Cash contributions means the recipient's cash outlay, including the outlay of money contributed to the recipient by third parties. (g) Closeout means the process by which a Federal awarding agency determines that all http://www.whitehouse.gov/OMB/circulars/a110/al 1 0.html 6/20/00 OMB Circular A-110 Page 6 of 41 applicable administrative actions and all required work of the award have been completed by the recipient and Federal awarding agency. (h) Contract means a procurement contract under an award or subaward; and a procurement subcontract under a recipient's or subrecipient's contract. (i) Cost sharing or matching means that portion of project or program costs not borne by the Federal Government. (j)Date of completion means the date on which all work under an award is completed or the date on the award document, or any supplement or amendment thereto, on which Federal sponsorship ends. (k)Disallowed costs means those charges to an award that the Federal awarding agency determines to be unallowable, in accordance with the applicable Federal cost principles or other terms and conditions contained in the award. (1) Equipment means tangible nonexpendable personal property including exempt property charged directly to the award having a useful life of more than one year and an acquisition cost of $5000 or more per unit. However, consistent with recipient policy, lower limits may be established. (m) Excess property means property under the control of any Federal awarding agency that, as determined by the head thereof, is no longer required for its needs or the discharge of its responsibilities. (n) Exempt property means tangible personal property acquired in whole or in part with Federal funds,where the Federal awarding agency has statutory authority to vest title in the recipient without further obligation to the Federal Government. An example of exempt property authority is contained in the Federal Grant and Cooperative Agreement Act(31 U.S.C. 6306), for property acquired under an award to conduct basic or applied research by a non-profit institution of higher education or non-profit organization whose principal purpose is conducting scientific research. (o) Federal awarding agency means the Federal agency that provides an award to the recipient. (p)Federal funds authorized means the total amount of Federal funds obligated by the Federal Government for use by the recipient. This amount may include any authorized carryover of unobligated funds from prior funding periods when permitted by agency regulations or agency implementing instructions. (q) Federal share of real property, equipment,or supplies means that percentage of the property's acquisition costs and any improvement expenditures paid with Federal funds. (r) Funding period means the period of time when Federal funding is available for obligation bythe recipient.pent. 4110.. (s) Intangible property and debt instruments means,but is not limited to, trademarks, copyrights,patents and patent applications and such property as loans, notes and other debt instruments, lease agreements, stock and other instruments of property ownership, whether http://www.whitehouse.gov/OMB/circulars/al 10/al 10.html 6/20/00 . urvits Lircular A-i iv Page 7 of 41 considered tangible or intangible. (t) Obligations means the amounts of orders placed, contracts and grants awarded, services received and similar transactions during a given period that require payment by the recipient during the same or a future period. (u) Outlays or expenditures means charges made to the project or program. They may be reported on a cash or accrual basis. For reports prepared on a cash basis, outlays are the sum of cash disbursements for direct charges for goods and services,the amount of indirect expense charged, the value of third party in-kind contributions applied and the amount of cash advances and payments made to subrecipients. For reports prepared on an accrual basis, outlays are the sum of cash disbursements for direct charges for goods and services, the amount of indirect expense incurred, the value of in-kind contributions applied, and the net increase(or decrease)in the amounts owed by the recipient for goods and other property received, for services performed by employees, contractors, subrecipients and other payees and other amounts becoming owed under programs for which no current services or performance are required. (v) Personal property means property of any kind except real property. It may be tangible, having physical existence, or intangible,having no physical existence, such as copyrights,patents, or } securities. (w) Prior approval means written approval by an authorized official evidencing prior consent. (x) Program income means gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the award(see exclusions in paragraphs .24 (e) and(h)). Program income includes,but is not limited to, income from fees for services performed,the use or rental of real or personal property acquired under federally-funded projects, the sale of commodities or items fabricated under an award, license fees and royalties on patents and copyrights, and interest on loans made with award funds. Interest earned on advances of Federal funds is not program income. Except as otherwise provided in Federal awarding agency regulations or the terms and conditions of the award,program income does not include the receipt of principal on loans,rebates, credits, discounts, etc., or interest earned on any of them. (y) Project costs means all allowable costs, as set forth in the applicable Federal cost principles, incurred by a recipient and the value of the contributions made by third parties in accomplishing the objectives of the award during the project period. (z) Project period means the period established in the award document during which Federal sponsorship begins and ends. (aa) Property means, unless otherwise stated,real property, equipment, intangible property and debt instruments. (bb) Real property means land, including land improvements, structures and appurtenances thereto,but excludes movable machinery and equipment. (cc) Recipient means an organization receiving financial assistance directly from Federal -•�. awarding agencies to carry out a project or program. The term includes public and private institutions of higher education,public and private hospitals, and other quasi-public and private non-profit http://www.whitehouse.gov/OMB/circulars/al 10/al 10.html 6/20/00 OMB Circular A-110 Page 8 of 41 or ganizations anizations such as,but.not limited to, communityaction agencies, research institutes, educational g g associations, and health centers. The term may include commercial organizations, foreign or international organizations (such as agencies of the United Nations)which are recipients, subrecipients, or contractors or subcontractors of recipients or subrecipients at the discretion of the Federal awarding agency. The term does not include government-owned contractor-operated facilities or research centers providing continued support for mission-oriented, large-scale programs that are government-owned or controlled, or are designated as federally-funded research and development centers. (dd) Research and development means all research activities,both basic and applied, and all development activities that are supported at universities,colleges, and other non-profit institutions. "Research" is defined as a systematic study directed toward fuller scientific knowledge or understanding of the subject studied. "Development" is the systematic use of knowledge and understanding gained from research directed toward the production of useful materials,devices, systems, or methods, including design and development of prototypes and processes. The term research also includes activities involving the training of individuals in research techniques where such activities utilize the same facilities as other research and development activities and where such activities are not included in the instruction function. (ee) Small awards means a grant or cooperative agreement not exceeding the small purchase threshold fixed at 41 U.S.C. 403(11) (currently$25,000). (ff) Subaward means an award of financial assistance in the form of money, or property in lieu of money, made under an award by a recipient to an eligible subrecipient or by a subrecipient to a lower tier subrecipient. The term includes financial assistance when provided by any legal agreement, even if the agreement is called a contract,but does not include procurement of goods and services nor does it include any form of assistance which is excluded from the definition of"award" in paragraph (e). (gg) Subrecipient means the legal entity to which a subaward is made and which is accountable to the recipient for the use of the funds provided. The term may include foreign or international organizations (such as agencies of the United Nations) at the discretion of the Federal awarding agency. (hh) Supplies means all personal property excluding equipment, intangible property, and debt instruments as defined in this section, and inventions of a contractor conceived or first actually reduced to practice in the performance of work under a funding agreement("subject inventions"), as defined in 37 CFR part 401, "Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts, and Cooperative Agreements." (ii) Suspension means an action by a Federal awarding agency that temporarily withdraws • Federal sponsorship under an award,pending corrective action by the recipient or pending a decision to terminate the award by the Federal awarding agency. Suspension of an award is a separate action from suspension under Federal agency regulations implementing E.O.s 12549 and 12689, "Debarment and Suspension." ''""' (jj) Termination means the cancellation of Federal sponsorship, in whole or in part,under an agreement at any time prior to the date of completion. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 . OMB Circular A-1 iu Page 9 of 41 (kk)Third party in-kind contributions means the value of non-cash contributions provided by non-Federal third parties. Third party in-kind contributions may be in the form of real property, equipment, supplies and other expendable property, and the value of goods and services directly benefiting and specifically identifiable to the project or program. (11) Unliquidated obligations, for financial reports prepared on a cash basis, means the amount of obligations incurred by the recipient that have not been paid. For reports prepared on an accrued expenditure basis, they represent the amount of obligations incurred by the recipient for which an outlay has not been recorded. (mm) Unobligated balance means the portion of the funds authorized by the Federal awarding agency that has not been obligated by the recipient and is determined by deducting the cumulative obligations from the cumulative funds authorized. (nn) Unrecovered indirect cost means the difference between the amount awarded and the amount which could have been awarded under the recipient's approved negotiated indirect cost rate. (oo)Working capital advance means a procedure where by funds are advanced to the recipient to cover its estimated disbursement needs for a given initial period. .3 Effect on other issuances. For awards subject to this Circular, all administrative requirements of codified program regulations,program manuals,handbooks and other nonregulatory materials which are inconsistent with the requirements of this Circular shall be superseded, except to the extent they are required by statute, or authorized in accordance with the deviations provision in Section .4. .4 Deviations. The Office of Management and Budget(OMB)may grant exceptions for classes of grants or recipients subject to the requirements of this Circular when exceptions are not prohibited by statute. However, in the interest of maximum uniformity, exceptions from the requirements of this Circular shall be permitted only in unusual circumstances. Federal awarding agencies may apply more restrictive requirements to a class of recipients when approved by OMB. Federal awarding agencies may apply less restrictive requirements when awarding small awards, except for those requirements which are statutory. Exceptions on a case-by-case basis may also be made by Federal awarding agencies. .5 Subawards. Unless sections of this Circular specifically exclude subrecipients from coverage, the provisions of this Circular shall be applied to subrecipients performing work under awards if such subrecipients are institutions of higher education, hospitals or other non-profit organizations. State and local government subrecipients are subject to the provisions of regulations implementing the grants management common rule,"Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments,"published at 53 FR 8034 (3/11/88). • SUBPART B -Pre-Award Requirements .10 Purpose. Sections .11 through .17 prescribes forms and instructions and other pre- award matters to be used in applying for Federal awards. .11 Pre-award policies. