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RES 2001-1454 - Agmt with St. Vincent de Paul homeless family shelter a t 4,te es' RECEIVED Planning Departme t • ; Omaha/Douglas Civic Center V PIA �' 142819 Farnam Street,Suite 1100 �,rr R� Q t Omaha,Nebraska 68183-0110 IY ia (402)444-5200 o �ti CITY CLERK (402)444-5150 Telefax(402)444-6140 47'ED FEB03 June 5, 2001 O N r,. N E ft i S-K City of Omaha Robert C.Peters Hal Daub,Mayor Acting Director Honorable President and Members of the City Council, The attached proposed Resolution approves an Agreement between the City of Omaha and The St. Vincent de Paul Homeless Family Shelter,a Nebraska non-profit corporation,613 North 17th Street, Omaha,Nebraska 68102,in the amount of$21,600.00 to provide emergency shelter and services to homeless persons. Funds will be paid from the Emergency Shelter Grant Fund No. 154, Organization No. 8501, Agency No. 200. The City of Omaha 2001 Consolidated Submission for Community Planning and Development was approved by the City Council on December 19,2000 setting out the City's Community Development Program for 2001, and identified the provision of emergency shelter and essential services for homeless persons as an urgent need. The City of Omaha has received a Fiscal Year 2001 Emergency Shelter Grant Entitlement of $222,000.00 from the U.S. Department of Housing and Urban Development. As a result of this Agreement the St.Vincent de Paul Shelter will provide emergency shelter totaling • 12,000 nights of shelter, 400 hours of crisis counseling, and 18,000 meals to homeless persons. The City solicited proposals from`rion-profits through a Request for Proposals process earlier this year. Proposals were reviewed by Planning staff who determined applicant eligibility and developed the allocation formula.The recommended funding allocations identified below supplement shelter operating costs: Organization Stephen Center $ 17,800 Salvation Army $ 23,350 Siena-Francis $ 47,200 Help the Homeless $ 48,050 Catholic Charities $ 52,900 St. Vincent de Paul $ 21,600 Total $210,900 • City Administration $ 11,100 Grand Total $222,000 Honorable President and Members of the City Council Page 2 The St. Vincent de Paul Homeless Family Shelter has a current Contract Compliance (CC-1)form on file in the Human Relations Department. We urge your favorable consideration of this Resolution. Sincerely, Refed to City C cil for ons' ration: c . 6j Robert C. Peters „jSS Date Mayor's Office/ itle Date Acting Planning Director �1 Approved as to Funding: Approved: r7 1/ 7 6j e-TQirA i9 A -5 Stanley Ti Date Kelhe Paris-Asaka Date Acting Finance Director Human Relations Director P:\PLN1\5719pjm.doc • 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 St. Vincent de Paul Homeless Family Shelter, 613 North 17th Street, a corporation organized and existing pursuant to the provisions of the Nebraska Non-Profit Corporation Act (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 existing under the laws of the State of Nebraska, and is authorized and empowered to exercise all powers conferred by the State constitution,laws,Home Rule Charter of the City of Omaha, 1956, as amended, and local ordinances, including but not limited to, the power to contract; and WHEREAS, the City of Omaha received a Fiscal Year 2001 allocation in the amount of $222,000 of Stewart B. McKinney Homeless Assistance Act funds from the United States Department of Housing and Urban Development for the purpose of providing shelter and services to homeless and temporarily displaced families; and, WHEREAS,the City of Omaha 2001 Consolidated Submission for Community Planning and Development was approved by the City Council on December 19,2000,by Resolution No. 3377,as amended, setting out the City's Community Development Program for 2001, and identifying the provision of emergency shelter and essential services for homeless persons as an urgent need in the City of Omaha; and, y � WHEREAS, it is in the best interests of the.City of Omaha and the residents thereof that the City enter into an Agreement with The St. Vincent de Paul Homeless Family Shelter to provide funding in the amount of$21,600 for the provision of emergency shelter and services to homeless persons. NOW, THEREFORE, in consideration of these mutual covenants,The St. Vincent de Paul Homeless Family Shelter 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 St. Vincent de Paul Homeless Family Shelter, 613 North 17th Street, Omaha, Nebraska 68102, a non-profit corporation. (See Exhibit 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 nonprofit agency, authority or organization receiving ESGP funds to undertake eligible activities. In this Agreement, the Subrecipient is The St. Vincent de Paul Homeless Family Shelter. 1.6 "HUD" shall mean- the U.S. Department of Housing and Urban Development. 1.7 "Emergency Shelter Grant Program" (ESGP) - shall mean the program administered by the City of Omaha and funded under Subtitle B of Title IV of the Stewart B. McKinney Homeless Assistance Act (Pub. L. 100-77), as amended. The program purpose is to provide assistance to homeless persons in accordance with Federal Regulations in 24 CFR Part 576, the program objectives,priorities, and strategies as stated in the City of Omaha Program Guidelines, the Consolidated Submission for Community Planning and Development, and the most recent ESGP Request for Proposals. 1.8 "ESGP Funds" shall mean - the portion of the Emergency Shelter Grant Program funds awarded to the City as may be available during Program Year 2001 for the use specified herein, in an amount not to exceed $21,6000, subject to the terms, conditions, and requirements of said Grant. Availability of funds is subject to and conditioned upon actual receipt of same, by the City of Omaha. - 2 41111, 1.9 "Grant" shall mean - non-repayable ESGP funds made subject to the terms, conditions and provisions of the grant agreement under which said grant is made. 1.10 "Facility" shall mean- The St. Vincent de Paul Homeless Family Shelter located at 613 North 17t" Street, Omaha,Nebraska 68102. 1.11 "Program Income" shall mean - gross income received by the Recipient or Subrecipient directly generated from the use of ESGP funds. When such income is generated by an activity that is only partially assisted with ESGP funds, the income shall be prorated to reflect the percentage of ESGP funds used. (See Exhibit "B".) 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$21,600 in ESGP funds,Fund No. 154, Organization No. 8500 in the form of a grant for the purposes set forth in this Agreement, and as detailed in Exhibit "C" 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 ESGP funds in amounts adequate to meet any contractual obligations in force upon the date of execution of this Agreement, as well as, this proposed obligation. Should adequate funding not be available,the City shall notify the Contractor as soon as reasonably possible. At such 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 allowable expenditures. Payments shall be made on the basis of monthly requests-for payment and shall be reimbursements for actual expenditures. Allowable expenditures are identified as Exhibit "D". 2.1.3 Monthly billing will be submitted to the Director by The St. Vincent de Paul Homeless Family Shelter with the monthly progress report. The monthly billing is due no later than fifteen(15) days following each monthly reporting period. 2.2 The City shall refer client cases to The St. Vincent de Paul Homeless Family Shelter as need dictates to promulgate approved programs and activities. 2.3 The City shall review and monitor the required monthly reports that identify the progress/accomplishments of The St. Vincent de Paul Homeless Family Shelter on the activities included in this Agreement and on contracts entered into with third parties pursuant thereto (see Exhibit "C"). - 3 - 2.4 The City shall prepare monthly payment vouchers for The St. Vincent de Paul Homeless Family Shelter based upon the contractor's monthly progress report and request for payment. SECTION 3. DUTIES AND RESPONSIBILITIES OF THE CONTRACTOR 3.1 The Contractor does hereby certify, contract and agree that any and all funding obtained or made available hereunder shall be used solely and exclusively for the express purpose of providing shelter and services to homeless persons. 3.2 The Contractor shall provide shelter and services for clients as required in the scope of work as attached hereto. (See Exhibit "C"). 3.3 The Contractor shall submit a monthly progress report to the Director delineating The St. Vincent de Paul Homeless Family Shelter accomplishments for the previous 30 day period on the specific activities approved by the City Planning Department. (See Exhibit "C") 3.4 The Contractor shall submit a monthly financial report (income statement) to the Director delineating the revenue and line item expenditures for The St. Vincent de Paul Homeless Family Shelter In addition, a monthly check register is to be submitted listing each expenditure by check number, payee, date, and amount for each expenditure for which reimbursement is requested. 3.5 The Contractor shall comply with all provisions and regulations of the Emergency Shelter Grant Program and have an annual audit completed in compliance with OMB Circular A-133. 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 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 expends less than$300,000 in each fiscal year. A copy of the audit shall be provided to the Director. OMB Circular A-133, is attached as Exhibit "E". 3.6 The Contractor will comply with Section 504 of the Rehabilitation Act of 1973 regarding project accessibility and insure that all work on the facility is in accordance with the design standards as stated in the Uniform Federal Accessibility Standards. 3.7 The Contractor specifically hereby states, agrees and certifies that it is familiar with the limited purpose set forth in the Federal Laws, Rules and Regulations, and in the laws of the State of Nebraska, for which personal information requested may be used and that the information received will be used solely for those limited purposes and not to harass, degrade or humiliate any person. The information released shall be used for the limited purpose stated, and the Contractor further agrees to indemnify - 4 - and hold harmless the City of Omaha for any liability arising out of the improper use by the Contractor of information provided. 3.8 The Contractor and any Subcontractors shall maintain such records and accounts, including property, personnel and financial records, as are deemed necessary by the City to assure a proper accounting for all expenses. The Comptroller General of the United States, or any of their duly authorized representatives, or any duly authorized representatives of the City 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 project 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. 3.9 Any program income received will be returned to the City of Omaha within thirty (30) days of receipt. 3.10 The Contractor shall comply with all requirements of the Emergency Shelter Grant Program and acknowledge,by execution of this Agreement, receipt of Department of Housing and Urban Development Regulations 24 CFR Parts 50, 58, 575, and 576 Emergency Shelter Grant Program, Stewart B. McKinney Homeless Assistance Act Final Rule, dated August 10, 1988, as amended. (See Exhibit "K"). 3.11 Comply with all federal non-discrimination requirements and accommodate clients without regard to race, color,handicap, familial status, sex, age,religion, or national origin. 3.12 Provide access to the City for on-site reviews when requested. SECTION 4. TERM OF THE AGREEMENT This Agreement shall be in full force and effect and will continue for a period of twelve (12)months, from the time of favorable consideration by the City Council of the City of Omaha and execution by the Mayor. The Director may extend the term of this agreement,but in no event may the term exceed eighteen (18)months from the date of execution of this Agreement. 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 - 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. 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 representative of the parties. 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 patty's usual place of business. This Agreement may 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. - 6 - 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. 5.12 Default. If, through any cause, the Contractor shall fail to fulfill in a timely and proper manner any obligations under this Agreement, or violate any of the covenants, representations or agreements hereof;the City may upon written notice terminate this Agreement or such parts thereof as to this Agreement, and may hold the Contractor liable for any damages caused to the City by reasons of such default and termination. 5.13 Nebraska Law. This Agreement shall be a contract made under and governed by the laws of the State of Nebraska. 5.14 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. 5.15 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 Contractor, to any person for influencing or attempting to influence an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any Federal contract, the making of any Federal grant, the making of any Federal loan, the entering into of any cooperative agreement, and the extension, continuation, renewal, amendment or modification of any Federal contract, grant, loan, or cooperative agreement. (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 Contractor 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. - 7 - 5.16 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 Attachments A, B, C, F, H, N and 0 to OMB Circular A-110 (Exhibit "J"). 5.17 Other Program Requirements. The Contractor shall be required to carry out each activity of this Agreement in compliance with all Federal laws and regulations described in Subtitle B of Title IV of the Stewart B. McKinney Homeless Assistance Act (Pub L. 100-77), as amended, and Federal Regulations in 24 CFR Part 576, including the final rule that requires certification regarding the involvement of homeless persons in work or service related to activities assisted under the ESGP grant, and also requires participation of homeless persons on the board of directors of the subrecipient. (Exhibit "K"). 5.18 Termination of Assistance. If an individual or family who receives assistance from a recipient or subrecipient violates program requirements, the recipient or subrecipient may terminate assistance in accordance with a formal process established by the recipient or subrecipient that recognizes the rights of individuals affected, which may include a hearing. 5.19 Contract Compliance Clause Sec. 10-192. Equal employment opportunity clause. During the performance of this contract, the contractor agrees as follows: (1) The contractor shall not discriminate against any employee or applicant for employment because of race,religion, color, sex, age, disability or national origin. The contractor shall take affirmative action to ensure that applicants are employed and that employees are treated during employment without regard to their race,religion, color, sex or national origin. As used herein,the word "treated" shall mean and include, without limitation, the following: recruited, whether by advertising or by other means; compensated; selected for training, including apprenticeship; promoted; upgraded; demoted; downgraded; transferred; laid off; and terminated. The contractor agrees to and shall post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officers setting forth the provisions of this nondiscrimination clause. (2) The contractor shall, in all solicitations or advertisements for employees placed by or on behalf of the contractor, state that all qualified applicants will receive consideration for employment without regard to race, religion, color, sex, or national origin, age, disability. (3) The contractor shall send to each representative of workers with which he has a collective bargaining agreement or other contract or understanding a notice advising the labor union or workers' representative of the contractor's - 8 - commitments under the equal employment opportunity clause of the city and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (4) The contractor shall furnish to the human relations director all federal forms containing the information and reports required by the federal government for federal contracts under federal rules and regulations, including the information required by sections 10-192 to 10-194, inclusive, and shall permit reasonable access to his records. Records accessible to the human relations director shall be those which are related to paragraphs (1) through (7) of this subsection and only after reasonable notice is given the contractor. The purpose of this provision is to provide for investigation to ascertain compliance with the program provided for herein. (5) The contractor shall take such actions with respect to any subcontractor as the city may direct as a means of enforcing the provisions of paragraphs (1) through (7) herein, including penalties and sanctions for noncompliance; however, in the event the contractor becomes involved in or is threatened with litigation as the result of such directions by the city, the city will enter into such litigation as is necessary to protect the interests of the city and to effectuate the provisions of this division; and, in the case of contracts receiving federal assistance,the contractor or the city may request the United States to enter into such litigation to protect the interests of the United States. (6) The contractor shall file and shall cause his subcontractors, if any, to file compliance reports with the contractor in the same form and to the same extent as required by the federal government for federal contracts under federal rules and regulations. Such compliance reports shall be filed with the human relations director. Compliance reports filed at such times as directed shall contain information as to the employment practices,policies, programs and statistics of the contractor and his subcontractors. (7) The contractor shall include the provisions of paragraphs (1) through(7) of this section, "Equal employment opportunity clause," and section 10-193 in every subcontract or purchase order so that such provisions will be binding upon each subcontractor or vendor. 5.20 Living Wage Contract Clause Contractor acknowledges that if this contract is over$75,000 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 - 9 - 0 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. Contractor further acknowledges 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, NE 68183, Attn: Joe Couch (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) The St. Vincent de Paul Homeless Family Shelter Rich Koeppen, Executive Director 613 North 17th Street Omaha,NE 68102 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated. below. ATTEST: CITY •F ai MAHA: = I it C k.K OFT TY OF O ATE MAC,:• -'i E TY OF OMAHA DATE W NP-SS: .r',‘ THE ST. VINCENT DE PAUL t,1 s - + HOMELESS FAMILY SHELT R 14(1)/j-ii) ke"Au..e..1?", z 40fLei ,SAr/ • ate Date / APPROVE S TO FO 4-2s of P:\PLN1\5721pjm.doc CITY ATTORNEY DATE - 10 - SCHEDULE OF EXHIBITS Agreement Exhibit Location Description A 1.2 Articles of Incorporation, Corporate Resolution B 1.11 Definition-Program Income C 2.1, 2.3, 3.2, 3.3 Scope of Work and Reporting Requirements D 2.1.2 Allowable Expenditures E 3.5 OMB Circular No. A-133 F 5.1 Equal Employment Opportunity Clause G 5.1 Affirmative Action Plan H 5.10 Termination- CFR 85.43 and CFR 85.44 I 5.16 OMB Circular No. A-122 J 5.16 OMB Circular No: A-110, Attachments A, B, C, F, H,N, 0 K 3.10, 5.17 24 CFR Parts 50, 58, 575 & 576, ESGP Final Rule P:\PLN1\5721pjm.doc A ATTACHMENT II , SKA STATE 'OF .. Fj •x ,,.:}- 1 TEBR ,Q� . . ' 'z:444rliffe—' 'WV 111 f, Allyn J. 1Jirrriiiuilil, )rrrrtaril of 'tatr of tlir Ititr of '?rlira ilia t 1irrrlilr rrrtifII that THE ST. VINCENT DE PAUL HOMELESS FAMILY SHELTER filed Articles of Incorporation with its registered office located in Omaha, Nebraska ,' in this office as a nonprofit corporation on February 24 , 1988. I further certify that said corporation is in good standing as of this date . ill (Orfitillton j i1llrrruf,, 1 flaur llprrunta Litt uty !}and anb t affixed the (lirrat oral of tit 'tatt .I : A' ,•. �. e ,,...;:`` - _ of Ntbranka. . t,.. : .,: . . . -,, , t - .. Bunt at 'fttualn tins VI.• 1. ''•- t:• lr• : • •�.r.:: :,.: ..: `., twenty-fourth �. .� . t" ..,.,<; t'ii.•.,;ri •*. ... bay of February /� , ,..; ;r . y1; • .: t� gear .nf our i.ard, ant tflau ,.. ,\ ' . =i:',e; . Band rant Elunbrrb and e . h ei y �'. ' ' t•f'• :- :Yale . r. ty' 5ht L. �t� V r MM�� •.�� Cutt,} n . , .• . .. � . . x . .„ ,, i L t ( 1 r� . .,ems` • � 7 SECRETARY OF STATE1 `� • DEPUTY • ATTACHMENT II • A R 1 ICLES OF INCORPORAAIO N2?8-il 0 F ! ' 1 H E ST . VINCENT de P A U ' L F A M I L Y SHELTER A Nonprofit Corporation By__ The following are submitted by the undersigned incorporators of THE ST . VINCENT de PAUL HOMELESS FAMILY SHELTER , a Nonprofit . Corporation, as the articles of .incorporation of the corporation under the terms of the Nebraska Nonprofit Corporation Act, R.R. S. Secs . 