ORD 34009 - Agmt with Creighton Saint Joseph Regional Health Care Systems for employee assistance program •
t (.. l ,e ),/y 6 6 i
OF otAAHA,Art RECEIVE)� '1' l ,.
U, `���,s� Law Department
�.1 ' 96 S E P 1 09 Omaha/Douglas Civic Center
1 '+R«, , 8: 1819 Farnam Street,Suite 804
, f n,� c Omaha,Nebraska 68183-0804
° p- 4` � '\� (402)444-5115
A° yry CITY CLERK Telefax(402)444-5125
��TFU FEW'.
OMAHa, NEBRASK,A'
City of Omaha Herbert M.Fide
City Attorney
Hal Daub,Mayor
Honorable President
and Members of the City Council,
The purpose of the attached Ordinance,prepared at the request of Councilmember Brenda Council,
is to approve a Grant Agreement between the City of Omaha and Creighton Saint Joseph Regional
Health Care Systems, L.L.C. for the Operation Bridge Employee Assistance Program. The
Agreement in the amount of$280,000 covers a time period of 36 months from the time of favorable
consideration by the City Council and execution by the Mayor.
Funding for the project is provided by the Enterprise Community Social Services Block Grant.
Sincerely,
Jo A avel
Assistant City Attorney
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ORDINANCE NO. .•34/0,°IJ 9' rr
r AN ORDINANCE approving an Agreement with Creighton Saint Joseph Regional Health Care
Systems and providing an effective date.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF OMAHA:
Section 1. This Agreement with Creighton Saint Joseph Regional Health Care Systems is
necessary to allocate funds for a 36 month period to Creighton Saint Joseph Regional Health Care
Systems for operation of the Operation Bridge Employee Assistance Program. On December 12,
1995 by Resolution No. 3394,the City Council approved the Enterprise Community Memorandum
of Agreement and Stakeholders'Tool Kit with Benchmarks and Timelines,which budgeted$280,250
to Operation Bridge, an affiliate of Creighton Saint Joseph Regional Health Care Systems, for the
purpose of operating the Employee Assistance Program. Since the final Social Service Block Grant
amount of $2,947,368 differs slightly from the anticipated $2,950,000 entitlement amount, the
Operation Bridge, an affiliate of Creighton Saint Joseph Regional Health Care Systems Grant has
been reduced by $250 to $280,000.
Section 2. The Mayor is hereby authorized to execute and the City Clerk attest the
Agreement attached hereto between the City of Omaha and Creighton Saint Joseph Regional Health
Care Systems.
Section 3. This Ordinance,not being of legislative character, shall be in full force and take
effect immediately upon passage under and by virtue of the authority granted by Section 2.12 of the
Home Rule Charter of the City of Omaha, 1956, as amended.
INTRODUCED BY COUNCILMEMBER
r `d•-a04-7, APPROVED BY:
ING /4/,he
AYOR OF THE Y OF OMAfIX
PASSED OCT 1 1996 -/
ATTEST: APPROVED AS TO FORM:
01
OF THE OMAHA AlSr TANT C TY ATTORNEY
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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
Creighton Saint Joseph Regional HealthCare System,L.L.C.,a Delaware limited liability company,
doing business as Saint Joseph Center for Mental Health, doing business as Operation Bridge,
(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, on June 20, 1994, based upon its application, the City of Omaha received
Enterprise Zone designation from the State of Nebraska; and,
WHEREAS,on December 20, 1994,based upon its application,the City of Omaha received
enterprise community designation from the United States Department of Housing and Urban
Development; and
WHEREAS, on February 1, 1994, the City of Omaha pursuant to Section 13-2109 R.S.
Supp., 1994, appointed an Enterprise Zone Association Board; and,
WHEREAS,pursuant to such applications and statute it is the duty of such Board to promote
the Enterprise Zone to outside groups and individuals,establish a formal line of communication with
el
residents and businesses in the Enterprise Zone, act as a liaison between residents, businesses, and
the City for development activity that may effect the Enterprise Zone or Zone residents, compile
periodic Enterprise Zone and Enterprise Community status reports for the City, plan, recommend
and encourage the coordination of development activities and make recommendations; and,
WHEREAS,on December 12, 1995,by Resolution No. 3394,the City Council approved the
Enterprise Community Memorandum of Agreement and Stakeholders'Toolkit with Benchmarks and
Timelines which allocated$280,250 to Operation Bridge, an affiliate of the Creighton Saint Joseph
Regional HealthCare System,L.L.C., in Omaha,Nebraska,for the purpose of offering an Employee
Assistance Program to businesses in the Enterprise Community; and,
WHEREAS, since the final Enterprise Community Social Service Block Grant amount of
$2,947,368 differs slightly from the anticipated $2,950,000 grant amount, minor reductions have
been made to each sub-recipient's grant amount; and,
WHEREAS, on April 1, 1996, the Enterprise Zone Association Board recommended
approval of funding in the amount of$280,000 to Operation Bridge, an affiliate of the Creighton St.
Joseph Regional Health Care System, L.L.C. for the purpose of offering an Employee Assistance
Program to businesses in the Enterprise Community.
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 Creighton Saint Joseph Regional HealthCare System,L.L.C.,
doing business as Saint Joseph Center for Mental Health, doing business as Operation Bridge, to
provide funding in the amount of$280,000 for the provisions of the Operation Bridge Interactive
Leadership Employee Assistance Program for the Enterprise Community.
NOW, THEREFORE, in consideration of these mutual covenants, Operation Bridge and the
City of Omaha do hereby agree as follows:
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SECTION 1. DEFINITIONS -ABBREVIATIONS
1.1 "City" shall mean-the City of Omaha, a Nebraska Municipal Corporation.
1.2 "Contractor" shall mean - Creighton Saint Joseph Regional HealthCare Systems, L.L.C.,
doing business as Saint Joseph Center for Mental Health, doing business as Operation
Bridge, 32 Loockerman Square, Suite L-100, Dover, County of Kent, Delaware, 19901, a
limited liability company. (See Exhibit "A")
1.3 "Director" shall mean-the Planning Department Director of the City of Omaha.
1.4 "Enterprise Community" shall mean-the area of Omaha designated by the U.S. Department
of H.U.D. as an enterprise community, shown on the map in Exhibit "B".
1.5 "Recipient" shall mean-the City of Omaha.
1.6 "Subrecipient" shall mean- a public or private nonprofit agency, authority or organization
receiving SSBG funds to undertake eligible activities. In this Agreement,the Subrecipient
is the Operation Bridge.
1.7 "Social Service Block Grants (SSBG)" - shall mean the program administered by the City
of Omaha and funded under the Empowerment Zones/Enterprise Communities program of
the Omnibus Budget Reconciliation Act of 1993. The program purpose is to empower
American communities to create jobs and opportunity,take effective action to solve difficult
and pressing economic,human,physical and community development challenges of today,
and to build for tomorrow as part of a Federal-State-Local and private sector partnership in
accordance with Federal Regulations in 45 CFR Part 96 Subpart C (Exhibit C) and the
program objectives,priorities, and strategies as stated in the Omaha Enterprise Community
Application.
1.9 "SSBG Funds" shall mean-the portion of the Social Service Block Grant program awarded
to the City as may be available during Program year 1996, 1997 and 1998 for the use
specified herein, in an amount not to exceed $280,000 subject to the terms, conditions, and
requirements of said Grant.
1.10 "Grant" shall mean-non-repayable SSBG funds made subject to the terms, conditions and
provisions of the grant agreement under which said grant is made.
1.11 "Facility" shall mean - the Operation Bridge, 1941 South 42nd Street, Suite 122, Omaha,
Nebraska 68105-2942.
1.12 "Operation Bridge" shall mean-the agency located at 1941 South 42nd Street, Suite 122,
Omaha, NE 68105-2942, affiliated with Creighton Saint Joseph Regional HealthCare
System, L.L.C. providing mental health care services in Omaha,Nebraska.
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1.13 "Program Income" shall mean - gross income received by the Recipient or Subrecipient
directly generated from the use of SSBG funds. When such income is generated by an
activity that is only partially assisted with SSBG funds, the income shall be prorated to
reflect the percentage of SSBG funds used. (See Exhibit "D".)
1.14 "Enterprise Zone Association Board" shall mean-the board appointed by the City of Omaha
pursuant to Section 13-2109 R.S. Supp., 1994 and as specified in the application for
enterprise zone designation submitted to the State of Nebraska and in the application for
enterprise community designation submitted to the United States Department of Housing and
Urban Development.
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 $280,250 in SSBG funds, Fund No. 188, in the form of a grant for the
purposes set forth in this Agreement, and as detailed in Exhibit "E" 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 SSBG 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 budget items. Payments shall be
made on the basis of monthly requests for payment and shall be reimbursements for
actual expenditures. The budget is identified as Exhibit "F".
2.1.3 Monthly billing will be submitted to the Director by Operation Bridge. The monthly
billing is due no later than fifteen(15)days following each monthly reporting period.
2.3 The City shall review(1) and monitor the required quarterly progress reports that identify
the progress/ accomplishments of Operation Bridge on the activities included in this
Agreement and on contractors entered into with third parties pursuant thereto and (2) the
recommendations of the Enterprise Zone Association Board concerning such quarterly
progress reports. Quarterly progress reports are due no later than fifteen(15)days following
each quarterly reporting period.
2.4 The City shall prepare monthly payment vouchers for Operation Bridge, based upon the
Contractor's quarterly progress report and monthly request for payment.
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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 purposes set
forth in this Agreement, and as detailed in Exhibit "E", Scope of Work.
3.2 The Contractor shall provide services for clients as required in the scope of work as attached
hereto. (See Exhibit "E".) Clients shall be in accordance with the Scope of Work. (See
Exhibit "B".)
3.3 The Contractor shall submit quarterly progress reports to the Director and the Enterprise
Zone Association Board delineating the Operation Bridge accomplishments for the previous
90 day period on specific activities approved by the City Planning Department. (See Exhibit
"E".) This quarterly progress report shall be due no later than fifteen (15) days following
each quarterly reporting period.
3.4 The Contractor shall submit monthly financial reports (income statements)to the Director
delineating the revenue and line item expenditures for Operation Bridge. In addition, a
monthly check register is to be submitted listing each expenditure by check number, payee,
date, and amount for all expenditures for which reimbursement is requested. These reports
shall include all program income.
3.5 The Contractor shall have an annual audit completed in compliance with OMB Circular A-
133. A copy of the audit shall be provided to the Director. OMB Circular A-133 is attached
as Exhibit "G".
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 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.
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3.9 Any program income received will be applied to the support of this Interactive Leadership
Employee Assistance Program.
3.10 The Contractor shall comply with all requirements and acknowledges, by execution of this
Agreement,receipt of Department of Health and Human Services Regulations 45 CFR Part
96 Subpart C.
3.11 The Contractor shall acquire bonding for the amount of$50,000 for the Board of Directors,
officers and employees entrusted with the handling of funds pursuant to this Agreement.
SECTION 4. TERM OF THE AGREEMENT
This Agreement shall be in full force and effect and will continue for a period of 36 months
from the time of favorable consideration by the City Council of the City of Omaha and execution
by the Mayor. Annual reports identifying the progress/accomplishments of Operation Bridge shall
be submitted to the City of Omaha and the Enterprise Zone Association Board throughout the terms
of the City's Enterprise Zone (State of Nebraska) and Enterprise Community (U.S. Department of
Housing and Urban Development) designations.
SECTION 5. PROVISIONS OF THE AGREEMENT
5.1 Equal Employment Opportunity Section 3 Clause. Attached hereto as Exhibits "H" and "I",
and made a part hereof by this reference, are the equal employment provisions of this
Agreement.
5.2 Non-Discrimination. The Contractor shall not, in the performance of this Agreement,
discriminate or permit discrimination in violation of federal or state laws or local ordinances
because of race, color, handicap, familial status, sex, age, political or religious opinions,
affiliations or national origin.
5.3 Captions. Captions used in this Agreement are for convenience and are not used in the
construction of this Agreement.
5.4 Applicable Law. Parties to this Agreement shall conform with all existing and applicable
City ordinances, resolutions, state laws, federal laws, and all existing and applicable rules
and regulations. Nebraska law will govern the terms and the performance under this
Agreement.
5.5 Interest of the City. Pursuant to Section 8.05 of the Home Rule Charter, no elected official
or any officer or employee of the City shall have a financial interest, direct or indirect,in any
City agreement. Any violation of this section with the knowledge of the person or
corporation contracting with the City shall render the Agreement voidable by the Mayor or
Council.
5.6 Merger. This Agreement shall not be merged into any other oral or written agreement, lease
or deed of any type.
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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 10-1423 of the Omaha Municipal Code.
5.8 Assignment. The Contractor may not assign its rights or obligations under this Agreement
without the express prior written consent of the City.
5.9 Strict Compliance. All provisions of this Agreement and each and every document that shall
be attached shall be strictly complied with as written, and no substitution or change shall be
made except upon written direction from authorized representatives of the parties.
5.10 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 parry'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"J"). Upon termination of this Agreement all funds and interest in any
account hereunder shall become the property of the City and shall be returned to the City.
5.11 Indemnification. The Contractor shall indemnify and hold the City harmless from and
against: (1)any and all claims arising from contracts between the Contractor and third parties
made to effectuate the purposes of this Agreement; and(2) any and all claims, liabilities or
damages arising from the preparation or presentation of any of the work covered by this
Agreement.
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
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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 subcontractors, subgrants, and contracts under
grants,loans,and cooperative agreements)and that all subrecipients shall certify and
disclose accordingly.
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 "K"), and
with the requirements of Attachments A, B, C, F, H, N and 0 to OMB Circular A-110
(Exhibit "L")
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 45 CFR Part
96 Subpart C (Exhibit C), and in Subpart K of the CDBG Program Entitlement Grant
Regulations Handbook 6500 (Exhibit "M").
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.
SECTION 7. 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
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(2) Operation Bridge
Toby Taubenheim
Executive Director
122 Applewood Mall
Omaha,NE 68105
IN WITNESS WHEREOF,the parties have executed this Agreement as of the date indicated
below.
ATTEST: CITY OF ,a Municipal Corporation
C CLERK O E CITY OF OMAHA YOR OF TH Y OF OMA
l .
Date
WITNESS: CREIGHTON SAINT JOSEPH REGIONAL
HEALTHCARE SYSTEM
kt.oVC
MATT KURS, CEO
l - -7 -- j Q 4, Saint Joseph Center for Mental Health
Date and Saint Joseph Hospital
APPROVED AS TO FORM:
a
ASSISTA CITY ATTORNEY
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SCHEDULE OF EXHIBITS
Exhibit Location Description
A 1.2 Articles of Incorporation, Corporate Resolution
B 1.4 & 3.2 Enterprise Community Map
C 1.7, 3.10, 5.17 45 CFR Part 96 Subpart C
D 1.12 Definition- Program Income
E 2.1, 3.1, 3.2, 3.3 Scope of Work and Reporting Requirements
F 2.1.2 Budget
G 3.5 OMB Circular No. A-133
H 5.1 Equal Employment Opportunity Clause
I 5.1 Affirmative Action Plan
J 5.10 Termination - CFR 85.43 and CFR 85.44
K 5.16 OMB Circular No. A-122
L 5.16 OMB Circular No.A-110,Attachments A,B,C,F,H,
N, O
M 3.10, 5.17 Subpart K of the CDBG Program
Entitlement Grant Regulations Handbook 6500
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ACTION nv WRITTEN CONSbNT OF
C'' ICHTON SAINT JOSEPH RECIONAI,R'F:ALTRrARJ AVOTEM®,Li-C.
I do hereby certify that I am a duly.elected officer of-Creighton Saint Joseph Ft „ of al
Healthcare Syste s, L.L.e., a Delaware limited liability company, (the"Company")authorized
to do bwineze in the-State of Nobrraka, and that tL•e-failu iag is a copy otthe-Rcsolution
adopted by written cons t of sai organization, effective November 9, 1995: 1'
WHEREAS, Co any and,its affiLates are committed to providing an array of'Lumen
and social servile for the Omaha Community;
I �f • ,
AREAS, Com desires to offer its Employee Assistance Program to businesses in
the Entc.ptise Community; ,:,,
WHEREAS, Company and Enterptise Community Association desire to enter into an
agreomc::for Company's Employee Assistance Program;
r
AREAS, Company's services gill be available to employees of participating
businesses to addrece-eubatanoc abuse,problem ga ibling,-uotio e -menlaldfsorders,
sociological and medical traumas,as well as multi-cultural diversity problems that impaot the
work fors.: and social living; and
W IEREAS, Company will participate in the Enterprise Community Job Pool/Employer
Pool by establishing service agreements with individ s from the Enterprise Community area.
Theso sc•v�ce agreements will provide employees of a participating businesses with access to
v,"c.c the ser of the Interactive Leadership Employee ssistance Program.