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 10 of 41 (a)Use of Grants and Cooperative Agreements, and Contracts. In each instance, the Federal awarding agency shall decide on the appropriate award instrument(i.e., grant, cooperative agreement, or contract). The Federal Grant and Cooperative Agreement Act(31 U.S.C. 6301-08) governs the use of grants, cooperative agreements and contracts. A grant or cooperative agreement shall be used only when the principal purpose of a transaction is to accomplish a public purpose of support or stimulation authorized by Federal statute. The statutory criterion for choosing between grants and cooperative agreements is that for the latter, "substantial involvement is expected between the executive agency and the State, local government, or other recipient when carrying out the activity contemplated in the agreement." Contracts shall be used when the principal purpose is acquisition of property or services for the direct benefit or use of the Federal Government. (b)Public Notice and Priority Setting. Federal awarding agencies shall notify the public of its intended funding priorities for discretionary grant programs, unless funding priorities are established by Federal statute. .12 Forms for applying for Federal assistance. (a)Federal awarding agencies shall comply with the applicable report clearance requirements of 5 CFR part 1320, "Controlling Paperwork Burdens on the Public,"with regard to all forms used by the Federal awarding agency in place of or as a supplement to the Standard Form 424(SF-424) series. (b)Applicants shall use the SF-424 series or those forms and instructions prescribed by the Federal awarding agency. (c) For Federal programs covered by E.O. 12372, "Intergovernmental Review of Federal Programs," the applicant shall complete the appropriate sections of the SF-424 (Application for Federal Assistance) indicating whether the application was subject to review by the State Single Point of Contact(SPOC). The name and address of the SPOC for a particular State can be obtained from the Federal awarding agency or the Catalog of Federal Domestic Assistance. The SPOC shall advise the applicant whether the program for which application is made has been selected by that State for review. (d)Federal awarding agencies that do not use the SF-424 form should indicate whether the application is subject to review by the State under E.O. 12372. .13 Debarment and suspension. Federal awarding agencies and recipients shall comply with the nonprocurement debarment and suspension common rule implementing E.O.s 12549 and 12689, "Debarment and Suspension." This common rule restricts subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. .14 Special award conditions. If an applicant or recipient: (a)has a history of poor performance, (b) is not financially stable, (c)has a management system that does not meet the standards prescribed in this Circular, (d)has not conformed to the terms and conditions of a previous award, or(e) is not otherwise responsible,Federal awarding agencies may impose additional requirements as needed, provided that such applicant or recipient is notified in writing as to: the nature of the additional requirements, the reason why the additional requirements are being imposed, the nature of the corrective action needed, the time allowed for completing the corrective actions, and the method for http://www.whitehouse.gov/OMB/circulars/a110/a110.html p•//www.whitehouse.go /OMB/circulars/a110/a110.html 6/20/00 . OMB Circular A-11 u Page 11 of 41 requesting reconsideration of the additional requirements imposed. Any special conditions shall be promptly removed once the conditions that prompted them have been corrected. .15 Metric system of measurement. The Metric Conversion Act, as amended by the Omnibus Trade and Competitiveness Act(15 U.S.C. 205)declares that the metric system is the preferred measurement system for U.S. trade and commerce. The Act requires each Federal agency to establish a date or dates in consultation with the Secretary of Commerce,when the metric system of measurement will be used in the agency's procurements, grants, and other business-related activities. Metric implementation may take longer where the use of the system is initially impractical or likely to cause significant inefficiencies in the accomplishment of federally-funded activities. Federal awarding agencies shall follow the provisions of E.O. 12770, "Metric Usage in Federal Government Programs." .16 Resource Conservation and Recovery Act(RCRA) (Pub. L. 94-580 codified at 42 U.S.C. 6962). Under the Act, any State agency or agency of a political subdivision of a State which is using appropriated Federal funds must comply with Section 6002. Section 6002 requires that preference be given in procurement programs to the purchase of specific products containing recycled materials identified in guidelines developed by the Environmental Protection Agency(EPA) (40 CFR parts 247-254). Accordingly, State and local institutions of higher education, hospitals, and non-profit organizations that receive direct Federal awards or other Federal funds shall give preference in their procurement programs funded with Federal funds to the purchase of recycled products pursuant to the EPA guidelines. .17 Certifications and representations. Unless prohibited by statute or codified regulation, each Federal awarding agency is authorized and encouraged to allow recipients to submit certifications and representations required by statute, executive order, or regulation on an annual basis, if the recipients have ongoing and continuing relationships with the agency. Annual certifications and representations shall be signed by responsible officials with the authority to ensure recipients'compliance with the pertinent requirements. SUBPART C-Post-Award Requirements Financial and Program Management .20 Purpose of financial and program management. Sections .21 through .28 prescribe standards for financial management systems,methods for making payments and rules for: satisfying cost sharing and matching requirements, accounting for program income,budget revision approvals, making audits, determining allowability of cost, and establishing fund availability. .21 Standards for financial management systems. (a)Federal awarding agencies shall require recipients to relate financial data to performance data and develop unit cost information whenever practical. (b)Recipients' financial management systems shall provide for the following. (1)Accurate, current and complete disclosure of the financial results of each federally- "- sponsored project or program in accordance with the reporting requirements set forth in Section .52. If a Federal awarding agency requires reporting on an accrual basis from a recipient http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 12 of 41 that maintains its records on other than an accrual basis, the recipient shall not be required to establish an accrual accounting system. These recipients may develop such accrual data for its reports on the basis of an analysis of the documentation on hand. (2)Records that identify adequately the source and application of funds for federally- sponsored activities. These records shall contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, outlays, income and interest. (3) Effective control over and accountability for all funds,property and other assets. Recipients shall adequately safeguard all such assets and assure they are used solely for authorized purposes. (4) Comparison of outlays with budget amounts for each award. Whenever appropriate, financial information should be related to performance and unit cost data. (5)Written procedures to minimize the time elapsing between the transfer of funds to the recipient from the U.S. Treasury and the issuance or redemption of checks,warrants or payments by other means for program purposes by the recipient. To the extent that the provisions of the Cash Management Improvement Act(CMIA) (Pub. L. 101-453) govern, payment methods of State agencies, instrumentalities, and fiscal agents shall be consistent with CMIA Treasury-State Agreements or the CMIA default procedures codified at 31 CFR part 205, "Withdrawal of Cash from the Treasury for Advances under Federal Grant and Other Programs." (6) Written procedures for determining the reasonableness, allocability and allowability of costs in accordance with the provisions of the applicable Federal cost principles and the terms and conditions of the award. (7)Accounting records including cost accounting records that are supported by source documentation. (c)Where the Federal Government guarantees or insures the repayment of money borrowed by the recipient, the Federal awarding agency, at its discretion, may require adequate bonding and insurance if the bonding and insurance requirements of the recipient are not deemed adequate to protect the interest of the Federal Government. (d)The Federal awarding agency may require adequate fidelity bond coverage where the recipient lacks sufficient coverage to protect the Federal Government's interest. (e)Where bonds are required in the situations described above, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties, as prescribed in 31 CFR part 223, "Surety Companies Doing Business with the United States." _.22 Payment. (a)Payment methods shall minimize the time elapsing between the transfer of funds from the United States Treasury and the issuance or redemption of checks,warrants,or payment by other means by the recipients. Payment methods of State agencies or instrumentalities shall be consistent with Treasury-State CMIA agreements or default procedures codified at 31 CFR part 205. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 vivits urcuiar ri-i i., Page 13 of 41 (b)Recipients are to be paid in advance,provided they maintain or demonstrate the willingness to maintain: (1)written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient, and(2) financial management systems that meet the standards for fund control and accountability as established in Section .21. Cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. (c) Whenever possible, advances shall be consolidated to cover anticipated cash needs for all awards made by the Federal awarding agency to the recipient. (1)Advance payment mechanisms include,but are not limited to, Treasury check and electronic funds transfer. (2)Advance payment mechanisms are subject to 31 CFR part 205. (3)Recipients shall be authorized to submit requests for advances and reimbursements at least monthly when electronic fund transfers are not used. (d)Requests for Treasury check advance payment shall be submitted on SF-270, "Request for Advance or Reimbursement," or other forms as may be authorized by OMB. This form is not to be used when Treasury check advance payments are made to the recipient automatically through the use of a predetermined payment schedule or if precluded by special Federal awarding agency instructions for electronic funds transfer. (e)Reimbursement is the preferred method when the requirements in paragraph(b) cannot be met. Federal awarding agencies may also use this method on any construction agreement, or if the major portion of the construction project is accomplished through private market financing or Federal loans, and the Federal assistance constitutes a minor portion of the project. (1)When the reimbursement method is used,the Federal awarding agency shall make payment within 30 days after receipt of the billing, unless the billing is improper. (2)Recipients shall be authorized to submit request for reimbursement at least monthly when electronic funds transfers are not used. (f)If a recipient cannot meet the criteria for advance payments and the Federal awarding agency has determined that reimbursement is not feasible because the recipient lacks sufficient working capital, the Federal awarding agency may provide cash on a working capital advance basis. Under this procedure,the Federal awarding agency shall advance cash to the recipient to cover its estimated disbursement needs for an initial period generally geared to the awardee's disbursing cycle. Thereafter, the Federal awarding agency shall reimburse the recipient for its actual cash disbursements. The working capital advance method of payment shall not be used for recipients unwilling or unable to provide timely advances to their subrecipient to meet the subrecipient's actual cash disbursements. http://www.whitehouse.gov/OMB/circulars/al 10/al 1 0.html 6/20/00 OMB Circular A-110 Page 14 of 41 (g)To the extent available, recipients shall disburse funds available from repayments to and interest earned on a revolving fund,program income,rebates, refunds, contract settlements, audit recoveries and interest earned on such funds before requesting additional cash payments. (h)Unless otherwise required by statute, Federal awarding agencies shall not withhold payments for proper charges made by recipients at any time during the project period unless (1) or(2) apply. (1)A recipient has failed to comply with the project objectives, the terms and conditions of the award, or Federal reporting requirements. (2) The recipient or subrecipient is delinquent in a debt to the United States as defined in OMB Circular A-129, "Managing Federal Credit Programs." Under such conditions,the Federal awarding agency may, upon reasonable notice, inform the recipient that payments shall not be made for obligations incurred after a specified date until the conditions are corrected or the indebtedness to the Federal Government is liquidated. (i) Standards governing the use of banks and other institutions as depositories of funds advanced under awards are as follows. (1) Except for situations described in paragraph(i)(2), Federal awarding agencies shall not require separate depository accounts for funds provided to a recipient or establish any eligibility requirements for depositories for funds provided to a recipient. However,recipients must be able to account for the receipt, obligation and expenditure of funds. (2)Advances of Federal funds shall be deposited and maintained in insured accounts whenever possible. (j) Consistent with the national goal of expanding the opportunities for women-owned and minority-owned business enterprises, recipients shall be encouraged to use women- owned and minority-owned banks (a bank which is owned at least 50 percent by women or minority group members). (k) Recipients shall maintain advances of Federal funds in interest bearing accounts,unless (1), (2)or(3) apply. (1)The recipient receives less than$120,000 in Federal awards per year. (2)The best reasonably available interest bearing account would not be expected to earn interest in excess of$250 per year on Federal cash balances. (3) The depository would require an average or minimum balance so high that it would not be feasible within the expected Federal and non-Federal cash resources. (1)For those entities where CMIA and its implementing regulations do not apply, interest earned on Federal advances deposited in interest bearing accounts shall be remitted annually to Department of Health and Human Services,Payment Management System, Rockville, MD 20852. Interest amounts up to $250 per year may be retained by the recipient for administrative expense. http://www.whitehouse.gov/OMB/circulars/a110/a110.html_ 6/20/00 .OMB