21 - 1901 et seq. Article 1 . Name of Corporation. The name of the corporation shall be THE ST. VINCENT de PAUL HOMELESS FAMILY SHELTER. Article 2 , Period of Duration, The period of duration of the corporation shall be perpetual . Article 3 . Purpose . The purposes for which the corporation is • organized are to generally promote the charity of the Society of St. Vincent De Paul of Omaha , Nebraska; to provide shelter for poor , needy and homeless ' persons regardless of- race , creed , color or religion ; 'and , any other charitable purpose (as such term is used under Sec . 5r01 ( c ) ( 3 ) of the Internal Revenue Code of 1986 ) which is not inconsistent with the charitable purposes of the Society of St . Vincent De Paul of Omaha , Nebraska. Article 4 , Dedication of Assets to Exempt Purpose . Al'I,zLAssets . originally contributed to the corporation or received by the corporation at any future time shall be expressly dedicated to the charitable purpose of the corporation . No part of the net earnings of the corporation shall inure to the benefit of any private ;~ shareholder or individual . • / .. ATTACHMENT II . • Distr iOotic,n of h; ,'tE t.t t•11 L'� � C lul �t r� . Upon oissc•lution of the corporation , the Board of Directors shall distribute the assets of the corporation to the Society of St. ,__.__, .. Vincent de Paul of Omaha , Nebraska ; provided that organization is . still in existence and still qualifies as a charitable organization under Sec. 501 (c ) ( 3 ) of the Internal Revenue Code of 1986 . If that • organization is not then in existence or is not then qualified under Sec . 501 (c) ( 3 ) , then the Board of Directors shall distribute the assets of the corporation to one or more org4i1 zations which are qualified under Sec . 501 ( c ) ( 3 ) , which will , in the Board's judgment best accomplish the charitable purposes of the Society of St. • • Vincent de Paul of Omaha, Nebraska. In no event shall the Board of Directors distribute the assets , or any part of the assets of . the corporation to any organization which is not qualified under Sec. 501 (c) ( 3 ) of the Internal Revenue Code of 1986 . • Article 6 , Miscellaneous Provisions . The corporation shall take all steps which its deems reasonable to avoid being classified as a private foundation under Sec . 509 of the Internal Revenue .Code of 1986 . I.n no event shall the corporation engage in any activities on which taxes are imposed by Sec . 4941 of the Internal Revenue of 1986 . • Article 7 , Membership . The corporation shall not have members . Article 6 . Initiaj Registered Agent and Office. The Initial Registered Office of the corporation shall be 365 North Saddll- Creek Road , Omaha., Nebraska 681.31 and the initial registered agent of the corporation shall be John C . Lindsay . ATTACHMENT II • • f • Article 9 . initial board 'of Directors„ the snit al Board of . Directors shall consist of fifteen individuals and the names and street addresses of the persons who are to serve as the initial -directors : ' The fol l.ow.i.n.g ,d.i,.r.ec., .tors .shag„1 .._have• .a term through Decembe,r. ., 31.,, 1990 : Jack : Toohey ,/ Bi 11" McAndrews• 2943 : No. 58th St. 7530 Grover Omaha , NE . 68104 • . Omaha, NE. 68124 Mary McGill ; Stan Pierce 103 No , 54th 1301 Hickory . ' Omaha , NE . 68132 Papillion, N . 68046 • Tom Ruhman 2104 Davenport Omaha , NE . 68102 The following . director•s shall have a term through December 31 , 1989 ! Joe Archibald v Sharon Perine • 472T Grant 4735 N. 65 St. Omaha, NE. 68104 Omaha, NE 58104 Fred Hendricks ,/ Bob Elworth 4412 Jaynes 1320 S. 79 Omaha, NE 68111 Omaha, NE 68124 Joe McFadden 7801 Poppleton Omaha, NE ' 68124 • . The following directors shall have a term through December 31 , 1988: Alva Barnett Coreen Miller 5010 No. 55th St. 6318 Jaynes Omaha, NE . 68104 Omaha, NE. 68104 Joe Sutton Bill Donovan 13427 Montclair Dr. 6546 Bedford • Omaha , NE . 68144 Omaha, 'NE. 68104 . • Joe Solia ✓ 9502 Briarwood . Omaha , NE . 68147 Article 10.• Incorporators . The names and street addresses of the incorporators are : . Mary F . Lindsay of 1024 Mercer Blvd. , ' Omaha, • • ATTACHMENT II tdebrss L d 681 3 t and John C . Lindsay of 365 North Saddle Creel. Road , Omaha , Nebraska 68131 . • The above articles of incorporation of THE ST. VINCENT de PAUL HOMELESS FAMILY SHELTER are hereby adopted by the ' incorporators of the corporation on this '7- day of February 1988 . Mary Lindsay o n C. Lin say State of Nebraska ) 11 ) .s . s . . • County of Douglas ) On this day of February 1988, Mary F. Lindsay and John. C . . Lindsay , personally known to me to be the incorporators of THE ST . VINCENT de PAUL HOMELESS FAMILY SHELTER, personally appeared before me and acknowledged the above articles of :incorporation of THE ST. VINCENT de PAUL HOMELESS. FAMILY SHELTER. • -Sass at lwio • � WIUJAM J.UND AY.JR , •�� c< f� ofColima *.It MI • Notary Public / , 3 f 1998 4 CERTIFICATE OF REVIVAL OR RENEWAIST ,,17. DOMESTIC NON-PROFIT CORPORATIONS S CT 7.7",' `" _-' Received iii ,r::: .. film roll no. I Scott Moore, Secretary of State nt page Room 1301 State Capitol, P.O. Box 94608 Lincoln, NE 68509 - ::1 �`� Sccret:ry of Stat Submit in Duplicate Fly id 1 Name of Corporation St. V I A/CEN T -bt 'At4 L Ho,s1 t.Css r4 M/L'/ S#4"4 70 The corporation was dissolved by the Secretary of State on G - 02 19 8 2 , —L-`'c for (check one) X A. Nonpayment of biennial fee B. Failure to maintain a registered agent C. Expiration of corporate existence The above named grounds for dissolution either did not exist or have been eliminated and the corporate name complies with the requirements of Neb. Rev. Stat. §21-1931 DATED 12 - 3 / - ?8 c . (..- ... ......1/4-,—. Signa ure Defer C . ►3ala.'//oti / Pres;e ehit Printed Name/Title NOTE: Every filing must be signed by the chairperson of the board of directors,the president, or one of the officers of the corporation. If the corporation has not yet been formed or directors have not yet been selected,the filing shall be signed by an incorporator. If the corporation is in the hands of a receiver,trustee, or other court appointed fiduciary,the filing shall be signed by that fiduciary. FILING FEE: $10.00 CERTIFICATE OF REINSTATEMENT I, SCOTT MOORE, Secretary of State, do hereby cancel the certificate of dissolution and reinstate the above named corporation as a corporation in good standing to do business in the State of Nebraska, and further state that the grounds for dissolution of the corporation did not exist or have been eliminated. IN TESTIMONY WHEREOF, I do hereby affix my signature or a facsimile thereof and seal. (State Seal) Revised 1/31/97 Neb. Rev. Stat. 21-19,139 FROM : STUINCENTHS FAX NO. : 4023424213 Feb. 09 2001 03:08PM P2 • BOARD OF DIRECTORS - YEAR 2001 ST. VINCENT DE PAUL HOMELESS FAMILY SHELTER Joe Archibald 3325 Fontenelle Blvd. 68104 451.3386 Treasurer Ed Bergin 6153 Oak St 68106 558-9982 John Bow er 1510 So. 141st Circle 66144 333-7207 Jim Dennell 509 Brentwood Road 68114 H: 392-1080 • Wee-chair W: 34 94754 Tom Donohue 15468 Western Ave 68154 H: 498-0162 W: 346.44e2 56`f l Dave Flynn 2520 So. 92nd Plaza 68124 397-6414 Chairman Dick Hays 5445 Hanover Plaza 68152 572-6721 Rich Koeppen 613 N. 17th St 68102 342-3759 Executive Director-Shellox - William Laird 3333 Pine St 68105 H: 3413995 W : 3934190 Nick Niemann 1537 North 131st Ave 68154 493.6871 Don Moray 5426 Seward Street 6 8!o`f H: 553-5424 W: 677.8848 Bob O'Connell 701 Sunset Trail 68132 551.4895 Shirley Ortman 2022 S. 80th Ave 68124 H: 397.6912 • W: 559.4009 t• Fr. John Pletramale 654 S 86th St 68114 391-36d8 Spiritual Advisor Barb Siaven 8505 S.45th Ave Bellevue 68157 H: 733.0709 '3; Society President W: 978-5216 i Dee Valenti 14157. Seward St 68154 H: 498-5959 -Secretary Cell: 968.4340 RESOLUTION — - — - It is hereby resolved, this 19th day of April,2000,by a majority vote of the quorum of the Board of Directors of the St. Vincent dePaul Homeless Family Shelter, Inc., ("Shelter") at its regular monthly meeting of April, 2000, that the Shelter accepts the sum of SEVENTEEN THOUSAND AND NO/l00($17,000.00)DOLLARS and any funds granted hereafter from the Emergency Shelter Grant Program, and Shelter hereby accepts this money pursuant the terms of this Grant. It is further resolved,that the Executive Director,Richard Koeppen, or the President of the Shelter,Peter C, Bataillon,have the authority and are hereby authorized to execute the necessary documents on behalf of the Shelter to accepts said funds. Dated: April 19, 2000. P\i Secretary EXHIBIT 3 Community Development Block Grant Program Handbook 6500 Entitlement Grant Regulations September 1988 "Program income" means gross income received by the Recipient or a Subrecipient directly generated from the use of CDBG funds. When such income is generated by an activity that is only partially assisted with CDBG funds, the income shall be prorated to reflect the percentage of CDBG funds used. (1) Program income includes, but is not limited to the following: (i) Proceeds from the disposition by sale or long term lease of real property purchased or improved with CDBG funds ; (ii) Proceeds from the disposition of equipment purchased with CDBG funds ; (iii) Gross income from the use or rental of real or personal property acquired by the Recipient or. a Subrecipient with CDBG funds, less the costs incidental to the generation of such income; (iv) Gross income from the use or rental of real property owned by the Recipient or a Subrecipient that was constructed or improved with CDBG funds, less the costs incidental to the generation of such income; (v) Payments of principal and interest on loans made using CDBG funds; (vi) Proceeds from the sale of loans made with CDBG funds; (vii) Proceeds from the sale of obligations secured by loans made with CDBG funds; (viii) Interest earned on funds held in a revolving fund account; (ix) Interest earned on program income pending disposition of such income; and, (x) Funds collected through special assessments made against properties owned and occupied by households not of low and moderate income, where such assessments are used to recover all or part of the CDBG portion of a public improvement. (2) Program income does not include interest earned (except for interest described in § 570.513) on cash advances from the U. S. Treasury. Such interest shall be remitted to HUD for transmittal to the U. S. Treasury and will not be reallocated under section 106(c) or (d) of the Act. Examples of other receipts that are not considered program income are proceeds from fundraising activities carried out by Subrecipients receiving CDBG assistance; funds collected through special assessments used to recover the non-CDBG portion of a public improvement ; and proceeds from the disposition of real property acquired or improved with CDBG funds when such disposition occurs after the applicable time period specified in § 570.503(b)(8) for Subrecipient-controlled property or § 570.505 for Recipient-controlled property. EXHIBIT C SCOPE OF WORK 1. Provide availability of 40 emergency shelter beds to homeless persons and approximately 12,000 units of shelter and 400 total hours of counseling services at The St. Vincent de Paul Homeless Family Shelter. 2. Maintain the Facility in compliance with all relevant State and local codes and ordinances. 3. Keep the Facility open on a 24 hour, 7 day per week basis. 4. Provide three meals daily. 5. Coordinate emergency housing and essential services with other shelters and service providers and referral agencies within the City, as need dictates. 6. Supplement the City ESGP Grant with matching funds, in an amount not less than$21,600, to be used for homeless assistance. a. Matching funds must be expended for homeless assistance during the effective period of this Agreement. b. The expenditure and use of matching funds is to be documented pursuant to Section 3, Paragraph 3.4 of this Agreement. 7. Allowable activities which are reimbursable under the provisions of this grant agreement are based upon those activities proposed in The St. Vincent de Paul Homeless Family Shelter FY 2001 Emergency Shelter Grant Program application that was submitted to the City of Omaha. Copies of the application are on file in the City of Omaha Planning Depaitnient. 8. Provide monthly and annual documentation of the program activities, client census, and other client information, as requested by, and deemed necessary by the City of Omaha, for the. purpose of statistical evaluation, monitoring and coordination of client services. A copy of the required reporting forms follow this exhibit. 9. Participate in the City of Omaha and Omaha Area Continuum of Care for the Homeless (OACCH) activities, including: - The 'Colleague Evaluation and Feedback'process; - Provide the City of Omaha with updated information to maintain the'Continuum of Care' Directory; - Participate in the Continuum of Care OASIS system, or other client information base system designated to collect information for the City of Omaha and OACCH; - Provide information for the shelter and service provider census counts administered by. OACCH; and - Allow review of your facility and/or program(s) by the OACCH Continuum of Care Quality Control Review Panels. P:\PLN1\5721pjm.doc I EXHIBIT D ALLOWABLE EXPENDITURES St. Vincent DePaul Shelter Shelter Operating Expenses* $21,600 *Shelter Operating Expenses includes, but is not limited to, shelter maintenance and repairs, pest control, equipment and furnishings, supplies, utilities, trash disposal, security, and insurance. P:\PLN1\5721pjm.doc iel i ' 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 GI 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. Subpart C.-.-Auditees .300 Auditee responsibilities. 305 Auditor selection. f p://www.whitehouse.gov/omb/circulars/a133/a133.htm1 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- Feder...a1AgenciesandPass-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 6/214 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 Cr) • 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/a133.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 are11111 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/a133/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/al33.html 6/21/00 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 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- http://www.whitehouse.gov/omb/circulars/a1 33/a133.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)1he 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 • 6MB 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 progam- 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 'LOMB 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://vvww.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 0 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). http://www.whitehouse.gov/omb/circulars/a133/a133.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, IN 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/a133.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). 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 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); 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.htm1 6/21/00 • . ' IDMB 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 significantlyy 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 Federal agencies or pass-through entities could indicate risk. For example, recent monitoring or other 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: (1)Internal control deficiencies which were identified as material weaknesses; http://www.whitehouse.gov/omb/circulars/a133/a133.html 6/21/00 115MB 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) FGL` (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 I OMB Home Page I Budget Information I Legislative Information I Management Reform/GPRA Grants Management 1 Financial Management I Procurement Policy I Information &Regulatory Policy I Special Topics Read our Privacy Policy • 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 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. 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- incorrie 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 bt 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. DAVIS BACON EXEMPTION CHECKLIST Project Name: The St. Vincent dePaul Homeless Family Shelter Project Address: Project No. It is determined that the above project is exempt from Davis-Bacon Prevailing Wage Rate provisions because: Residential rehabilitation or new construction project is funded in whole or in part with CDBG funds and such residential property contains less than 8 units. Residential rehabilitation or new construction contract, including construction and non-construction costs, is funded with HOME funds and such residential property contains less than 12 assisted units. Proceeds of award of federal funds are solely for the acquisition of real property (land, pre-existing buildings and improvements). • The entire project consists of demolition and no construction is eminent on site. • Funding solely for demolition to be completed by City or its contractor before transfer of land to developer. Funding for on-site improvements only. On-site improvements are completed on land owned by the City and improvements are completed before transfer of land to developer. • Funding for off-site improvements that are separately owned. Off-site and on-site construction are provided for in separate construction contracts. Project funding is for infrastructure improvements owned and operated by utility company. The prime construction contract financed in whole or part with CDBG or HOME funds is incidental and the amount is less than$2,000. • Funding for professional services only(legal/acct./architectural/engineering). These services are funded under a separate contract from any construction contract. Funding source is Emergency Shelter Grant (ESG) or Supportive Housing Grant (SHP) which are exempt from Davis/Bacon. The project will be done through a force account. There is no federal money in the construction contract. Other- Explain: (j_iLvki_e Date: .S `7_3 h( Signature of Responsible Administrator A description of the scope of the project is attached. EXHIBIT "H" 24 CFR 85.43 ENFORCEMENT (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). 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 ')MB Circular Ar122 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 D, Attachment A). 1 of 63 6/21/00 2:34 PM )MB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/aI22.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 of 63 6/21/00 2:34 PM r OMB Cir4u1 r A-I22 http://www.whitehouse.gov/omb/circulars/a122/a122.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 l.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 3 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/al27/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 OMB Circular A-122 http://www.wmierwuse.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 1O.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 L 5 of 63 6/21/00 2:34 PM • OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a1i22.htm1 " 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 membership in organizations that lobby should be unallowable. Response: Paragraph 25 of the Circular disallows lobbying costs. 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 31.205.38(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 _ _ J OMi3 Circula.r A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htrnl 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) 7 of 63 . 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a1227af22.htihl.r 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$25,000 incurred on the award should be included in the modified total direct cost base. Administrative Cap of 26 percent Comment: Most commenters strongly opposed the 26 percent administrative cap stating that such limitation on cost reimbursement is arbitrary, capricious, and unnecessary. Some argued that a cap would be financially disastrous to non-profit organizations because they receive most of their funding from Federal sources (unlike universities). A detailed analysis is urged to determine the average administrative 8 of 63 6/21/00 2:34 PM OM$Ciroultar 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. 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 OM$Circaar A-122 http://www.wnnenuuse.gov/omb/circulars/a122/a122.htntl 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/a122.htm1 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 11. 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%122.ht411 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 (iii) 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 OMicl Circulnjr A-122 http://www.w,iucuuuse.gov/omb/circulars/a122/a122.htm1 (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 Governm-. or a State, local or foreign government, are not allowable if the-proceeding: (1)relates to a violation of, ' 15 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a12271a1`22.htnil 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 CirculaF 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 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/aj 22.htm1 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 .0MB Cirpuiar A-122 http://www.wnucuouse.gov/omo/circulars/a122/a122.html 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. C. Attachment C 19 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/at22.htm1 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 to 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 Circula'i A-122 http://www.wmtenuuse.gov/omb/circulars/a122/a122.htrul 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 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 i OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htiil 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 D. 