NOW, THEREFORE BE IT RESOLVED, that the Company does hereby agree to
enter into an Agreement with the City of Omaha to provide services to Enterprise Community
Social Sevices.
BL'IT FURTHER RESOLVED,that the Board President and all Officers of the
Company rc hereby authorized to take all such actions, including the execution of an AL-moment
and any s,::arity documents in favor of the City of Omaha and Enterprise Community Social
Services, a.z shall be necessary or appropriate to carry out the plupose and intent of this
Resolutic ,.
1 (.1 hereby further certify that since the adoption of said Resolution, it has neitho been
revoked r;,;.y.-amended; and
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I do hereby further certify that the following individuals have been duly elected or
appointed as the executive committee members of the L.L.C. and currently hold such positions as
of the date signed.
Father Michael Morrison
David W. Layne
Thomas Mackey
Neil Sorrentino
Signed this day of_Zo`re^h e , 1995.
_.
David W.Layne
Secretary
Father Michael Morrison
Th mull Mackey
Neil Sorrentino
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United States of.erica, a,�, _ _. , ,"' . .F 'i Departanent of State
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State of Nebraska. � ��
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I, Ott Moore, Secretary of State of the State of Nebraska do hereby
ceQ'w y',
the attached Is a true and correct copy of the Certificate of Authority
in tktx;State of Nebraska for
CRs 1GHTON SAINT JOSEPH REGIONAL HEALTHCARE
SY ''rEM, L.L.C.
a Dziaware limited liability company, as filed and recorded
in t11 offi
ce on February 28, 1905.
: fi;I:iyi'aer certify that said limited liabilitycompany is hereby
out ort to Monad'busfucesin th4 S oi-Ncbraakaa.
.,`
In Testimony Whereof, I have hereunto set my hand end
Oxed the Great Seal of the State
f Nebraaaka on February 28
in the year of our Lord, one thoussi J
/• nine hundred and ninety-five.
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CRETIFICATZ 91?202141ATION
=ISIGHTON SAINT JOSEPH I= AL IJEALTSCARE SYSTEM, L.L.12.
'Lzia untidiest@ of Ponnadon or - "'I" Seint-lueoph Regional llegthCiay. -484.11B1,
L.L.C. (the "ILO% dated Pebruary 1, 1995 ia bang duly executed and filed by ParIck J. .
Straka,51 an authorized person,to form a •• • company under the Delaware Limited
LiabW Company Act(6 neLc. 1 18-101, -}
MST. The name of the limited liab ,s company formed hereby is Creightoa Saint
Joseph Regional EleakhC.sre System, L.L.C.
SECOND. Tee address of the .: office of the LLC in the SUN of Delaware is
32 Lc WCIS" MU%Squam, Suite 1,1001 Dover, • '''N of Kot, Delaware 19901.
' flUBD. The name and address of dte • - • agent for service of process on the LLC
in the State of Delaware ii do The — • - aU Co/potation System. Inc., 32 Levckstman
Squinti, Butte 1.400, Dover. County of Warn. Delaware 19901.
POUR121. The affairs of the LLC be goyesrucd by Delaware kw and by ae terms
of the ()legating agreement entered into by t recwbea of the LLC.
nst virrNEss WHEREOF, the n rIgoM has'executed this Certificate ofFormation
as of tio,3 date !tit above written.
Names Patrick J. Straka
\Col'
,12-05-1,995 08:02 --- P:,05
Creighton Saint Joseph Regional IiealthCare Syatzrz, L.L.0
Executive Committee
Thomas B. Mackey Chairman
Neil M. Sorrentino •
David W. Layne Sccretury
Father Michael J. Morrison
•
Q► are ration
kige
IIP
MAIN OFFICE
1941 Sou-rH 42ND STREET,SurmE 122
OMAHA.NEBRASKA 68105-2942
PH 402-346-7100
Fax 402-346-7908
WESTN R OMAHA
January 4, 1996
14748 WEST CENTER ROAD
OMAHA,NEBRASKA 68144
Enterprise CommunityZone BELLEVE
1309 HARLAN DRIVE
Ms. Marion Todd BELLEVUE,NEBRASKA 68005
Dear Ms. Todd,
This letter is clarify for you that an agreement between the Enterprise Community Zone
and Operation Bridge will be signed and authorized by Matt Kurs, CEO, Saint Joseph
Center for Mental Health and Saint Joseph Hospital.
Sincerely,
e (c)... Ictilitsclszv.:,,....)
Toby Taubenheim
Executive Director
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IN AFFILIATION WITH SAINT JOSEPH MENTAL HEALTH SERVICE SYSTEM
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:;; EXHIBYT' D
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) Cross 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
orpart of the CDBGportion 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.
APR nR '96 OS:56,I1 OMAHA CITY PLANNING • P.3i=i
•
EXHIBIT E
OPERATION BRIDGE, INC.
•
INTERACTIVE LEADERSHIP EMPLOYEE ASSISTANCE PROGRAM
Enterprise Community Social Service Block Grant
Contact: Betty Nelum (346-7100)
Grant Amount: $2$0,000
Budgeted Term: 3 Years
Sco_pe of Work
Operation Bridge, Inc. shall offer its Employee Assistance Program to businesses in the Enterprise
Community or businesses where at least 50% of their employees reside in the Enterprise
Community with the goal of servicing 18 companies per year with an average of 40 employees
each. Operation Bridge, Inc. plans a five percent increase in jobs created each year as a direct
result of their efforts. The annual projection for the number of jobs created is 36 per year resulting
in 108 new positions during the three-year budget term or 360 new positions during the entire ten-
year program.
Services will be available to employees of participating businesses to address substance abuse,
problem gambling, emotional and mental disorders, sociological and medical traumas, as well as
multi-cultural diversity problems that impact the work force and social living.
The EAP goal is to increase job retention and productivity levels, reduce absenteeism and "sick"
time resulting in lower medical costs, improved business profitability and overall quality, thereby
positioning the businesses for expansion and job creation.
•
The program will help employees develop leadership as well as survival skills and plan career
advancement opportunities in addition to raising the employer's awareness and sensitivity to multi-
cultural diversity problems.
A comparable Student Assistance Program shall be available for schools located in the Enterprise
Community.
Operation Bridge, Inc. will accomplish the objectives of this program by:
• distributing informational materials to at least 75 EC businesses each year.
• making presentations to at least 50 businesses and/or business associations each year.
• developing and providing informational brochures and posters for businesses to share with
employees featuring the Employee Assistance Program and listing the additional Services
available to people in the Enterprise Community.
• adding 1.5 additional staff positions for the Enterprise Community Employee Assistance
Program.
• providing initial client interviews at no charge to employers.
• providing client services with flexible sliding scale fees based on financial need.
•
"n L
• providing services to approximately 1,500 clients annually.
• providing training and consulting services including multi-cultural diversity training for
supervisory personnel.
• documenting activities and maintaining appropriate records including efforts to purchase
supplies and services from businesses located within the Enterprise Community.
• building the overall program to be perpetually self-sustaining from client fees and other sources
after the SSBG three-year funding period.
Operation Bridge, Inc. shall expand their services by initiating and/or collaborating and/or
participating in programs relating to job preparedness,job training,job creation and job linking for
Enterprise Community residents and employers.
Operation Bridge. Inc. shall submit quarterly reports to the Enterprise Zone Coordinator for the
entire term of the Enterprise Community federal designation not later than 15 days following the
end of each quarter.
° The quarterly reports shall include:
• the number and type of presentations.
• the number of individuals at each presentation
• the number and type of informational pieces distributed and method of distribution along with a
general description of the recipients.
•
the number and content of service agreements established includingnames of businesses and
the number of employees.
•
• the number and types of services provided at each business, planned results and
implementation timetable.
• the specific description of newly created employers names andpayranges.
P P jobsincluding P ..
•
The. preceding Scope of Work is a true and accurate description of the goals and objectives of the _.
•
Interactive Leadershi Employee to yee Assistance Program to be included as Exhibit "E" in the
p P l c
forthcoming agreement.
•
Vic . Q U ir}l it g / y
•'ame,'�V Title Date/
Name Title Date
' .1. EXHIBIT F
Operation Bridge
Budget
Source of Funds Months 1-12 Months 13-24 Months 25-36 Total.
EZ SSBG 93,700 93,798 92,502 280,000
Client Fees 1,500 10,000 18,000 29,500
Total Income 95,200 103,798 110,502 309,500
Use of Funds Months 1-12 Months 13-24 Months 25-36 Total
1 FTE Counselor 29,120 29,993 30,893 90,006
Benefits 4,863 5,008 5,159 15,030
.66 FTE Sup/Counselor 27,500 27,910 28,330 83,740
Benefits 3,473 3,525 3,578 10,576
Telephone 1,500 1,500 1,500 4,500
Office Supply 1,400 1,400 1,000 3,800
Evaluation/Testing 5,800 5,800 5,800 17,400
Pre Employ Testing 7,500 7,118 4,698 19,316
Travel 800 800 800 2,400
Rent 6,300 6,300 6,300 18,900
Print/Mat/Training 2,000 1,000 1,000 4,000
Clerical/Admin 2,250 2,250 2,250 6,750
Postage/Fax 1,200 1,200 1,200 3,600
Reserve for Program
Continuation 1,494 9,994 17,994 29,482
Total Expenses 95,200 103,798 110,502 309,500
( S 1
14,
I
•E.XECLITTVE OFFICE.'OF ThE PRESIDENT EXHIBIT'
OFF,CE c MANAGEMENT'AND BUDGET
WAS}NGTON.D.C.2 .0.3
March 8 , 1990
• OMB Circular No.• A-133
TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Audits of Institutions of Higher Education and Other
Nonprofit Institutions
1. guroase. Circular A-133 establishes audit requirements and .
defines Federal responsibilities for implementing and monitoring
• such requirements for institutions of higher education and other
nonprofit institutions, receiving Federal awards.
2. . Authority. Circular A-133 is issued under the authority of
. the Budget and Accounting Act of 1921, as amended; the Budget and
Accounting Procedures Act of 1950, as amended; Reorganization
Plan No. 2 of '1970; and Executive Order No. 11541.
4
3. §upersession. Circular A-133 supersedes Attachment F,
subparagraph 2h, of Circular A-110, "Uniform Administrative
Requirements for Grants and other Agreements with Institutions of
Higher Education, Hospitals, and other Nonprofit Organizations. "
4. Applicability. The provisions of Circular A-133 apply to:
a. Federal departments and agencies responsible for
administering programs that involve grants, cost-type contracts
and other agreements with institutions of higher education and
other nonprofit recipients.
b. Nonprofit institutions, whether they are recipients,
receiving awards directly from Federal agencies, or are sub-
recipients, receiving awards indirectly through other recipients.
These principles, to the extent permitted by law, constitute
• guidance to be applied by agencies- consistent with and within the
discretion, conferred by the statutes governing agency action.
5. gequirements and Responsibilities.
•
The specific requirements and responsibilities of Federal
departments and agencies and institutions of higher education and
other nonprofit institutions are sat forth in the attachment. •
6. Effective Date. The provisions of Circular A-133 are
effective upon publication and shall apply to audits of nonprofit
institutions for fiscal years that begin on or after January 1,
) 1990. Earlier implementation is encouraged. However, until this
Circular.-is implemented, the audit provisions of Attachment F to
Circular A-110 shall continue to be observed.
7. policy Review (sunset] Date. Circular A-133 will have a
policy review three years from the date of issuance.
8. • Zpcniries. Further information concerning Circular A-133
may be obtained by contacting the Financial Management Division,
Office .of Management and Budget, Washington, D.C. 20503,
telephone (202) 395-39.93.
•
10�� �
Richard G. Darman
Director
•
•
•
•
•
•
•
•
•
•
•
C2d CIRCULAR A-133
AZDITS OF INS lIVTLONS OF EICHER EDUCATION
1 _ AHD OTT R NONPROFIT INSTITuT10NS
1. Definitions. Fcr the purposes of this Circular, the
following definitions apply:
a. "Award" means financial assistance, and Federal
cost-type contracts used to buy services or goods for the use of
the Federal Government. It includes awards received directly
from the Federal agencies or indirectly through recipients. It
does not include procurement contracts to vendors under grants or
contracts, used to buy goods or services. Audits of such vendors
shall be covered by the terms and conditions of the contract.
b. "Cognizant agency" means the Federal agency assigned by
andout the
Budgetto
the Office o_ Management carry
responsibilities described in paragraph 3 of this Attachment.
c. "Coordinated audit approach" means an audit wherein the
independent auditor, and other Federal and non-federal auditors
consider each other's work, in deter ining the nature, timing,
and extent of his or her own auditing procedures. A coordinated
audit must be conducted in accordance with Government Auditing
• tandards and meet the objectives and reporting requirements set
forth in paragraph 12 (b) and 15, respectively, of this
Attachment. The objective of the coordinated audit approach is
to minimize duplication of audit effort, but not to limit the
scope of the audit work so as to preclude the independent auditor
frog meeting the objectives set forth in paragraph 12 (b) or
issuing the reports required in paragraph 15 in a timely manner.
d. "Federal agency" has the same meaning as the ter
'agency' in Section 551 (1) of Title 5, United States Code.
e. "Federal Financial Assistance."
(1) "Federal financial assistance" means assistance
provided by a Federal agency to a recipient or sub-recipient to
carry out a program. Such assistance may be in the form of:
-- grants;
-- contracts;
-- cooperative agreements;
-- loans;
-- loan guarantees;
• . -- property;
-- interest subsidies;
-- insurance;
• -- direct appropriations;
-- other non-cash assistance.
l l •l l l l
l • % l
(2) Such assistance does not include direct Federal
cash assistance to individuals.
(3) Such assistance includes awards received directly
from Federal agencies, or indirectly when subirecipiente receive
funds identified as Federal funds by recipients.
(4) The granting agency is responsible for identifying
the source of funds awarded to recipients; the recipient is
responsible for identifying the source of funds awarded to sub-
recipients.
f. "Generally accepted accounting principles" has the
meaning specified in the Government Auditinc Sandards.
g. "Independent auditor" means:
(1) A Federal, State, or local government auditor who
meets the standards specified in the rtmlimantAusliting
Standards; or
(2) A public accountant who meets such standards.
h. 'internal control structure" means the policies and .
• procedures established to provide reasonable assurance that:
(1) Resource. use is consistent with laws, regulations,
and award terms;
(2) Resources are safeguarded against waste, loss, and
misuse; and
(3) Reliable data are obtained, maintained, and fairly
disclosed in reports.
i. "Major program" means an individual award or a number
of awards in a category of Federal assistance or support for
which total expenditures are the larger. of .three percent of total
Federal funds expended or $100,000, on which the auditor will be
required to express an opinion .as to whether the major program is
being arly1ristered in compliance with laws and regulations.
Each of the following categories of Federal awards shall
constitute a major program where total expenditures are the
larger of three percent of total Federal funds expended or
$100, 000:
Research and Development.
- Student Financial Aid. .
2
• _ I
Individual awards not in the student aid Cr
research and development category.
j . "Management decision" means the evaluation by the
management of an establishment of the findings and
recommendations included in an audit report and the issuance of a
final decision by management concerning its response to such
findings and recommendations, including actions concluded to be
necessary.
k. "Nonprofit institution" 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. The term '
"nonprofit institutions" includes institutions of higher
education, except those institutions that are audited as part of
single audits in accordance with Circular A-128 "Audits of State
and Local Governments. " The term does not include hospitals
which are not affiliated with an institution of higher education,
or State and local governments and Indian tribes covered by
Circular A-128 +"Audits of State and Local Governments."
1. "Oversight" agency means the Federal agency that
provides the predominant amount of direct funding to a recipient
not assigned a cognizant agency, unless no direct funding is
received. Where there is no direct funding, the Federal agency
with the predominant indirect funding will assume the general
oversight responsibilities. The duties of the oversight agency
are described in paragraph 4 of this Attachment.
m. "Recipient" means an organization receiving financial
assistance to carry out a program directly from Federal agencies.
n. -"Research and development" includes all research
activities, both basic and applied, and all development
activities that are supported at universities, colleges, and
other nonprofit institutions. "Research" is defined as a
systematic study directed toward fuller scientific knowledge or
understanding of the subject studied. "Development" is the
systematic use of knowledge and understanding gained from
research directed toward the production of useful materials,
devices, systems, or methods, including design and development of
prototypes and processes.
o. "Student Financial Aid" includes those programs of
general student assistance in which institutions participate,
such as those authorized by Title IV of the Higher Education Act
of 1965 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 awards
3
•
to students on a competitive basis, er for specified studies or
research.
p. "Sib-recipient" means any person or government
department, agency, establishment, or nonprofit organization that
receives financial assistance to carry out a program through a
primary recipient or other sub-recipient, but does not include an
individual that is a beneficiary of such a program. A sub-
recipient may also be a direct recipient of Federal awards under
other agreements.
q. "Vendor" means an organization providing a recipient or
sub-recipient with generally required goods or services that are.
related to the administrative support of the Federal assistance
program.