Circular A-11u Page 15 of 41 State universities and hospitals shall comply with CMIA, as it pertains to interest. If an entity subject to CMIA uses its own funds to pay pre-award costs for discretionary awards without prior written approval from the Federal awarding agency, it waives its right to recover the interest under CMIA. (m)Except as noted elsewhere in this Circular, only the following forms shall be authorized for the recipients in requesting advances and reimbursements. Federal agencies shall not require more than an original and two copies of these forms. (1) SF-270,Request for Advance or Reimbursement. Each Federal awarding agency shall adopt the SF-270 as a standard form for all nonconstruction programs when electronic funds transfer or predetermined advance methods are not used. Federal awarding agencies, however, have the option of using this form for construction programs in lieu of the SF-271, "Outlay Report and Request for Reimbursement for Construction Programs." (2) SF-271, Outlay Report and Request for Reimbursement for Construction Programs. Each Federal awarding agency shall adopt the SF-271 as the standard form to be used for requesting reimbursement for construction programs. However, a Federal awarding agency may substitute the SF-270 when the Federal awarding agency determines that it provides adequate information to meet Federal needs. .23 Cost sharing or matching. (a)All contributions, including cash and third party in-kind, shall be accepted as part of the recipient's cost sharing or matching when such contributions meet all of the following criteria. (1)Are verifiable from the recipient's records. (2)Are not included as contributions for any other federally-assisted project or program. (3)Are necessary and reasonable for proper and efficient accomplishment of project or program objectives. (4)Are allowable under the applicable cost principles. (5)Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching. (6) Are provided for in the approved budget when required by the Federal awarding agency. (7) Conform to other provisions of this Circular, as applicable. (b)Unrecovered indirect costs may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. (c)Values for recipient contributions of services and property shall be established in accordance with the applicable cost principles. If a Federal awarding agency authorizes recipients to donate buildings or land for construction/facilities acquisition projects or long-term use,the value of the donated property for cost sharing or matching shall be the lesser of(1)or(2). http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 L OMB Circular A-110 Page 16 of 41 (1)The certified value of the remaining life of the property recorded in the recipient's accounting records at the time of donation. (2) The current fair market value. However,when there is sufficient justification,the Federal awarding agency may approve the use of the current fair market value of the donated property, even if it exceeds the certified value at the time of donation to the project. (d)Volunteer services furnished by professional and technical personnel, consultants, and other skilled and unskilled labor may be counted as cost sharing or matching if the service is an integral and necessary part of an approved project or program. Rates for volunteer services shall be consistent with those paid for similar work in the recipient's organization. In those instances in which the required skills are not found in the recipient organization,rates shall be consistent with those paid for similar work in the labor market in which the recipient competes for the kind of services involved. In either case,paid fringe benefits that are reasonable, allowable, and allocable may be included in the valuation. (e) When an employer other than the recipient furnishes the services of an employee, these services shall be valued at the employee's regular rate of pay(plus an amount of fringe benefits that are reasonable, allowable, and allocable,but exclusive of overhead costs),provided these services are in the same skill for which the employee is normally paid. (f) Donated supplies may include such items as expendable equipment, office supplies, laboratory supplies or workshop and classroom supplies. Value assessed to donated supplies included in the cost sharing or matching share shall be reasonable and shall not exceed the,fair market value of the property at the time of the donation. (g)The method used for determining cost sharing or matching for donated equipment, buildings and land for which title passes to the recipient may differ according to the purpose of the award, if(1) or(2) apply. (1) If the purpose of the award is to assist the recipient in the acquisition of equipment, buildings or land, the total value of the donated property may be claimed as cost sharing or matching. (2) If the purpose of the award is to support activities that require the use of equipment, buildings or land,normally only depreciation or use charges for equipment and buildings may be made. However, the full value of equipment or other capital assets and fair rental charges for land may be allowed,provided that the Federal awarding agency has approved the charges. (h)The value of donated property shall be determined in accordance with the usual accounting policies of the recipient,with the following qualifications. (1) The value of donated land and buildings shall not exceed its fair market value at the time of donation to the recipient as established by an independent appraiser(e.g., certified real property appraiser or General Services Administration representative) and certified by a responsible official of the recipient. (2)The value of donated equipment shall not exceed the fair market value of equipment http://www.whitehouse.gov/OMB/circulars/al 10/all0.html 6/20/00 .0MB Circular A-1 iu Page 17 of 41 of the same age and condition at the time of donation. (3) The value of donated space shall not exceed the fair rental value of comparable space as established by an independent appraisal of comparable space and facilities in a privately- owned building in the same locality. (4) The value of loaned equipment shall not exceed its fair rental value. (5) The following requirements pertain to the recipient's supporting records for in-kind contributions from third parties. (i)Volunteer services shall be documented and, to the extent feasible, supported by the same methods used by the recipient for its own employees. (ii)The basis for determining the valuation for personal service, material, equipment,buildings and land shall be documented. .24 Program income. (a)Federal awarding agencies shall apply the standards set forth in this section in requiring recipient organizations to account for program income related to projects financed in whole or in part with Federal funds. (b)Except as provided in paragraph(h)below,program income earned during the project period shall be retained by the recipient and, in accordance with Federal awarding agency regulations or the terms and conditions of the award, shall be used in one or more of the ways listed in the following. (1)Added to funds committed to the project by the Federal awarding agency and recipient and used to further eligible project or program objectives. (2)Used to finance the non-Federal share of the project or program. (3)Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based. (c) When an agency authorizes the disposition of program income as described in paragraphs (b)(1)or(b)(2),program income in excess of any limits stipulated shall be used in accordance with paragraph(b)(3). (d)In the event that the Federal awarding agency does not specify in its regulations or the terms and conditions of the award how program income is to be used,paragraph(b)(3) shall apply automatically to all projects or programs except research. For awards that support research,paragraph (b)(1) shall apply automatically unless the awarding agency indicates in the terms and conditions another alternative on the award or the recipient is subject to special award conditions, as indicated in Section .14. (e)Unless Federal awarding agency regulations or the terms and conditions of the award provide otherwise,recipients shall have no obligation to the Federal Government regarding program http://www.whitehouse.gov/OMB/circulars/al 10/all 0.html 6/20/00 0 OMB Circular A-110 Page 18 of 41 income earned after the end of the project period. (f) If authorized by Federal awarding agency regulations or the terms and conditions of the award, costs incident to the generation of program income may be deducted from gross income to determine program income,provided these costs have not been charged to the award. (g)Proceeds from the sale of property shall be handled in accordance with the requirements of the Property Standards(See Sections .30 through .37). (h)Unless Federal awarding agency regulations or the terms and condition of the award provide otherwise,recipients shall have no obligation to the Federal Government with respect to program income earned from license fees and royalties for copyrighted material,patents,patent applications, trademarks, and inventions produced under an award. However, Patent and Trademark Amendments(35 U.S.C. 18) apply to inventions made under an experimental, developmental, or research award. .25 Revision of budget and program plans. (a) The budget plan is the financial expression of the project or program as approved during the award process. It may include either the Federal and non-Federal share, or only the Federal share, depending upon Federal awarding agency requirements. It shall be related to performance for program evaluation purposes whenever appropriate. (b)Recipients are required to report deviations from budget and program plans, and request prior approvals for budget and program plan revisions, in accordance with this section. (c)For nonconstruction awards,recipients shall request prior approvals from Federal awarding agencies for one or more of the following program or budget related reasons. (1) Change in the scope or the objective of the project or program(even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or award document. (3)The absence for more than three months, or a 25 percent reduction in time devoted to the project,by the approved project director or principal investigator. (4)The need for additional Federal funding. (5) The transfer of amounts budgeted for indirect costs to absorb increases in direct costs, or vice versa, if approval is required by the Federal awarding agency. (6)The inclusion, unless waived by the Federal awarding agency, of costs that require prior approval in accordance with OMB Circular A-21, "Cost Principles for Educational Institutions," OMB Circular A-122, "Cost Principles for Non-Profit Organizations," or 45 CFR part 74 Appendix E, "Principles for Determining Costs Applicable to Research and Development under Grants and Contracts with Hospitals," or 48 CFR part 31, "Contract Cost Principles and Procedures," as applicable. http://wwvv.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 19 of 41 (7)The transfer of funds allotted for training allowances(direct payment to trainees)to other categories of expense. (8)Unless described in the application and funded in the approved awards,the subaward, transfer or contracting out of any work under an award. This provision does not apply to the purchase of supplies,material, equipment or general support services. (d)No other prior approval requirements for specific items may be imposed unless a deviation has been approved by OMB. (e) Except for requirements listed in paragraphs (c)(1) and(c)(4)of this section,Federal awarding agencies are authorized, at their option, to waive cost-related and administrative prior written approvals required by this Circular and OMB Circulars A-21 and A-122. Such waivers may include authorizing recipients to do any one or more of the following. (1) Incur pre-award costs 90 calendar days prior to award or more than 90 calendar days with the prior approval of the Federal awarding agency. All pre-award costs are incurred at the recipient's risk(i.e., the Federal awarding agency is under no obligation to reimburse such costs if for any reason the recipient does not receive an award or if the award is less than anticipated and inadequate to cover such costs). (2)Initiate a one-time extension of the expiration date of the award of up to 12 months unless one or more of the following conditions apply. For one-time extensions, the recipient must notify the Federal awarding agency in writing with the supporting reasons and revised expiration date at least 10 days before the expiration date specified in the award. This one-time extension may not be exercised merely for the purpose of using unobligated balances. (i) The terms and conditions of award prohibit the extension. (ii)The extension requires additional Federal funds. (iii)The extension involves any change in the approved objectives or scope of the project. (3) Carry forward unobligated balances to subsequent funding periods. (4)For awards that support research, unless the Federal awarding agency provides otherwise in the award or in the agency's regulations, the prior approval requirements described in paragraph(e) are automatically waived(i.e.,recipients need not obtain such prior approvals) unless one of the conditions included in paragraph(e)(2) applies. (f) The Federal awarding agency may, at its option,restrict the transfer of funds among direct cost categories or programs, functions and activities for awards in which the Federal share of the project exceeds $100,000 and the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the Federal awarding agency. No Federal awarding agency shall permit a transfer that would cause any Federal appropriation or part thereof to be used for purposes other than those consistent with the original intent of the appropriation. http://www.whitehouse.gov/OMB/circulars/a110/al 1 0.html 6/20/00 OMB Circular A-110 Page 20 of 41 (g)All other changes to nonconstruction budgets, except for the changes described in paragraph(j), do not require prior approval. (h)For construction awards,recipients