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 Circularr A-122 http://www.wniwuvuse.gov/ornb/circulars/a122/a122.html 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: 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. 23 of 63 6/21/00 2:34 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 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 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 vrvyrs l ircuyar A-I Lt http://www.wmtenouse.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. 3. The cost of certain activities are not allowable as charges to Federal awards (see, for example, 25 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 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 of group benefits on behalf of members or clients, including life and hospital 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 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 U1Vy3 circular A-122 http://www.wmweuouse.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 required, appropriate modifications shall be made in order to develop the special rate(s). 27 of 63. 6/21/00 2:27 PM M VE:50'i 11,n 010 OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/al 22/al 22.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. a. Some 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 � - a 01113LircultarA-12,z -- . tlttp://www.wii uduse.gov/omoicIrculars/al22/a122.htrl 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 which is used for funding, interim reimbursement, and reporting indirect costs on awards pending the establishment of a final rate for the period. 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. h. If a dispute arises in a negotiation of an indirect cost rate between the cognizant agency and the non-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 QM13 Circular•A-122 http://www.w «m„uuse.gov/ombicircuiars/a122/a122.hmil 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 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.htm1 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; (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 34 of 63 6/21/00 2:27 PM OMF3 Circular A-122 http://www.wnitenouse.gov/omb/circulars/a122/al22.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 Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htinl 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. (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 OM;S Uircu14v A-122 http://www.wu,w,,uuse.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 r.. 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 Fig vnn 1.17 PM twin rt-ILL - nnpaiwww.. .....,..fuse.goviomorcircu Jars/ai22/a122.htn1 (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. (4)Penalty does not include restitution, reimbursement, or compensatory damages. 39 of 63 6/21/00 2:27 PM r, OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 • (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 Fn 1 inn .77 PM L)rv;b l,,rcu.ar it-ILL http://www.wintonouse.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 may be 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 be 0 41 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 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. (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 viv,p urcuwx w-ILL http://www..,.....,..,use.gov/omb/cIrculars/a 122/a 122.hun1 • (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 maybe 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-122 http://www.whitehouse.gov/omb/circulars/a122/a122.htm1 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. A• (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 QMh3 Circplaa A-122 http://www.wmwnouse.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/a122.htlnl 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 any other insurance 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 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. (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.htm1 (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.htm1 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 viv tArcu`grrt-1L.L nup:awww.w...,.,...,use.goviomoicircuiarsiaituaILL.ntrril (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 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/al22.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 not 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 - f P)1/M 1.77 PM OM.t3 Cirqular A-122 http://www.wnrtenouse.gov/omb/circulars/a122/a122.html 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 _ I OMt,larcutajA-122 -- http://www.w,,,m,,.,use.gov/omb/circulars/a122/a122.htm1 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. 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. 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 OMibLircut rA-122 nnp:nwww..,,,,......,use.gowomoicircwarsiai2uaitt.ntmi 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, former home. These costs, together with those described in(4), are limited to 8 per cent of the sales price 55 of 63 6/21/00 2:27 PM OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/al22/al22.htm1 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 pits C irculAr I zz - http://www.wu..ououse.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 0 organization provides for a reserve for normal severances, such method will be acceptable if the charge t. 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 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 v1v.0�,uvuiw.-.-1LL ii«}ra,wcvw...._______..ac.gu uu v, tu,c,rculars/a122/a122.htnd • 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 performance 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 r ;t, 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 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 OM1i LlrcuitlrA-12t http://www.wnucuouse.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 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 t , 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 6/21/00 2:27 PM °Mit CircU14A-122 ntp:nwww........,..,,use.goviomb/circulars/a122/a122.htnii • __., I Information&Regulatory Policy I Special Topics Read our Privacy Policy 63 of 63 6/21/00 2:27 PM OMB Circular A-110 ., Page 1 of 41 EXHIBIT tJ" CIRCULAR A-110 (REVISED 11/19/93, As Further Amended 9/30/99) CIRCULAR NO. A-110 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. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 1 1 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. S. 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/al l0.html 6/20/00 • • • OMB Circular A-110 Page 3 of 41 .14 Special._award..conditions. .15 Metric sy_stemof 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 P.rogran. 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 Realproperty. _.33 Federally-owned and exempt property. .34 Equipment. .35 Supl..iesand.other_expendable_property. _.36 Intangible property. http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 0 OMB Circular A-110 Page 4 of 41 .37 Propertytrust relationship.. Procurement Standards .40 Purpose oLprocurement 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 adjustnlentsand continuing responsibilities. http://www.whitehouse.gov/OMB/circulars/a110/al 10.html 6/20/00 1 • • • OMB Circular A-i 10 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/al 10/al 10.html 6/20/00 OMB Circular A-110 Page 6 of 41,u 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 by the recipient. (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 . • . WMts circular A-i 1 u 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"' organizations such as,but not limited to, community action agencies, research institutes, educational 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. p ppg � ro P "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 . WMB Circular A-11 u 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 1 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 6/20/00 OMB Circular A-11u 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 0 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 y1V1i3 ulrcwar r►-i iv - - rage Li 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 10.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/al l0.html. 6/20/00 0MB Circular A-1 iu 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 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/a110.html 6/20/00 . . OMB Circular A-11 u 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/a110/a110.html 6/20/00 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://www.whitehouse.gov/OMB/circulars/a110/al 10.html 6/20/00 ` i 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/al 10/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/a110.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 • OMVIB 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 411 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/al 10/al 10.html 6/20/00 I 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). 411 http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 1 OMB Circular A-110 Page 28 of41 .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/al 10.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 IC 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 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/al 1 0.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. 411 http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 OMB Circular A-110 Page 34 of 41--Q (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-for a period of three years from the date of submission of the final expenditure report or, for awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, 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 0 - - 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 r — 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 I 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 Y2 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 Budget Information I Legislative Information ( Management Reform/GPRA I Grants Management I Financial Management I Procurement Policy http://www.whitehouse.gov/OMB/circulars/a110/a110.html 6/20/00 • A i-lACI-VENT 12 i Wednesday _ October 2, 1996 R a E • • e - . Z • dila US = r • =T' • • Part IV . a • • • no Department of Om Housing and Urban ea MS _- - Development sso • 24 CFR Part 576 Streamlining the Emergency Shelter �_MMINS _'— Grants Program; Final Rule . UN • • • • • • 5154'6 Federal Register / Vol. 6i. No. 192 i \Vednesday. October 2, 1996 / Rules and Regulations DEPARTMENT OF HOUSING AND Development. 451 Seventh Street,SW., regulations on rulemaking in 24 CFR URBAN DEVELOPMENT Washington, DC 20410. part 10. However, part 10 provides for 24 CFR Part 576 SUPPLEMENTARY INFORMATION exceptions to the general rule if the Background agency finds good cause to omit [Docket No. FR-4088-F-01] advance notice and public participation. On March 4. 1995,President Clinton - The good cause requirement is satisfied RIN 2506--AB84 when rior ublic rocedure is issued a memorandum to all Federal P P P departments and agencies regarding "impracticable, unnecessary, or contrary Office of the Assistant Secretary for regulatory reinvention. In response to to the public interest" (24 CFR 10.1). Community Planning and this memorandum, the Department of HUD finds that good cause exists to Development; Streamlining the P publish portions of this rule for effect Emergency Shelter Grants Program Housing and Urban Development g y conducted a page-by-page review of its without first soliciting public comment. AGENCY: Office of the Assistant regulations to determine which can be This rule merely removes unnecessary Secretary for Community Planning and eliminated,consolidated, or otherwise regulatory provisions and does not Development, HUD. improved. HUD has determined that the establish or affect substantive policy. ACTION: Final rule. regulations for the ESG Program can be Therefore, prior public comment is improved and streamlined by unnecessary. SUMMARY: This final rule amends HUD's eliminating unnecessary provisions. Some portions of this rule have been regulations for the Emergency Shelter Several provisions in the regulations subject to notice-and-comment Grants (ESG)Program. In an effort to repeat statutory language.It is rulemaking in the past. A proposed rule comply with the President's regulatory unnecessary to maintain statutory that was published in 58 FR 17766 reform initiatives, this rule will requirements in the Code of Federal (April 5, 1993)•included statutory streamline the regulations by Regulations(LI'N), because those provisions applicable to Indian tribe eliminatingprovisions that are allocations, and was based on the first requirements are otherwise fully Notice of FundingAvailability redundant of stry. atus tes are otherwise rule make accessible and binding. Furthermore,iftuanec mat the Departmnt used to ditribute(NOFA) the ESG regulations lations clearer and more regulations contain statutory language, Emergency shelter grant(ESG) amounts ' HUD must amend the regulations to Indian tribes. Normally, the concise. In addition, this rule will whenever Congress amends the statute.provisionsimplementing Therefore,this final ruley' reflect im lementinDepartment would not allow a final rule removes to be based on a roe osed rule for legislation that has amended the repetitious statutory language and which so much time has lapsed. program since the last general rule replaces it with a citation to the specific Because this very limited portion of the amending the ESG regulations.The statutory section for easy reference. program has beenoperating in legislation has,among other changes to Several other provisions in the accordance with the statutory the program:Extended program regulations apply to more than one entitlements to Indian tribes; requirements and expressly based upon • established new limits one expenditures program,and therefore HUD repeated the methodology included in the - xP these provisions in different parts.This proposed rule,and because this is the for specified purposes,including repetition is unnecessary,and updating first general rule that the Department administrative costs, services,and . these scattered provisions is has published on this program prevention activities; reduced the cumbersome and often creates subsequent to the proposed rule(upon amount required to be matched by confusion.Therefore,this final rule which the Department received no grantees and recipients,especially those consolidates duplicative and related comments), an exception is being made non-State recipients that are least , provisions,maintaining appropriate to the standard rulemaking policy.The 1 capable of meeting matching funds - cross-references for the reader's r requirements;and mandated convenience.For example,requirements Department emphasizes,however,that ; habitability standards and required the for environmental review have been any provisionsadefinalin h the proposed lerbased d that , implementation ofprocedures to ensure are made in this rule are i Pmoved into the section on"Other strictly upon the statutory provisions - confidentiality of records relating to federal requirements"(§576.57)and and are allowed primarily because family violence services. . have been streamlined by reference to a inclusion in this rule provides better I. EFFECTIVE DATE: November 1,1996. . new rule on these requirements that was notice to affected parties. i FOR FURTHER INFORMATION CONTACT: published on April 30, 1996 (61 FR Similarly, this rule also makes final a Mark Johnston,Director,Program 19120).This April 30 rule also permits very limited interim rule on the Coordination and Analysis Division, streamlining of references to flood reallocation of unused ESG amounts Office of Community Planning and hazards and coastal barriers in §576.57. that was published on November 19, , Development,Room 7262,telephone Similarly,provisions that are not 1992 (57 FR 54505) and has remained in (202) 708-1226.For questions on regulatory requirements—for example, effect since that time.The Department program requirements for Indian tribes, provisions containing nonbinding - received three comments on the interim. contact:Bruce Knott,Director,Housing guidance or explanations—have been rule, one of which praised the rule and , and Community Development Division, removed.Although this information can two which suggested changes. Based on Office of Native American Programs, be helpful to program participants,HUD its experience in operating under the Room B-133,telephone(202) 755-0068. will more appropriately provide this provision contained in the interim rule, (These telephone numbers are not toll- information through handbook guidance the Department does not believe that the , free.) For hearing-and speech-impaired or other materials,rather than maintain administrative mechanism chosen to persons, these numbers may be accessed it in the CFR distribute the unused funds is unfair, as via TTY(text telephone)by calling the Justification for Final Rulemaking suggested by one of the commeni rs. Federal Information Relay Service at 1- The regulations already ensu- 800-877-6339. HUD generally publishes a rule for preference for using grant amo,.Jits in . The address for both of these persons public comment before issuing a rule for the jurisdiction to which;he ire is:Department of Housing and Urban effect,in accordance with its own allocated.A change su oc `.i "' Federal Re< ster / Vol. 61, No. 192 / Wednesday, October 2, 1996 / Rules and Regulations 51547, ' another commenter,regarding advance otherwise applicable under this " notification by the Department before an progra becoming homeless.This policy is m action to recover unspent grant Section 832(e) of NAHA reflected in language added to §576.1, amounts, does not require a regulation recipient to certify that it will develop "Aphies h Department od purpose". for implementation. Therefore,in and implement procedures to ensure the While the is not issuing this final streamlining rule,the confidentiality of recordsg expanding its definition of"homeless", Department is not changing the anyindividual provided family violence ins restating in this preamble its provision on reallocation of unused prevention or treatment services with defertionding of the scope doesf that grant amounts. ESG Pro definition.The Department not Program assistance.In addition,the believe that the limited resources of the The ESG Pi�i am address or location of any ESG-assisted ESG program The more general regulations housing used as a family violence Congress were intended by shelter may not be madepublic without who ress to be used a serve persons • applicable to the ESG Program(24 CFR who are poorly housed;the primary part 576) were amended most recently the Cotten authorization of persons part at final rule published on November responsible for the operation of the _ purpose of the program is. to help shelter. persons who lack shelter.Therefore,in 7, 1989 (54 FR 46799).Today's Section 832 this program the Department is streamlining rule into orates (f expressly extends concerned with persons who are,or may eligibility for assistance under the ESG provisions in two subsequent statutes Program to Indian tribes.This extension personsorn become,homeless,rather than that contain numerous amendments to is reflected in numerous sections of this subtitle of title of the Stewart B. requirements or who are living fn overcrowded McKinney Homeless Assistance Act(42 beru ape. dcaio alIndian interested d orroteredsubstandard housing.Department, t,such U.S.C.McKinney Homeless Assistance LanceMcKinneyadministered 8 the housingassistan such Act), the 371— 37 legislation(the for he in competing for ESG set-aside funds asa the payments programs,ro 8 assistance ESG program: will be included in periodic NOFAs hoymegts public od Indian (1)section 832 (104 Stat. published in the Federal Register, housing, son living the HOME 4359) of the National Affordable provided in§576.31 of this final rule. Program,target Housing Act(Pub. L. 101-625,approved persons living in overcrowded or NovemberusingAct (NAHA); 2 Section 832(g)mandates the Secretary substandard Departmentt w ( ) ( ) to prescribe standards for emergency The h would correct several section 1402 (106 Stat. 4012) of theomissions from the current regulations Housingand CommunityDevelopment shelters that ensure appropriate privacy, by adding P safety,and health-related living (h)and(i)to Act of 1992 (Pub. L 102-550,approved conditions. Section 576.55 of this rule October 28, 1992) (1992 Act). §576.57(as redesignated).Paragraph(h) • continues to require that buildings used refers to statutory lobbying and Changes in NAHA for emergency shelters comply with ��iOS requirements.Paragraph(i) local govern safety and sanitation cues that the Davis-Bacon Act(40 recipients to use up