2 . Audit of Ncnorof it Institutions. '
a. gecuirements wed- on Awards Received.
(1) Nonprofit institutions that receive $100,000 or
more a year in Federal awards shall have an audit made in
accordance with the provisions of this Circular. Boveve_r,
nonprofit institutions receiving $100, 000 or more but receiving
awards under only one program have the option of having an audit
of their institution prepared in accordance with the provisions.
of the Circular or having an audit made of the one program. For
prior or subsequent years, when an institution has only loan
guarantees or outstanding loans that were made previously, the
institution may be required to conduct audits for those programs,
in accordance with regulations of the Federal 'agencies providing
those guarantees or loans.
(2) Nonprofit institutions that receive at least
$25, 000 but less than $100,000 a year in Federal awards shall
have an audit made in accordance with this Circular or have an
audit made of each Federal award, in accordance with Federal laws
and regulations governing the programs in which they participate.
(3) Nonprofit institutions receiving less than $25,000
a year in Federal awards are exempt from Federal audit
requirements, but records must be available for review by
appropriate officials of the Federal grantor agency or
subgranting entity.
b. Oversight by Federal Agencies.
(1) To each of the larger nonprofit institutions the
Office of Management and Budget (OMB) will assign a Federal -
agency as the cognizant agency for monitoring audits and ensuring
} .. the resolution of audit findings that affect the programs of more
than one agency.
4
•
- (2) Smaller institutions not assigned a cognizant
agency will be under the general oversight of the Federal agency
that provides them with the most funds.
(3) Assignments to Federal cognizant agencies for
carrying out responsibilities in this section are set forth in a
separate supplement to this Circular.
(4) Federal Government-owned, contractor-operated
facilities at institutions or laboratories operated primarily for
the Government are not included in the cognizance assignments.
These will remain the responsibility of the contracting agencies.
The listed assignments cover all of the functions in this
Circular unless otherwise indicated. The Office of Management
and Budget will coordinate changes in agency assignments.
3 . Cacnizrnt Aaencv Res onsibil ities. A cognizant agency
shall:
a. Ensure that audits are made and reports are received in
a timely manner and in accordance with the requirements of this
Circular. 4
b. Provide technical advice and liaison to institutions
and independent auditors.
• c. Obtain or make quality control reviews of selected-
audits made by non-Federal audit organizations, and provide the
results, when appropriate, to other interested organizations.
d. Promptly inform other affected Federal agencies and
appropriate Federal law enforcement officials of any reported
illegal acts or irregularities. A cognizant agency should also
inform State or local law enforcement and prosecuting
authorities, if not advised by the recipient, of any violation of
law within their jurisdiction.
e. Advise the recipient of audits that have been found not
to have met the requirements set forth in this Circular. In such
instances, the recipient will work with the auditor to take
corrective action. If corrective action is not taken, the
cognizant agency shall notify the recipient and Federal awarding
agencies of the facts and make recommendations for follow-up
' action. Major inadequacies or repetitive substandard performance
of independent auditors shall be referred to appropriate
professional bodies for disciplinary action.
f. Coordinate, to the extent practicable, audits or
reviews made for Federal agencies that are in addition to the
audits made pursuant to this Circular, so that the additional
5
•
audits or reviews build upon audits performed in accordance with
the Circular.
g. Ensure the resolution of audit findings, that affect the
programs of more than one agency.
h. Seek the views of other interested agencies before
completing a coordinated program.
i. Help coordinate the audit work and reporting
responsibilities among independent public accountants, State
auditors, and.both resident and non-resident Federal auditors to
achieve the most cost-effective audit.
4 . Cversicht Acencv Responsibilities. An oversight agency
shall provide technical advice and counsel to institutions and
independent auditors when requested by the recipient. The
oversight .agency may assIIMe all or soma of the responsibilities
normally performed by a cognizant agency.
5. pecioient Responsibilities. A recipient that receives a
Federal award and provides $25,000 or more of it during its
fiscal year to a sub-recipient shall:
} a. Ensure that the nonprofit institution sub-recipients
that receive $25,000 or more have met the audit requirements- of
this Circular, and that sub-recipients subject to OMB Circular
A-128 have met the audit requirements of that Circular;
b. Ensure that appropriate corrective action is taken
within six months after receipt of the sub-recipient audit report
in instances of noncompliance with Federal laws and regulations;
c. Consider whether sub-recipient audits necessitate
adjustment of the recipient's own records; and
d. Require each sub-recipient to permit independent
• auditors to have access to the records and financial statements
as necessary for the recipient to comply with this Circular.
• 6. pelatJ,cn to Queer Ai 4it Requirement.
•
a. An audit made in accordance with this Circular shall be
in lieu of any financial audit required under individual Federal
awards. To the extent that an audit made in accordance with this
Circular provides Federal agencies with the information and
assurances they need to carry out their overall responsibilities,
they shall rely upon and use such information. However, a
Federal agency shall make any additional audits or reviews
necessary to carry out responsibilities under Federal law and
regulation. Any additional Federal audits or reviews shall be
6
planned and carried out in such a way as to build upon work
performed by the independent auditor.
b. Audit planning by Federal audit agencies should
consider the extant to which reliance can be placed upon work
performed by other auditors. Such auditors include State, local,
Federal, and other independent auditors, and a recipient's
internal auditors. Reliance placed upon the work of other
auditors should be documented and. in accordance with.Government
Auditing .Standards.
c. The provisions of this Circular do not limit the
authority of Federal agencies to rake or contract for audits and
evaluations of Federal awards, nor do they limit the authority of '
any Federal agency Inspector General or other Federal official.
d. The provisions of this Circular do not authorize any
institution or sub-recipient thereof to constrain Federal
agencies, in any manner, from carrying out additional audits,
evaluation or reviews.
e. A Federal agency. that makes or contracts for audits, in
addition to the audits made by recipients pursuant to this
Circular, shall, consistent with other applicable laws and
regulations, arrange for funding the cost of such additional
audits. Such additional audits or reviews include financial,
performance audits and program evaluations.
7. preauencv of Audi. Audits shall usually be performed
annually but not less frequently than every two years.
8 . ganctions. No audit costs may be charged to Federal awards
when audits required by this Circular have not been made or have
been made but not in accordance with this Circular. In cases of
continued inability or unwillingness to have a proper audit in
accordance with the Circular, Federal agencies must consider
appropriate sanctions including:
-- withholding a percentage of awards until the audit is
• completed satisfactorily;
-- withholding or disallowing overhead costs; or
_- suspending Federal awards until the audit is made.
9 . Audit Costs. The cost of audits made in accordance with the
provisions of this Circular are allowable charges to Federal
• awards. The charges may be considered a direct cost or an
allocated indirect cost, determined in accordance with the
provisions of Circular A-21, "Cost Principles for Universities"
or Circular A-122, "Cost Principles for Nonprofit Organizations,
7
r .
1 ,
•
FAR subpart 31, or other applicable cost principles or
regulations.
10. Auditor Selection. In arranging for audit services
institutions shall follow the procurement standards prescribed by .
Circular A-llo, "Uniform Requirements for Grants and Agreements
with Institutions of Higher Education, Hospitals and other
Nonprofit Organizations. "
11. Small and Minority Audit Firms.
a. Small audit firms and audit firms owned and controlled
by socially and economically disadvantaged individuals shall have
the maximum practicable opportunity to participate in contracts
awarded to fulfill the requirements of this Circular.
b. Recipients of Federal awards shall take the following -
steps to further this goal:
•
(1) Ensure that small audit firms and audit firms
owned and controlled by socially and economically disadvantaged
individuals are used to the fullest extant practicable;
(2) Make information on forthcoming opportunities
available and arrange timefraaes for the audit to encourage and
facilitate participation by small audit firms and audit firms
• owned and controlled by socially and economically disadvantaged
individuals;
(3) Consider in the contract process whether firms
competing for larger audits intend to subconttact with small
audit firms and audit firms owned and controlled by socially and
economically disadvantaged individuals;
(4) Encourage contracting with small audit firms or
audit firms owned and controlled by socially and economically
disadvantaged individuals which have traditionally audited
government programs and in cases where this is not possible,
assure that these firms are given consideration for audit
• subcontracting opportunities;
.. (5) Encourage contracting with consortiums of small
audit firms as described in section (1) , above, when a contract
is too large for an individual small audit firm or audit firm
owned and controlled by socially and economically disadvantaged
individuals; and
(6) ' Use the services and assistance, as appropriate,
of such organizations as the Small Business Administration in the
solicitation and utilization of small audit firms or audit firms
1 owned and controlled by socially and economically disadvantaged
individuals.
8
12. ,4co3 4 Qf Audit and Audit 4b1 ect iveg.
a. The audit shall be made by an independent auditor in
accordance with Goverment Auditing Standards developed -by the
Comptroller General of the United States covering financial
audits. An audit under this Circular should be an
organization-wide audit of the institution. However, there may
be instances where Federal. auditors are performing audits or are
planning to perform audits at nonprofit institutions. In these
cases, to minimize duplication of audit work, a coordinated audit
approach may be agreed upon between the independent auditor, .the
recipient and the cognizant agency or the oversight agency.
Those auditors who assume responsibility for any or all of the •
reports called for by paragraph 15 should follow guidance set
forth in Gcverament Auditincdar-.s in using work performed by
i
O hers.
b. The auditor shall determine whether:
(1) . The financial statements of the institution
present fairly its financial position and the results cf its
operations in Accordance with generally accepted accounting
principles;
(2) The institution has an internal control structure
. to provide reasonable assurance that the institution is managing
Federal awards in compliance with applicable laws and
regulations, and controls that ensure compliance with the laws
and regulations that could have a material impact on the
financial statements; and
(3) The institution has complied with laws and
regulations that may have a direct and material effect on its
financial statement amounts and on each major Federal program.
13 . Internal Controls Over Federal Awards; Compliance Reviews.
a. yam. The independent auditor shall determine and
report on whether the recipient has an internal control structure
' to provide reasonable assurance that it is managing Federal
awards in compliance with applicable laws, regulations, and
contract terms, and that it safeguards Federal funds. In
performing these reviews, independent auditors should rely upon
work performed by a recipient's internal auditors to the maximum
extent possible. The extent of such reliance should be based
upon the Government Auditing Standards.
b. internal Control. Review.
(1) In order to provide this assurance on internal
controls, the auditor must obtain an understanding of the
9
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internal -control structure and assess levels of internal control
risk. Attar obtaining an understanding of the controls, the
assessment must be made whether or not the auditor intends to
place reliance on the internal control structure.
•
(2) As part of this review, the auditor shall:
(a) Perform tests of controls to evaluate the
effectiveness of the design and operation of the policies and
procedures in preventing or detecting material noncompliance.
Tests of controls will not be required for those areas where the
internal control structure policies and procedures are likely to
be ineffective in preventing or detecting noncompliance, in which
case a reportable condition or a material weakness should be
reported in accordance with paragraph 15 c(2) of this Circular.
(b) Review the recipient's system for monitoring
sub-recipients and obtaining and acting cn sub-recipient Audit
reports.
•
(c) Determine whether controls are in effect to
ensure direct. and indirect costs were computed. and billed in
accordance with the guidance provided in the general requirements
section of the compliance supplement to this Circular.
c. Compliance Review.
11) The auditor shall determine whether the recipient
has complied with laws and regulations that may have a direct and
material effect an any of its major Federal programs. In
addition, transactions selected for non-major programs shall be
tested for compliance with Federal laws and regulations that
apply to such transactions.
(2) in order to determine- which major programs are to
be tested for compliance, recipients shall identify, in their
accounts, all Federal funds received and expended and the
programs under which they ware received, This :01,01 include
funds received directly from Federal agencies, through other
State and local governments or other recipients. To assist
recipients in identifying Federal awards, Federal agencies and
primary recipients shall provide the Catalog of Fede;al Domestic
• A_ssist3*:cc (CFDA) numbers to the recipients when making the
awards.
(3) The review must include the selection of an
adequate number of transactions fro= each major Federal financial
assistance program so that the auditor obtains sufficient
evidence to support the opinion on compliance required by
paragraph 15c(3) of this Attachment. The selection and testing
1 of transactions shall be based on the auditors' professional
judgment considering such factors as the amount of expenditures
10
1.
for the program; the newness of 'the program or changes in its
conditions; prior experience with the program particularly as
revealed-in audits and other evaluations (e. .,, inspections,
program reviews, or system reviews required by Federal
Acquisitiots.Regulations) ; the extant to which the program is-
carried cut through sub-recipients; the extant to which the
program contracts for goods or services; the level to which the
program is already subject to program reviews or other forms of
independent oversight the -adequacy of -the controls for ensuring
compliance; the expectation of adherence or lack of adherence to
the applicable laws and regulations; and the potential impact of
adverse findings.
(4) In making the test of transactions, the auditor
. shall determine whether: •
•
-- the amounts reported as expenditures were for
allowable services, and
• -- the records show that those who received
services or benefite were eligible to receive
thee.
(5) 'In addition to transaction tasting, the auditor-
shall determine whether:
matching requirements, levels of effort and
earmarking limitations were met,
Federal financial reports and claims for
advances and reimbursement contain
information that is supported by books and
records from which the basic financial
statements have been prepared, and
•
-- amounts claimed or used for matching were
determined in accordance with 1) OMB Circular.
A-21, "Cost Principles -for Educational
Institutions"; 2) matching or cost sharing
requirements in Circular A-110, *Uniform
• Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals
and Other Nonprofit organizations"; 3)
Circular A-122, "Cost. Principles for
Nonprofit organizations"; 4) FAR subpart 31
cost principles ; and ,5) other applicable cost
principles or regulations.
(6) The principal compliance requirements of the
largest Federal programs may be ascertained by referring to the
"Compliance Suoolement for Simla Audits. of Educational
N Institutions and Other Nonprofit oraanizationa," and the
11
•
"��liance Su lement for Sina�e Audit4 of state and Local
Governments," issued by OMB and available from the Government
Printing Office. For those programs not covered in the
Compliance Supplements, the auditor should ascertain compliance
requirements by reviewing the statutes, regulations, and
agreements governing individual programa.
(7) Transactions related to other awards that are
selected in connection with examinations of financial statements
and evaluations of internal controls shall be tested for
compliance with Federal laws and regulations that apply to such
transactions.
14 . I/legal Acts. If, during or in connection with the audit of
a nonprofit institution, the auditor becomes aware of illegal
acts, such acts shall be reported in accordance with the
provisions of the Goverment Auditing Standards.
15. Audit gemorts.
a. Audit reports must be prepared at the completion of the
audit.
b. The audit report shall state that the audit was made in
accordance with the provisions of this Circular.
c. The report shall be made up of at least the following
three parts:
(1) The financial statements and a schedule of Federal
awards and the auditor's report on the statements and the
schedule. The schedule of Federal awards should identify major
programs and show the total expenditures for each program.
Individual major programs other than Research and Developm nt and
Student Aid should be listed by catalog number- as identified in
the Catalog of Federal b stic i rent . Expenditures for
Federal programs other than major programs shall be shown under
the caption "other Federal assistance." Also, the value of
non-cash assistance such as loan guarantees, food commodities or
• donated surplus properties or the outstanding balance of loans
should be disclosed in the schedule.
. '(2) A written report of the independent auditor's
understanding of the internal control structure and the
assessment of control risk. The auditor's report should include
as a mini: 1) the scope of the work in obtaining understanding
of the internal control structure and in assessing the control
risk, 2) the nonprofit institution's significant internal
controls or control structure including the controls established
to ensure compliance with laws and regulations that have a
material impact on the financial statements and those that
provide reasonable assurance that Federal awards are being
12
•.:`Y�,...,`fir r • <
' managed in compliance with applEdablr,t laws and regulations, and
' 3) the reportable conditions, including the identification of
material weaknesses, identified as a result of the auditor's work
in understanding and assessing the control risk. If the auditor
limits his/her consideration of the internal control structure
for any reason, the circumstances should be disclosed in the
report.