shall request prior written approval promptly from Federal awarding agencies for budget revisions whenever(1), (2)or(3) apply. (1)The revision results from changes in the scope or the objective of the project or program. (2)The need arises for additional Federal funds to complete the project. (3)A revision is desired which involves specific costs for which prior written approval requirements may be imposed consistent with applicable OMB cost principles listed in Section .27. (i)No other prior approval requirements for specific items may be imposed unless a deviation has been approved by OMB. (j)When a Federal awarding agency makes an award that provides support for both construction and nonconstruction work, the Federal awarding agency may require the recipient to request prior approval from the Federal awarding agency before making any fund or budget transfers between the two types of work supported. (k) For both construction and nonconstruction awards,Federal awarding agencies shall require recipients to notify the Federal awarding agency in writing promptly whenever the amount of Federal authorized funds is expected to exceed the needs of the recipient for the project period by more than $5000 or five percent of the Federal award,whichever is greater. This notification shall not be required if an application for additional funding is submitted for a continuation award. (1) When requesting approval for budget revisions,recipients shall use the budget forms that were used in the application unless the Federal awarding agency indicates a letter of request suffices. (m) Within 30 calendar days from the date of receipt of the request for budget revisions, Federal awarding agencies shall review the request and notify the recipient whether the budget revisions have been approved. If the revision is still under consideration at the end of 30 calendar days, the Federal awarding agency shall inform the recipient in writing of the date when the recipient may expect the decision. .26 Non-Federal audits. (a) Recipients and subrecipients that are institutions of higher education or other non-profit organizations (including hospitals) shall be subject to the audit requirements contained in the Single Audit Act Amendments of 1996 (31 USC 7501-7507) and revised OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." (b) State and local governments shall be subject to the audit requirements contained in the Single Audit Act Amendments of 1996 (31 USC 7501-7507) and revised OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations." http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 21 of 41 (c)For-profit hospitals not covered by the audit provisions of revised OMB Circular A-133 shall be subject to the audit requirements of the Federal awarding agencies. (d) Commercial organizations shall be subject to the audit requirements of the Federal awarding agency or the prime recipient as incorporated into the award document. .27 Allowable costs. For each kind of recipient, there is a set of Federal principles for determining allowable costs. Allowability of costs shall be determined in accordance with the cost principles applicable to the entity incurring the costs. Thus, allowability of costs incurred by State, local or federally-recognized Indian tribal governments is determined in accordance with the provisions of OMB Circular A-87, "Cost Principles for State, Local, and Indian Tribal Governments." The allowability of costs incurred by non-profit organizations is determined in accordance with the provisions of OMB Circular A-122, "Cost Principles for Non-Profit Organizations." The allowability of costs incurred by institutions of higher education is determined in accordance with the provisions of OMB Circular A-21, "Cost Principles for Educational Institutions." The allowability of costs incurred by hospitals is determined in accordance with the provisions of Appendix E of 45 CFR part 74, "Principles for Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals." The allowability of costs incurred by commercial organizations and those non-profit organizations listed in Attachment C to Circular A-122 is determined in accordance with the provisions of the Federal Acquisition Regulation(FAR)at 48 CFR part 31. .28 Period of availability of funds. Where a funding period is specified, a recipient may charge to the grant only allowable costs resulting from obligations incurred during the funding period and any pre-award costs authorized by the Federal awarding agency. .29 Conditional exemptions. (a) OMB authorizes conditional exemption from OMB administrative requirements and cost principles circulars for certain Federal programs with statutorily-authorized consolidated planning and consolidated administrative funding,that are identified by a Federal agency and approved by the head of the Executive department or establishment. A Federal agency shall consult with OMB during its consideration of whether to grant such an exemption. (b)To promote efficiency in State and local program administration,when Federal non- entitlement programs with common purposes have specific statutorily-authorized consolidated planning and consolidated administrative funding and where most of the State agency's resources come from non-Federal sources, Federal agencies may exempt these covered State-administered,non- entitlement grant programs from certain OMB grants management requirements. The exemptions would be from all but the allocability of costs provisions of OMB Circulars A-87 (Attachment A, subsection C.3), "Cost Principles for State, Local, and Indian Tribal Governments," A-21 (Section C, subpart 4), "Cost Principles for Educational Institutions," and A-122 (Attachment A, subsection A.4), "Cost Principles for Non-Profit Organizations," and from all of the administrative requirements provisions of OMB Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education,Hospitals, and Other Non-Profit Organizations," and the agencies' grants management common rule. (c) When a Federal agency provides this flexibility, as a prerequisite to a State's exercising this option, a State must adopt its own written fiscal and administrative requirements for expending and http://www.whitehouse.gov/OMB/circulars/a110/al 1 0.html 6/20/00 OMB Circular A-110 Page 22 of 41 accounting for all funds,which are consistent with the provisions of OMB Circular A-87, and extend such policies to all subrecipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not be used for general expenses required to carry out other responsibilities of a State or its subrecipients. Property Standards .30 Purpose of property standards. Sections .31 through .37 set forth uniform standards governing management and disposition of property furnished by the Federal Government whose cost was charged to a project supported by a Federal award. Federal awarding agencies shall require recipients to observe these standards under awards and shall not impose additional requirements, unless specifically required by Federal statute. The recipient may use its own property management standards and procedures provided it observes the provisions of Sections .31 through .37. .31 Insurance coverage. Recipients shall, at a minimum,provide the equivalent insurance coverage for real property and equipment acquired with Federal funds as provided to property owned by the recipient. Federally-owned property need not be insured unless required by the terms and conditions of the award. _.32 Real property. Each Federal awarding agency shall prescribe requirements for recipients concerning the use and disposition of real property acquired in whole or in part under awards. Unless otherwise provided by statute, such requirements, at a minimum, shall contain the following. (a)Title to real property shall vest in the recipient subject to the condition that the recipient shall use the real property for the authorized purpose of the project as long as it is needed and shall not encumber the property without approval of the Federal awarding agency. (b) The recipient shall obtain written approval by the Federal awarding agency for the use of real property in other federally-sponsored projects when the recipient determines that the property is no longer needed for the purpose of the original project. Use in other projects shall be limited to those under federally-sponsored projects (i.e., awards)or programs that have purposes consistent with those authorized for support by the Federal awarding agency. (c) When the real property is no longer needed as provided in paragraphs(a) and(b), the recipient shall request disposition instructions from the Federal awarding agency or its successor Federal awarding agency. The Federal awarding agency shall observe one or more of the following disposition instructions. (1) The recipient may be permitted to retain title without further obligation to the Federal Government after it compensates the Federal Government for that percentage of the current fair market value of the property attributable to the Federal participation in the project. (2) The recipient may be directed to sell the property under guidelines provided by the Federal awarding agency and pay the Federal Government for that percentage of the current fair market value of the property attributable to the Federal participation in the project(after deducting actual and reasonable selling and fix-up expenses, if any, from the sales proceeds). When the recipient is authorized or required to sell the property,proper sales procedures shall http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 23 of 41 be established that provide for competition to the extent practicable and result in the highest possible return. (3)The recipient may be directed to transfer title to the property to the Federal Government or to an eligible third party provided that, in such cases, the recipient shall be entitled to compensation for its attributable percentage of the current fair market value of the property. .33 Federally-owned and exempt property. (a)Federally-owned property. (1) Title to federally-owned property remains vested in the Federal Government. Recipients shall submit annually an inventory listing of federally-owned property in their custody to the Federal awarding agency. Upon completion of the award or when the property is no longer needed, the recipient shall report the property to the Federal awarding agency for further Federal agency utilization. (2) If the Federal awarding agency has no further need for the property, it shall be declared excess and reported to the General Services Administration, unless the Federal awarding agency has statutory authority to dispose of the property by alternative methods(e.g., the authority provided by the Federal Technology Transfer Act(15 U.S.C. 3710 (I))to donate research equipment to educational and non-profit organizations in accordance with E.O. 12821, "Improving Mathematics and Science Education in Support of the National Education Goals.") Appropriate instructions shall be issued to the recipient by the Federal awarding agency. (b)Exempt property. When statutory authority exists, the Federal awarding agency has the option to vest title to property acquired with Federal funds in the recipient without further obligation to the Federal Government and under conditions the Federal awarding agency considers appropriate. Such property is "exempt property." Should a Federal awarding agency not establish conditions, title to exempt property upon acquisition shall vest in the recipient without further obligation to the Federal Government. .34 Equipment. (a) Title to equipment acquired by a recipient with Federal funds shall vest in the recipient, subject to conditions of this section. (b)The recipient shall not use equipment acquired with Federal funds to provide services to non-Federal outside organizations for a fee that is less than private companies charge for equivalent services, unless specifically authorized by Federal statute, for as long as the Federal Government retains an interest in the equipment. (c)The recipient shall use the equipment in the project or program for which it was acquired as long as needed,whether or not the project or program continues to be supported by Federal funds and shall not encumber the property without approval of the Federal awarding agency. When no longer needed for the original project or program,the recipient shall use the equipment in connection with its other federally-sponsored activities, in the following order of priority: (i) Activities sponsored by the Federal awarding agency which funded the original project,then(ii) activities sponsored by other r http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 24 of 41 Federal awarding agencies. (d)During the time that equipment is used on the project or program for which it was acquired, the recipient shall make it available for use on other projects or programs if such other use will not interfere with the work on the project or program for which the equipment was originally acquired. First preference for such other use shall be given to other projects or programs sponsored by the Federal awarding agency that financed the equipment; second preference shall be given to projects or programs sponsored by other Federal awarding agencies. If the equipment is owned by the Federal Government, use on other activities not sponsored by the Federal Government shall be permissible if authorized by the Federal awarding agency. User charges shall be treated as program income. (e)When acquiring replacement equipment,the recipient may use the equipment to be replaced as trade-in or sell the equipment and use the proceeds to offset the costs of the replacement equipment subject to the approval of the Federal awarding agency. (f) The recipient's property management standards for equipment acquired with Federal funds and federally-owned equipment shall include all of the following. (1) Equipment records shall be maintained accurately and shall include the following information. (i)A description of the equipment. (ii)Manufacturer's serial number,model number,Federal stock number, national stock number, or other identification number. (iii) Source of the