to 5% of an annual standards. U.S.C.276a-276a-5),which establishes Section 832(b)of NAHA permits uirements,does ESG Program grant for administrative Changes in Housing and Community pp1 l tothis Program.um wage ram.Although the purposes. Section 832(c) increased from Development Act of1992 2090 to 30% the percentage of a grant Davis-Bacon Act was never incorporated that may be used to provide essential Section 1402(b) of the 1992 Act into the McKinney Act and therefore is services. Section 832(d)withdraws requires a certification regarding the• not applicable to the ESG program,a homelessness prevention activities from involvement of homeless individuals specific statement to this effect was not as "essential services", and families in providing work or included in the program regulations. categorization imposes a separate limit of 30%ices of services pertaining to facilities or Similar references may be found in the aggregate amount of assistance to a activities assisted under the ESG other McKinney Act programs State(including each territory), local program. Section 1402(c)requires each administered by HUD. • lovernnient, or Indian tribe that maybe and of localpro govt recrnment,Indian tribe, Findings and Certifications and nonprofit recipient that receives ised for efforts to prevent homelessness. ESG funds to provide for the Paperwork Reduction Act Statement. Section 832(e) reduced by$100,000 that States ared 0 participation of homeless individuals on The information collection heevide as a match to assistance its board of directors or other requirements contained in§§576.21, eceived under the ESG ro p°hcym�ng entity. Section 1402(d) 576.31,576.57,576.43,576.59,and program. The provides that grantees and recipients 576.61 in this rule have been approved 100,000 reduction is required to be p' 100,00 ed by eachState e a manneremay terminate assistance provided to an by the Office of Management and tat those State in participating individual or family who violates Budget(OMB) in accordance with the Kcal will n benefit t Indian tribes, program requirements only in Paperwork Reduction Act of 1995 (44 ;encies,and nonprofit accordance with a formal process. U.S.C.3501-3520), and assigned OMB tat are least to eft r organizationsto the Section 1402(e) expressly authorizes as control numbers 2506-0117 and 2506— tat are least able to co. The Deportment an eligible activity the use of not more 0089.An agency may not conduct or than 10 percent of any ESG grant for sponsor,and a person is not required to revising §576.51 (as redesignated) to costs of staff. respond to,a collection of information fleet the determination under which e Department has been operating that Policy Emphasis unless the collection displays a valid erritory is not required to provide The Departmentseecontrol number. itching funds.This revision, which is that emere shelters are to intended tomphasize RegulatoryFlexibilityAct thorized as a matter of the be part of a process for ending In accordance with the Regulatory partment's discretion by 48 U.S.C. homelessness. Thus,emergency shelter Flexibility Act(5 U.S.C. 605(b)),the 59a(d), ensures that the funds grant funds are also appropriately pealed to the territories can be Secretary has reviewed this rule before )vided whether or not they are able to homelessnesson for famorts to ilies and void publication and by at have a significantg c et the matching requirements individuals at imminent risk of thato this rulem will not have ata economic impact on a substantial I .., 51543 Federal Register / Vol. 61, No. 192 / Wednesday, October 2, 1996 / Rules and Regulations number mbe oeely in f the small na ente tio s. Thetei r le is policies or programs would result from move toward independent living as well lapromulgation of this rule. as to prevent homelessness. . amendments to existing regulations for the purpose of recognising specific Unfunded Mandates Reform Act 3. Section 576.3 is amended as statutory requirements under which the The Secretary has reviewed this rule follows. program already is operating.The beforepublication and byapproving a. By revising of"Consolidated lidafirst sentence inthe PP g itdefinition of"Consolidated plan."; remainder of the rule merely certifies, in accordance with the b.By revising the definitions of streamlines regulations by removing Unfunded Mandates Reform Act of 1995 "Conversion", "Homeless", "Major unnecessary provisions.The rule will (2 U.S.C. 1532), that this rule does not rehabilitation", "Metropolitan city", have no adverse or disproportionate impose a Federal mandate that will economic impact on small businesses. result in the expenditure by State,local, "Private Reabi nonprofitn", Ro novatton", and tribalgovernments,in the aggregate, "Rehabilitation", "Renovation",and Environmental Review g1Peg "Urban county"; or by the private sector, of$100 million c. By removing the definition for This rulemaking does not have an or more in any one year.This rule is "Eme en shelter environmental impact. This rulemaking limited to simplifying and streamlininga un t amounts or simply amends existing regulations by the Emergency Shelter Program grant amounts"; streamlining and updating provisions regulations. d. By redesigns de paragraphs(a) and does not alter the environmentalthrough(h) of the definition of The Catalogof Federal Domestic "Essential services"as paragraphs (1) effect of the regulations being amended. Assistance program number is 14.231. A Finding of No Significant Impact with through (8),respectively; and respect to the environment was made in List' of Subjects in 24 CFR part 576 e. By redesig a defi paragraphs(a) accordance with HUD regulations in 24 Community facilities,Emergency through(f)of the definition of C.rK part 50 that implement section sheltergrants,Grant programs—housing (6),respectively;on" paragraphs p grams—housing (1)through and 102(2)(C)of the National Environmental and community development,Grant Policy Act of 1969 (42 U.S.C.4332)at programs—social programs,Homeless, f.By adding definitions in the time of development of the ESG Reporting and recordkeeping alphabetical order e "Administrative costs program regulations. That Finding requirements. "Indian tribe", and "Responsible remains applicable to this rule,and is entity";to read as follows: available for public inspection between For the reasons stated in the preamble,part 576 of title 24 of the §578.3 Definitions. 7:30 a.m. and 5:30 p.m. weekdays in the Code of Federal Regulations is amended ' * Office of the Rules Docket Clerk at the as follows: Administrative costs means as the above address. term is defined in 583.135(b)of this • Executive Order 12612,Federalism PART 576—EMERGENCY SHELTER part,except that the exclusion relates to GRANTS PROGRAM: STEWART B. the costs of carrying out eligible The General Counsel,as the McKINNEY HOMELESS ASSISTANCE activities under§576.21(a). Designated Official under section 6(a)of ACT Consolidated plan means the plan Executive Order 12612, Federalism,has reared in accordance with part 91 of determined that the policies contained 1.The authority citation for part 576 prepared P in this rule will not have federalism continues to read as follows: .. this title. ' • implications,rule s,because the Conversion means a change in the use P regulatory Authority:42 U.S.C.3535(d)and 11376. of a building to an emergency shelter for changes either.(1) Would not have the homeless under this part,where the substantial direct effects on States, . . Subpart A--General cost of conversion and any including units of local government and Se ction Secon 576.1 is revised to read as rehabilitation costs exceed 75 percent of other political subdivisions established follows: the value of the building after by the States;on the relationship conversion. between the Federal Government and §578.1 Applicability and purpose. . • the States; or on the distribution of This part implements the Emergency Formula city or countymeans a power and responsibilities among the Shelter Grants program contained in metropolitan city or urban county that various levels of government;or(2) subtitle B of title IV of the Stewart B. is eligible to receive an allocation of would merely implement statutory McKinney Homeless Assistance Act(42 grant amounts under§576.5. changes to the Emergency Shelter U.S.C. 11371-11378).The program Grants Program.A more comprehensive authorizes the Secretary to make grants review under Executive Order 12612 of to States, units of general local Homeless means as the term is any of these changes is not required government,territories, and Indian defined in 42 U.S.C. 11302. cause the implementation of the tribes (and to private nonprofit ' •e statutes leaves little discretion with the organizations providing assistance to Indian tribe means as the term is Department to lessen these impacts. homeless individuals in the case of defined in 42 U.S.C. 5302(a). grants made with reallocated amounts) Major rehabilitation means Executive Order 12606, The Family for the rehabilitation or conversion of rehabilitation that involves costs in The General Counsel, as the . buildings for use as emergency shelter excess of 75 percent of the value of the Designated Official under Executive for the homeless,for the payment of building before rehabilitation. Drder 12606, The Family,has certain operating expenses and essential Metropolitan citymeans a city.that ietermined that this rule does not have services in connection with emergency was classified as a metropolitan city potential for significant impact on shelters for the homeless,and for under 42 U.S.C.5302(a)for the fiscal imily formation,maintenance,and homeless prevention activities. The year immediately preceding the fiscal eneral well-being, and, thus,is not program is designed to be the first step year for which emergency shelter,,rant ubject to review under the Order.No in a continuum of assistance to enable amounts are made available. - ( L , ignificant change in existing HUD homeless individnalc and families to * • a I Federal Rester / Vol. 61, No. 192 / Wednesday, October 2. 1996 / Rules and Regulations�l 52549 Private nonprofit organization means (1) Renovation,major rehabilitation, as the term is defined in 42 U.S.C. or conversion of buildings for use as o��onsi�Uons—prmartiy religious • 11371. emergency shelters for the homeless; Rehabilitation means the labor, (a)Provision of assistance. (1) m eria tools, and other costs (2) Provision of essential services to Assistance may be provided under this the homeless, subject to the limitations part to a grantee or recipient that is a improving buildings, other than minor in paragraph (b) of this section; primarily religious organization if the or routine repairs. The term includes where ne usep ofit a builder is changed (3) Payment for shelter maintenance, primarily religious organization agrees g g operation,rent, repairs,security,fuel, to provide all eligible activities under to an emergency shelter and the cost of equipment,insurance,utilities, food, this program this change and any rehabilitation costs p gram in a manner that is free does not exceed 75 percent the value and furnishings'Not more than 10 - from religious influences and in of the building before the change in use. percent of the grant amount maybe accordance with the following • Renovation means rehabilitaon used for costs of staff: principles: Renov of 75 percent it less that (4) Developing and implementing (i)It will not discriminate against any involvesthe value costs the building before homeless prevention activities,subject employee or applicant for employment rehabilitation. to the limitations in 42 U.S.C. on the basis of religion and will not 11374(a)(4)and paragraph (c) of this limit employment or give preference in Responsible entity means as the term is in §58.2 of this as section. Grant funds may be used under employment to persons on the basis of is applieddefined inthough .2 of )is title,of this title this paragraph to assist families that religion: § have received eviction notices or notices and §576.57(e). (ii)It will not discriminate against any of termination of utility services only if person applying for shelter or any of the Urban county means a countythat the conditions stated in 42 U.S.C. eligible activities under this part on the . was classified as an urban county under 11374(a)(4)are met;and basis of religion and will not limit such 42 U.S.C. 5302(a) for the fiscal year (5)Administrative costs,in housing or other eligible activities or immediately preceding the fiscl year accordance with 42 U.S.C. 11378. give preference to persons on the basis for which emergency shelter grant (b) Limitations on provision of of religion:and amounts are made available. essential services. (1)Grant amounts (iii)It will provide no religious provided by HUD to units of general instruction vr counseling,wars ip (not no local government,territories,or Indian religious services or worship (not 4.A new §576.5 is added in subpart- tribes, and grant amounts provided by a includingvoluntary A. to read as follows: eti nondenominational State to State recipients,may be used to Prayers pro meetings),engage in no o §576.5 Allocation of grant amounts. provide an essential service under religious proselytizing,and exert no (a) Territories. HUD will set aside for paragraph(a)(2) of this section only if other religious influence in the to the territories an amount the service is a new service, or is a Provision of shelter and other eligible equal allocation.2 percent itthe total amount quantifiable increase in the level of a activities HUD under this part. equal to 0.2 percent of under thisal part in service above that which the unit of (2)HUD may providerecipient that reallocated isa any fiscal prop HUD will allocate this general local government(or,in the case amounts tor a isorganization a an set-aside amount to territory based of a nonprofit organization,the unit of assistance y religwillious not if the upon its proportionate munteach sharete of the total general local government in which the orgassistance n onot ui used by the population all territories. proposed activities are to be located), the case of homeless to acquire a structure (in (b) States,ofallt metropolitan cities, urban territory, or Indian tribe,as applicable, act of er§57 prevention co(b) States, and Indian HUD will provided with local funds during the 12 activities under§5 structure owned byr to h counties, the amounts that remain after calendar months immediately before the rehabilitate a except as owned the the set-aside to tents that under grantee or State recipient received. organization, of this se described in paragraph (a)of this section,to States, initial grant amounts. • paragraph(b)of this section. metropolitan urban and (2) Limits on the use of assistance for • (b)Rehabilitation or conversion of • metropolitan India tribes,cities,provided urban counties,in 42 U.S.C. essential services established in 42 toe rehabilitate o convert Grants may be used 11373.HUD will subsequently U.S.C. 11374(a)(2)are applicable even to rehabilitate or to an distribute the amount set aside for when the unit of local government, emergency shelter a structure that is Indian tribes under this paragraph as territory,or Indian tribe provides some owned by a primarily religious provided in §576.31. or all of its grant funds to a nonprofit organization,only if: (c)Notification of allocation amount. recipient.This limitation may be )The runuve (ored il thereof) waived in accordance with 42 U.S.C. converted is too be renovated,rehabilitated,hase HUD will notify in writing each State, converted with HUD assistance has been metropolitan city,urban county,and 11374. - j territory that is eligible to receive an leased to an existing or newly (c) Limitation on homeless prevention established wholly secular organization; allocation under this section of the activities. Limits on the use of assistance (2)The HUD assistance is provided to amount of its allocation. for homeless prevention activities the secular organization (and not the established in 42 U.S.C. 11374(a)(4)are religious organization)to make the Subpart B—Eligible Activities applicable even when the unit of local improvements; government, territory,or Indian tribe (33)The leased structure will be used 5.Section 576.21 is revised to read as provides some or all of its grant funds exclusively for secular purposes follows: to a nonprofit recipient.P available to all persons;§576.21 Eligible activities. §§576.22 and 576.23 [Redesignated as (4)The lease payments paid to the (a)Eligible activities. Emergency primarily religious organization do not §§576.23 and 576.25) shelter grant amounts may be used for 6. Sections 576.22 and 576.23 are exceed the fair market rent for the one or more of the following activities redesignated as §§576.23 and 576.25, structure rehabilitation, before the renovation, relating to emergency shelter for the respectively,and are revised to read as re 5 port orn ofthercost homeless: follows: (5)The portion the cost of any improvements that benefit any unleased 5,15SO .•Federal Register / Vol. 61, No. 192 / Wednesday, October 2, 1996 / Rules and Regulations portion of the structure will be allocated meets the definition of private nonprofit This consolidated plan serves as the to. and paid for by. the religious organization contained in §576.3.The jurisdiction's application for funding organization:and obligation of funds will be conditioned (6) The primarily religious upon compliance with these under this part. organization agrees that if the recipient requirements. §576.52 [Removed] does not retain the use of the leased • premises for wholly secular purposes §57625 Who may carry out eligible 10. Section 576.52, "Environmental for the useful life of the improvements, activities review",is removed. the primarily religious organization will (a) Generally.As provided in 42 pay to the original grantee(lion which U.S.C. 11373 eligible activities maybe §5576'53 [Redesignated as§576.33 and the amounts used to renovate, carried out by all State recipients nd amended] rehabilitate, or convert the building grantees, except States. ' 11. Section 576.53,"Review and. • were derived)an amount equal to the (b) States. All of a State's formula approval of applications",is residual value of the improvements.A allocation,except for administrative redesignated as §576.33 and is amended private nonprofit organization must costs, must be made available to the by removing the reference"576.89"and remit to HUD this amount if the following entities: adding in its place the reference organization is the lessee as well as the (1) Units of general local government "576.69". grantee. The original grantee is expected in the State,which may include formula to use this amount to alleviate cities and counties even if such cities §576•55 [Redesignated as§576.35 and homelessness in its jurisdiction,but and counties receive grant amounts amended] there is no requirement that funds directly from HUD; or 12. Section 576.55 is redesignated as received after the close of the grant (2)Private nonprofit organizations,in §576.35 and is amended by revising period be used in accordance with the accordance with 42 U.S.C. 11373(c). (a)(1), (b),and (c), to read as follows: requirements of this part. (c)Nonprofit recipients. Units of (c) Assistance to a wholly secular general local government,territories, §576.35 Deadlines for using grant private nonprofit organization. (1)A and Indian tribes may distribute all or amounts. primarily religious organization may part of their grant amounts to nonprofit • establish a wholly secular private recipients to be used for emergency (a)(1) States.Each State must make nonprofit organization to serve as a . shelter grant activities. available to its State recipients all recipient. The secular organization may emergency shelter grant amounts that it • be eligible to receive all forms of Subparts C and D—[Removed] was allocated under§576.5 within 65 are removed. days of the date of the grant award by assistance available under this part, 7.Subparts C and D subject to the following: HUD. Funds set aside by a State for (i) The secular organization must Subparts E through H[Redesignated homeless prevention activities under agree to provide shelter and services as Subparts C through F] §576.21(a)(4)must be made available to eligible under this part in a manner that State recipients within 180 days of the is free from religious influences and in i 8.Subparts E through H are g redesignated as subpartsgrant award by HUD. C through F accordance with the principles set forth in paragraph(a)(1) of this section. Subpart C—Award and Use of Grant (b)Formula cities and counties, (ii)The secular organization may Amounts tribes— enter into a contract with the religious territories and Indian organization to provide essential - §576.51 [Redesignated as§576.31] Expenditure of grant funds.Each services or undertake homeless 9.Section 576.51 is redesignated as formula city or county,territory,and prevention activities.The religious Indian tribe must spend all of the grant organization must agree in the contract §576.31!lows: and is revised to read as amounts it was allocated or awarded to carryout its contractual follows: under§§576.5 or 576.31 within 24. • responsibilities in a manner free from §576.31 Application requirements, months of the date of the grant award by • religious influences and in accordance (a)Indian tribes.After funds are set HUD. with the principles set forth in aside for allocation to Indian tribes (c)Failure to meet deadlines.