(3) The auditor's report on compliance containing:
-- An opinion as to whether each major Federal
program was being administered in compliance with
laws and regulations applicable to the matters
described in paragraph 13 (c) (3) of this
Attachment, including compliance with laws and
•
regulations .pertaining to financial reports and
claims for advances and reimbursements;
-- A statement of positive assurance on those items
that were tested for compliance and negative
assurance on those items not tested;
-- Material findings of noncompliance presented in
their proper perspective:
4
• o The size of the universe in. number of items
and dollars, .
o The number and dollar amount of transactions
• tested by the auditors,
o The number -and corresponding dollar amount of
instances of noncompliance;
•
-- Where findings are specific' to a particular
Federal award, an identification of total amounts
• questioned, if any, for each Federal award, as a
result of noncompliance and the auditor's
recommendations for necessary corrective action.
d. The three parts of the audit report may be bound into a
single document, or presented at the same time as separate
documents.-
.,,.
e. Nonmaterial findings need not be disclosed with the
compliance: report but should be reported in writing to the
recipient in a separate communication. The recipient, in turn,
should forward the findings to the Federal grantor agencies or
subgrantor sources.
f. All fraud or illegal acts or- indications of such acts,
including all questioned costs found as the result of these acts
13
that auditors become aware of, may be covered in a separate
written report submitted in accordance with the Goya
ent
Auc,yting Standards.
g. The auditor's report should disclose the status of
known but uncorrected significant material findings and
recommendations from prior audits that affect the current audit
objective as specified in the Government Auditing Standards:
h. In addition to the audit report, the recipient shall
provide a report of its comments on the findings and
recommendations in the report, including a plan for corrective
action taken or planned and comments on the status of corrective
action taken on prior findings. If corrective action is not
necessary, a statement describing the reason it is not should
•
accompany the audit report.
i. Copies of the audit report shall be submitted in
accordance with the reporting standards for financial audits
contained in the Gcvernment Auditing Standards. Sub-recipient
• auditors shall submit copies to recipients that provided Federal
awards. The report shall be due within 30 days after the
completion of the audit, but the audit should be completed and
the report submitted not later than 13 months after the end of
the recipient 's fiscal year unless a longer period is agreed to
with the cognizant or oversight agency.
j . Recipients of more than $100,000 in Federal awards
shall submit one copy of the audit report within 30 days after
issuance to a central clearinghouse to be designated by the •
Office of Management and Budget. The clearinghouse will keep
completed audit reports on file.
k. Recipients shall keep audit reports, including sub-
recipient reports, on file for three years from their issuance.
16. Audit Resolution.
a. As provided in paragraph 3 , the cognizant agency shall
be responsible for ensuring the resolution of audit findings that
affect the programs of more than one Federal agency. Resolution
of findings that relate to the programs of a single Federal
agency will be the responsibility of the recipient and the
agency. Alternate arrangements may be made on case-by-case basis
by agreement among the agencies concerned.
b. A management decision shall be made within six inonths
after receipt of the report by the Federal agencies responsible
for audit resolution. Corrective action should proceed as
rapidly as possible.
} 14
17.- audit Wort nersf` nd'�Rhoorts. Workpapers and report shall
be retained for a minimum of three years from the data of the
audit report, unless the auditor is notified in writing by the
• cognizant-agency to extend the retention period. Audit .
vorkpapers shall be made available upon request to the cognizant
agency or its designee or the General Accounting Office, at the
completion of the audit.
•
•
•
•
•
•
•
•
•
•
•
•
15
• . ' EQUAL EMPLOYMENT OPPORTUNITY CLAUSE EXHIBIT H
During the performance of this contract, the contractor agrees as follows:
( 1 ) The contractor shall not discriminate against any employee applicant for employment
because of race, religion, color, sex 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 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 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 of 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, religions, color, sex or national origin.
( 3 ) The contractor shall send to each labor union or representative of workers with which
he has a collective bargaining agreement or other contract or understanding a notice
advising the labor union or worker's representative of the contractor's commitments
under the equal employment opportunity clause of the city and shall post copies of the
notice in conspicuous places available to employees and applicants for employment.
( 4 ) The contractor shall furnish to the contract compliance officer all federal forms
containing the information and reports required by the federal government for federal
contracts under federal rules and regulations, and including the information required by
Section 10-192 to 10-194, inclusive, and shall permit reasonable access to his
records. Records accessible to the contract compliance officer 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 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 Sates.
( 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 contract compliance officer. Compliance
reports filed at such times as directed shall contain information as to the employment
practices, policies, programs and statistics of the contractor and his subcontractors.
(7 ) The contractor shall include the provisions of Paragraphs (1) through (7) of this
Section. 'Equal Employment Opportunity Clause', and Section 10-193 in every .NS.
subcontract or purchase order so that such provisions will be binding upon ,each
subcontractor or vendor.
EXHIBIT I
•
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, and 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
EJ)
•
•
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 3 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-income persons, a
recipient is encouraged to undertake efforts to provide to low-income persons economic
opportunities other than training, employment, and contract awards, in connection with
Section 3 covered assistance.
(b) Other training and employment-related opportunities. Other economic opportunities to
train and employ Section 3 residents include, but need not be limited to, use of "upward
mobility", "bridge" and trainee positions to fill vacancies; hiring Section 3 residents in
management and maintenance positions within other housing developments; 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 and materials from housing
authority resident-owned businesses, purchase of materials and supplies from PHA resident-
owned businesses and use of procedures under 24 CFR part 963 regarding HA contracts to
HA resident-owned businesses. A recipient or contractor may employ these methods directly
or may provide incentives to non-Section 3 businesses to utilize such methods to provide
other economic opportunities to low-income persons. (2) A Section 3 joint venture means an
association of business concerns, one of which qualifies as a Section 3 business concern,
formed by written joint venture agreement to engage in and carry out a specific business
venture for which purpose the business concerns combine their efforts, resources, and skills
for joint profit, but not necessarily on a continuing or permanent basis for conducting
business generally,and for which the Section 3 business concern:
(i) Is responsible for a clearly defined portion of the work to be performed and holds
management responsibilities in the joint venture;and
•
(ii) Performs at least 25 percent of the work and is contractually entitled to compensation
proportionate to its work.
Effective August 1, 1994
EXHIB TT f
•
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
.' 4 .r . .
, J-:4 s Thursday
._ November 3, 1983
e
— 4=1
sa
. tee®
r
ss
immk
�`L' Part lit
--- Office of .
-a---= Management and
Budget
-a Department of
Defense
_ General Services
Administration
-- Circular A-122: Cost Principles for
Nonprofit Organizations; Lobbying and .
f Related Activities . .
•
50860 Fed ett!k Rbgistjer / Vol.48; No. 214 / Thursday, November 3, 1983 / Notices
OFFICE OF MANAGEMENT AND. •to use a more limited definition of compliance with a myriad of statutory
BUDGET unallowable costs;and
•to clarify and limit reporting and funprovisions mandating that no federal
Circular A-122•Cost Principlea•for recordkeeping requirements in the spirit and tocomply,s be used in balanor ced fashion.with
Nonprofit Organizations;Lobbying and of the Paperwork Reduction Act. ,Related Activities •
fundamental First Amendment
iIl.Background of Circular A-122 imperatives.
AGENCY:Office of:Management and For contractors or grantees to use
AGEN GEN t. Circular A-122,"Cost Principles for federal monies to engage in lobbying is
scrum:Notice. Nonprofit Organizations,"establishes uniform rules for determining the costs an inappropriate use of federal funds for
•
I.Summary of grants,contracts,and other a purpose that was not intended.Such
agreements.Like other OMB cost misuse resourcesf funds diverts true
mission
issions
This notice offers interested parties an principle circulars for state and local orcontract.from Moreover,oe g n of the
opportunity to comment on the Office of governments and for educational grant or government
Management and Budget's(OM9}•, institutions,A-122 is a management subsidy of the lobbying efforts of its
proposed revision to Circular A-112, directive addressed to the Heads of contractors and grantees distorts the
"Cost Principles for Nonprofit Federal departments and Agencies and political process.It favors the political
Organizations."The proposed revision is the legal basis for defining allowable expression of some—o.t ri�a!ions with
makes unallowable the costs associated costs and setting forth procedures for contracts or grants—attcarry the het suss of
with lobbying and related activities. recovering them. others,who must carry on their political
Parallel revisions are being proposed for Circular A-122 was first issued in expression at their own expense.
defense and civilian contractors by the June.1980.It was developed by an Despite the frequently worthwhile b Department of Defense(DOD or interagency team made up of the major content of the lobbying runs
conducted by
Defense), the General Services grant-making agencies and led by OMB, such organizations,it runs against the
Administration(GSA),and NASA. Before issuance, public comments were grain of First Amendment government
These proposed revisions follow the A- sought and received and consultations neutrality in political debate for federal
122 revision text, were held with the General Accounting funds to be used in this manner.
The comments printed in the text of Office.The cost principles built upon t+Government neutrality in the democratic
the proposed revision are for • accounting rules previously in use by Process is especially endangered by the !
explanatory purposes.They will not be federal agencies in their dealings with practice of using grant or co^trace funds
printed in the Circular after the nonprofit crganizetiors.The Circular for lobbying and related activity
revisions are final. - • standardized and simplified those rules. because,as a general rule,only one side
II.Supplementary Information Generally,the circular provides that,to in the debate is funded.Those favoring
be recovered from the federal grant programs and contracting activity
OMB published a proposal on January government,coats must be necessary, have the grants and contracts: those
24.1983, to revise Circular A-122's reasonable,and related to the federally- opposed do not.Not to control this
treatment of the costs of lobbying and sponsored activity.In addition,costs practice,then,is not only to subsidize
related activities.Following publication, must be legal,proper,and consistent national debate over the extent and
OMB received approximately 48,300 with the policies that govern the desirability of government spending.
comments from the general public, domestic and military,but to subsidize
private and public organizations,and orgenization's other expenditures.
federalprivate agencies.dpublThe disallowance of lobbying and systematically but one side of those
Approximately 18,500 related costs in the proposed revision is debates.
comments opposed the proposed comparable to the disallowance by Moreover,use of federal funds for
revisions,and approximately 31,800 Circular A-122 of other costs which are private lobbying and related political
supported them.Many of the opposing disallowed on grounds of public policy: activity can give the appearance of
comments expressed support for the for example,advertising,fundraising federal support of one political position
general principle that federal tax dollars costs,and entertainment.In each of over another.It can create
should not be used for lobbying and these examples,a determination has misunderstanding and interfere with the
related purposes,but objected that the been made that it would not bean neutral,non-ideological administration
means proposed in the January 24 notice appropriate or cost-efficient practice to of federally-funded programs.All
would disrupt the legitimate activities of permit federal tax dollars to be used for citizens have the right to receive the
•
federal nonprofit grantees and these purposes.In this notice,costs of benefits of federally-funded programs
contractors.On the other hand,many of lobbying and related activities are without being made the captive
the supporting comments have implied
or stated a need for regulations proposed to be similarly disallowed, audience for a grass roots lobbying
significantly more restrictive than those iV.Purpose of the Revisions campaign,and without fear that de all y
proposed in January.In order to'accord The purpose of these revisions is to of services is accompanied by federally •
-
the issues raised by these comments establish a comprehensive government- policy
partisanship in political or public
further study,and to permit a new round wide set of cost principles to ensure that. Polihi controversies.
proposal is d
of public comments on a revisedThis is designed to balance
proposal,OMB withdrew the.January 24 used by federally-appropriated
or grantees d fors are t the First Amendment rightsswith of theheeral
proposal at the end of a 45-day public lobbying or related activities.The intent grantees and First
Amendment
comment period.The current proposal is is not to discouragecorrespondingga First
significantly changed from the January or in any way obligation and legitimate governmental
2.1 proposal. th1e most important changes efforts�condu conducted with heirns for oownfu • Interest subsidize d the political the government
have been: but to ensure that the federal' does not
• to adopt an allocation method government does not subsidize such advocacy activities of private groups or
ucs:ounting for the costs of lobbying and activities.In•addition,as later noted,the institutions.Noe person toro group has a
related activities: revision is for the purpose of assuringFirst Amendmentringtorpolii receive
governmental funding for political
f •
', Federal Register / Vol. 48, No. 214 / Thursday, November 3. 1983 / Notices 50861
expression;requiring grantees and fostered,or"prescribe(dj (as) orthodox" • 'publicity'and'propaganda.'Thus,there
contractors to bear the costs of their a particular view on such issues. West appears to be no firm distinction between the
own lobbying efforts does not infringe Virginia State Board of Education v. conduct which is premissible and that which
upon their constitutional rights.Free Barnette.319 U.S.624.645(1943). is prohibited.
speech does not mean subsidized OMB has received thousands of Moreover.in the absence of clear and
speech.The Supreme Count emphasized letters from members of the public who fair guidelines enforceable across the
this point in a recent unanimous opinion are understandably concerned when board.agency officials have been
when it stated that the federal they see their tax money involved in reluctant to make politically-sensitive
• government"is not required by the First projects that involve political organizing determinations in particular cases.This
Amendment to subsidize lobbying,. . . for causes they may not support. problem is especially serious where
We again reject the notion that First Furthermore,numerous cases have been there is a natural conjunction of interest
Amendment rights are somehow not cited and documented—by federal between agency officials and their
fully realized unless they are subsidized agencies,the Comptroller General, contractors and grantees. as where
by the State."Regan v. Taxation with Congress.and the general public—of grantees or contractors lobby for
Representation of Washington. 103 S. federal grant and contract funds that additional appropriations to the agency
Ct.1997. 2001 (1983). were used for lobbying or related it.volved.The thousands of grantees and
On the other hand, there are serious aeti•.ities.Nevertheless, due to prior contractors who receive federal money
constitutional problems with a system insufficient regulatory restrictions and are a strong lobbying force in
that permits tax money to be used for limited enforcement efforts. the true Washington.and can use grant and
the political expression of private magnitude of these abuses has never contract funds to help perpetuate their
individuals or groups.Americans have been quantified.Many organizations programs,irrespective of the programs'
the First Amendment right both to receiving federal grants engage in
g merit or effectiveness.
engage freely in speech and political extensive lobbying and related political The improper use of federal funds for
expression,and to refrain from activity,but in many instances the lobbying and related activities has been
speaking, without interference or control financial and performance reports filed perceived as a problem for many years
onon part the government or its by the organizations are insufficiently In 1919,Congress passed legislation
the. Wooley oft v.Maynard. 430 U.S. detailed to permit the federal agency to making certain uses of federal funds for
7u5, 714(1977).The proposed revision is determine whether federal funds have lobbying purposes a criminal offense for
intended to ensure that the use of been used for those purposes and, federal employees: as early as 1948,the
Federal grants,contracts nd'other therefore,misused.The problem has General Accounting Office began to
agreements by private organizations been exacerbated by the lack of any unearth instances of federal grantees
engagingin lobbying does not erode or clear definitions of lobbying, and,in
ying using federal funds for lobbying
infringe these constitutional rights,or particular.of exactly what activities are purposes.Over the past ten years.
unallowable.
distort the political process by . Congress has attached over fifty riders
Both criminal statutes-18 U.S.C.
encouraging or discouraging certain to appropriations bills addressing parts
Section 1913—and appropriations
forms of political activity. of the problem.In the past few years,
The activities of government in a restrictions—including Section 607(a)of pressure has increased for further steps.
the Treasury,Postal Service, and
democracy necessarily involve a degree General Government Appropriations As a result:
of political advocacy,since government Act -currently:prohibit the use of • On December 18,1981, the
officials are expected to communicate federal funds for certain types of Department of Defense issued revisions
with the people,explain their programs, lobbying•but there is no clear, uniform to its Defense Acquisition Regulations
and provide leadership and direction to definition of prohibited activities to (DAR).addressing for the first time the
the nation.Thus,Members of Congress which grantees,contractors, auditors, issue of lobbying costs,and making such
and their staffs,the President and his costs unallowable under DOD contracts.
political appointees.necessarily agency officials,or the public can refer. • On April 27,1982 and October 22,
participate in forms of political The clear signal from Congress through the appropriations laws and other 1982.DOD further toughened its rules
advocacy. However,it is a distortion of actions has not been translated into. disallowing lobbying costs.eliminating
the marketplace of ideas for the certain exceptions from coverage.
effective management controls.
government to use its financial power to 1'he vagueness of existing anti- • On May 28,1982,NASA issued a
"tip the electoral process,"Efrod V. new cost principle in the NASA
lobbying restrictions has hampered the
S;:rn;. 427 U S.353.356(1976).by Procurement Regulations (NASAPR)
ability of contractors and grantees to
suhsiiiizing the political advocacy making lobbying costs unallowable for
activities of private organizations and comply voluntarily with the restrictions,and has made the job of auditors NASA contractors.This was revised
corporations.This proposal will ensure, difficult, if not impossible. For example, August 16.1982.
to the extent consistent with the • On November 2,1982. the General
communications function of the in recent General Accounting Office Services Administration issued a new
. (GAO) investigations of improper
government.that taxpayers are not lobbying expenditures. the contractors cost principle in the Federal
required. directly or indirectly."to and grantees were able to urge that Procurement Regulations (FPR)making
contribute to the support of an current rules did not ban the lobbying costs unallowable for civilian
ideological cause(they)may oppose." expenditures.As the Investigations contracts with commercial
.4hood v. Detroit Bocrd of Education. - Subcommittee of the House Armed organizations.