equipment, including the award number. (iv) Whether title vests in the recipient or the Federal Government. (v)Acquisition date(or date received, if the equipment was furnished by the Federal Government) and cost. (vi) Information from which one can calculate the percentage of Federal participation in the cost of the equipment(not applicable to equipment furnished by the Federal Government). (vii) Location and condition of the equipment and the date the information was reported. (viii)Unit acquisition cost. (ix)Ultimate disposition data, including date of disposal and sales price or the method used to determine current fair market value where a recipient compensates the Federal awarding agency for its share. (2) Equipment owned by the Federal Government shall be identified to indicate Federal ownership. http://www.whitehouse.gov/OMB/circulars/al 10/al 1 0.html 6/20/00 OMB Circular A-110 Page 25 of 41 (3)A physical inventory of equipment shall be taken and the results reconciled with the equipment records at least once every two years. Any differences between quantities determined by the physical inspection and those shown in the accounting records shall be investigated to determine the causes of the difference. The recipient shall, in connection with the inventory, verify the existence, current utilization, and continued need for the equipment. (4)A control system shall be in effect to insure adequate safeguards to prevent loss, damage, or theft of the equipment. Any loss, damage, or theft of equipment shall be investigated and fully documented; if the equipment was owned by the Federal Government, the recipient shall promptly notify the Federal awarding agency. (5)Adequate maintenance procedures shall be implemented to keep the equipment in good condition. (6) Where the recipient is authorized or required to sell the equipment,proper sales procedures shall be established which provide for competition to the extent practicable and result in the highest possible return. (g) When the recipient no longer needs the equipment, the equipment may be used for other activities in accordance with the following standards. For equipment with a current per unit fair market value of$5000 or more, the recipient may retain the equipment for other uses provided that compensation is made to the original Federal awarding agency or its successor. The amount of compensation shall be computed by applying the percentage of Federal participation in the cost of the original project or program to the current fair market value of the equipment. If the recipient has no need for the equipment, the recipient shall request disposition instructions from the Federal awarding agency. The Federal awarding agency shall determine whether the equipment can be used to meet the agency's requirements. If no requirement exists within that agency, the availability of the equipment shall be reported to the General Services Administration by the Federal awarding agency to determine whether a requirement for the equipment exists in other Federal agencies. The Federal awarding agency shall issue instructions to the recipient no later than 120 calendar days after the recipient's request and the following procedures shall govern. (1) If so instructed or if disposition instructions are not issued within 120 calendar days after the recipient's request, the recipient shall sell the equipment and reimburse the Federal awarding agency an amount computed by applying to the sales proceeds the percentage of Federal participation in the cost of the original project or program. However, the recipient shall be permitted to deduct and retain from the Federal share $500 or ten percent of the proceeds, whichever is less, for the recipient's selling and handling expenses. (2)If the recipient is instructed to ship the equipment elsewhere,the recipient shall be reimbursed by the Federal Government by an amount which is computed by applying the percentage of the recipient's participation in the cost of the original project or program to the current fair market value of the equipment,plus any reasonable shipping or interim storage costs incurred. (3) If the recipient is instructed to otherwise dispose of the equipment,the recipient shall be reimbursed by the Federal awarding agency for such costs incurred in its disposition. • http://www.whitehouse.gov/OMB/circulars/a110/al 1 0.html 6/20/00 OMB Circular A-110 Page 26 of 41 (4)The Federal awarding agency may reserve the right to transfer the title to the Federal Government or to a third party named by the Federal Government when such third party is otherwise eligible under existing statutes. Such transfer shall be subject to the following standards. (i)The equipment shall be appropriately identified in the award or otherwise made known to the recipient in writing. (ii) The Federal awarding agency shall issue disposition instructions within 120 calendar days after receipt of a final inventory. The final inventory shall list all equipment acquired with grant funds and federally-owned equipment. If the Federal awarding agency fails to issue disposition instructions within the 120 calendar day period, the recipient shall apply the standards of this section, as appropriate. (iii) When the Federal awarding agency exercises its right to take title,the equipment shall be subject to the provisions for federally-owned equipment. .35 Supplies and other expendable property. (a) Title to supplies and other expendable property shall vest in the recipient upon acquisition. If there is a residual inventory of unused supplies exceeding$5000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federally-sponsored project or program, the recipient shall retain the supplies for use on non-Federal sponsored activities or sell them,but shall, in either case, compensate the Federal Government for its share. The amount of compensation shall be computed in the same manner as for equipment. (b) The recipient shall not use supplies acquired with Federal funds to provide services to non- Federal outside organizations for a fee that is less than private companies charge for equivalent services, unless specifically authorized by Federal statute as long as the Federal Government retains an interest in the supplies. .36 Intangible property. (a) The recipient may copyright any work that is subject to copyright and was developed, or for which ownership was purchased,under an award. The Federal awarding agency(ies)reserve a royalty-free, nonexclusive and irrevocable right to reproduce,publish, or otherwise use the work for Federal purposes, and to authorize others to do so. (b) Recipients are subject to applicable regulations governing patents and inventions, including government-wide regulations issued by the Department of Commerce at 37 CFR part 401, "Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements." (c)The Federal Government has the right to: (1) obtain, reproduce,publish or otherwise use the data first produced under an award; and http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 'OMB Circular A-110 Page 27 of 41 (2) authorize others to receive, reproduce,publish, or otherwise use such data for Federal purposes. (d) (1) In addition, in response to a Freedom of Information Act(FOIA)request for research data relating to published research findings produced under an award that were used by the Federal Government in developing an agency action that has the force and effect of law, the Federal awarding agency shall request, and the recipient shall provide,within a reasonable time,the research data so that they can be made available to the public through the procedures established under the FOIA:If the Federal awarding agency obtains the research data solely in response to a FOIA request,the agency may charge the requester a reasonable fee equaling the full incremental cost of obtaining the research data. This fee should reflect costs incurred by the agency, the recipient, and applicable subrecipients. This fee is in addition to any fees the agency may assess under the FOIA(5 U.S.C. 552 (a)(4)(A)). (2) The following definitions apply for purposes of paragraph(d) of this section: (i)Research data is defined as the recorded factual material commonly accepted in the scientific community as necessary to validate research findings,but not any of the following: preliminary analyses,drafts of scientific papers,plans for future research,peer reviews, or communications with colleagues. This "recorded" material excludes physical objects(e.g., laboratory samples). Research data also do not include: (A) Trade secrets, commercial information, materials necessary to be held confidential by a researcher until they are published, or similar information which is protected under law; and (B)Personnel and medical information and similar information the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, such as information that could be used to identify a particular person in a research study. (ii)Published is defined as either when: (A)Research findings are published in a peer-reviewed scientific or technical journal; or (B) A Federal agency publicly and officially cites the research findings in support of an agency action that has the force and effect of law. (iii) Used by the Federal Government in developing an agency action that has the force and effect of law is defined as when an agency publicly and officially cites the research findings in support of an agency action that has the force and effect of law. (e)Title to intangible property and debt instruments acquired under an award or subaward vests upon acquisition in the recipient. The recipient shall use that property for the originally-authorized purpose, and the recipient shall not encumber the property without approval of the Federal awarding agency. When no longer needed for the originally authorized purpose, disposition of the intangible property shall occur in accordance with the provisions of paragraph .34(g). (111 http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 28 of 41 .37 Property trust relationship. Real property, equipment, intangible property and debt instruments that are acquired or improved with Federal funds shall be held in trust by the recipient as trustee for the beneficiaries of the project or program under which the property was acquired or improved. Agencies may require recipients to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with Federal funds and that use and disposition conditions apply to the property. Procurement Standards .40 Purpose of procurement standards. Sections .41 through .48 set forth standards for use by recipients in establishing procedures for the procurement of supplies and other expendable property, equipment, real property and other services with Federal funds. These standards are furnished to ensure that such materials and services are obtained in an effective manner and in compliance with the provisions of applicable Federal statutes and executive orders. No additional procurement standards or requirements shall be imposed by the Federal awarding agencies upon recipients,unless specifically required by Federal statute or executive order or approved by OMB. .41 Recipient responsibilities. The standards contained in this section do not relieve the recipient of the contractual responsibilities arising under its contract(s). The recipient is the responsible authority,without recourse to the Federal awarding agency, regarding the settlement and satisfaction of all contractual and administrative issues arising out of procurements entered into in support of an award or other agreement. This includes disputes, claims,protests of award, source evaluation or other matters of a contractual nature. Matters concerning violation of statute are to be referred to such Federal, State or local authority as may have proper jurisdiction. .42 Codes of conduct. The recipient shall maintain written standards of conduct governing the performance of its employees engaged in the award and administration of contracts. No employee, officer, or agent shall participate in the selection, award, or administration of a contract supported by Federal funds if a real or apparent conflict of interest would be involved. Such a conflict would arise when the employee, officer, or agent, any member of his or her immediate family,his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in the firm selected for an award. The officers, employees, and agents of the recipient shall neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, or parties to subagreements. However,recipients may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct shall provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the recipient. .43 Competition. All procurement transactions shall be conducted in a manner to provide, to the maximum extent practical, open and free competition. The recipient shall be alert to organizational conflicts of interest as well as noncompetitive practices among contractors that may restrict or eliminate competition or otherwise restrain trade. In order to ensure objective contractor performance and eliminate unfair competitive advantage,contractors that develop or draft specifications, requirements, statements of work, invitations for bids and/or requests for proposals shall be excluded from competing for such procurements. Awards shall be made to the bidder or offeror whose bid or offer is responsive to the solicitation and is most advantageous to the recipient,price, quality and other factors considered. Solicitations shall clearly set forth all requirements that the bidder or offeror shall fulfill in order for the bid or offer to be evaluated by the recipient. Any and all bids or offers http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 • OMB Circular A-110 Page 29 of 41 may be rejected when it is in the recipient's interest to do so. .44 Procurement procedures. (a)All recipients shall establish written procurement procedures. These procedures shall provide for, at a minimum, that(1), (2) and(3) apply. (1)Recipients avoid purchasing unnecessary items. (2)Where appropriate, an analysis is made of lease and purchase alternatives to determine which would be the most economical and practical procurement for the Federal Government. (3) Solicitations for goods and services provide for all of the following. (i)A clear and accurate description of the technical requirements for the material, product or service to be procured. In competitive procurements, such a description shall not contain features which unduly restrict competition. ` • (ii)Requirements which the bidder/offeror must fulfill and all other factors to be used in evaluating bids or proposals. (iii) A description, whenever practicable, of technical requirements in terms of functions to be performed or performance required, including the range of acceptable characteristics or minimum acceptable standards. (iv) The specific features of"brand name or equal" descriptions that bidders are required to meet when such items are included in the solicitation. (v) The acceptance,to the extent practicable and economically feasible, of products and services dimensioned in the metric system of measurement. (vi)Preference, to the extent practicable and economically feasible, for products and services that conserve natural resources and protect the environment and are energy efficient. (b)Positive efforts shall be made by recipients to utilize small businesses, minority-owned firms, and women's business enterprises, whenever possible. Recipients of Federal awards shall take all of the following steps to further this goal. (1)Ensure that small businesses, minority-owned firms, and women's business enterprises are used to the fullest extent practicable. (2)Make information on forthcoming opportunities available and arrange time frames for purchases and contracts to encourage and facilitate participation by small businesses, minority-owned firms, and women's business enterprises. (3) Consider in the contract process whether firms competing for larger contracts intend to subcontract with small businesses,minority-owned firms, and women's business enterprises. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 40 OMB Circular A-110 Page 30 of 41 • (4)Encourage contracting with consortiums of small businesses,minority-owned firms and women's business enterprises when a contract is too large for one of these firms to handle individually. (5)Use the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Department of Commerce's Minority Business Development Agency in the solicitation and utilization of small businesses,minority- owned firms and women's business enterprises. (c)The type of procuring instruments used(e.g., fixed price contracts, cost reimbursable contracts,purchase orders, and incentive contracts) shall be determined by the recipient but shall be appropriate for the particular procurement and for promoting the best interest of the program or project involved. The "cost-plus-a-percentage-of-cost" or"percentage of construction cost" methods of contracting shall not be used. (d) Contracts shall be made only with responsible contractors who possess the potential ability to perform successfully under the terms and conditions of the proposed procurement. Consideration shall be given to such matters as contractor integrity, record of past performance, financial and technical resources or accessibility to other necessary resources. In certain circumstances, contracts with certain parties are restricted by agencies'implementation of E.O.s 12549 and 12689, "Debarment and Suspension." (e)Recipients shall,on request,make available for the Federal awarding agency,pre-award review and procurement documents, such as request for proposals or invitations for bids,independent cost estimates, etc.,when any of the following conditions apply. (1) A recipient's procurement procedures or operation fails to comply with the procurement standards in the Federal awarding agency's implementation of this Circular. (2) The procurement is expected to exceed the small purchase threshold fixed at 41 U.S.C. 403 (11) (currently$25,000) and is to be awarded without competition or only one bid or offer is received in response to a solicitation. (3) The procurement, which is expected to exceed the small purchase threshold, specifies. a"brand name"product. (4) The proposed award over the small purchase threshold is to be awarded to other than the apparent low bidder under a sealed bid procurement. (5)A proposed contract modification changes the scope of a contract or increases the contract amount by more than the amount of the small purchase threshold. .45 Cost and price analysis. Some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action. Price analysis may be accomplished in various ways, including the comparison of price quotations submitted,market prices and similar indicia, together with discounts. Cost analysis is the review and evaluation of each element of cost to determine reasonableness, allocability and allowability. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 • OMB Circular A-110 Page 31 of 41 .46 Procurement records. Procurement records and files for purchases in excess of the small purchase threshold shall include the following at a minimum: (a)basis for contractor selection, (b) justification for lack of competition when competitive bids or offers are not obtained, and(c)basis for award cost or price. .47 Contract administration. A system for contract administration shall be maintained to ensure contractor conformance with the terms, conditions and specifications of the contract and to ensure adequate and timely follow up of all purchases. Recipients shall evaluate contractor performance and document, as appropriate, whether contractors have met the terms, conditions and specifications of the contract. .48 Contract provisions. The recipient shall include, in addition to provisions to define a sound and complete agreement, the following provisions in all contracts. The following provisions shall also be applied to subcontracts. (a)Contracts in excess of the small purchase threshold shall contain contractual provisions or conditions that allow for administrative, contractual, or legal remedies in instances in which a contractor violates or breaches the contract terms, and provide for such remedial actions as may be appropriate. (b)All contracts in excess of the small purchase threshold shall contain suitable provisions for termination by the recipient, including the manner by which termination shall be effected and the basis for settlement. In addition, such contracts shall describe conditions under which the contract may be terminated for default as well as conditions where the contract may be terminated because of circumstances beyond the control of the contractor. (c)Except as otherwise required by statute, an award that requires the contracting(or subcontracting) for construction or facility improvements shall provide for the recipient to follow its own requirements relating to bid guarantees,performance bonds, and payment bonds unless the construction contract or subcontract exceeds $100,000. For those contracts or subcontracts exceeding $100,000, the Federal awarding agency may accept the bonding policy and requirements of the recipient,provided the Federal awarding agency has made a determination that the Federal Government's interest is adequately protected. If such a determination has not been made, the minimum requirements shall'be as follows. (1)A bid guarantee from each bidder equivalent to five percent of the bid price. The "bid guarantee" shall consist of a firm commitment such as a bid bond, certified check, or other negotiable instrument accompanying a bid as assurance that the bidder shall,upon acceptance of his bid, execute such contractual documents as may be required within the time specified. (2)A performance bond on the part of the contractor for 100 percent of the contract price. A"performance bond" is one executed in connection with a contract to secure fulfillment of all the contractor's obligations under such contract. (3)A payment bond on the part of the contractor for 100 percent of the contract price. A "payment bond" is one executed in connection with a contract to assure payment as required by statute of all persons supplying labor and material in the execution of the work provided for in the contract. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 till OMB Circular A-110 Page 32 of 41 (4) Where bonds are required in the situations described herein, the bonds shall be obtained from companies holding certificates of authority as acceptable sureties pursuant to 31 CFR part 223,"Surety Companies Doing Business with the United States." (d)All negotiated contracts (except those for less than the small purchase threshold) awarded by recipients shall include a provision to the effect that the recipient, the Federal awarding agency, the Comptroller General of the United States, or any of their duly authorized representatives, shall have access to any books,documents,papers and records of the contractor which are directly pertinent to a specific program for the purpose of making audits, examinations, excerpts and transcriptions. (e)All contracts, including small purchases, awarded by recipients and their contractors shall contain the procurement provisions of Appendix A to this Circular, as applicable. Reports and Records .50 Purpose of reports and records. Sections .51 through .53 set forth the procedures for monitoring and reporting on the recipient's financial and program performance and the necessary standard reporting forms. They also set forth record retention requirements. .51 Monitoring and reporting program performance. (a)Recipients are responsible for managing and monitoring each project,program, subaward, function or activity supported by the award. Recipients shall monitor subawards to ensure subrecipients have met the audit requirements as delineated in Section .26. (b) The Federal awarding agency shall prescribe the frequency with which the performance reports shall be submitted. Except as provided in paragraph .51(f),performance reports shall not be required more frequently than quarterly or, less frequently than annually. Annual reports shall be due 90 calendar days after the grant year; quarterly or semi-annual reports shall be due 30 days after the reporting period. The Federal awarding agency may require annual reports before the anniversary dates of multiple year awards in lieu of these requirements. The final performance reports are due 90 calendar days after the expiration or termination of the award. (c)If inappropriate, a final technical or performance report shall not be required after completion of the project. (d) When required,performance reports shall generally contain, for each award,brief information on each of the following. (1)A comparison of actual accomplishments with the goals and objectives established for the period,the findings of the investigator, or both. Whenever appropriate and the output of programs or projects can be readily quantified, such quantitative data should be related to cost data for computation of unit costs. (2)Reasons why established goals were not met, if appropriate. (3) Other pertinent information including, when appropriate, analysis and explanation of • http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 `OMB Circular A-110 Page 33 of 41 cost overruns or high unit costs. (e)Recipients shall not be required to submit more than the original and two copies of performance reports. (f)Recipients shall immediately notify the Federal awarding agency of developments that have a significant impact on the award-supported activities. Also,notification shall be given in the case of problems, delays, or adverse conditions which materially impair the ability to meet the objectives of the award. This notification shall include a statement of the action taken or contemplated, and any assistance needed to resolve the situation. (g)Federal awarding agencies may make site visits, as needed. (h)Federal awarding agencies shall comply with clearance requirements of 5 CFR part 1320 when requesting performance data from recipients. .52 Financial reporting. (a) The following forms or such other forms as may be approved by OMB are authorized for obtaining financial information from recipients. (1) SF-269 or SF-269A,Financial Status Report. (i) Each Federal awarding agency shall require recipients to use the SF-269 or SF- 269A to report the status of funds for all nonconstruction projects or programs. A Federal awarding agency may,however, have the option of not requiring the SF-269 or SF-269A when the SF-270,Request for Advance or Reimbursement, or SF-272,Report of Federal Cash Transactions, is determined to provide adequate information to meet its needs, except that a final SF-269 or SF-269A shall be required at the completion of the project when the SF-270 is used only for advances. (ii)The Federal awarding agency shall prescribe whether the report shall be on a cash or accrual basis. If the Federal awarding agency requires accrual information and the recipient's accounting records are not normally kept on the accrual basis, the recipient shall not be required to convert its accounting system,but shall develop such accrual information through best estimates based on an analysis of the documentation on hand. (iii)The Federal awarding agency shall determine the frequency of the Financial Status Report for each project or program,considering the size and complexity of the particular project or program. However, the report shall not be required more frequently than quarterly or less frequently than annually. A final report shall be required at the completion of the agreement. (iv)The Federal awarding agency shall require recipients to submit the SF-269 or SF-269A(an original and no more than two copies)no later than 30 days after the end of each specified reporting period for quarterly and semi-annual reports, and 90 calendar days for annual and final reports. Extensions of reporting due dates may be approved by the Federal awarding agency upon request of the recipient. • http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 34 of 41 (2) SF-272,Report of Federal Cash Transactions. (i)When funds are advanced to recipients the Federal awarding agency shall require each recipient to submit the SF-272 and,when necessary, its continuation