(1)Any paragraph (a)(1) of this section. under§576.5,HUD will publish a emergency shelter rg cy grant amounts that (iii) The rehabilitation,conversion, or Notice of Funding Availability(NOFA) are not made available or obligated renovation of emergency shelters are -in the Federal Register.The NOFA will within the applicable time periods subject to the requirements of paragraph specify the requirements and specified in paragraphs(a)(1) or(b)of (b) of this section. - procedures applicable to the allocation this section will be reallocated under (2) HUD will not require the religious and competitive awarding of these set- §576.45.organization to establish the secular aside funds to eligible Indian tribe • organization before the selection of its applicants. (2)The State must recapture any grant application. In such a case,the religious (b) States, territories,and formula amounts that a State recipient does not organization may apply on behalf of the cities and counties.To receive obligate and spend within the time secular organization. The application emergency shelter grant amounts,a periods specified in paragraph (a)(2)of will be reviewed on the basis of the State,territory,or formula city or county this section. The State, at its option, religious organization's financial must: must make these amounts and other -esponsibility and capacity,and its (1)Submit documentation required amounts returned to the State (except =ommitment to provide appropriate under this part,part 5 of this title,or amounts referred to in §576.22(b)(6) -esources to the secular organization ' any other applicable provisions of available as soon as practicable to other after formation. After formation,a Federal law;and units of general local government for ;ecular organization that is not in (2)Submit and obtain HUD approval use within the time period specified in :xistence at the time of the application of a consolidated plan that includes paragraph(a)(2) of this section or to .vill be required to demonstrate that it . activities to be funded under this part. HUD for reallocation under§576.45. Federal Register / Vol. 61, No. 192 / Wednesd , October.2,._1996 / • Subpart D--Reallocations - ^ • _Mule$ ar1�.l�eg�at�� 5� • • e. By revising paragraph (d)(2): amended) (Redesignated as§576.41 and (e.By t removing o g the parenthetical L useof amounts reallocated under this graph(e))"in the 13. Section 576.61 is redesignatedintroductory text of (h)Amounts not reallocated.Any §576.41 and is amended by: as g. By revisin P� ph (e)'and grant amounts that are not reallocated a. Revising the section heading; (h). to read as follows: (f). �)'and under this section, or that are b. Revising paragraphs (b), (d)(1), §576.43 reallocated,but are unused,will be (d)(2), (e). (f), and (g); Roved Conson of grant amounts; reallocated under§576.45(d).An and lack of approved Consolidated Plan— States, amounts that are reallocated,but are c. Revising the heading of paragraph territories,and Indian tribes. (c) to read as follows: • returned, will be reallocated under (a)Applicability, This section§576.41 Reallocation;lack of approved • when: applies §576.45(c). • consolidated plan--formula cities and (s)toA State, approvalo or Indian tribe• §576.67 [Redesignated as 578 counties. fails obtain of its • amended) § 45 and • consolidated plan within 90 days of the 15. Section 576.67 is redesignated as (b) Grantee. HUD will make available date upon which amounts under this §576.45,and is amended as follows: to the State in which the city or countyp art first becme available for allocation a. paragraph(c)(1),by italicizing is located the amounts that a city or in any fiscal year;or _ the first sentence and by removing the county referred to in (2)Grant amounts cannot be reference"§576.43"and adding paragraph(a)of reallocated to a State under§576.41. place the reference"§576.5"; this section have received. in its (s)section would of availability. (b) Grantees. (1)HUD will reallocate b.By redesignating (cjd) • • ty the amounts that a State or Indian tribe and (3)as paragraphs g paragraph-d(4), (2) (1)Execute a grant a referred to in paragraph (a)(1) P �Phs (c) (3)and(4),agreement with section would have rceived of this respectively; By addingd a new HUD for the fiscal year for which the (i)In accordance with 42 U.S.C. d.By revising ara a amounts to be reallocated were initially 11373(d)(3);and paragraph(c)(2); made available. (c)(4),as redesignated; p�(c)(3)and (2) necessary,submit an (ii)If grant amounts remain, then to e.•In amendment Ifnec so its applicationanfor that territories ss that demonstrate paragraph (.52" by removing the fiscal year for the reallocation amounts homeless individuals. reference to"§576.52"and adding in its it to receive. The amendment (2)HUD extraordinary need or large numbers of place a reference to by removing "; must wishesbe submitted receive. . the responsible amounts H that a territory f In paragraph(d),by anda ng i will make available the reference tor "subpart D"and adding in HUD field office no later than 30 days paragraph(a)(1) of this section would B under its place a reference to "§576.5"; after notification is given to the State have received to other territories thatparagraph under paragraph (c) of this section. demonstrate ag• y revising the heading of extraordinary (s and(e)Amendment review and approval, numbers of homeless individuals.or as follows: (1)Section 576.33 governs the review (c) Notification o large h.By revising paragraph(f)(2)to read and approval of application availability. of amendments under this section. HUD ty' HUD will make §578.45 or unused Reallocation of grant amounts; reallocations to States and Indian tribes returned unused amounts. under this section by direct notification will endeavor to make grant awards within 30 days of the application or Federal Register notice that will.set amendment deadline,or as soon (c) ' • ' :hereafter as forththe terms and conditions under (1)States and o (2)Program cable. which amounts under this section are to counties:• * formula cities and dam activities represented by be reallocated and grant awards made. • (2)Indian tribes.Returned giant troposed amendments are subject to In the case of reallocations to territories, amounts that were allocated to an nvironmenial review under§576.57 in the responsible HUD field office will Indian tribe he same manner as original proposals. Promptly notify each territory (f)Deadlines for using reallocated will be made available to reallocation ry of any other Indian tribes. rant amounts. Section 576.35governs indicate the terms thisunder section oun tsTerritories. were allocated edit ie use of amounts reallocated nder and will conditions under which reallocation to a Lis section. amounts are to be made available and territory will be made available,first,to (g)Amounts that cannot be grant awards made. other territories and,if grant amounts allocated.Any grant amounts that (d)Eligibility remain,then to States. Herat be reallocated to a State under g tyforreallocation (4)Further reallocation:States, • is section will be reallocated as amounts under this section, the formula and Indian tribes.HUD will aunts.In order to receive reallocation formula cities and counties,territories, ovided by§576.43.Amounts that are am or county,tlocated under this section, but thatState,territory, or Indian under ores reallocate returned or unused,will be tribe)must: paragraph (e)of this section any * grant amounts that remain after 1located under§576.45. (2)Execute aapplying the preceding provisions of HUD for the fisc grantear formhich the returnedt with to(c)of this section reallocation or that are 1 '6.63 [Redesignated as§,76,43 and amounts to be reallocated were initially ended] HUD after 4. Section 576.63 is redesignated as made available• under those provisions. '6.43 and is amended: ' ' ' By revisingnd mended: (f) Grant amounts. HUD maymake a (fl Definitions—returned n s —returned or unused By revising heading; grant award for less than the mount (2gout amounts. * ■ By revising the first paragraphs(a)and of); applied for or for fewer than all of the emergency en For poses r this a section, (c); activities identified in the application considered "unused"(i.e.,Federal B ed shelter grant amounts are graph revising the introductory text of amendment. By (g)Deadlines for using reallocated deobWhen h amounts. Section 576.35 governs the (i)l When they become available for reallocation by HUD after a grantee has l 515.E 2 Federal Register / Vol. 61, No. 192 / Wednesday, October 2, 1996 / Rules and Regulations executed a grant agreement with HUD individuals), or persons in the same (2)Each State,territory,Indian tribe, for those amounts; or geographic area. unit of local government,and nonprofit (ii) The amounts remain after (b) Calculating the applicable period. recipient that receives funds under this reallocation under § 576.43 or paragraph The 3-and 10-year periods applicable part must involve homeless individuals (c) of this section. under paragraph (a) of this section begin and families in providing work or to run: services pertainingto facilities or Subpart E-Program Requirements • • , , , activities assisted under this part, in §576.71 [Redesignated as§576.51 and 576 75accordance with 42 U.S.C. 11375(c)(7). revised) § [Redesignated as§576.55] 16. Section 576.71 is redesignated as 18. Section 576.75 is redesignated as §576.79 [Redesignated as 5576.57 and amended] §576.51 and is revised to read as §576.55 and is revised to read as follows: follows: 20. Section 576.79 is redesignated-as - §576.57, and is amended as follows: §576.51 Matching funds • §576.55 Building standards. a. By revising paragraphs(e) and (f); (a) General.Each grantee,other than (a) Any building for which emergency b. By redesignating paragraph (h) as a territory, must match the funding shelter grant amounts are used for paragraph (j); and provided by HUD under this part as set conversion,major rehabilitation, c. By adding new paragraphs(h)and forth in 42 U.S.C. 11375. The first . rehabilitation, or renovation must meet (i) to read as follows: S100,000 of any assistance provided to local government safety and sanitation §576.57 Other Federal requirements. a recipient that is a State is not required standards. • , • to be matched,but the benefit of the . (b)For projects of 15 or more units, ' ' unmatched amount must be shared as when rehabilitation costs are: (e) Environmental review provided in 42 U.S.C. 11375(c)(4)... (1) 75 percent or more of the responsibilities.-(i) Generally. Matching funds must be provided after replacement cost of the building,that Responsible entities must assess the the date of the grant award to the project must meet the requirements of environmental effects of each • • grantee. Funds used to match a previous §8.23(a)of this title;or application under part 58 of this title. • ESG grant may not be used to match a (2) Less that 75 percent of the An applicant must include in its , subsequent grant award under this part. replacement cost of the building,that application an assurance that the j A grantee may comply with this• project must meet the requirements of applicant will assume all the requirement by providing the matching §8.23(b)of this title. environmental review responsibility funds itself,or through matching funds • that would otherwise be performed by or voluntary efforts provided by any §576 77 [Redesignated as§576.56] HUD as the responsible Federal official State recipient or nonprofit recipient(as 19. Section 576.77 is redesignated as under the National Environmental ap ropriate). §5/6.56,and is revised to read as • Policy Act of 1969 (NEPA)and related b) Calculating the matching amount. follows: authorities listed in part 58 of this title. The grant award is subject to In calculating the amount of matching §576.58 Homeless assistance and completion of the # environmental funds, in accordance with 42 U.S.C. participation responsibilities set out in part 58 of this i 11375(a)(3),the time contributed by (a)Assistance. (1) Grantees and title within a reasonable time period volunteers shall be determined at the recipients must assure that homeless after notification of the award. his rate of$5 per hour. For purposes of this individuals and families are given provision does not preclude the paragraph,the grantee will determine assistance in obtaining: applicant from enclosing its the value of any donated material or- . (i)Appropriate supportive services, environmental certification and Re uest building, or of any lease, using a method -including permanent housing,medical for Release of Funds with its q reasonably calculated to establish a fair health treatment,mental health a lication. market value. supervision,treatment,counselin , and pp g (2)Awards to States.In the case of §576.73 [Redesignated as§576.53 and other services essential for achieving emergency shelter grants to States that amended] independent living;and - are distributed to: 17. Section 576.73 is redesignated as (ii)Other Federal,State,local,and (i) Units of general local government, §576.53,and is amended by revising • private assistance available for such the unit of general local government paragraph (a)and the introductory text individuals• shall be the responsible entity,and the of paragraph(b),to read as follows: (2)Requirements to ensure State will assume HUD's functions with confidentiality of records pertaining to regard to the release of funds; or §578.53 Use as an emergency shatter. the provision of family violence (ii) Nonprofit organizations, the State (a)(1) Restrictions and definition. prevention or treatment services with shall be the responsible entity,and HUD Period of use restrictions applicable to assistance under this part are set forth will perform functions regarding i.lease assistance provided under this part are " in 42 U.S.C. 11375(c)(5). of funds under part 58 of this title. governed by 42 U.S.C. 11375(a). Use of (3)Grantees and recipients may,in (3) Release of funds. HUD will not grant amounts for developing and accordance with 42 U.S.C. 11375(e), release funds for an eligible activity if implementing homeless prevention • terminate assistance provided under the grantee,recipient, or any other party activities does not trigger period of use this part to an individual or family who commits emergency shelter grant funds requirements. violates program requirements. before the grantee submits, and�'.'.TC (2)For purposes of the requirements. (b) Participation. (1)Each unit of local approves,any required Regi;est under this section,the term same government,Indian tribe,and nonprofit Release of Funds. general population means either the recipient that receives funds under this (f)Audit.The financial n t.r 1.. -'• same types of homeless persons • .. part must provide for the participation systems used by a State,.z - originally served with ESG assistance of homeless individuals on its county,governmental en.. (i.e.,battered spouses,runaway . policymaldng entity in accordance with Indian tribe that is a grantf, .1.... . .. children, families,or mentally ill 42 U.S.C. 11375(d). . program must provide for . i i Federal Register / Vol. 61, No. 192 / Wednesday, r 2, 1996 / Rules and R Octobe Regulation's accordance with part 4-4 of this title.A second sentence and addin 51553 �. .. private nonprofit organization is subject (a)andg Paragraphs period document compliance with (b),to read as follows: to the audit requirements of OMBows:' the provisions of this part Circular A-133,as set forth in part 45 §'?8 81 Responsibility for grant (b) Requirements to ensure of this title. (OMB Circulars are * * *The State,territory,Indian the proviadministration pertaining available from the Executive Office ofsi n of family confidenality of viiolence to • the President,Publication Service, 725 tribe,or unit of local government is prevention or treatment services with 17th Street,NW.,Suite G-2200, responsible for ens Washington, ensuring that its assistance under this part are set forth gt DC 20503,Telephone, recipients carry out the recipients'202-395-7332.) emergency shelter grant r P 42 U.S.C. 11375(c)(5). ' • compliance with all applicable ograms in (h)Lobbying and disclosure requirements in the cs of: 5576.89 (Redesignated as§576.87 and requirements.The disclosure (a)A State makingamended] requirements and prohibitions of 42 available to State recipients;amountsr 25.es Section 576.89,"Sanctions",is U.S.C. 3537a and 3545 and 31 U.S.C. (b)A territory,Indian tribe,or unit of redesignated as §576.67,and is 1352 (the Byrd Amendment),and the general local government distributing amended as follows: grant amounts to nonprofit recipients. a.By removing a reference in implementing regulations at parts 4 and 87 of this title. §,76 83 [Redesignated Paragraph(b)to"§576.55(a)(2)"and (i) Davis-Bacon Act.The provisions of amended] as§578 83 and adding in its place a reference to the Davis-Bacon Act(40 U.S.C.276a— 23. Section 576.83,"Method of ( )( ) and 276a-5) do not apply to this program. payment", "§576.35 a 2 " P gr is redesignated as §576.63, By b. removing references in §578-� as§578.591 'and is amended by removing the last paragraphs(b)and(c)to"§576.67(d) 21.Section[Redesignated,"'Relocation and sentence. and adding in-their places references to §578.87 "§5 Dated:Septemberd)". Subpart F—Grant Administration 24. Section 576.87 is redesignated as 20,1996. . §576.65 and is revised to read as Andrew Cuomo, §576.81 [Redesignated as§576.81 and follows: Assistant Secretary forCommunity Planning amended) 22. Section 576.81 is redesignated as §576.65 Recordkeepin9 and Development. §576.61,and is amended by redesignated revisingthe (a)Each grantee must ensure that (FR Doc.96-25054 Filed 10-1-96:8:45 anal records are maintained for a 4-year 8/LUNG CODE 4210-29? • ATTACHMENT 13 l IMPORTANT. These consolidated regulations. which combine the new streamlined regulations rich still effective parts of the old regulations, were prepared by SNAPS scat; to assist HUD staff and 8SG grantees. This is an unofficial document. and will be replaced by the updated Code of Federal Regulations. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (TITLE 24) REGULATIONS RELATING TO HOUSING AND URBAN DEVELOPMENT (SUBTITLE B) OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND DEVELOPMENT (CHAPTER V) COMMUNITY FACILITIES (SUBCHAPTER C) EMERGENCY SHELTER GRANTS PROGRAM (PART 576) 24 CFR Part 576 Authority: STEWART B. MCKINNEY HOMELESS ASSISTANCE ACT, as amended; 42 U.S.C. 11371-78 . Effective Date: November 1, 1996 Subpart A--General @ 576. 1 -- Applicability and purpose. This part implements the Emergency Shelter Grants program contained in subtitle B of title IV of the Stewart B. McKinney Homeless Assistance Act (42 U.S .C. 11371-11378) . The program authorizes the Secretary to make grants to States, units of general local government, territories, and Indian tribes (and to private nonprofit organizations providing assistance to homeless individuals • in the case of grants made with reallocated amounts) for the rehabilitation or conversion of buildings for use as emergency shelter for the homeless, for the payment of certain operating expenses and essential services in connection with emergency shelters for the homeless, and for homeless prevention activities. The program is designed to be the first step in a continuum of assistance to enable homeless individuals arid families to move toward independent living as well as to prevent homelessness . 576. 