451 U.S.209,235-238(1977).The Services Committee recently concluded: 'These developments,however,affect
. proposal also seeks to avoid the only defense and civilian contracts with
(l'lhere is a deficiency in the
appearance that,by awarding Federal commercial organizations.No generally-
appropriations acts'prohibition of lobbying
grants.contracts.or other agreements to with appropriated funds.A review of the applicable cost principle has been
organizations engaged in political legislative history of the publicity- issued to control the federal funding of
advocacy on particular sides of public propaganda appropriations acts restrictions lobbying under contracts and grants to
issues. the government has endorsed. proxidtes no definition of the critical terms nonprofit organizations.
•
50862 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1983 / Notices m
This proposal thus addresses the final preamble,the proposals are in fact nonetheless be required to maintain
major area in which federal cost identical save for the inclusion in the fully documented time records in order
principles have nut yet adopted DAR proposal of more restrictive to rebut auditor assertions of disbelief of
•restrictions on the use of federal funds definitions of lobbying and related their claims.The A-122 proposal
for lobbying and related activities by activities than are proposed for all other includes specific previsions to safeguard
private organizations.It has been covered
prepared in nizati consultation with the parties.
) against this potential problem and
2.Existing rules have failed to stop or exempts indirect cost employees from
General Accounting Office,which identify abuses:Cases have been cited documentation requirements. including
supports this initiative.The proposal is and documented of federal grant and the creation of time logs.calendars,or
similar in critical respects to the current contract funds that were used for similar records,if they self-certify that
Defense.NASA.and GSA procurement lobbying and related activities. they spent less than 25%of their time on
regulations. Parallel tevisions now being Moreover, insufficient regulatory lobbying or related activities.The
proposed by GSA and NASA will guidance under the current A-122 has proposed revision also mandates that
eliminate all differences:revisions now limited enforcement efforts so that the agency documentation guidance be
being proposed by Defense will true magnitude of actual abuses has not restricted further by review pursuant to
eliminate these differences save for been quantified.Such audits as now the Paperwork Reduction Act, to ensure
certain provisions later described in this take place regarding the use of federal it is the least burdensome necessary to
notice which retain more restrictive funds for lobbying
definitions
otce of lobbying restrict in the Y g purposes can easily satisfy the documentation requirement
present DAR. bog down into disputes between objectives.The self-certification rights
attorneys and accountants regarding and protections of the proposal are only
V.Necessity for the A-122 Revision definitions,rules and standards.Thus, possible because of the clear definitions
regarding many agencies choose not to commit of lobbying and related activities that
There is little disagreement
the inappropriateness of using federal limited auditing resources to an effort are elsewhere set forth.It is impossible.
which,whatever its importance,can risky for grantees and ultimately
grant and contract funds fur lobbying
and related activities.Still,some have often be limited or even thwarted meaningless to self-certify to
•
argued that no regulations should be in because existing standards are vague compliance with a vague and ultimately
effect for contractors;alternatively, and unclear. meaningless standard.
3. The vagueness of existing. 5. The A-122proposa/explicitly
ethers have agreed that none should be
in effect for nonprofit grantees.(Often, standards impose administrative end protects many activities presently
interpretative problems on nonprofit subject to claims of una/lowability'A-
:aaad without even appreciating the irony
o their positiers, those arguing for self- grantees:The corollary to the above 122's comprehensive treatment of
';:'�:anption strenuously assert the need problem for auditing agencies is that lobbying makes many activities
strung regulation to restrict the use many nonprofit grantees—often the allowable that auditors might currently
of federal funds for lobbying purposes least financially endowed—are deem unallowable.Examples of the
i.y eveayone other than themselves.)The particularly disadvantaged if and as above include:
procurement agencies have properly actually audited.Many grantees may —Lobbying at the state level to enhance
!ejected the notion of no regulation for lack the resources or access to outside the organization's ability or cost to
civilian. sjace and defense contractors. professional assistance to effectively
'i his revision of the OMB Circular is in resist forced,questionable or subjective recognitformion
the of principles
orci les of
fs also,in
furtherance of the view that fair, construction by auditors of the presently tatesbr ntprinciples ouederalism.
coax::is:: nt ai:gulatian makes sense for undefined"lobbying"..term.Moreover, state appropriate state
may, through
anti is iii ;he tali:-eat of the government the absence of clearly defined standards state processes,waive the •
ie..,,:"li •;s a:onpr;fit grantees.The ensures that all grantees are now disallowance provision for state
t•c%lt• av:.:,t points help explain that necessarily uncertain of the allowability lobbying by state subglantees.
j '" ' ' of many intended expenditures— —All federal Executive Branch contacts
t `i '' ,n,1: li:• as,LJe to cover whatever their good faith desire not to • except attempts to influence the
c m,trur!ors u:?Jer tough g:r%delines spend grant funds for lobbying si Win or veto of le tslation.
while ry'''Fcti;••;ly evenrp.,,.b,nonprofit The A-122 proposal clearly definess —Employee gp Yee activity related to service
gr•an/0,::from any 1-v1,111ot:'on:During the types of lobbying and related activities • as an elected or appointed official,or
pas: t•.;::yedr3,lohl;yin;provisions far are unallowable and,further and member of a governmental advisory
more nest:ictave than the proposed A- critically,provides cor binding advance panel.
122 revi,icm h:c.e been added to the cost guidance from agencies in situations —Providing technical advice to
principles,;nv.:rning all defense and where grantees are in doubt as to the legislative bodies in response to
r:ivali•u..:':nh a :tu s. (These provisions meaning of the Circular.
are Li::•f;'!•:•r♦ a.i:e.vhcre in the specific written requests. •
4. The A-122 proposal also safeguards 6. The Internal Revenue Code and
pre:rn:1'1,• 1 use or federal funds fur against paperwork requirements ta
other restrictions on lobbin have no
lob!,ci,ig arid rele'ed purposes is no less which grantees are presently subject: bearing on preventing the use of grantee
an abut when ergaged in by grantees Aside from the current absence of
than by contractors,and OMB knows of definitions of lobbying and related that&d lobbying purposes:The tax
• no basis for differential.much lessau that Code lobbying provisions for tax
highly differential treatment of the two. effectively subject granteeso he requirment further, otherwise exemt �make unnecessary the
Since parallel revisions are being issued that they document certain allowable promulgation of cost standards in this
for A-122, the FPR,and the NASAPR expenses charged to the government. area is belied by the fact that those
sets of cost principles. the present This requirement is particularly onerous provisions are for the purpose of
initiative guarantees uniformity of with indirect cost("overhead")
lobbying cost rules for both nonprofit employees who frequently spend limited such organizations.Under the Code,as
and profit-making recipients of federal amounts of time engaged in lobbying or long as an organization's lobbying
funds. (As is elsewhere described in the related activities—but who may expenditures do not exceed a certain
1\
Federal Re
gister / Vol. 48. No. 214 rj 'Thursday, November 3. 1983 [Notice's 50863
portion of its revenues.it is eligible for 7. The Comptroller Ceneml supports • Efforts to employ state or local
tax exempt status.The Code lobbying the need for A-122 revision:As officials to lobby Congress or state
provisions are only determinative. indicated elsewhere in the preamble, the legislatures;
however, of wherther an organization is A-122 proposal was prepared in active • Legislative liaison activities,but
• sufficiently devoted to a public purpose consultation with the General only to the extent that they are directly
to justify preferential tax treatment.The Accounting Office,which supports the related to unallowable lobbying •
provisions do not address the issue of initiative and believes that the proposal activities as otherwise defined by the
whether federal grant monies should be satisfies the concerns which it had ' Circular.(All legislative liaison
used to subsidize lobbying—the sole expressed earlier. activities are covered by DAR.) j
purpose of cost standards.Indeed,the And, as noted elsewhere,after a GAO The proposal will make unallowable
fact that the code lobbying provisions investigation of lobbying activities by only the portion of costs attributable to
do not address the use of grant monies grantees under Title X of the Public lobbying and related activities—not.as
for lobbying has been implicitly Health Services Act, the Comptroller in the January 24 proposal,entire cost
recognized by Congress on numerous General stated in September 1982: items used in part for political advocacy.
occasions through appropriation bill
prohibiting such Clear federal guidance is needed both to Further,and critically, the proposal
riders e.g.. Pub.L 97-377,section expenditures.Pub. ensure that Title X program funds are not Will provide relief from paperwork and
used for lobbying and to preclude audit problems such as those
L.96-74. section 607. unnecessary controversy over whether experienced under the current DAR.
It is clear that because expenditures grantees are violating federal restrictions. - FPR.and NASAPR: for the purposes of
by nonprofits des o are
mean mthat ible fedeer ral grant e The move pri to nciples nd make
more
l1 specificc complying with this revision,employees
the cost pp f accounted for on an indirect basis will
monies should be spent for those grantees is the appropriate mechanism to not he required to maintain time logs or
purposes.For example, the Code does achieve these ends.[Emphasis added.( 4 g
notprohibit tax exempt organizations similar records if they lobby less than
P g VI.Summary Description of Proposal 23%of the time.The federal government
from spending their revenues on will relyu
advertising or entertainment.Circular upon their
lobbying time below their good faith
This proposal uses the term"lobbying
A-122, however,allows only certain and related activities" to describe • certification ofen
unallowable activities instead of the found
for organizations that have been
advertising costs.and disallows all
f found to have materiall misstated
entertainment costs.Another example is expansive term"political advocacy' Y
section 503 of the Code, which denies used in the January 24 proposal.This theall precedingc or unallowablef -year costs within
tax exempt status in certain instances to reflects a significant tightening of the the five-year period.Under
definition of unallowable activity the the proposal,the absence of time logs or
organizations using their revenues for in
the private gain of controlling new proposal.Unlike the January 24 similar records not kept creti pursuant to
•
individuals.The regulatory scheme proposal, this proposal will not cover grantee or contractor discretion will no
longembodied in section 503 does not imply. • • Lobbying at the local level(covered disallowing
llor serve claimsas a b for nfor act cost or
however, that the federal government under the current DAR and FPR); employees. indirect cost
employees.
should not have more stringent • Appearances before Congress or In order to provide even-handed.
restrictions on the use of federal grant state legislatures at their written request government-wide rules for paperwork
monies for private gain.This point is (covered under the current DAR); and audits.Defense, GSA, and NASA
best understood by the fact that nothing • Contracts with Executive Branch are proposing parallel revisions in their
in the Code would prevent many officials, other than in connection with procurement regulations.
grantees from spending all of their grant the veto or signing of enrolled bills,or
funds for lobbying purposes. attempts to use state or local officials as VII.Variances With the Lobbying
Correlatively,the fact that the Code conduits for unallowable lobbying Provision of Defense Acquisition
• and other provisions of law regulate the (covered under the January 24 proposal); Regulations(DAR)
business community in its lobbying • Litigation on behalf of others not A standardized lobbying provision
activities. e.g..Section 162(e),!RC; directly authorized by grant or contract that will govern grantees and
Federal•Elcction Campaign Act,2 U.S.C. (covered under the January 24 proposal): contractors alike resulted from
Sections 431-456.does not mean that • Lobbying at the state level that extensive negotiations among the four
there should be no provisions in the would affect the organization's ability or agencies which are responsible for the
DAR. FPR or NASAPR regarding such cost of performing a grant or contract • major sets of cost principles affecting
activities.Some in the business (covered under the current DAR.FPR. grants and contracts: the Federal.
community have suggested that current and NASAPR); Procurement Regulations (FPR), which
Provisions regarding the unallcwability • The entire cost of membership dues covers civilian contractors and which is
of lobbying expenditures should be to trade associations or other administered by GSA; the NASA
superseded by definitions of lobbying organizations which have lobbying as a Procurement Regulations R);the
• set forth in the Federal Regulation of 'substantial organizational purpose" DAR,which covers defensee come contractors
Lobbying Act. 2 U.S.C.sections 261-270. (covered under tite January 24 proposal) and is administered by the Department
That p.•sition has been properly ,Unsllo Unallowable activities will consist of: of Defense;end Circular A-122,which
rejected,and no Congressional intent or covers nonprofit organizations and is
operative theory can seriously support • Federal,stale or local electioneering implemented under the guidance of
the n:iron that the Code,lobbyists
and support of campaign organizations. OMB.
re•istr�:Lion laws or anyother-like PACS, and the like;
3Although exact conformity was
st,,tutes permit the government to avoid • Direct lobbying of Congress and,to reached between the lobbying
its responsibility to assure that federal the degree noted above,state provisions in the FPR, NASAPR,and the
grant end contract funds are spent for legislatures; • A-122 proposal,four exempted activities
authorized purposes and intended and • Crass roots lobbying concerning under these regulations are restricted
best uses. state or federal legislation: under the DAR proposal.The activl+ties
5086..... 4 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1983 / Notices
allowable under the proposed A-122, Institutions of Higher Education. spent in lobbying by such employees,or
FPR, and NASAPR.but unallowable Hospitals.and Other Nonprofit upon other evidence not precluded
under the proposed DAR are as follows: Organizations: Uniform Administrative above.As earlier noted,the absence of
(a)Local lobbying activities to Requirements." (See.e.g.Circular A-110. time logs or comparable records for
influence officials on local concerns. Attachments C and F.)The Circular, indirect cost employees not kept
(b)Providing technical advice or inter a/io.generally requires grantees to pursuant to the discretion of the grantee
a.sistance to Congress or state keep for a period of three years. or contractor will not serve as a basis
legislatures,or members or committees "[f)inancial records,supporting for contesting or disallowing claims.
thereof,in response to a specific written documents,statistical records.and all Only if a material misstatement is found
request;and other records pertinent to[grants)."and
• (c)Lobbying and related activities at to access for audit purposes "pertinent on the basis requireof the keeping evidence can an
the stale level:(1) for the purpose of hooks,documents,papers and records agency e the of time logs
influencing legislation directly affecting of• • • recipient organizations:' fur necessity
employees.This who engageng the
the ability of the orgar.ization or cost to As later described in the preamble. incidental� t} oof bbying havings t
the organization of performing the grant the proposal also modifies, in certain ll of lobbying federalto account
or contract; or(2) in the case of states' situations, the ability of auditors to for all of their time to agencies.
subgrantees. if the restrictions are require the creation of certain Subparagraph a(5)requires agencies
waived by the state(the subgrantor) documents and records.See paragraph resolutionto ish procedures forissuesa advance
through appropriate state processes. 1.a.(4)of the proposal. rofe definitional arising
(d) Legislative liaison activities that As with the DAR. FPR,and NASAPR. under this revision.This will alleviate
are unrelated to unallowable lobbying and as is already the case under A-122's the inevitable problems of interpretation
activities, as otherwise defined in the general rules for unallowable costs. the at the margin and will avoid creatinga
proposal. costs identified as unallowable by these disincentive for organizations to enage
Vi11.Analysis revisions include not only costs of the in borderline activity merely because of
The proposeddirect activity but also the costs of other the uncertainty of applicability of the
revision comprises activities directly supporting such direct provisions.
three paragraphs.The first creates a activity.Under the proposal,for Subparagraph b defines five
new paragraph in Attachment B to example,if a lobbyist spends four hours categories of lobbying and related
Circular A-122. to be called "B21 lobbying the Congress and an additional activities that are unallowable.It should
Lobbying and Related Activities." eight hours in study,consultation, and. be read in conjunction with
Paragraph 821 consists of three preparation for the lobbying,the full subparagraph c,which establishes
subparagraphs. twelve hours are disallowed,along with exceptions to these prohibitions.
Subparagraph a establishes an
ic1:,uh2aragra hra swork for the overall the cost of any support services and any Subparagraph b(1)makes unallowable
revision.Subparagraph a(1)represents other costs attributable to the lobbying certain electioneering activities at the
re from the current principles activity, federal, state,or local levels.It applies
noof costdeparture f allocation familiar hecet principles
As emphasized in the comment to referenda as well as to elections of
and While the to grantees
ant detail published along with the proposal's text candidates to office.The restrictions
reporting contractors.While
wille preciseeci dell only the portion of cost items allocable should be familiar to nonprofit
ofhe set according proceduresto nl c agencya y to the lobbying activity is unallowable.
This departs from the approach taken in by 2nU.S.C.S Section
onthey are prohibited
p:+ractice, this paragraph establishes a the January 24,1983,proposal which by 28 U.S.C.Section 501(c)(3).
general format similar to,and no more Subparagraph b(2)makes unallowable
onerous than. that now to made the entire cost of any cost item
comparable unallowable applicable activities.See, used for lobbying activities unallowable. •
the financial or administrative support •
for the HHS"Guide for Subparagraph a(2)makes clear that of political entities—including political
Nonprofit example the (May 1983),at the certification required as a part of the Parties.compaigns,political action
Organizations"Indirect Cost 108l financial status report required under committees, or other organizations—
p.73(Sample Direct v Method). Attachment G of Circular A-110 is with the purpose of influencing
Indirect costFormat—Direct
rateAllocation Meth are deemed a certification of compliance elections.Thus,it bars indirect support
conducted between an organization and with this revision(paragraph B21, of electioneering activities through
a single cognizant agency on an "Lobbying and Related Activities").It is intermediaries.
organization-by-organization ozantancyon
anther than important that a responsible official of • Subparagraph b(3)makes unallowable
on a basis.This approachthe contractor or grantee investigate and the costs of attempts to influence state
will save grantby-gn a recipient ensure compliance with these or federal legislation.Unlike the January
will
orgsave :;ns c agencies ands time and provisions: however,no new paperwork 24.1983,proposal,this proposal confines
rt in id le time
is required, the reach of unallowable lobbying to
effort in casese he where the organizatione or Subparagraph a(3)restates the general Legislative,but not executive.
receives
Further, the subparagraph rule for cost documentation,but is decisiunmaking.This is the traditional
modified by subparagraph a(4).IAhich understanding of lobbying and was'
follows existing accounting practice and provides that for the purposes of
emphasizes that lobbying and related complyingwith this revision. Many
urged commentingby organizations
izmmnnters.