sheet, SF-272a. The Federal awarding agency shall use this report to monitor cash advanced to recipients and to obtain disbursement information for each agreement with the recipients. (ii)Federal awarding agencies may require forecasts of Federal cash requirements in the "Remarks" section of the report. (iii)When practical and deemed necessary, Federal awarding agencies may require recipients to report in the "Remarks" section the amount of cash advances received in excess of three days. Recipients shall provide short narrative explanations of actions taken to reduce the excess balances. (iv)Recipients shall be required to submit not more than the original and two copies of the SF-272 15 calendar days following the end of each quarter. The Federal awarding agencies may require a monthly report from those recipients receiving advances totaling$1 million or more per year. (v)Federal awarding agencies may waive the requirement for submission of the SF-272 for any one of the following reasons: (1)When monthly advances do not exceed $25,000 per recipient,provided that such advances are monitored through other forms contained in this section; (2)If, in the Federal awarding agency's opinion,the recipient's accounting controls are adequate to minimize excessive Federal advances; or, (3)When the electronic payment mechanisms provide adequate data. (b) When the Federal awarding agency needs additional information or more frequent reports, the following shall be observed. (1)When additional information is needed to comply with legislative requirements, Federal awarding agencies shall issue instructions to require recipients to submit such information under the "Remarks" section of the reports. (2)When a Federal awarding agency determines that a recipient's accounting system does not meet the standards in Section .21, additional pertinent information to further monitor awards may be obtained upon written notice to the recipient until such time as the system is brought up to standard. The Federal awarding agency, in obtaining this information, shall comply with report clearance requirements of 5 CFR part 1320. (3)Federal awarding agencies are encouraged to shade out any line item on any report if not necessary. (4)Federal awarding agencies may accept the identical information from the recipients in machine readable format or computer printouts or electronic outputs in lieu of prescribed formats. (5)Federal awarding agencies may provide computer or electronic outputs to recipients http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 35 of 41 when such expedites or contributes to the accuracy of reporting. .53 Retention and access requirements for records. (a)This section sets forth requirements for record retention and access to records for awards to recipients. Federal awarding agencies shall not impose any other record retention or access requirements upon recipients. (b)Financial records, supporting documents, statistical records, and all other records pertinent to an award shall be retained Tor a period of three years from the date of submission of the final expenditure report or, for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, as authorized by the Federal awarding agency. The only exceptions are the following. (1)If any litigation, claim, or audit is started before the expiration of the 3-year period, the records shall be retained until all litigation,claims or audit findings involving the records have been resolved and final action taken. (2)Records for real property and equipment acquired with Federal funds shall be retained for 3 years after final disposition. (3) When records are transferred to or maintained by the Federal awarding agency,the 3- year retention requirement is not applicable to the recipient. (4) Indirect cost rate proposals, cost allocations plans, etc. as specified in paragraph .53(g). (c) Copies of original records may be substituted for the original records if authorized by the Federal awarding agency. (d)The Federal awarding agency shall request transfer of certain records to its custody from recipients when it determines that the records possess long term retention value. However, in order to avoid duplicate recordkeeping, a Federal awarding agency may make arrangements for recipients to retain any records that are continuously needed for joint use. (e)The Federal awarding agency,the Inspector General, Comptroller General of the United States, or any of their duly authorized representatives,have the right of timely and unrestricted access to any books, documents,papers, or other records of recipients that are pertinent to the awards, in order to make audits, examinations, excerpts, transcripts and copies of such documents. This right also includes timely and reasonable access to a recipient's personnel for the purpose of interview and discussion related to such documents. The rights of access in this paragraph are not limited to the required retention period,but shall last as long as records are retained. (f)Unless required by statute,no Federal awarding agency shall place restrictions on recipients that limit public access to the records of recipients that are pertinent to an award, except when the Federal awarding agency can demonstrate that such records shall be kept confidential and would have been exempted from disclosure pursuant to the Freedom of Information Act(5 U.S.C. 552) if the records had belonged to the Federal awarding agency. - http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 36 of 41 (g)Indirect cost rate proposals, cost allocations plans, etc. Paragraphs(g)(1) and(g)(2) apply to the following types of documents, and their supporting records: indirect cost rate computations or proposals, cost allocation plans, and any similar accounting computations of the rate at which a particular group of costs is chargeable(such as computer usage chargeback rates or composite fringe benefit rates). (1) If submitted for negotiation. If the recipient submits to the Federal awarding agency or the subrecipient submits to the recipient the proposal,plan, or other computation to form the basis for negotiation of the rate,then the 3-year retention period for its supporting records starts on the date of such submission. (2) If not submitted for negotiation. If the recipient is not required to submit to the Federal awarding agency or the subrecipient is not required to submit to the recipient the proposal,plan, or other computation for negotiation purposes, then the 3-year retention period for the proposal,plan, or other computation and its supporting records starts at the end of the fiscal year(or other accounting period)covered by the proposal,plan, or other computation. Termination and Enforcement .60 Purpose of termination and enforcement. Sections .61 and .62 set forth uniform suspension,termination and enforcement procedures. .61 Termination. (a)Awards may be terminated in whole or in part only if(1),(2) or(3) apply. (1)By the Federal awarding agency, if a recipient materially fails to comply with the terms and conditions of an award. (2)By the Federal awarding agency with the consent of the recipient, in which case the two parties shall agree upon the termination conditions, including the effective date and, in the case of partial termination, the portion to be terminated. (3) By the recipient upon sending to the Federal awarding agency written notification setting forth the reasons for such termination,the effective date, and,in the case of partial termination, the portion to be terminated. However, if the Federal awarding agency determines in the case of partial termination that the reduced or modified portion of the grant will not accomplish the purposes for which the grant was made, it may terminate the grant in its entirety under either paragraphs (a)(1) or(2). (b) If costs are allowed under an award, the responsibilities of the recipient referred to in paragraph .71(a), including those for property management as applicable, shall be considered in the termination of the award, and provision shall be made for continuing responsibilities of the recipient after termination, as appropriate. .62 Enforcement. (a)Remedies for noncompliance. If a recipient materially fails to comply with the terms and http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 37 of 41 conditions of an award,whether stated in a Federal statute,regulation, assurance, application, or notice of award,the Federal awarding agency may, in addition to imposing any of the special conditions outlined in Section .14, take one or more of the following actions, as appropriate in the circumstances. (1)Temporarily withhold cash payments pending correction of the deficiency by the recipient or more severe enforcement action by the Federal awarding agency. (2) Disallow (that is, deny both use of funds and any applicable matching credit for) all or part of the cost of the activity or action not in compliance. (3)Wholly or partly suspend or terminate the current award. (4) Withhold further awards for the project or program. (5)Take other remedies that may be legally available. and appeals. In takingan enforcement action,the awardingagency shall provide (b)Hearings pp the recipient an opportunity for hearing, appeal, or other administrative proceeding to which the recipient is entitled under any statute or regulation applicable to the action involved. (c)Effects of suspension and termination. Costs of a recipient resulting from obligations incurred by the recipient during a suspension or after termination of an award are not allowable unless the awarding agency expressly authorizes them in the notice of suspension or termination or subsequently. Other recipient costs during suspension or after termination which are necessary and not reasonably avoidable are allowable if(1) and(2) apply. (1)The costs result from obligations which were properly incurred by the recipient before the effective date of suspension or termination, are not in anticipation of it, and in the case of a termination, are noncancellable. (2)The costs would be allowable if the award were not suspended or expired normally at the end of the funding period in which the termination takes effect. (d)Relationship to debarment and suspension. The enforcement remedies identified in this section, including suspension and termination, do not preclude a recipient from being subject to debarment and suspension under E.O.s 12549 and 12689 and the Federal awarding agency implementing regulations(see Section .13). SUBPART D-After-the-Award Requirements .70 Purpose. Sections .71 through .73 contain closeout procedures and other procedures for subsequent disallowances and adjustments. .71 Closeout procedures. (a)Recipients shall submit,within 90 calendar days after the date of completion of the award, all financial,performance, and other reports as required by the terms and conditions of the award. The Federal awarding agency may approve extensions when requested by the recipient. CV-) http://vvww.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 38 of 41 (b)Unless the Federal awarding agency authorizes an extension, a recipient shall liquidate all obligations incurred under the award not later than 90 calendar days after the funding period or the date of completion as specified in the terms and conditions of the award or in agency implementing instructions. (c)The Federal awarding agency shall make prompt payments to a recipient for allowable reimbursable costs under the award being closed out. (d) The recipient shall promptly refund any balances of unobligated cash that the Federal awarding agency has advanced or paid and that is not authorized to be retained by the recipient for use in other projects. OMB Circular A-129 governs unreturned amounts that become delinquent debts. (e) When authorized by the terms and conditions of the award,the Federal awarding agency shall make a settlement for any upward or downward adjustments to the Federal share of costs after • closeout reports are received. (f) The recipient shall account for any real and personal property acquired with Federal funds or received from the Federal Government in accordance with Sections .31 through .37. (g) In the event a final audit has not been performed prior to the closeout of an award, the Federal awarding agency shall retain the right to recover an appropriate amount after fully considering the recommendations on disallowed costs resulting from the final audit. .72 Subsequent adjustments and continuing responsibilities. (a) The closeout of an award does not affect any of the following. (1)The right of the Federal awarding agency to disallow costs and recover funds on the basis of a later audit or other review. (2)The obligation of the recipient to return any funds due as a result of later refunds, corrections, or other transactions. (3)Audit requirements in Section .26. (4)Property management requirements in Sections .31 through .37. (5)Records retention as required in Section .53. (b) After closeout of an award, a relationship created under an award may be modified or ended in whole or in part with the consent of the Federal awarding agency and the recipient,provided the responsibilities of the recipient referred to in paragraph_.73(a), including those for property management as applicable, are considered and provisions made for continuing responsibilities of the recipient, as appropriate. .73 Collection of amounts due. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 39 of 41 (a)Any funds paid to a recipient in excess of the amount to which the recipient is finally determined to be entitled under the terms and conditions of the award constitute a debt to the Federal Government. If not paid within a reasonable period after the demand for payment,the Federal awarding agency may reduce the debt by(1), (2)or(3). (1)Making an administrative offset against other requests for reimbursements. • (2)Withholding advance payments otherwise due to the recipient. (3)Taking other action permitted by statute. (b)Except as otherwise provided by law, the Federal awarding agency shall charge interest on an overdue debt in accordance with 4 CFR Chapter II, "Federal Claims Collection Standards." Appendix A Contract Provisions All contracts, awarded by a recipient including small purchases, shall contain the following provisions as applicable: 1. Equal Employment Opportunity-All contracts shall contain a provision requiring compliance with E.O. 11246, "Equal Employment Opportunity," as amended by E.O. 11375, "Amending Executive Order 11246 Relating to Equal Employment Opportunity," and as supplemented by regulations at 41 CFR part 60, "Office of Federal Contract Compliance Programs,Equal Employment Opportunity,Department of Labor." 