3 -- Definitions . The terms Grantee and HUD are defined in 24 CFR part 5. Administrative costs means as the term is defined in 583.135 (b) of this part, except that the exclusion relates to the costs of carrying out eligible activities under O 576.21(a) . Consolidated plan means the plan prepared in accordance with part 91 of this title, which describes needs, resources, priorities and proposed activities to be undertaken with respect to HUD programs, including the HOME program. An approved consolidated plan means a consolidated plan that has been approved by HUD in accordance with part 91 of this title. Conversion means a change in the use of a building to an emergency shelter for the homeless under this part, where the : cost of conversion and any rehabilitation costs exceed 75 percent of the :value of the building after conversion. If such costs do not exceed 75 percent of the value of the building before conversion, they are to be considered rehabilitation and the three-year use requirement under @ 576.73 applies. The conversion of any building to an emergency shelter that is assisted under this part must meet local government safety and sanitation standards under @ 576.75. For projects of 15 or more units where rehabilitation costs are 75 percent or more of the replacement cost of the building, that project must meet the requirements of 24 CFR 8.23 (a) . Emergency shelter means any facility, the primary purpose of which is to provide temporary or transitional shelter for the homeless in general or for specific populations of the homeless. • 1 Essential services includes services concerned with employment, health, drug abuse, and education and may include (but are not limited to) : (a) Assistance in obtaining permanent housing. (b) Medical and psychological counseling and supervision. (c) Employment counseling. (d) Nutritional counseling. (e) Substance abuse treatment and counseling. (f) Assistance in obtaining other Federal, State, and local assistance including mental health benefits; employment counseling; medical assistance; Veteran's benefits; and income support assistance such as Supplemental Security Income benefits, Aid to Families with Dependent Children, General Assistance, and Food Stamps; (g) Other services such as child care, transportation, job placement and job training; and (h) Staff salaries necessary to provide the above services. Formula city or county means a metropolitan city or urban county that is eligible to receive an allocation of grant amounts under ® 576.5. Homeless means as the term is defined in 42 U.S.C. 11302 . Homeless prevention means activities or programs designed to prevent the incidence of homelessness, including (but not limited to) : (a) Short-term subsidies to defray rent and utility arrearages for families that have received eviction or utility termination notices; (b) Security deposits or first month's rent to permit a homeless family to move into its own apartment; (c) Mediation programs for landlord-tenant disputes; (d) Legal services programs for the representation of indigent tenants in eviction proceedings; (e) Payments to prevent foreclosure on a home; and (f) Other innovative programs and activities designed to prevent the incidence of homelessness. Indian tribe means as the term is defined in 42 U.S.C. 5302 (a) Major rehabilitation means rehabilitation that involves costs in excess of 75 percent of the value of the building before rehabilitation. Metropolitan city means a city that was classified as a metropolitan city under 42 U.S.C. 5302 (a) for the fiscal year immediately preceding the fiscal year for which emergency shelter grant amounts are made available. Private nonprofit organization means as the term is defined in 42 U.S.C. 11371. Rehabilitation means the labor, materials, tools, and other costs of improving buildings, other than minor or routine repairs. The term includes where the use of a building is changed to an emergency shelter and the cost of this change and any rehabilitation costs does not exceed 75 percent of the value of the building before the change in use. Renovation means rehabilitation that involves costs of 75 percent or les :: of the value of the building before rehabilitation. 2 Responsible entity means as the term is defined in @ 58 .2 of this title, as applied though © 58 .1 (b) (3) of this title and © 576 .57 (e) . w. State means each of the several States and the Commonwealth of Puerto Rico. Territory means each of the following: the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, Palau (Trust Territory of the Pacific) , and any other territory or possession of the United. States. State recipient means any unit of general local government or nonprofit organization to which a State makes available emergency shelter grant amounts. Unit of general local government means any city, county, town, township, parish, village, or other general purpose political subdivision of a State. Urban county means a county that was classified as an urban county under 42 U.S.C. 5302 (a) for the fiscal year immediately preceding the fiscal year for which emergency shelter grant amounts are made available. Value of the building means the monetary value assigned to a building by an independent real estate appraiser, or as otherwise reasonably established by the grantee or the State recipient. 576. 5 -- Allocation of grant amounts. (a) Territories. HUD will set aside for allocation to the territories an amount equal to 0.2 percent of the total amount of each appropriation under this part in any fiscal year. HUD will allocate this set-aside amount to each territory based upon its proportionate share of the total population of all territories . (b) States, metropolitan cities, urban counties, and Indian tribes. HUD will allocate the amounts that remain after the set-aside to territories under paragraph (a) of this section, to States, metropolitan cities, urban counties, and Indian tribes, as provided in 42 U.S.C. 11373 . HUD will subsequently distribute the amount set aside for Indian tribes under this paragraph as provided in © 576.31. (c) Notification of allocation amount. HUD will notify in writing each State, metropolitan city, urban county, and territory that is eligible to receive an allocation under this section of the amount of its allocation. Subpart B--Eligible Activities O 576.21 -- Eligible activities. (a) Eligible activities. Emergency shelter grant amounts may be used for one or more of the following activities relating to emergency shelter for the homeless : (1) Renovation, major rehabilitation, or conversion of buildings for use as emergency shelters for the homeless; (2) Provision of essential services to the homeless, subject to the limitations in paragraph (b) of this section; . (3) Payment for shelter maintenance, operation, rent, repairs, security, fuel, equipment, insurance, utilities, food, and furnishings. Not more than 10 percent of the grant amount may be used for costs of staff; (4) Developing and implementing homeless prevention activities, subject to the limitations in 42 U.S.C. 11374 (a) (4) and paragraph (c) of this section. Grant funds may be used under this paragraph to assist families that have received eviction notices or notices of termination of utility services only if the conditions stated in 42 U.S.C. 11374 (a) (4) are met; and (5) Administrative costs, in accordance with 42 U.S.C. 11378. (b) Limitations on provision of essential services. (1) Grant amounts provided by HUD to units of general local government, territories, or Indian tribes, and 3 grant amounts provided by a State to State recipients, may be used to provide an essential service under paragraph (a) (2) of this section only if the service is a new service, or is a quantifiable increase in the level of a service above that which the unit of general local government (or, in the case of a nonprofit organization, the unit of general local government in which the proposed activities are to be located) , territory, or Indian tribe, as applicable, provided with local funds during the 12 calendar months immediately before the grantee or State recipient received initial grant amounts. (2) Limits on the use of assistance for essential services established in 42 U.S .C. 11374 (a) (2) are applicable even when the unit of local government, territory, or Indian tribe provides some or all of its grant funds to a nonprofit recipient. This limitation may be waived in accordance with 42 U.S.C. 11374. (c) Limitation on homeless prevention activities. Limits on the use of assistance for homeless prevention activities established in 42 U.S.C. 11374 (a) (4) are applicable even when the unit of local government, territory, or Indian tribe provides some or all of its grant funds to a nonprofit recipient. O 576 .23 -- Limitations--Primarily religious organizations. (a) Provision of assistance. (1) Assistance may be provided under this part to a grantee or recipient that is a primarily religious organization if the primarily religious organization agrees to provide all eligible activities under this program in a manner that is free from religious influences and in accordance with the following principles: (i) 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; (ii) It will not discriminate against any person applying for shelter or any of the eligible activities under this part on the basis of religion and will not limit such housing or other eligible activities or give preference to persons on the basis of religion; and (iii) It will provide no religious instruction or counseling, conduct no religious services or worship (not including voluntary nondenominational prayer before meetings) , engage in no religious proselytizing, and exert no other religious influence in the provision of shelter and other eligible activities under this part. (2) HUD may provide reallocated amounts to a recipient that is a primarily religious organization if the assistance will not be used by the organization to acquire a structure (in -the case of homeless prevention activities under 576.21 (a) (4) ) , or to rehabilitate a structure owned by the organization, except as described in paragraph (b) of this section. • (b) Rehabilitation or conversion of emergency shelters. Grants may be used to rehabilitate or convert to an emergency shelter a structure that is owned by a primarily religious organization, only if: (1) The structure (or portion thereof) that is to be renovated, rehabilitated, or converted with HUD assistance has been leased to an existing or newly established wholly secular organization; (2) The HUD assistance is provided to the secular organization (and not the religious organization) to make the improvements; (3) The leased structure will be used exclusively for secular purposes available to all persons; (4) The lease payments paid to the primarily religious organization do not exceed the fair market rent for the structure before the renovation, rehabilitation, or conversion; (5) 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 religious organization; and (112) 4 . (6) 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 to the original grantee (from which the amounts used to renovate, rehabilitate, or convert the building were derived) an amount equal to the residual value of the improvements. A private nonprofit organization must remit to HUD this amount if the organization is the lessee as well as the grantee. The original grantee is expected to use this amount to alleviate homelessness in its jurisdiction, but there is no requirement that funds received after the close of the grant period be used in accordance with the requirements of this part. (c) Assistance to a wholly secular private nonprofit organization. (1) A primarily religious organization may establish a wholly secular private nonprofit organization to serve as a recipient. The secular organization may be eligible to receive all forms of assistance available under this part, subject to the following: • (i) The secular organization must agree to provide shelter and services eligible under this part in a manner that is free from religious influences and in accordance with the principles set forth in paragraph (a) (1) of this section. (ii) The secular organization may enter into a contract with the religious organization to provide essential services or undertake homeless prevention activities . The 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 (a) (1) of this section. (iii) The rehabilitation, conversion, or renovation of emergency shelters are subject to the requirements of paragraph (b) of this section. (2) HUD will not require the religious organization to establish the secular organization before the selection of its application. In such a case, the religious organization may apply on behalf of the secular organization. The application will be reviewed on the basis of the religious organization's financial responsibility and capacity, and its commitment to provide appropriate resources to the secular organization after formation. After formation, a secular organization that is not in existence at the time of the application will be required to demonstrate that it meets the definition of private nonprofit organization contained in @ 576.3. The obligation of funds will be conditioned upon compliance with these requirements. 576 .25 -- Who may carry out eligible activities. (a) Generally. As provided in 42 U.S.C. 11373 eligible activities may be carried out by all State recipients and grantees, except States. (b) States. All of a State's formula allocation, except for administrative costs, must be made available to the following entities: (1) Units of general local government in the State, which may include formula cities and counties even if such cities and counties receive grant amounts directly from HUD; or (2) Private nonprofit organizations, in accordance with 42 U.S.C. 11373 (c)•. (c) Nonprofit recipients. Units of general local government, territories, and Indian tribes may distribute all or part of their grant amounts to nonprofit recipients to be used for emergency shelter grant activities. Subpart C--Award and Use of Grant .Amounts • 576 . 31 --Application requirements. (a) Indian tribes. After funds are set aside for allocation to Indian tribes under © 576.5, HUD will publish a Notice of Funding Availability (NOFA) in the _ Federal Register. The NOFA will specify the requirements and procedures applicable to the allocation and competitive awarding of these set-aside funds to eligible Indian tribe applicants. • (b) States, territories, and formula cities and counties. To receive emergency 5 -s;ieltr grant amounts, a State, territory, or formula city or county must : (1) Submit documentation required under this part, part 5 of this title, or any other applicable provisions of Federal law; and (2) Submit and obtain HUD approval of a consolidated plan that includes activities to be funded under this part. This consolidated plan serves as the jurisdiction' s application for funding under this part. @ 576 .33 -- Review and approval of applications (a) Conditional grant. HUD may make a conditional grant restricting the obligation and use of emergency shelter grant amounts. Conditional grants may be made where there is substantial evidence that there has been, or there will be, a failure to meet the requirements of this part. In such a case, the reason for the conditional grant, the action necessary to remove the condition, and the deadline for taking those actions will be specified. Failure to satisfy the condition may result in imposition of a sanction under @ 576.69, or in any other action authorized under applicable Federal law. (b) Grant agreement. The grant will be made by means of a grant agreement executed by HUD and the grantee. HUD will not disburse funds before the grant agreement is fully executed. @ 576 .35 -- Deadlines for using grant amounts. • (a) (1) States. Each State must make available to its State recipients all emergency shelter grant amounts that it was allocated under @ 576.5 within 65 days of the date of the grant award by HUD. Funds set aside by a State for homeless prevention activities under @ 576.21 (a) (4) must be made available to State recipients within 180 days of the grant award by HUD. (2) State recipients-- (i) Obligation of grant funds. Each State recipient must have its grant amounts obligated (as that term is defined at @ 576.3) within 180 days of the date on which the State made the grant amounts available to the State recipient. In the case of grants for homeless prevention activities under @ 576.21 (a) (4) , State recipients are required to obligate grant amounts within 30 days of the date on which the State made the grant amounts available to the State recipient. (ii) Expenditure of grant funds. Each State recipient must spend all of its grant amounts within 24 months of the date on which the State made the grant amounts available to the State recipient. In the case of grants for homeless prevention activities, State recipients must spend such sums within 180 days of the date on which the State made the grant amounts available to the recipient. (b) Formula cities and counties, and Territories-- (1) Obligations of funds. Each formula city and county, and each Territory, must have all grant amounts that it was allocated under @ 576.43 or @ 576.45 obligated within 180 days of the date of the grant award by HUD. (2) Formula cities and counties, territories and Indian tribes-Expenditure of grant funds. Each formula city or county, territory, and Indian tribe must spend all of the grant amounts it was allocated or awarded under @@ 576. 5 or 576.31 within 24 months of the date of the grant award by HUD. (c) Failure to meet deadlines. (1) Any emergency shelter grant amounts that are not made available or obligated within the applicable time periods specified in paragraphs (a) (1) or (b) of this section will be reallocated under @ 576.45. (2) The State must recapture any grant amounts that a State recipient does not obligate and spend within the time periods specified in paragraph (a) (2) of this section. The State, at its option, must make these amounts and other amounts returned to the State (except amounts referred to in @ 576 .22 (b) (6) available as soon as practicable to other units of general local government for use within time period specified in paragraph (a) (2) of this section or to HUD ft_r reallocation under @ 576.45. 6 • Subpart D--Reallocations • • 576 . 41 -- Reallocation; lack of approved consolidated plan--formula cities and counties . (a) Applicability. This section applies where a formula city or county fails to• submit or obtain HUD approval of its consolidated plan within 90 days of the date upon which amounts under this part first become available for allocation in any fiscal year. (b) Grantee. HUD will make available to the State in which the city or county is located the amounts that a city or county referred to in paragraph (a) of this section would have received. (c) Notification of fund availability. The responsible HUD field office will • promptly notify the State of the availability of any reallocation amounts under this section. (d) Eligibility for reallocation amounts. In order to receive reallocation amounts under this section, the State must: (1) Execute a grant agreement with HUD for the fiscal year for which the amounts to be reallocated were initially made available. (2) If necessary, submit an amendment to its application for that fiscal year for the reallocation amounts it wishes to receive. The amendment must be submitted to the responsible HUD field office no later than 30 days after notification is given to the State under paragraph (c) of this section. (e) Amendment review and approval. (1) Section 576.33 governs the review and approval of application amendments under this section. HUD will endeavor to make grant awards within 30 days of the application amendment deadline, or as soon thereafter as practicable. • (2) Program activities represented by proposed amendments are subject to environmental review under © 576.57 in the same manner as original proposals. (f) Deadlines for using reallocated grant amounts. Section 576.35 governs the use of amounts reallocated under this section. (g) Amounts that cannot be reallocated. Any grant amounts that cannot be reallocated to a State under this section will be reallocated as provided by 576.43 . Amounts that are reallocated under this section, but that are returned or unused, will be reallocated under @ 576.45. • 576.43 -- Reallocation of grant amounts; lack of approved Consolidated Plan--States, territories, and Indian tribes. (a) Applicability. This section applies when: (1) A State, territory, or Indian tribe fails to obtain approval of its consolidated plan within 90 days of the date upon which amounts under this part first become available for allocation in any fiscal year; or (2) Grant amounts cannot be reallocated to a State under @ 576.41. (b) Grantees. (1) HUD will reallocate the amounts that a State or Indian tribe referred to in paragraph (a) (1) of this section would have received: (i) In accordance with 42 U.S.C. 11373 (d) (3) ; and (ii) If grant amounts remain, then to territories that demonstrate extraordinary need or large numbers of homeless individuals. (2) HUD will make available the amounts that a territory under paragraph (a) (1) of this section would have received to other territories that demonstrate extraordinary need or large numbers of homeless individuals. (c) Notification of funding availability. HUD will make reallocations to 7 tates and Indian tribes under this section by direct notification or Federal Register notice that will set forth the terms and conditions under which amounts under this section are to be reallocated and grant awards made. In the case of reallocations to territories, the responsible HUD field office will promptly notify each territory of any reallocation amounts under this section and will indicate the terms and conditions under which reallocation amounts are to be made available and grant awards made. (d) Eligibility for reallocation amounts. In order to receive reallocation . amounts under this section, the formula city or county, State, territory, or Indian tribe must: (2) Execute a grant agreement with HUD for the fiscal year for which the amounts to be reallocated were initially made available. • (e) Review and approval. (1) Section 576.33) , and such additional requirements as HUD may specify in the notification under paragraph (c) of this section, govern the review and approval of application amendments under this section. HUD will rank the amendments and make grant awards under this section on the basis of the following factors : (i) The nature and extent of the unmet homeless need within the jurisdiction in which the grant amounts will be used; (ii) The extent to which the proposed activities address this need; and (iii) The ability of the grantee to carry out the proposed activities promptly. .