' costs must be identified and dealt with organizations are not required to Many necessity andations
apporpriately. in accordance with the prepare or maintain time logs, stressed the of and
Circular's provisions. + appropriateness of contacts with
No de's ilro provisions.
record-keeping in cu.endars.or like records to document officials charged not with passing laws
ndirect cost •
requirements have been included in this etmployee lime s who ent by
state in good faith that Executive Branch lobbying made
but with executing them.Thus the only
proposal,as such requirements are they spend less than 25%of their time on unallowable are attempts to influence a
generally set forth for all nonprofit lobbying and related activities.This
decision to si or veto enacd
organizations in OMB Circular A-110: means that the agency and auditor must legislation. and attempts to use state
"Grants and Agreements with rely on the good-faith estimates of time and local officials as conduits for
• Federal Register'/ Vol. 48, No.-214 / Thursday; November 3. 1983 / Notices 50865
•
grantee and contractor lobbying of unallowable.Under the DAR.all lobbying exempted from unalluwability
Congress or state legislatures. legislative liaison activities are deemed under this section must be "directly
The coverage of subparagraph b(3) unallowable. related"to lower costs or better
has been limited to state and federal Subparagraph c:sets forth five performance of grants or contracts.
legislation in these proposals. unlike the exceptions to subparagraph b.The costs Lobbying in the case of secondary.
prohibitions in the Internal Revenue of activities described in subparagraph c tangential or speculative links between
Code. the DAR,the FPR,and the . are not unallowable under this proposal. proposed state laws and grant or
NASAPR. because it is difficult to Note that this does not necessarily make contract costs or performance will
distinguish between legislative and such costs a/Iuwabh':allowability or remain unallowable.
executive lobbying at the local level. unullowability of such costs will be • In recognition of the principles of
. Many of the comments received from determined by the terms of the grant. federalism,states which are subgrantors
•
organizations critical of the January 24, contract, or other agreement involved. for federal grants may, through
1983, proposal gave examples of Circular A-122 does not authorize costs appropriate state processes, waive the
contacts with local officials that are or expenditures;it exclusively limits the disallowance provision for state
vital to carrying out grants or allowability of costs or expenditures. lobbying by state subgrantees. ,
contracts—for example. obtaining Subparagraph c(1)exempts the The final exception.in subparagraph
zoning changes.police protection.or provision of technical advice or c(5). is for any activity specifically
permits.At the local level. there is no assistance to a legislature upon a authorized by statute to be undertaken
rigorous separation between legislative specific written request.This includes pursuant to the federal grant,contract.
and Executive Branches.and it would not merely testimony,but also or other agreement.The provisions of
be difficult to construct or enforce a rule conferenr.es with legislators and staff this Circular do not override statutory
regarding legislative lobbying at the when requested.The exemption is law
local level. meant to be permitted on a limited Paragraph 2 renumbers paragraphs
As indicated,however, in keeping basis, to fulfill the specific informational D21 through B50 of Circular A-122's
with the intent of the revision.b(3) needs of legislatures,and members and Attachment B.Since the cost items
includes a phrase clarifying that efforts staffs thereof. covered under Attachment B are
expended to influence state and local Subparagraph c(2),patterned after 26 numbered in alphabetical order.
officials to accomplish the lobbying U.S.C.4911(d)(2)(E),makes clear that "Lobbying and Related Activities"is
activities defined in b(3)are likewise communications with Executive Branch
unallowable.Under the proposal,the officials are not unallowable,with two •appropriately designated as paragraph
government would not reimburse the exceptions:(1) to influence a decision to 821. necessitating the renumbering of
cost of meeting with mayors or city sign or veto legislation or(2) to influence paragraphs B21 through B50 as 822
council representatives if the purpose is state or local officials to serve as • through D51.
to convince them to lobby the Congress conduits for unallowable lobbying Paragraph 3,like paragraph 2,is a
for legislation that the grantee or activities.as defined by this revision. technical language change.It changes
contractor favors. Subparagraph c(3)ensures that the the former term"lobbying" to the new
Subparagraph b(4)deals with grass salary of an employee does not become term"lobbying and related activities,"
roots lobbying,and is applicable only to unallowable because of participation in as used in this revision.
grass roots campaigns concerning civic affairs as an elected or appointed IX.Legal Authority
legislation.This provision is not meant official or member of a governmental The responsibility for implementing
to disallow associations from informing advisory panel.
their membership about legislative Subparagraph c(4)exempts lobbying grant programs, including the power of
developments or soliciting their or related activity at the state level administration,has been delegated by
members' views as a basis for where it directly affects the ability of or Congress to the grant-and contract-
developing the associations'own cost to the organization of performing making agencies.Those agencies have
legislative positions. the grant or contract.Such lobbying can the direct legal authority to establish
The proposal's definition of grass directly benefit the federal government. cost principles and,prior to the late
roots lobbying is less inclusive than the The proposed exception does not permit 1970's.did so in a piecemeal fashion
Internal Revenue Code definition.in that the use of federal funds to lobby state . without coordinated government-wide
the IRC includes local lobbying:and legislatures to promote the ideological standards.OMB's legal authority in this
restricts "any attempt to influence any objectives of the organization.merely process derives from the President's
legislation through an attempt to affect because those objectives are consonant constitutional authority to"Take Care
the npi,-:ions of the general public or any with the purposes of the grant or that the Laws be Faithfully Executed,"
segment thereof."This subparagraph contract.A recipient of a grant for U.S.Constitution,Article II.Section 3,as
restricts only efforts to obtain specified services to the elderly cannot thereby well as from general supervisory
lobbying actions on the part of the engage in lobbying on behalf of the responsibilities vested by Congress in
public. (See 26 U.S.C.4911(d)(1)(A)). concerns of the eldery.Rather,the the President and in OMB.
Subparagraph b(5)makes unallowable lobbying must relate to the Grants management responsibility
the cost of legislative liaison activities organization's direct performance of the was placed in OMB by Executive Order
when they relate to unallowable grant or contract.Fur example,a grantee No.11541 (July 1.1970).pursuant to
lobbying and related activities as in a drug rehabilitation program might Reorganization Plan No.2 of 1970,5
defined in paragraph b.This distinction be able to lobby a state legislature for U.S.C.App.Subsequently,grants
recognizes that while the primary laws permitting the prescription of management authority was transferred
purpose of an organization's"legislative methadone to heroin addicts,or a to GSA by Executive Order No.11717
liaison" unit is ordinarily to direct and grantee distributing dairy products to (May 9.1973)and retransferred back to
prepare for what has been defined in the needy might lobby against an OMB by Executive Order No.11893
this revision as unallowable lobbying, increased excise tax on milk that would (December 31,1975).Relevant statutory
there are many other functions served increase its distribution costs.It should authorities include the Budget and
that this revision does not make be understood,however. that state Accounting Act of 1921.ch.18,Section
. ;- ).
_I-•
50866 Federal Register / Vol. 48. No. 214 / Thursday, November 3. 1983 / Notices ,
209.31 U.S.C.Section 18:the Budget and years.Although it has never enacted would be classified as unallowable
Accounting Procedures Act of 1950,ch. comprehensive legislation to address the under these revisions.Subparagraph c(5)
946 Section 104. 31 U.S.C.Section 18a; use of federal funds for lobbying of the proposal makes any such
Pub. L.No.97-258, Section 1,31 U.S.C. purposes on a government-wide basis, specifically authorized activity
Section 3507; Pub. L. No.93-400,Section Congress has used the vehicle ofallowable;3.41 U.S.C. Section 402.Under these and appropriationsnflitw thus,thisenacted ion utesbut
other general management authorities. acts to curb some of the conflict with any statutes but is
OMB may develop plans for more flagrant abuses and to prod the consistent with the broad thrust of
Executive Branch into action.Over the congressional policy in the area.
implementing better management with past ten years.some 40 to 50 riders have As noted, this proposal has been
"a view to efficient and economical been attached to appropriations bills to prepared in active consultation with the
service"and may issue supplementary address some aspects of the problem. General Accounting Office,which
interpretative guidelines"to promote These appropriations riders use many supports
consistent and efficient use of different formulations,but have as a s posal this initiativeai sandeconcerns believes that
procurement contracts,grant ccmnion element the prohibition of the which the GAO had expressed lier.
agreements,and cooperative use of appropriated funds for publicity •
agreements."In its capacity of or propaganda purposes designed to
exercising the President's general X.Enforcement
management functions over the support or defeat legislation.One such Circular A-122 is a management
management
m Branch. OMB has the power appropriations rider.Section 607(a)of directive to federal agencies
toExecutive B and direct the managemento the Treasury. Postal Service,and establishing cost principles for use in
superviseui of federalect the General Government Appropriations connection with grants and contracts
Agencies, in turn, incorporate the Act, applies across the board to all with nonprofit organizations. It does not
provisions and requirements of federal agencies: contain its own enforcement
applicable OMB circulars into grant and No part of any appropriation contained in mechanism, though its terms are
contract agreements through regulations, this or any other Act,or of the funds incorporated in grants and contracts
tt contract terms,h oru meann, available for expenditure by corporation or through agency regulations or grant
i this or contract
the Circular other me provisions agency,shall be used for"publicity or
bIncome legallyane binding r propaganda"purposes designed to support or instruments.The degree and nature of
ed grantees.Moreover,uponit has contractorsa held daefeat legislationbefore Congress.(Emphasis enforcement willo thesepeanti-lobbying, r ,
that the provisions of OMB Circular A— provisions depend. therefore,on
102 are legally applicable to grants even The Department of Interior operational experience and competing
when the grant-making agency has not Appropriations Acts use the following This demends on enforcement a analysis of enforcement resources.
explicitly implemented the Circular. formulation,which is more restrictive descriptive rather than prescriptive;it is
Qonnar Corporation v. he Circular, than the Treasury formulation: presented to provide a context for public
.4tlanta Rapid Transit Authority,442 F. No part of any appropriation contained in understanding of the proposal.
Supp.1168.1172(N.D.Ga.1977). this Act shall be available for any activity or 1. Voluntary Compliance.The
the publication or distribution of literature bedrock for enforcing these provisions is
Circular A-122 is on the same legal
footing. that in any way tends to promote"public voluntary compliance by grantees and
in summary, the legal authority for support or opposition"to any legislative contractors.In the past,restrictions on
OMB cost principles derives from Proposal on which congressional action is not the use of federal funds for lobbying and
comp
lete,delegated authority from in accordance with 18 U.S.C.1913.
reCongress and the President to manage The Labor,Health and Human inadeqateduately
activities communicatedos ha been
the Executive Branch with a view inadequately e and
Services,Education,and Related defined.Neither agencies nor recipient
toward economy and efficiency,as it Agencies Appropriations Act states: organizations devoted much attention to
affects the agencies'exercise of their
No part of any appropriation contained in them.This proposal is expected to
•gra'' administration functions, this Act shall be used to pay the salary or improve compliance significantly by:
rear proposed revision,like cost expenses of any grant or contract recipient or • Defining unallowable activities so
r.anciples disallowing advertising costs, agency acting for such recipient to engage in that organizations can comply in good
fundraising costs, and entertainment any activity designed to influence legislation faith,and
costs, is directly related to the efficient or appropriations pending before the
and economical administration of Congress. • Providing formats(indirect cost rate
ons,grants. contracts, and other agreements. Other agencies and entities affected • st ttustreport)inrtwhichtesof
ponsible1al
By prohibiting the use of grant and by appropriations riders(in addition to officials of the grantee or contractor will
contract monies for lobbying or related the generally applicable provision in the confront the issue of the organization's
activities (unless specifically authorized Treasury appropriation)include
to be conducted with grant or contract Defense,State.Justice,Commerce, Tcoo assistanse.
.f Inds by statute), funds can be directed District of Columbia,Legal Servicesagencies organizationsshallbe prepared in oreres I
toward their proper uses,therebyP yam•
thieving greater publicu efit. s the Corporation,
Services
TrOation,and Community s onr involve
l definitionalo lexpendituresiiu concerning
Comptroller General has noted,"The Systems Agencies.Taken as a whole, potential shouded in the inevitablent this
cost principles applicable to all federal these provisions indicate a far-ranging d procedure should reduce s athe
grantees is the appropriate mechanism Congressional concern to control t se difficulty of interpretations at
to achieve these ends (of ensuring that of federal funds for lobbying purposes. 2.Sanctions. Penalties for violations
program funds are not used for Neither legislation nor legislative history of this revision are the same as for
I'ilahying)."GAO/1-IRD-82_108 suggests any deliberate departure by the violations of existing A-122 provisions.
(Si•ptemher 24. 1982), at 27. Congress from this principle.
'f'he legal basis for the proposed In serveral specific instances, The minor or unintentionaln sanction ini the event of
revision is further supported by a series Congress has directly authorized the use these restct restrictions costs recovery,.e..
of congressional actions over the last 20 of appropriated funds for activities that the federal agency will obtain
., 1
Federal Register / Vol. 48. No. 214 / Thursday. November 3. 1983 / Notices 5467
' reimbursement from the contractor or activities and 40%on federal grant On the other hand, considerable
grantee of misspent funds.In more activities,40%of the salary may be • problems of definition and interpretation
serious cases.contracts and grants can allocated to the grant.This approach is arise when terms such as "substantial"
be suspended or terminated.or consistent with the DAR.FPR. and are used to define the point at which the
contractors and grantees can be NASAPR lobbying cost treatment entire cost of a meeting or conference is
debarred from further awards.The provisions.as well as the traditional to become wholly unallowable.
availability of these sanctions for accounting method of prorating costs Given the inherent difficulties in using
oniviolating
te anti-lobbying
lob rs restrictionsbeen between allowable and unallowable cost principles to attempt to deal with
appropriationslegislationactivities. this problem,it appears that the better
confirmed by the Office of Legal An Counsel of the Department of Justice. alternative method of allocating approach would be for agencies to adopt
g p
3.Advance screening. One of the most costs of items used for both lobbying more stringent policies regarding the
effective means of enforcing these actitvities and grant/contract purposes funding of meetings and conferences
restrictions is to ensure that grants and that was considered and rejected was when they are likely to finance or
contracts officers are aware of the past the concept that no federal money can otherwise support clear lobbying
be used to pay for any portion of a cost activities.(See Office of Management performance of organizations seeking item that is used for lobbying activities and Budget Memorandum.M-82-4:
new or continued funding. If an Y g g
organization has not devoted past (i)in any way,or(2) over Sao of the "Improper Uses of Federal Funds." April
time. 26.1982.
appropriations to the grant or contract The OIviD )
purposes, and has materially divertedproposal published on 2.Definition of Lobbying Activities.
them to lobbying(or other extraneous January 24.1983 followed this approach. One of the weaknesses of current
activities).questions can legitimately be Commenters argued that it would restrictions on tax-funded lobbying is
raised as to whether additional grants or increase the cost of performing federal the lack of a clear and detailed
contracts would be appropriate.Once grants and contracts because it would definition of exactly what is and what is
uniform and understood cost principles effectively require them to separate their not covered.In constructing the
are:in place. it is expected that agencies lobbying activities from their grant or definition in this proposal. OMB has
will take steps to ensure more thorough contracts activities.This could lead to drawn upon experience and language
advance screening of grant and contract inefficient duplication of equipment and from Internal Revenue Code definitions.
applications. facilities—with attendent increased statutory provisions.Defense, GSA,and
• 4.Audits. Contractors and grantees costs to the taxpayer.They also argued NASA procurement regulations,and
are currently subject to audit that it would burden the First similar sources.Care has been taken not
requirements.and to the possibility of Amendment rights of contractors and to prohibit activities that are
audit by agency Inspectors General or grantees because engaging in lobbying legitimately necessary to the fulfillment
the Comptroller General;However,most activities could result in disallowance of . of the grant or contract.
audits have not focused on compliance otherwise legitimate costs.The purpose The proposal addresses the various
with anti-lobbying provisions.Audit of this proposal,however. is to enforce categories of lobbying (e.g..grass roots
strategy and priority will continue to be governmental neutrality by preventing lobbying),and defines the unallowable
established by the independent the use of federally appropriated funds activities.A separate section is devoted
judgment of these enforcement bodies. for lobbying and related activities.To to activities which are exceptions to the:
After uniform cost principles are the extent that an approach would general restrictions.
promulgated.it will become possible for significantly increase costs or burden The following alternative definitions
. more vigorous and effective audit First Amendment expression, it is of unallowable activities have been
enforcement to take place.Stratified inappropriate.
audits and other strategies can be used considered and rejected:
d e an therntrat for greater •
Some commenters have urged that a. The definitions used in Olb1B's
nonprofit organizations be
complianceliance among all grantees and shouldJQne,ory29, 1983,proposal could be
ineligible to receive any federal funding used.This would result in disallowing,
contractors. Alternatively.promulgation if they engage in any lobbying activities. following categories
of a defined set of rules can and will Such an approach would be more amongothers,the cats ories
serve as a protective barrier against restrictive then OMB's January 24,1983, of activity not covered in this proposed
audit harassment,and will and should revision:
make for fairer and simpler audits for proposal and would be strongly opposed • Lobbying on local concerns at the
antees and contractors.This should be 1'yv many affected groups. Furthermore,a local level.