2. Copeland "Anti-Kickback" Act(18 U.S.C. 874 and 40 U.S.C. 276c) -All contracts and subgrants in excess of$2000 for construction or repair awarded by recipients and subrecipients shall include a provision for compliance with the Copeland"Anti-Kickback" Act(18 U.S.C. 874), as supplemented by Department of Labor regulations (29 CFR part 3, "Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States"). The Act provides that each contractor or subrecipient shall be prohibited from inducing,by any means, any person employed in the construction, completion, or repair of public work,to give up any part of the compensation to which he is otherwise entitled. The recipient shall report all suspected or reported violations to the Federal awarding agency. 3. Davis-Bacon Act,as amended (40 U.S.C. 276a to a-7) -When required by Federal program legislation, all construction contracts awarded by the recipients and subrecipients of more than$2000 shall include a provision for compliance with the Davis-Bacon Act(40 U.S.C. 276a to a-7) and as supplemented by Department of Labor regulations (29 CFR part 5, "Labor Standards Provisions Applicable to Contracts Governing Federally Financed and Assisted Construction").Under this Act, contractors shall be required to pay wages to laborers and mechanics at a rate not less than the minimum wages specified in a wage determination made by the Secretary of Labor. In addition, contractors shall be required to pay wages not less than once a week. The recipient shall place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation and the award of a contract shall be conditioned upon the acceptance of the wage determination. The • http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 40 of 41 recipient shall report all suspected or reported violations to the Federal awarding agency. 4. Contract Work Hours and Safety Standards Act(40 U.S.C. 327-333) - Where applicable, all contracts awarded by recipients in excess of$2000 for construction contracts and in excess of$2500 for other contracts that involve the employment of mechanics or laborers shall include a provision for compliance with Sections 102 and 107 of the Contract Work Hours and Safety Standards Act(40 U.S.C. 327-333), as supplemented by Department of Labor regulations (29 CFR part 5). Under Section 102 of the Act, each contractor shall be required to compute the wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in excess of the standard work week is permissible provided that the worker is compensated at a rate of not less than 1 %2 times the basic rate of pay for all hours worked in excess of 40 hours in the work week. Section 107 of the Act is applicable to construction work and provides that no laborer or mechanic shall be required to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transportation or transmission of intelligence. 5. Rights to Inventions Made Under a Contract or Agreement-Contracts or agreements for the performance of experimental, developmental, or research work shall provide for the rights of the Federal Government and the recipient in any resulting invention in accordance with 37 CFR part 401, "Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements," and any implementing regulations issued by the awarding agency. 6. Clean Air Act(42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act(33 U.S.C. 1251 et seq.), as amended - Contracts and subgrants of amounts in excess of$100,000 shall contain a provision that requires the recipient to agree to comply with all applicable standards, orders or regulations issued pursuant to the Clean Air Act(42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as amended(33 U.S.C. 1251 et seq.). Violations shall be reported to the Federal awarding agency and the Regional Office of the Environmental Protection Agency(EPA). 7. Byrd Anti-Lobbying Amendment(31 U.S.C. 1352) - Contractors who apply or bid for an award of$100,000 or more shall file the required certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay any person or organization for influencing or attempting to influence an officer or employee of any agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with obtaining any Federal contract, grant or any other award covered by 31 U.S.C. 1352. Each tier shall also disclose any lobbying with non-Federal funds that takes place in connection with obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the recipient. 8. Debarment and Suspension (E.O.s 12549 and 12689) -No contract shall be made to parties listed on the General Services Administration's List of Parties Excluded from Federal Procurement or Nonprocurement Programs in accordance with E.O.s 12549 and 12689, "Debarment and Suspension." This list contains the names of parties debarred, suspended, or otherwise excluded by agencies, and contractors declared ineligible under statutory or regulatory authority other than E.O. 12549. Contractors with awards that exceed the small purchase threshold shall provide the required certification regarding its exclusion status and that of its principal employees. OMB Home Page I Budget Information I Legislative Information ( Management Reform/GPRA Grants Management I Financial Management I Procurement Policy http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 Certification for U.S. Department of Housing and Urban Development a Drug-Free Workplace EXHIBIT"K" Applicant Name Charles Drew Health Center, Inc. Program/Activity Receiving Federal Grant Funding Charles Drew Health Center Clinic for the--'Homeless 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 (1) 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 employee, up to and including termination, consistent with the c. Making it a requirement that each employee to be engaged 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 para 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 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.) Charles Drew Health Center Satellite Clinic for the Homeless 1490 North 16th Street Omaha, Douglas County, Nebraska 68105 Check here 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 Title Joeann Cooper , Interim CEO Signature ) Date X G I April 10, 2001 �� / form HUD-50070(3/98) ref.Handbooks 7417.1,7475.13,7485.1 &.3 Certification for U.S. Department of Housing and Urban Development a Drug-Free Workplace Applicant Name Charles Drew Health Center Program/Activity Receiving Federal Grant Funding Charles Drew Health Center Clinic for the Homeless 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 (1) 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 after receiving notice under subparagraph d.(2) from an em- employees for violation of such prohibition. 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 employee, up to and including termination, consistent with the c. Making it a requirement that each employee to be engaged 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 para- 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 --- 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.) Indian—Chicano Health Center 5155 South 36th Street Omaha, Douglas County, Nebraska 68107 Check here! if there are workplaces on file that are not identified on theattached h psheets. 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 [Title Mary Lee Fitzsimmons Chief Executive Officer Signature Date X X June 1, 2001 form HUD-50070(3/98) ref.Handbooks 7417.1,7475.13,7485.1 &.3 Certification for U.S. Department of Housing and Urban Development a Drug-Free Workplace Applicant Name Charles Drew Health Center Program/Activity Receiving Federal Grant Funding Charles Drew Health Center Clinic for the Homeless 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 (1) 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 employee, up to and including termination, consistent with the c. Making it a requirement that each employee to be engaged 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 para- rily in a drug abuse assistance or rehabilitation pro2ram 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 --- 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.) Council Bluffs Community Health Center 300 West Broadway, Suite 6 Council Bluffs, Pottawattanie County, Iowa 51503 Check here I !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 Title r' Wyndle L. Young, Sr. ! Chief Executive Officer Signature Date )L_A 1�7711/(tir5L.� May 10, 2001 form HUD-50070(3/98) ref.Handbooks 7417.1,7475.13,7485.1&.3 EXHIBIT L Use of Debarred, Suspended or Ineligible Contractors Subject to CFR part 24, Charles Drew Health Center, a subgrantee to the City of Omaha,hereby certifies that all contractors, subcontractors and suppliers to be used on the Supportive Housing Program project located at 2915 Grant Street, Omaha, NE 68111 , are eligible to participate in • the Supportive Housing Program and that they are not on any debarred, suspended or ineligible list. AGENCY CERTIFICATION Date: April 10 , 2001 / Signature: dr„,i,',�,,/L/ _,(.._. Typed Name,Joeann Cooper Title: TntPrim CFO Agency: Charles Drew Health Center, Inc. i- " C-25A CITY OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebr August 21, 2001 RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: WHEREAS, on February 24, 2000, the U. S. Department of Housing and Urban Development published in the Federal Register a Notice of Funding Availability for Continuum of Care Homeless Assistance designed to help communities develop Continuum of Care systems to assist homeless persons; and, WHEREAS, the Omaha Area Continuum of Care for the Homeless is comprised Nee of organizations providing shelter and services to homeless individuals and families on an area- wide basis; and, WHEREAS, the City of Omaha undertook an inclusive community process for developing and implementing a Continuum of Care strategy which included participation of the membership of the Omaha Area Continuum of Care for the Homeless; and, WHEREAS, the City of Omaha developed and submitted to the U. S. Department of Housing and Urban Development a consolidated application with, among others, Siena/Francis House, Family Housing Advisory Services, the Charles Drew Health Center, Community Alliance Rehabilitation Services, the YWCA, Family Service of Omaha, the Salvation Army, the Stephen Center for Continuum of Care - Supportive Housing Assistance; and, WHEREAS, on March 13, 2001, the U. S. Department of Housing and Urban Development notified the City of Omaha of the final selection of the Charles Drew Health Center project entitled, "Primary Health Care for the Homeless" for funding under Fiscal Year 2000 Supportive Housing Program; and, WHEREAS, the U. S. Department of Housing and Urban Development has awarded the Charles Drew Health Center Supportive Housing funds in the amount of$625,778, • and has assigned the grant number NE26B001010 for the Charles Drew Health Center project (FY 2000, Fund 190, Agency 200, Organization 8018); and, WHEREAS, Supportive Housing assistance for Omaha's Continuum of Care programs will help provide a much needed comprehensive approach to the development and implementation of housing and service delivery programs to help homeless individuals and families move to permanent housing and self-sufficiency; and, By Councilmember Adopted City Clerk Approved Mayor C-25A CITY 'OF OMAHA LEGISLATIVE CHAMBER Omaha,Nebr August 21, 2001 PAGE 2 WHEREAS, from time to time it is necessary for HUD and the City to make revisions to such Supportive Housing Program grant agreements including the shifting of funds among categories and additions or deletions in the line items within Support Services and. Operations Budgets which additions and deletions do not change the original contract amount; and, WHEREAS, it is in the best interest of the City for the City Council to authorize the Mayor to approve all revisions to this Supportive Housing Program Grant Agreement, as approved by HUD; except that revisions involving a change in the subrecipient, a change in the project site, or a change in the category of participants to be served shall require the prior approval of the City Council. 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 Charles Drew Health Center, a Nebraska Non-Profit Corporation, 2915 Grant Street, Omaha, Nebraska 68111, for Supportive Housing funding in the amount of$625,778, to be used to provide primary health care to homeless persons, is hereby approved. Funds in the amount of $625,778 shall be paid from the Continuum of Care Supportive Housing Grant NE26B001010 (Fiscal Year 2000, Fund Number 190, Agency Number 200, Organization Number 8018). BE IT FURTHER RESOLVED, THAT, the PP Mayor is authorized to approve all revisions to this Supportive Y Housing Program Grant Agreement, as approved by HUD, except that revisions involving a change in the subrecipient, a change in the project site, or a change in the category of participants to be served shall require the prior approval of the City Council. P:\PLN1\5789pjm.doc APPROVED AS TO FORM: ie -------e"‹, -- 1-eA--'t (7)'6 414 • 1 -i3-0\ A -i CITY ATTORNEY DATE By ouncilmember Adopted A 2 1 2001 - 0 ' ; CityClerk Approved -4-4 8?/ �3 ' Mayor0 hU 8 0 0 5- P) fv pq (/) W pv crc, O ' NO - ▪ o - ' �' o z • o n o p O o 0 act a.• cCID . cD a CD 5' o• • 00 CD O -r Z r�" CD CDD J pD "- d ors � Po d Cl; oo - '" Zk<est. rnD co cp 0 ° Al cD O 5 O �' N C� cn v' CD p P��+ O +n t� CD G.o En G � C CAD O P' ,.* cn w ' z 0 p o o ,CD �' Oro z CD r* O N cn 0 CD CD -- cD cD v, • a o CD 111 cD . • \(-) CDcm c co '3 y Cr,„ bid 0 �'.ch ,� O �r CD "C) \_ Q N �• p NI C O_ �' tNii CD ~• o0o Po rLI� 0 - r' acn'. aCD aj ' 0 � c � o' po • CCDD P� cn cn CD O )-t O CD o0o �� ~' cn • • • • • • • • • • • • • • • • • • • • t• p � . • •