(2) HUD will endeavor to make grant awards within 30 days of the application amendment deadline, or as soon thereafter as practicable. (f) Grant amounts . HUD may make a grant award for less than the amount applied for or for fewer than all of the activities identified in the application amendment. (g) Deadlines for using reallocated amounts. Section 576.35 governs the use of amounts reallocated -under this section. (h) Amounts not reallocated.- Any grant amounts that are not reallocated under this section, or that are reallocated, but are unused, will be reallocated under 576.45(d) . Any amounts that are reallocated, but are returned, will be reallocated under Q 576.45 (c) . 576.45 -- Reallocation of grant amounts; returned or unused amounts. • (a) General. From time to time, HUD will reallocate emergency shelter grant amounts that are returned or unused, as those terms are defined in paragraph (f) of this section. HUD will make reallocations under this section by direct notification or Federal Register Notice that will set forth the terms and conditions under which the grant amounts are to be reallocated and grant awards are to be made. • (b) FEMA boards . HUD may use State and local boards established under the Emergency Food and Shelter Program administered by the Federal Emergency Management Agency, as a resource to identify potential applicants for reallocated grant amounts . (c) Reallocation -- returned grant amounts. (1) States and formula cities and counties. HUD will endeavor to reallocate returned emergency shelter grant amounts that were initially allocated under ® 576.5 to a State or a formula city or county, for use within the same jurisdiction. Reallocation of these grant amounts is subject to the following requirements: (i) Returned grant amounts that were allocated to a State will be made available (A) first, to units of general local government within the State and • (B) if grant amounts remain, then to other States. (ii) Returned grant amounts that were allocated to a formula city or county 8 will be made available: (A) First, for use in the city or county, to units of general local' government that are authorized under applicable law to carry out activities serving the homeless in the jurisdiction; (B) If grant amounts remain, then to the State in which the city or county is located; (C) If grant amounts remain, to units of general local government in the State; and (D) If grant amounts remain, to other States. (1) States and formula cities and counties. Any grant amounts that: • (i) Remain after applying the preceding provisions of this paragraph (c) , or (ii) Are returned to HUD after reallocation under such provisions, will be further reallocated under paragraph (d) of this section. (2) Indian tribes. Returned grant amounts that were allocated to an Indian tribe will be made available to other Indian tribes. (3) Territories. Returned grant amounts that were allocated to a territory will be made available, first, to other territories and, if grant amounts remain, then to States. (4) Further reallocation: States, formula cities and counties, territories, and •Indian tribes. HUD will reallocate under paragraph (e) of this section any grant amounts that remain after applying the preceding provisions of paragraph (c) of this section or that are returned to HUD after reallocation under rovis ' those ions P . (5) The responsible HUD field office will announce the availability of returned grant amounts. The announcement will establish deadlines for submitting applications, and will set out other terms and conditions relating to grant awards, consistent with this part. The announcement will specify the application documents to be submitted. (6) The responsible HUD field office may establish maximum grant -amounts, considering the grant amounts available, and will rank the applications using the criteria in paragraph (e) of this section. (7) HUD may make a grant award for less than the amount applied for or for fewer than all of the activities identified in the application, based on competing demands for grant amounts and the extent to which the respective activities address the needs of the homeless. (8) HUD will endeavor to make grant awards within 30 days of the application deadline or as soon thereafter as practicable. (9) Grants awarded under this section are subject to environmental review under © 576.57. (d) Reallocation -- unused grant amounts. Unused grant amounts will be added to the appropriation for the fiscal year immediately following the fiscal year in which the amounts become available to HUD for reallocation, and will be allocated in accordance with the provisions of © 576.5 of this part. (e) Selection criteria. HUD will award grants under paragraph (c) of this section based on consideration of the following criteria: (1) The nature and extent of the unmet homeless need within the jurisdiction in which the grant amounts will be used; (2) The extent to which the proposed activities address this need; and (3) The ability of the grantee to carry out the proposed activities promptly. 9 (f) When grant amounts are returned or unused. • (1) For purposes of this section, emergency shelter grant amounts are considered "returned" when they become, available for reallocation because a jurisdiction does not execute a grant agreement with HUD for them. (2) For purposes of this section, emergency shelter grant amounts are considered "unused" (i.e. Federal deobligation) when they become available for reallocation by HUD after a grantee has executed a grant agreement with HUD for them: e.g. , where: (i) A State fails to make its grant amounts available to State recipients within the time period specified in @ 576.55 (a) (1) ; (ii) A formula city or county fails to obligate grant amounts within the time specified in ® 576.55 (b) ; (iii) A State recaptures grant amounts from a State recipient and makes them available to HUD as provided in ® 576 .55 (c) (2) ; (iv) Grant amounts become available as a result of imposition of a sanction (other than a reduction of grant amounts) under @ 576.89 or the close-out of a grant; or (v) A grantee referred to in paragraph (b) of this section fails to obligate grant amounts within the time period specified in its grant agreement. Amounts that remain after reallocation under ® 576.63 or ® 576.67 (c) are considered unused for purposes of this section. (f) Definitions-returned or unused grant amounts. (1) For purposes of this section, emergency shelter grant amounts ara considered "returned" when they become available for reallocation because a jurisdiction does not execute a grant agreement with HUD for them. (2) For purposes of this section, emergency shelter grant amounts are considered "unused" (i.e. , Federal deobligation) : (i) When they become available for reallocation by HUD after a grantee has executed a grant agreement with HUD for those amounts; or (ii) The amounts remain after reallocation under @ 576.43 or paragraph (c) of this section. Subpart E--Program Requirements ® 576 . 51 -- Matching funds. (a) General . Each grantee, other than a territory, must match the funding provided by HUD under this part as set forth in 42 U.S.C. 11375 . The fir $100, 000 of any assistance provided to a recipient that is a State is {...,... required to be matched, but the benefit of the unmatched amount must be sh.7.- as provided in 42 U.S.C. 11375 (c) (4) . Matching funds must be provided afte:: date of the grant award to the grantee. Funds used to match a previous ESG may not be used to match a subsequent grant award under this part. A grantee comply with this requirement by providing the matching funds itself, or thrcuA-;..: matching funds or voluntary efforts provided by any State recipient or nonpro:_=. recipient (as appropriate) . (b) Calculating the matching amount. In calculating the amount of matchn_ funds, in accordance with 42 U.S .C. 11375 (a) (3) , the time contribute':_ volunteers shall be determined at the rate of $ 5 per hour. For purposes of T`. paragraph, the grantee will determine the value of any donated matey_:.:_. building, or of any lease, using a method reasonably calculated toestab`..... fair market value. 1.0 1111 575 . 53 -- Use as an emergency shelter. ti (a) (1) Restrictions and definition. Period of use restrictions applicable to assistance provided under this part are governed by 42 U.S.C. 11375 (c) (1) . Use of grant amounts for developing and implementing homeless prevention activities does not trigger period of use requirements. (2) For purposes of the requirements under this section, the term same general population means either the same types of homeless persons originally served with ESG assistance (i.e. , battered spouses, runaway children, families, or mentally ill individuals) , or persons in the same geographic area. (b) Calculating the applicable period. The 3- and 10-year periods applicable under paragraph (a) of this section begin to run: (1) In the case of a building that was not operated as an emergency shelter for the homeless before receipt of grant amounts under this part, on the date of initial occupancy as an emergency shelter for the homeless. (2) In the case of a building that was operated as an emergency shelter before receipt of grant amounts under this part, on the date that grant amounts are first obligated for the shelter. 576 .55 -- Building standards. (a) Any building for which emergency shelter grant amounts are used for conversion, major rehabilitation, rehabilitation, or renovation must meet local government safety and sanitation standards. (b) For projects of 15 or more units, when rehabilitation costs are: (1) 75 percent or more of the replacement cost of the building, that project must meet the requirements of © 8.23 (a) of this title; or (2) Less that 75 percent of the replacement cost of the building, that project must meet the requirements of © 8.23 (b) be make that of this title. O 576 .56 -- Homeless assistance and participation. (a) Assistance. (1) Grantees and recipients must assure that homeless individuals and families are given assistance in obtaining: (i) Appropriate supportive services, including permanent housing, medical health treatment, mental health treatment, counseling, supervision, and other services essential for achieving independent living; and (ii) Other Federal, State, local and private assistance available for such individuals. (2) Requirements to ensure confidentiality of records pertaining to the provision of family violence prevention or treatment services with assistance under this part are set forth in 42 U.S.C. 11375 (c) (5) • (3) Grantees and recipients may, in accordance with 42 U.S.C. 11375 (e) , terminate assistance provided under this part to an individual or family who violates program requirements. (b) Participation. (1) Each unit of local government, Indian tribe, and nonprofit recipient that receives funds under this part must provide for the participation of homeless individuals on its policymaking entity in accordance with 42 U.S .C. 11375 (d) . (2) Each State, territory, Indian tribe, unit of local government, and nonprofit recipient that receives funds under this part must involve homeless individuals and families in providing work or services pertaining to facilities or activities assisted under this part, in accordance with 42 U.S.C. 11375 (c) (7) . 576 . 57 -- Other Federal requirements. In addition to the Federal requirements set forth in 24 CFR part 5, use of 11 „ r emergency shelter grant amounts must comply with the following requirements : (a) Nondiscrimination and equal opportunity. The nondiscrimination and equal opportunity requirements at 24 CFR part 5 are modified as follows : (1) Rehabilitation Act requirements. HUD' s regulations at 24 CFR part 8 implement section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) . For purposes of the emergency shelter grants program, the term "dwelling units” in 24 CFR part 8 shall include sleeping accommodations. (2) Use of emergency shelter grant amounts must also comply with the requirement that the grantee or the State recipient make known that use of the facilities and services is available to all on a nondiscriminatory basis. If the procedures that the grantee or recipient intends to use to make known the availability of the facilities and services are unlikely to reach persons of any particular race, color, religion, sex, age, national origin, familial status, or disability who may qualify for such facilities and services, the grantee or recipient must establish additional procedures that will ensure that such persons are made aware of the facilities and services. Grantees and recipients must also adopt procedures which will make available to interested persons information concerning the location of services and facilities that are accessible to persons with disabilities. (b) Applicability of OMB Circulars. The policies, guidelines, and requirements of 24 CFR part 85 (codified pursuant to OMB Circular No. A-102) and OMB Circular No. A-87, as they relate to the acceptance and use of emergency shelter grant amounts by States and units of general local government, and Nos. A-110 and A-122 as they relate to the acceptance and use of emergency shelter grant amounts by private nonprofit organizations. OMB Circulars referenced in this section are available at the Entitlement Cities Division, Room 7282, Department of Housing and Urban Development, 451 Seventh Street, SW. , Washington, DC 20410. (c) Lead-based paint. The requirements, as applicable, of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846) and implementing regulations at 24 CFR part 35. In addition, the grantee (or in the case of States, the State recipient) must also meet the following requirements relating to inspection and abatement of defective lead-based paint surfaces : (1) Treatment of defective paint surfaces must be performed before final inspection and approval of the renovation, rehabilitation or conversion activity under this part; and (2) Appropriate action must be taken to protect shelter occupants from the hazards associated with lead-based paint abatement procedures. (d) Conflicts of interest. In addition to the conflict of interest requirements in OMB Circulars A-102 and A-110, no person -- (1) (i) . Who is an employee, agent, consultant, officer, or elected or appointed official of the grantee, State recipient, or nonprofit recipient (or of any designated public agency) that receives emergency shelter grant amounts and (ii) who exercises or has exercised any functions or responsibilities with respect to assisted activities, or (2) 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 him 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. HUD may grant an exception to this exclusion as provided in © 570.611 (d) and (e) of this chapter. (e) Environmental review responsibilities . - (1) Generally. Responsible entities must assess the environmental effects of each application under part 58 of this title . An applicant must include in its application an assurance that the applicant will assume all the environmental review responsibility that would otherwise be performed by HUD as the responsible Federal official under the National Environmental Policy Act of 1969 (NEPA) and related authorities listed in part 58 of this title. The grant award is subject to completion of the 12 environmental responsibilities set out in part 58 of this title within a • reasonable time period after notification of the award. This provision does not preclude the applicant from enclosing its environmental certification and Request for Release of Funds with its application. (2) Awards to States. In the case of emergency shelter grants to States that are distributed to: (i) Units of general local government, the unit of general local government shall be the responsible entity, and the State will assume HUD's functions with regard to the release of funds; or (ii) Nonprofit organizations, the State shall be the responsible entity, and HUD will perform functions regarding release of funds under part 58 of this title. (3) Release of funds. HUD will not release funds for an eligible activity if • the grantee, recipient, or any other party commits emergency shelter grant funds before the grantee submits, and HUD approves, any required Request for Release of Funds. (f) Audit. The financial management systems used by a State, formula city or county, governmental entity, or an Indian tribe that is a grantee under this program must provide for audits in accordance with part 44 of this title. A private nonprofit organization is subject to the audit requirements of OMB Circular A-133, as set forth in part 45 of this title. (OMB Circulars are available from the Executive Office of the President, Publication Service, 725 17th Street, NW. , Suite G-2200, Washington, DC 20503, Telephone, 202-395-7332.) (j) Intergovernmental review. The requirements of Executive Order 12372 and the regulations issued under the order at 24 CFR part 52, to the extent provided by FEDERAL REGISTER notice in accordance with 24 CFR 52.3. (h) Lobbying and disclosure requirements. The disclosure requirements and prohibitions of 42 U.S.C. 3537a and 3545 and 31 U.S.C. 1352 (the Byrd Amendment) , and the implementing regulations at parts 4 and 87 of this title. • (i) Davis-Bacon Act. The provisions of the Davis-Bacon Act (40 U.S.C. 276a-276a-5) do not apply to this program. 576 . 59 Relocation and acquisition. (a) Minimizing displacement. Consistent with the other goals and objectives of this part, grantees and 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 a project assisted under this part. (b) Relocation assistance for displaced persons. A displaced person (defined in paragraph (f) (1) of this section) must be provided relocation assistance at the levels described in, and in accordance with, 49 CFR part 24, which contains the government-wide regulations implementing the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) . (c) Real property acquisition requirements. The acquisition of real property for a project is subject to the URA and the requirements described in 49 CFR part 24, subpart B. (d) Responsibility of grantees and recipients. Each grantee and recipient must assure that it will comply with the URA, the regulations at 49 CFR part 24, and the requirements of this section. The cost of assistance required by this section may be paid from local public funds, funds provided in accordance with this part, or funds available from other sources. (e) Appeals. A person who disagrees with the grantee's or recipient' s determination concerning a payment or other assistance required by this section may file a written appeal of that determination with the grantee or recipient. The appeal procedures to be followed are described in 49 CFR 24 .10. (f) Definition. -- (1) Displaced person. (i) 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, 13 � I permanently and involuntarily, as a direct result of acquisition, rehabilitation, or demolition for a project assisted under this part. Permanent, involuntary moves for an assisted project include: (A) A permanent move from the real property (building or complex) following notice by the grantee, recipient or property owner to move permanently from the property, if the move occurs on or after the date that the grantee or recipient submits to HUD an application for assistance that is later approved and funded; (B) A permanent move from the real property that occurs before the submission of the application to HUD, if the grantee, recipient or HUD determines that the displacement resulted directly from acquisition, rehabilitation, or demolition for the project, or (C) A permanent move from the real property by a tenant-occupant of a dwelling unit that occurs after the execution of the agreement between the recipient and HUD if: (1) The tenant has not been provided a reasonable opportunity to lease and occupy a suitable, decent, safe and sanitary dwelling in the same building/complex following the completion of the project at a rent, including estimated average utility costs, that does not exceed the greater of the tenant's rent and estimated average utility costs before the initiation of negotiations, or 30 percent of gross household income; or (2) The tenant has been required to relocate temporarily but the tenant is • not offered payment for all reasonable out-of-pocket expenses incurred in connection with the temporary relocation or other conditions of the temporary relocation are not reasonable, and the tenant does not return to the building/complex; or (3) The tenant is required to move to another unit in the same building/complex but is not offered reimbursement for all reasonable out-of-pocket expenses incurred in connection with the move. • (ii) A person does not qualify as a "displaced person" if: (A) The person has been evicted for cause based upon a serious or repeated violation of material terms of the lease or occupancy agreement and HUD determines that the eviction was not undertaken for the purpose of evading the obligation to provide relocation assistance; (B) The person moved into the property after the submission of the application and, before commencing occupancy, received written notice of the expected displacement; (C) The person is ineligible under 49 CFR 24.2 (g) (2) ; or (D) HUD determines that the person was not displaced as a direct result of acquisition, rehabilitation, or demolition for the project. (iii) The grantee or recipient may, at any time, request a HUD determination of whether a displacement is or would be covered under this section. (2) Initiation of negotiations . For purposes of determining the type of replacement housing payment to be made 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 grantee and HUD. Part F--Grant Administration @ 576 . 