Rr wholesale preclusion of participation in
of particular benefit to smaller grantees grants and contracts as a result of even • Lobbying at the state level,even
an.l contractors who lack the means an•dt a modest amount of lobbying would when the lobbying is directly related to
support staff to contend with audits raise difficult questions of legality and the cost to or ability of the organization
under the vague,ambiguous, and efficiency in a case where the applicant to perform the grant or contract.
differential rules now in effect.With was otherwise the most qualified • Attempts to influence"licensing.
expanded Inspector General and agency applicant. grants.ralemaking.formal or informal
audit staffs now in place, the protections guidelines, and olio
afforded by the proposal are manifest. One variation from the allocation adjudications, policy
principle considered by OMB related to statements."
XI.Alternative Approaches to Major the costs of conducting meetings and • Contacts with Executive Branch
Issues in The Revision conferences that are held in"substantial officials concerning any governmental
1. General Cost Treatment.This part" to promote lobbying. decisions.
proposal makes unallowable only the The practice of partisan meeting • Litigation on behalf of others not
portion of a cost item that is actually sponsors scheduling large blocks of directly authorized by grant or contract.
used in lobbying activities. as opposed "open time" to facilitate lobbying during • Encouragement of grass roots
to the entire item.Thus,if an employee Washington meetings could make the lobbying to influence notice and
spends GO%of his time on lobbying allocation approach impractical. comment rulemaking.
Y , . '
e
50868 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1983 / Notices
•
• Membership dues or contributions included"making available the results activity—rather than to identify specific
to organizations which have lobbying as of nonpartisan analysis, study, or activities that should not be subsidized
a "substantial organizational purpose." research, the distribution of which is not by the federal government.The result of
Many commenters on the January 24 primarily designed to influence the adopting any of those previously
proposal felt that the scope of outcome of any federal,state,or local established definitions in whole would
unallowable lobbying activities in that election,referendum,initiative, or be to disallow certain activities that are
proposal was too broad and would similar procedure,or any governmental properly allowable,and to allow certain
result in disallowing certain legitimate decision."The current proposal's activities that are not proper purposes
activities appropriately funded under a revised lobbying definition and for the expenditure of federal funds.
. grant Tr contract.For example,many accounting treatment do not make such Therefore, the approach of this
contracts with Executive Branch activity unallowable in the first place,so proposal has been to use concepts and
officials at the local.state,and federal the inclusion of such exception-is not definitions from the DAR.FPR.
levels are considered necessary to only unnecessary but confusing. NASAPR.and Internal Revenue Code
performance of the grant or contract. b.Lobbying could be defined as (IRC) where appropriate, and to deviate
and,often: compliance with the law. broadly as possible, with a detailed list from them where appropriate.The
Moreover. the concept of lobbying has of the unallowable activities:Some "Analysis" section of this preamble
traditionally been understood to be an criticism was made of OMB's January 24 identifies the areas of deviation and the
attempt to influence legislative rather proposal for rot being comprehensive rationale for them.Several areas of
than executive actions.Departure from enough in its restrictions on lobbying particular interest,however.should be
this understanding appears to create activities.Commenters felt that because noted. Unlike the DAR,FPR.NASAPR.
uncertainty and uneasiness among of the ambiguous nature of lobbying and and IRC. this proposal does not include
affected parties.Thus,OMB has rejected quasi-lobbying activities,it was more local lobbying,because of the difficulty
as too broad a definition of lobbying efficient to restrict the broadest scope of in distinguishing legislative from
that would deem Executive Branch these activities.As noted above, this executive lobbying at the local level and
contacts (other than in connection with argument was rejected in rewriting the the necessity of frequent contact by
the signing or veto of legislation)as proposal; in fact, the definitions have contractors and grantees with local
unallowable. been made less expansive.
officials or matters of administrative
Unlike the January 24 proposal, the
C. The lobbying restriction could concern to the contract and grant.
current draft does not disallow the consist of a broad,but undefined.promotion of grass roots lobbying to i,• f On the issue of legislative liaison
Y g prohibition on lobbying activities:This activity, this proposal basically adopts
influence notice and comment is essentially the approach being used the F'PR and NASAPR position in
rulemaking.The reason for the original currently in the grants area through making such activity unallowable only
inclusion of this provision was that such assorted appropriation bill riders,and it when related to otherwise unallowable
n'lemukings are quasi-legislative in has not been effective.Bynot specifying
character and that it is inappropriate P Eying lobbying. When legislative liaison
for which activities are restricted,agencies activity is performed in preparation for
the government to be financing march are required to do much more captains,rally orgainizers and other interpretative and negotiation work to revb�on s intent l tod make suchcontradicttae
ctivity
such persons for the performance of implement the restriction.Grantees and completely allowable.On the other
such activities in connection with grass contractors arc uncertain as to what is hand,legislative liaison can serve other
•
roots campaigns regarding such restricted,and whether the govenment is functions not made unallowable by this
regulations. On the other hand,the serious in enforcing those restrictions.In revision.
consultation process relative to the �
consult „ton process
s serious concerns addition,such an approach would 3.Documentation Requirements:
about .he aft disci applicabilityseriou of any
complicate audits conducted to When the method of cost treatment was
provi:ion regarding regulations to joint fordetlobby ng permine urposes, and would ther funds had been
esed items pa bfrall totalinvolved elin lobbying of cost
or collaborative efforts by grantees oranua y 24allo satoh (the
contractors to share information and particularly burdensome to smaller January 24 proposal)to the typical
to h the made grantees and contractors. "proportional"cost treatment used for
bythereby them ,�; federal improvetagencies.commentsis madeMB's d. The lobbying restriction could be cost items related to both unallowable.
them , in light h s It that this made identical in coverage to that of and allowable activities, documentation
matter should be studied duringovthe current Defense. GSA, or N.4SA of amounts of allowable and
course of theu comingprocurement regulations,or to the unallowable costs became a necessity.
whether f1 be known, tod if s determineo definition of"influencing legislation"in The principal alternative considered
whatwhether
•iextent.can b federal government the Internal Revenue Code:There would was to adopt the documentation
now finances gras3 federal
is tabu ❑ be substantial advantages to this philosophy of the GSA,Defense,and
lobbying approach,since current DAR.FPR,
ar.liviti��;of march captains, call NASA procurement regulations'
Y NASAPR,and IRS restrictions are well- restrictions on lobbying,i.e., to place the
organizers and the like in connection
o gh ize s comment connection
ectin , established and,in the case of the burden on the contractor or grantee to
Agency ice andors and others will g Internal Revenue Code,reasonably well- prove in all instances the
• examine this matter so as to determined NASAPR orovisionsharee unfamiliare DAR,FPR, to
whether additional language is neededappropriateness of a cost.This
the nonprofit community,while the IRS parinciples in general.would entail proach,while consistent with anost-
in the Circular to deal with this matter. restrictions on lobbying by 501(c)(3) implied burden on indirect cost
The exception in the January proposal organizations are unfamiliar to defense employees to maintain records (time
for distribution of nonpartisan analysis and civilian contractors.Moreover, the logs,calendars,or the like) to establish
for non-lobbying purposes is made IRS definition of"influencing of their time spent
superfluous by changes in the current legislation"is intended to identify the lobbyi g oron t related activities.This on
draft,and thus has been deleted.As character of the organization—whether would be particularly onerous for high
previously stated, the exception it is en ed in "substantial"lobbying ' `, �
g g level officials who,in the ordinary 1
Federal Register I Vol. 48, No. 214 / Thursday', November 3. 1983 / Notices ' S0889
course of business,frequently engage in the federal funds corporate giant funds are used for the purposes
only a small amount of lobbying.OMB organizational documents; audit reports; that were intended,and not to facilitate •
(along with Defense.GSA.and NASA) publications,newsletters, periodicals. lobbying campaigns.As noted above.
therefore proposes to allow grantees etc.issued by the recipient organization: current financial control procedures do
and contractors to certify in good faith and/or other information relating to a not permit an accurate estimate of the
the amout of lobbying and related recipient organization's activities? amount of tax dollars now diverted to
activities performed by indirect cost (3)Is the broad exclusion of local ' lobbying efforts by grantees and
employees (i.e., those who do not level lobbying from coverage of these contractors:whether large or small.
• already have to account for their time provisions necessary or desirable? correction of this problem will produce a
spent directly on a grant or contract). (4)Are any additional exceptions net gain to the intended beneficiaries of
Only if the employee is engaged necessary or desirable?Are any of the federal programs.The costs to be
(according to the organization's own exceptions provided in this proposal considered are primarily accounting and
estimate or outside evidence) in unnecessary or undesirable? recordkeeping costs for grantees and
lobbying or related activities more than (5)Restrictions on the encouragement contractors,as well as federal agencies.
25%of his time could further of grass roots lobbying inherently These new costs,however,are minimal
documentation be required. If a require an understanding of the in both absolute and relative amounts.
contractor or grantee is determined to distinction between providing and in many instances the revisions
ha,ve materially misstated allowable or information and encouraging lobbying. should reduce audit and compliance
unallowable costs within the preceding The intent of the section on grass roots costs.Furthermore,much of the
five-year period,more extensive lobbying(subparagraph b(4)) is that accounting work that the revision
documentation could be required. internal communications between an requires is already mandated by other
OMB also considered and rejected organization and its bona fide members sections of Circular A-122,or Circular
more extensive"sunshine"provisions to provide legislative information is A-110.This proposal has nonetheless
which would have called for full allowable,but the promotion of been prepared in accordance with the
disclosure by recipient organizations of membership lobbying is not. In light of analytical requirements of Executive
detailed information concerning their the above, is it desirable to add Order 12291.
personnel, public policy positions. language to the Circular regarding such
affiliations of officers and directors. internal communications; if so.what XiV.Paperwork Reduction Act
publications,and other such form should this language take? Requirements
information.OMB believes such (6) Is the allocation method the proper in accordance with the requirements
• reporting requirements would exceed accounting method for disallowing costs of the Paperwork Reduction Act of 1980.
those necessary to achieve the purpose related to sponsoring meetings and 44 U.S.C.3501 et seq., and 5 CFR Part
of these proposals.i.e., to ensure that conferences when these are used to 1320. the collection of information
federally appropriated funds are not promote lobbying?Would it be possible requirements contained in this proposed
used for lobbying or related activities by to disallow the entire cost of a meeting revision have been submitted for review
grantees and contractors.However, or conference if a"substantial parr is to OMB's Office of Information and
•OMB has explicitly sought comments on devoted to promoting lobbying?If so. Regulatory Affairs.
this issue.(See Issues for Comment. how should the term"substantial"be Comments about the appropriateness
paragraph 2.) defined? Comments
collection of information
4.Penalties:OMB considered and (7)Are there are any cases where the requirements in this proposal should be
rejected as too stringent a penalty explanatory comments in the proposal nn addressed to Edward C.Springer,Office
provision which would require the and the preamble are not sufficiently P g
return to the federal government of all clear or detailed to enable of Information and Regulatory Affairs.
grant or contract funds received by a understanding of the proposal's Office of Management and Budget.
nonprofit organization found to be meaning? Washington,D.C.20503.(202)395-4814.
engaged in lobbying or related activities. XIII.Designation as"Non-major"Rule XV.Comment Submittal and Further
Instead.OMB has opted to follow theg I Information
standard A-122 penalties of cost OMB has determined that the
recovery and, in certain cases, proposed revision to A-122 does not Comments should be submitted in
suspension. termination, and debarment. qualify as a "major rule"under the duplicate to the Financial Management
X11.Issues for Comment criteria as listed in Executive Order Division.Office of Management and
12291: Budget,Washington,D.C.29593.All
In addition to any other comments. (b) 'Major rule"means any regulation comments should be received within 45
the public is specifically invited to that is likely to result in: days of this notice.
comment on the following issues: (t) An annual effect on the economy FOR FURTHER INFORMATION CONTACT:
(1) Do the provisions of Subparagraph of 5100 million or more; John J.Lordan,Financial Management
e(4) (concerning the maintenance of time (2)A major increase in costs or prices Branch,Office of Management and
• logs and similar records)adequately for consumers,individual industries, Budget,.Washington.D.C.20503(202)
protect against unreasonable federal, state.or local government 395-6823.
recnrdkeepitkg burdens without agencies.or geographic regions;or Issued in Washington.D.C..November I.
rendering these provisions (3)Significant adverse effects on 1983
unenforceable?What changes.if any. competition,employment,investment. Darrell Johnson.
are recommended? productivity,innovation.or un the J ,
(2)Should broader disclosure ability of United States-based Budget and AfanagementOfficer.
requi:ements for recipient organizations enterprises to compete with foreign- (Circular A-122)
be included to facilitate the monitoring based enterprises in domestic or export Cost Principles for Nonprofit
of their activities?For example.should markets. Organizations
recipient organizations be required to The principal effect of the proposed
provide the agency granting or awarding revisions will be to ensure that federal Circular A-122 is revised as follows:
50870 Federal Register / Vol. 48, No. 214 / Thursday, November 3, 1983 / Notices
1.insert a new paragraph in (5)Agencies shall establish or propaganda purposes designed to support
Attachment B.as follows:"B21 procedures for resolving in advance,in or defeat legislation pending before
Lobbying and Related Activities." consultation with OMB,any significant Congress."E.g.. Pub.L.96-74.Section soy.93
a.(1)Organizations shall include.as questions or disagreements concerning Stilt.575.The Internal Revenue Code defines
part of their annual indirect cost the interpretation or application of "influencing legislation"as decal,stu"any
proposal,a statement identifying by subparagraphs a or b.Any such advance attempt to influence any[federal,state,or
category costs attributable in whole orany member
othrough communicationle with
resolution,if in writing,shill be binding arty member or employee of a legislative
in part to activities made unallowable in any subsequent settlements. audits.or body,or with any government official or
by subparagraph b,and stating how investigations with respect to that grant employee who may participate in the
• they are accounted for. or contract for purposes of formulation of the legislation."20 U.S.C.