61 -- Responsibility for grant administration. Grantees are responsible for ensuring that emergency shelter grant amounts ar-: administered in accordance with the requirements. of this .part and other applicable laws . The State, territory, Indian tribe,. or unit of local government is responsible for ensuring that its recipients carry out the recipient:, emergency shelter grant programs in compliance with all applicable requirem. .' .. in the case of : 14 (a) A State making grant amounts available to State recipients; or (b) A territory, Indian tribe, or unit of general local government • distributing grant amounts to nonprofit recipients. @ 576 .63 Method of payment. Payments are made to a grantee upon its request after the grant agreement has been fully executed, and may include a working capital advance for 30 days' cash needs or an advance of $ 5,000, whichever is greater. Thereafter, the grantee will be reimbursed for the amount of its actual cash disbursements. If a grantee requests a working capital advance, it must base the request on a realistic, firm estimate of the amounts required to be disbursed over the 30-day period in payment of eligible activity costs. . @ 576 .65 -- Recordkeepinq. (a) Each grantee must ensure that records are maintained for a 4-year period to document compliance with the provisions of this part. (b) Requirements to ensure confidentiality of records pertaining to the provision of family violence prevention or treatment services with assistance under this part are set forth in 42 U.S.C. 11375 (c) (5) . @ 576 .67 Sanctions. (a) HUD sanctions. If HUD determines that a grantee is not complying with the requirements of this part or of other applicable Federal law, HUD may (in addition to any remedies that may otherwise be available) take any of the following sanctions, as appropriate: (1) Issue a warning letter that further failure to comply with such requirements will result in a more serious sanction; (2) Condition a future grant; (3) Direct the grantee to stop the incurring of costs with grant amounts; (4) Require that some or all of the grant amounts be remitted to HUD; (5) Reduce the level of funds the grantee would otherwise be entitled to receive'; or (6) Elect not to provide future grant funds to the grantee until appropriate actions are taken to ensure compliance. (b) State sanctions. If a State determines that a State recipient is not complying with the requirements of this part or other applicable Federal laws, the State must take appropriate actions, which may include the actions described in paragraph (a) of this section. Any grant amounts that become available to a State as a result of a sanction under this section must, at the option of the State, be made available (as soon as practicable) to other nonprofit organizations or units of general local government located in the State for use within the time periods specified in @ 576.55 (a) (2) , or to HUD for reallocation under @ 576 .67 (d) . (c) Reallocations. Any grant amounts that become available to HUD as a result of the imposition of a sanction under this section will be reallocated under @ 576.67 (d) . Dated: September 20, 1996. Andrew Cuomo, Assistant Secretary for Community Planning and Development. [FR Doc. 96-25054 Filed 10-1-96; 8:45 am] Source: MICHIE'S CODE OF FEDERAL REGULATIONS (c) 1996 • 15 ATTACHMENT 14 Emergency Shelter Grants (ESG) Statute Citation: Steward B. McKinney Homeless Assistance Act, as amended; 42 U.S.0 11371-78 Section Number 11371 Definitions purposes of this part: (1) The term "local government" means a unit of general purpose local government. (2) The term "locality" means the geographical area within the jurisdiction of a local government. (3) The term "metropolitan city" has the meaning given such term in section 5302 of this title. (4) The term "operating costs" means expenses incurred by a recipient operating a facility assisted under this part with respect to- (A) the administration, maintenance, repair, and security of such housing; and (B) utilities, fuels, furnishings, and equipment for such housing. (5) The term "private nonprofit organization" means a secular or religious organization described in section 501 (c) of title 26 that is exempt from taxation under subtitle A of title 26, has an accounting system and a voluntary board, and practices nondiscrimination in the provision of assistance. (6) The term "recipient" means any governmental or private nonprofit entity that is approved by the Secretary as to financial responsibility. (7) The term "Secretary" means the Secretary of Housing and Urban Development. (8) The term "State" means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States. (9) The term "urban county" has the meaning given such term in section 5302 of this title. (10) The term "Indian tribe" has the meaning. given such term in section 5302 (a) (17) of this title. Section Number 11372 Grant assistance Secretary of Housing and Urban Development shall, to the extent of amounts proved in appropriation Acts under section 11377 of this title, make grants to :tes and local governments,and for Indian tribes,1 (and to private nonprofit ;anizations providing assistance to homeless individuals, in the case of grants 1 made with reallocated amounts) in order to carry out activities described in section 11374 of this title. Section Number 11373 Allocation and distribution of assistance (a) In general The Secretary shall allocate assistance under this part to metropolitan cities, urban counties, and States (for distribution to local governments and private nonprofit organizations in the States) , and to Indian tribes, in a manner that ensures that the percentage of the total amount available under this part for any fiscal year that is allocated to any State, metropolitan city, or urban county, or for Indian tribes is equal to the percentage of .the total amount available for section .S306 of this title for such prior fiscal year that is allocated to such State, metropolitan city, or urban county, or for Indian tribes. (b) Minimum allocation requirement If, under the allocation provisions applicable under this part, any metropolitan city or urban county would receive a grant of less than 0.05 percent of the amounts appropriated to carry out this part for any fiscal year, such amount shall instead be reallocated to the State, except that any city that is located in a State that does not have counties as local governments, that has a population greater than 40, 000 but less than 50, 000 as used in determining the fiscal year 1987 community development block grant program allocation, and that was allocated in excess of 1, 000, 000 in community development block grant funds in fiscal year 1987, shall receive directly the amount allocated to such city under subsection (a) of this section. (c) Distributions to nonprofit organizations Any local government or Indian tribe receiving assistance under this part may distribute all or a portion of such assistance to private nonprofit organizations providing assistance to homeless individuals. Any State receiving assistance under this part may distribute all or a portion of such assistance to private nonprofit organizations providing assistance to homeless individuals, if the local government for the locality in which the project is located certifies that it approves of the project. (d) Reallocation of funds (1) The Secretary shall, not less than twice during each fiscal year, reallocate any assistance provided under this part that is unused or. returned or that becomes available under subsection (b) of this section. (2) If a city or county eligible for a grant under subsection (a) of this section fails to obtain approval of its comprehensive plan during the 90-day period following the date funds authorized by this part first become available for allocation during any fiscal year, the amount that the city or county would have received shall be available to the State in which the city or county is located if the State has obtained approval of its comprehensive plan. Any amounts that cannot be allocated to a State under the preceding sentence shall be reallocated to other States, counties, and cities that demonstrate extraordinary need or large numbers of homeless individuals, as determined by the Secretary. (3) If a State or Indian tribe fails to obtain approval of its comprehensive plan during the 90-day period following the date funds authorized by this part first become available for allocation during any fiscal year, the amount that the State or Indian tribe would have received shall be reallocated to other States and to cities and counties, or other Indian tribes, as applicable, that demonstrate extraordinary need or large numbers of homeless individuals, as 2 4 r determined by the Secretary. (e) Allocations to territories ' In addition to the other allocations required in this section, the Secretary shall (for amounts appropriated after July 22, 1987) allocate assistance under this part to the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States, in accordance with an allocation formula established by the Secretary. Section Number 11374 Eligible activities (a) In general Assistance provided under this part may be used for the following activities relating to emergency shelter for homeless individuals : (1) The renovation, major rehabilitation, or conversion of buildings to be used as emergency shelters. (2) The provision of essential services, including services concerned with employment, health, drug abuse, or education, if- (A) such services have not been provided by the local government or Indian tribe during any part of the immediately preceding 12-month period, or the use of assistance under this part would complement those services; and • (B) not more than 30 percent of the aggregate amount of all assistance to a State, local government, or Indian tribe under this part is used for activities under this paragraph. (3) Maintenance, operation, insurance, utilities, and furnishings, except that not more than 10 percent of the amount of any grant received under this part may be used for costs of staff. - (4) Efforts to prevent homelessness such as financial assistance to families who have received eviction notices or notices of termination of utility services if- (A) the inability of the family to make the required payments is due to a sudden reduction in income; (B) the assistance is necessary to avoid the eviction or termination of services; "(C) there is a reasonable prospect that the family will be able to resume payments within a reasonable period of time; and (D) the assistance will not supplant funding for preexisting homelessness prevention activities from other sources. Not more than 30 percent of the aggregate amount of all assistance to a State, local government, or Indian tribe under this part may be used for activities under this paragraph. (b) Waiver authority The Secretary may waive the 20 percent limitation on the use of assistance for essential services contained in subsection (a) (2) (B) of this section, if the local government receiving the assistance demonstrates that the other elig t e activities under the program are already being carried out in the loc:.1)r ,. with other resources. 3 'Section Number 11375 Responsibilities of recipients (a) Matching amounts (1) Except as provided in paragraph (2) , each recipient under this part shall be required to supplement the assistance provided under this part with an equal amount of funds from sources other than this part. Each recipient shall certify to the Secretary its compliance with this paragraph, and shall include with such certification a description of the sources and amounts of such supplemental funds. (2) Each recipient under this part that is a State shall be required to supplement the assistance provided under this part with an amount of funds from sources other than this part equal to the difference between the amount received under this part and 100, 000. If the amount received by the State is $100, 000 or less, the State may not be required to supplement the assistance provided under this part. (3) In calculating the amount of supplemental funds provided by a recipient under this part, a recipient may include the value of any donated material or building, the value of any lease on a building, any salary paid to staff to carry out the program of the recipient, and the value of the time and services contributed by volunteers to carry out the program of the recipient at a rate determined by the Secretary. (b) Administration of assistance Each recipient shall act as the fiscal agent of the Secretary with respect to assistance provided to such recipient. (c) Certifications on use of assistance Each recipient shall certify to the Secretary that- (1) it will- (A) in the case of assistance involving major rehabilitation or conversion, maintain any building for which assistance is used under this part.as a shelter for homeless individuals and families for not less than a 10-year period; (B) in the case of assistance involving rehabilitation (other than major rehabilitation or conversion) , maintain any building for which assistance is used under this part as a shelter -for homeless individuals and families for not less than a 3-year period; or • (C) in the case of assistance involving solely activities described in paragraphs (2) and (3) of section 11374 (a) of this title, provide services or shelter to homeless individuals and families for the period during which such assistance is provided, without regard to a particular site or structure as long as the same general population is served; (2) any renovation carried out with assistance under this part shall be sufficient to ensure that the building involved is safe and sanitary; (3) it will assist homeless individuals in obtaining- (A) appropriate supportive services, including permanent housing, medical and mental health treatment, counseling, supervision, and other services essential for achieving independent living; and (B) other Federal, State, local, and private assistance available for such individuals; 4 A (4) in the case of a recipient that is a State, it will obtain any matching amounts required under subsection (a) of this section in a manner so that local governments, Indian tribes, agencies, and local , nonprofit organizations receiving assistance from the grant that are least capable of providing the recipient State with such matching amounts receive the benefit of the 100, 000 subtrahend under subsection (a) (2) of this section; (5) it will develop and implement procedures to ensure the confidentiality of records pertaining to any individual provided family violence prevention or treatment services under any project assisted under this part and that the address or location of any family violence shelter project assisted under this part will, except with written authorization of the person or persons responsible for the operation of such shelter, not be made public; (6) activities undertaken by the recipient with assistance under this part are consistent with any housing strategy submitted by the grantee in accordance with section 12705 of this title; and (7) to the maximum extent practicable, it will involve, through employment, volunteer services, or otherwise, homeless individuals and families in constructing, renovating, maintaining, and operating facilities assisted under this part, in providing services assisted under this part, and in providing services for occupants of facilities • assisted under this part. (d) Participation of homeless individuals The Secretary shall, by regulation, require each recipient that is not.a State to provide for the participation of not less than 1 homeless individual or former homeless individual on the board of directors or other equivalent policymaking entity of such recipient, to the extent that such entity considers and makes policies and decisions regarding any facility, services, or other assistance of the recipient assisted under this part. The Secretary may grant waivers to recipients unable to meet the requirement under the preceding sentence if the recipient agrees to otherwise consult with homeless or formerly homeless individuals in considering and making such policies and decisions. (e) Termination of assistance If an individual or family who receives assistance under this part from a recipient violates program requirements, the recipient may terminate assistance in accordance with a formal process established by the recipient that recognizes the rights of individuals affected, which may include a hearing. Section Number 11376 Administrative provisions (a) Regulations Not later than 60 days after July 22, 1987, the Secretary shall by notice establish such requirements as may be necessary to carry out the provisions of this part. Such requirements shall be subject to section 553 of title 5. The Secretary shall issue requirements based on the initial notice before the expiration of the 12-month period following July 22, 1987. Prior to the issuance of such requirements in final form, the requirements established by the Secretary implementing the provisions of the emergency shelter grants program under the provisions made effective by section 101(g) of Public Law 99-500 or Public Law 99-591 shall govern the emergency shelter grants program under this part. 5 Y (b) Initial allocation of assistance Not later than the expiration of the 60-day period following the date of enactment of a law providing appropriations to carry out this part, the Secretary shall notify each State, Indian tribe, metropolitan city, and urban county that is to receive a direct grant of its allocation of assistance under this part. Such assistance shall be allocated and may be used notwithstanding any failure of the Secretary to issue requirements under subsection (a) of this section. (c) Minimum standards of habitability The Secretary shall prescribe such minimum standards of habitability as the Secretary determines to be appropriate to ensure that emergency shelters assisted under this section are environments that provide appropriate privacy, safety, and sanitary and other health-related conditions for homeless persons and families. Grantees are authorized to establish standards of habitability in addition to those prescribed by the Secretary. Section Number 11377 Authorization of appropriations There are authorized to be appropriated to carry out this part $138,000, 000 for fiscal year 1993 and $143, 796,000 for fiscal year 1994. • Section Number 11378 Administrative costs A recipient may use up to 5 percent of any annual grant received under this part for administrative purposes. A recipient State shall share the amount available for administrative purposes pursuant to the preceding sentence with local governments funded by the State. • • -7c 2sA�: CITY OF OMAHA • LEGISLATIVE CHAMBER Omaha,Nebr June 5, 2001 RESOLVED BY THE CITY COUNCIL OF THE CITY OF OMAHA: WHEREAS,the provisions of emergency shelter and essential services for homeless persons is an urgent need in the City of Omaha; and, WHEREAS,the City of Omaha applied for Emergency Shelter Grant Program funds from the U.S. Department of Housing and Urban Development, as stated in the Consolidated Submission for Community Planning and Development, and received a$222,000.00 grant; and, WHEREAS, The St. Vincent de Paul Homeless Family Shelter will provide shelter and essential services for homeless persons, as provided in the grant application submitted to the City of Omaha in response to the FY 2001 Emergency Shelter Grant Program Request for Proposals; and, WHEREAS,the City of Omaha has previously funded shelters and service providers for the purpose of assisting homeless persons and families with the provision of food, health services, counseling, and shelter; and, WHEREAS, the Planning Department and the Mayor recommend approval of this grant; and, WHEREAS,it is beneficial and desirable to continue to provide shelter and services to homeless persons and families through The St. Vincent DePaul Homeless Family Shelter for a twelve-month period. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY f OF OMAHA: THAT,the attached Agreement,as recommended by the Mayor,between the City of Omaha and The St. Vincent de Paul Homeless Family Shelter, 613 North 17th Street, Omaha, Nebraska 68102,in the amount of$21,600 for the purpose of providing shelter to homeless persons and families for the one year period of said Agreement, is hereby approved. Funds shall be paid from the City of Omaha FY 2001 Emergency Shelter Grant Fund No. 154, Organization 8501, Agency No. 200. PAPLN1\5720pjm.doc APPROVED AS TO FORM: •Oedet& titila./14.) By 4-25-01 Councilmember ASSISTANT CITY ATTORNEY DATE Adopted .UN 5 200 ,, 7.p 1i I. / -LØ / Approv;a� , �dO mzi Nxn 1: O = O O erg t-- oc 7cir A) IWPIU oo CD ' N a • O°C W (fav, "d T `C (II O , C y0 p Q. o o0o � 0 , a e-,,.. %.13 = cl. % FD SDrP8 -1c4s1g. , \ o '-t sa- ., .., Q., rV O P — w O W C � \' O O " r-n FC -, Z p r� } O C o C O CD O n (p 0 A O w N CM r r+ �p E CD C. - ,__, A) C CD s '1C1 C (I� /71 CD CD "•t CD A) n x �C a o °, CD