Comment The fact that a cost included in interpretation of this Circular. Section 4911(d)(1)(B).This provision is
the proposal discussed in subparagraph a(i) b.Notwithstanding other provisions of narrower than the Internal Revenue Code
(such as an employee's salary,an item of this Circular. costs associated with the provisions because it does not apply to
equipment,or the cost of a facility)may be following activities are unallowable: influencing legislation at the local level.
used in part for lobbying or related activities, (1)Attempts to influence the outcomes Moreover.subparagraph c(5)excludes from
as defined by subparagraph B21 b.does not of any Federal. State,or local election. the coverage of this provision any lobbying or
make the.remainder unallowable. related activity at the state level directly
(2) he certification required as a part referendum,initiative,or similar related to the ability of or cost to the
procedure, through in kind or cash
of the Financial Status Report required ccntributions,endorsements,publicity. contract tion of performing the grant or
under Attachment G of Circular.A-110 or similar activity:
shall be deemed to be a certfication that
the requirements and standards of this Comment:The Internal Revenue Code (4) Preparation.distribution,or use of
paragraph, and of other paragraphs of prohiltits tax-exempt charitable organizations publicity or propaganda designed to
from interven[ingj in(including the influence legislation pending before
Circular A-122 respecting"lobbying and publishing or distributing of statements),any C-rngrevs or a State legislature by urging
related activities,"have been compiled p political campaign on behalf of any candidate members of the general public or any
with. for public office."2e U.S.C.Section S01(c)(3). segment thereof to contribute to or
(.1)Organizations shall maintain In addition,for purposes of defining participate in any mass demonstration,
adequate records to demonstrate that "influencing legislation."the Internal
the determination of costs as being Revenue Code defines"legislation"to include march,byirally,or ifgndor a to dwve,
allowable or unallowable pursuant to "action with respect to Acts.bills. lobbying campaign,or letter-writing or
subparagraph a(1)above complies with resolutions or similar items. . .by the public telephone campaign,for the purpose of
the requirements of this circular. in a referendum:initiative,constitutional influencing such legislation;or
Comment:As with other costs under this Section am 4911(e)(2).r similar procedure."zn U.S.C. Comment The Treasury,Postal Service,
Circular,to the extent that such In one respect.this subparagraph is and General Government Appropriations Act
documentation is not provided by the narrower than the Internal Revenue part traditionally contains a ridcontaineder providing:"No
organization,the amount that cannot provisions,because it is confined to anynt other any Act
,..shall be used in this or
reasonably be demonstrated to be allowable, "contributions,endorsements,publicity,or propaganda t...shall sused for publicity
up to the entire cost in question,shall be similar activity."in contrast to the broader or purposes designedg a support
disallowed. proscription of"participatlion)or or defeat legislation pending before
(4)For the purposes of complying with interven(tion),directly or indirectly• • ••• Congress."E.g.,ter 96-74,
ev Section e d 93
Stat.575.The Internal Revenue Code defines
subparagraph a, there will be no (2)Establishing,administering. "influencing legislation"to include:"any
requirement for time logs,calendars,or contributing to, or paying the expenses attempt to influence any[federal,state,or
similar records documenting the of a political party,campaign,political local)legislation through an attempt to affect •
activities of an employee whose salary action committee,or other organization the opinions of the general public or any
is treated as art indirect cost,and the established for the purpose of segment thereof."28 U.S.C.Section 4911
absence of time logs or comparable influencing the outcomes of elections; (d)(1)(A).This subparagraph is more
records for indirect cost employees not be it tailored than effortshese provisions.t oin
kept pursuant to the discretion of the Comment:The Internal Revenue Service because is limited to to obtain
grantee pu s ant contractor not serve has included within the list of disqualifying concerted actions on the part of the public
as a activities under 26 U.S.C.Section 501(c)(3)the and does not,therefore,include mere
basis for contesting or disallowing following:"participa(tion)or intervenj(ion), attempts"to affect the opinions of the general
claims,unless: (a) the employee engages directly or indirectly.in any political public or any segment thereof,"if such
in lobbying or related activities more campaign,on behalf of or in oopoaitio:, to any attempts do not lead to concerted action.This
than 25%of the time or(b)the candidate for p_rblic office."26 CFR Section is consistent with the GAO'e interpretation of
organisation has matarially misstated 1.501(c)(3)-(c)(3j(iii). the"publicity or propaganda"appropriations
allowable or unallowable costs within (3)Attempts to influence legislation rider.See 13 202975(Nov.3,1981).
the preceding five year period.Agency pending before Congress or a Stateeson -
guidance regarding the extent and legislature by communicating with any including attendance at legislatactivitiive
n-ture of documentation required member or employee of the Congress or sessions or committee hearings,
. pursuant to subparagraph a(3)shall be legislature, (including efforts to at, erin
ic'rie.ved under the criteria of the influence state or local officials to legislation.
gathering informationdanalyzing
zing the effect pendingf
Paperwork P.eduction Act. to ensure that engage in similar lobbying activit le pending
a legislation,e, and analyzinp the the
requirements are the least burdenacme with any government official or y).or thatuch activities
aytesdo
not relate extent
to 1
necessary to satisfy the objectives of employee in connection with a decision lobbying or related activities as defined
tt;is subparagraph. to sign or veto enacted legislation:
by paragraph l.b.hereof.
C.'orin,ert:This provision is for the purpose Comment:The Treasury,Postal Service, Comment The coats of all legislative
of assuring that agencies and auditors must and General Government Appropriations Act .liaison activities are made unallowable for
rely on the good faith estimates of time spent traditionally contains a rider providing:"No contractors under the current Defense
on lobbying by such employees.or upon part of any appropriation contained in this or Acquisition Regulations(DAR);Section 15—
outai,le evidence. any other Act. . .shall be used for publicity 205.51.but are allowable for civilian
a a•
Federal Register / Vol. 48, No. 214 / Thursday, November 3. 1983 / Notices 50871
contractors under the current Federal enrolled bills,or attempts to use state and affects the ability of or cost to the grantee or
Procurement Regulations(FPR).Section 1- local Offiicials as conduits for grantee and contractor of performing the grant or
15.205-52. contractor lobbying of Congress or stale contract:or(II)when states choose to adlupt
• This subparagraph is narrower than the legislatures. rules waiving such restrictions for their
DAR provisions.because it only makes
legislative liaison costs unallowable if they (3)Any activity in connection with an federal grant subgrantees.
relate to otherwise unallowable lobbying employee's service as an elected or (5)Any activity specifically
activities, appointed official or member of a authorized by statute to be undertaken,
C.Notwithstanding subparagraph b, governmental advisory panel: pursuant to the federal grant.contract.
costs associated with the following (4)Any lobbying or related activity at or other agreement.
activities are not unallowable under this the state level for the purpose of
paragraph: influencing legislation directly affecting Comment:This circular does not,nor could
the abilityof the organization or cost to it.limit the ability of Congress subject to
(1)Providing technical advice or t8 constitutional constraints,to appropriate
assistance to the Congress or a State the organization of performing:he grant, funds for the use by contractors or grantees
legislature or to a member,committee, contract,or other agreement: however, fur lobbying or related activities.
or other subdivision thereof,in response state governments acting as subgrantors •
to a specific written request by such may, through appropriate state 2.Renumber subsequent paragraphs
member.legislative body,or processes,waive the current practice of Attachment B.
subdivision; under OMB Circular A-102 making 3.Insert language in subparagraph
Comment This tracks the exception at 26 Circular A-122 applicable to nonprofit B.4.b of Attachment A.so that it reads
U.S.C.Section 4911(d)(2)(B). subgrantees with regard to such as follows:
2)Any communication with an lobbying activities at the state level as b.Promotion,lobbying or related
( are deemed appropriate. activities(as defined by subparagraph
executive branch official or employee. Comment:The(nterrnal Revenue Cade B21(b)-of Attachment B),and ublic
other than a communication made provisions defining Influencing
legislation" relations. p
expressly unallowable by paragraph cover lobbying at the state and local level,us
1.h.(3) hereof. do the current Defense Acquistiun Comments This is a technical language
Comment:This is identical in substance to Regulations(DAR),Section 15-205.51 and the change,which amends the former term
the exception at 29 U.S.C.Section 4911 current Federal Procurement Regulations "lobbying"to"lobbying and relat0d
(d)(2)(FI.Reud in conjunction with (FPR).Section 1-15.205-52.This activities."The added language is"or related
subparagraph b(3).the effect is to make clear subparagraph is narrower than those activities(as defined by subparagraph B21th(
that the only contacts with executive branch provisions because(1)lobbying at the local of Attachment B)."
officials made unallowable are those in level is not covered,and(2)lobbying at the I1'a nv<a3-xrus Filed 21-2.83:10..225 ens'
connection with the signing or veto"`r state level is not covered if it fa)directly 911.1.1146 coop 3110.0141
• �jc N.I,31 T L
AEC
Vri-
EXECUTIVE OFFICE OF THE PRESIDENT l,, '
#~ , OFFICE OF MANAGEMENT AND BUDGET AP
/j„� R 4 1944
?} � WASHINGTON. D.C. 20503
November 19, 1993 %eft L D
THE DIRECTOR "c514111
Oft
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 . p►uthority. 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
r r r r l r r
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. Recuired 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 I shall adopt the language in the Circular unless
different provisions are required by Federal statute or are
approved by OMB.
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 parts ular cases where adequate justification is
presented.
7. Information Contact. Further information concerning this
Circular may be obtained by contacting the Office of Federal
Financial Management, Office of Management and Budget,
Washington, DC 20503, Telephone (202) 395-3993 .
8. Termination Review Date. This Circularywill 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
Reaister. 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 encoura• - -010111
4—
411-#4-
. Panetta
Director
Attachment
-2-
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.
. 14 Special award conditions.
. 15 Metric system of measurement.
. 16 Resource Conservation and Recovery Act.
• . 17 Certifications and representations.
SUBPART C - POST-AWARD REQUIREMENTS
Financial _and _Program Management
. .20 Purpose of financial and program management.
. 21 Standards for financial management systems.
. 22 Payment.
. 23 Cost sharing or matching.
. 24 Program income.
_- ' . 25 Revision of budget and program plans.
. 26 Non-Federal audits.
.27 Allowable costs.
- . 28 Period of availability of funds.
Property Standards
-. 30 Purpose of property standards.
. 31 Insurance coverage.
. 32 Real property.
.33 Federally-owned and exempt property.
. 34 Equipment.
.35 Supplies and other expendable property.
- . 36 Intangible property.
. 37 Property trust relationship.
• 3
•
•
•
Procurement Standards
. 40 Purpose of procurement standards.
. 41 Recipient responsibilities.
.42 Codes of conduct.
.43 Competition.
.44 Procurement procedures.
. 45 Cost and price analysis.
. 46 Procurement records.
. 47 Contract administration.
. 48 Contract provisions.
Reports and Records
. 50 Purpose of reperts and records.
. 51 Monitoring and reporting program performance.
. 52 Financial reporting.
. 53 Retention and access requirements for records.
Termination and Enforcement
. 60 Purpose of termination and enforcement.
. 61 Termination.
. 62 Enforcement.
SUBPART D - AFTER-THE-AWARD REQUIREMENTS
. 70 Purpose.
. 71 Closeout procedures.
. 72 Subsequent adjustments and continuing responsibilities.
. 73 Collection of amounts due.
r
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
4
•
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 eauipment 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 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.
5
•
that
(i) Cost sharing or matching meansFederalp portion Gof
project or
program costs not borne by the
(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 pribciples 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 J
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.
6
(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 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
decrealse) 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 approvalmeans 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.
7
•
(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
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. "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) .
8
•
•
(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.
(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) Unliauidated 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.
9
. 4
(mm) Unobliaated 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
C-ircular, 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 w*ich 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
e-xclude 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.
10
. -«
. 11 Pre-award policies.
(a) Use of Grants and Cooperative . Agreements, and Contracts. In
each instance, the Federal awarding agency shall decide on
the appropriate award instrument (i..e. , grant, cooperative
Grant and Cooperative
tract The Federal p
agreement, or contract) .
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.
•
11
ies
. 13 Debarment and suspension. Federal awarding agencies and
n rocurement debarment comply with the no p
recipients shall p y
suspension common rule implementing E.O.s 12549 and 12689 ,
"Debarment and Suspension. " This common rule restricts subawards
are debarred, suspended
with certain parties that ,
and contracts
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 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 iinitially 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.
12
•
. 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.
4
(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 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
13
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. "
14
.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.
(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
15
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.
(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.
16
•
(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)
Consist
ent 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. 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
17
•
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.
18
•
(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) .
(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
consis4tent 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.
19
5 III
•
(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 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.
20
.24 Program income.
(a) Federal awarding agencies shall apply the standards set
forth in this section in requiring recipient organization.
to account for program income related to projects finance
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.
4
(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 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.
21
•
(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
Institutions of Higher Education, " OMB Circular A-122 ,
22
"Cost Principles for Non-Profit Organizations , " or 45
CFR part 74 Appendix E, "Principles for Determining
Costs Applicable to Research and Development under
Grants and Contracts with Hospitals, " or 48 CFR part
31, "Contract Cost Principles and Procedures, " as
applicable.
(7) The transfer of funds allotted for training allowances
(direct payment to trainees) to other categories of
expense.
(8) Unless described in the application and funded in the
approved 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.
21
•
•
(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.
(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.
t
(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
24
•
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 Fefieral 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 shall be subject
to the audit requirements contained in OMB Circular A-133 ,
"Audits of Institutions of Higher Education and Other Non-
Profit Institutions. "
(b) State and local governments shall be subject to the audit
requirements contained in the Single Audit Act (31 U.S. C.
7501-7) and Federal awarding agency regulations implementing
OMB Circular A-128, "Audits of State and Local
Governments. "
(c) Hospitals not covered by the audit provisions of 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
25
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 and Local 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.
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.
26
(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 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
compensation for its attributable
tiled to com en
shall be entitled P
percentage of the current fair market value of the
property.
• 27
•
•
. 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
28
a .•....ah^'-.. -era..'...t •4: ..t..,- <
r 4 4 r
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 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 fcr 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.
• 29
•
(vi) Information from which one can calculate the
percentage of Federal participation in the
cost of the equipment (not applicable to
equipment furnished by the Federal
Government) .
(vii) Location and condition of the equipment and
the date the information was reported.
(viii) Unit acquisition cost.
(ix) Ultimate disposition data, including date of
disposal and sales price or the method used
to determine current fair market value where
a recipient compensates the Federal awarding
agency for its share.
(2) Equipment owned by the Federal Government shall be
identified to indicate Federal ownership.
(3) A physical inventory of equipment shall be taken and
the results reconciled with the equipment records at
least once every two years. Any differences between
quantities determined by the physical inspection and
those shown in the accounting records shall be
investigated to determine the causes of the difference.
The recipient shall, in connection ,with the inventory,
verify the existence, current utilization, and
continued need for the equipment.
(4) A control system shall be in effect to insure adequate
safeguards to prevent loss, damage, or theft of the
equipment. Any loss, damage, or theft of equipment
shall be investigated and fully documented; if the
equipment was owned by the Federal Government, the
recipient shall promptly notify the Federal awarding
agency.
(5) Adequate maintenance procedures shall be implemented to
keep the equipment in good condition.
(6) Where the recipient is authorized or required to sell
the equipment, proper sales procedures shall be
established which provide for competition to the extent
practicable and result in the highest possible return.
(g) When the recipient no longer needs the equipment, the
equipment may be used for other activities in accordance
with the following standards. For equipment with a current
per unit fair market value of $5000 or more, the recipient
may retain the equipment for other uses provided that
compensation is made to the original Federal awarding agency
30
•
A • • l.. '
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.
•
(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.
31
'f. 1
�. I1 ;
•
•
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 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.
34
f
fit: .:. •s
(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
4 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.
35
•
(1) Ensure that small businesses, minority-owned firms, and
women's business enterprises are used to the fullest
extent practicable.
(2) Make information on forthcoming opportunities available
and arrange time frames for purchases and contracts to
encourage and facilitate participation by small
businesses, minority-owned firms, and women's business
enterprises.
(3) Consider in the contract process whether firms
competing for larger contracts intend to subcontract
with small' businesses, minority-owned firms, and
women's business enterprises.
(4) Encourage contracting with consortiums of small
businesses, minority-owned firms and women's business
enterprises when a contract is too large for one of
these firms to handle individually.
(5) Use the services and assistance, as appropriate, of
such organizations as the Small. Business Administration
and the Department of -Commerce's Minority Business
Development Agency in the solicitation and utilization
of small businesses, minority- owned firms and women's
business enterprises.
(c) The type of procuring instruments used (e.g. , fixed price
contracts, cost reimbursable contracts, purchase orders, and
incentive contracts) shall be determined by the recipient
but shall be appropriate for the particular procurement and
for promoting the best interest of the Rrogram 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. .
36
•
•
(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 s)pall 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.
. 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 ev
aluate 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
37
1
! la '
•
•
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.
(4) Where bonds are required in the situations described
herein, the bonds shall be obtained from companies
holding certificates of authority as acceptable
38
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 nec4ssary 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.
39
(1) A comparison of actual accomplishments with the goals
and objectives established for the period, the findings
of the investigator, or both. Whenever appropriate and
the output of programs or projects can be readily
quantified, such quantitative data should be related to
cost data ' for computation of unit costs.
(2) Reasons why established goals were not met, if
appropriate.
(3) Other pertinent information including, when
appropriate, analysis and explanation of cost overruns
or high unit costs.
(e) Recipients shall not be required to submit more than the
original and two copies of performance reports.
(f) Recipients shall immediately notify the Federal awarding
agency of developments that have a significant impact on the
award-supported activities. Also, notification shall be
given in the case of problems, delays, or adverse conditions
which materially impair the ability to meet the objectives
of the award. This notification shall include a statement
of the action taken or contemplated, and any assistance
needed to resolve the situation.
(g) Federal awarding agencies may make site visits, as needed.
(h) Federal awarding agencies shall comply with clearance
requirements of 5 CFR part 1320 when requesting performance
data from recipients.
. 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
40
1
•
•
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
4 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.
(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.
41
(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 ether 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.
42
ti ,
(4) Federal awarding agencies may accept the identical
information from the recipients in machine readable
format or computer printouts or electronic outputs in
lieu of prescribed formats.
(5) Federal awarding agencies may provide computer ' or
electronic outputs to recipients when such 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
43
y
•
•
recipients to retain any records that are continuously
needed for joint use.
(e) The Federal awarding agency, the Inspector General,
Comptroller General of the United States, or any of their
duly authorized representatives, have the right of timely
and unrestricted access to any books, documents, papers, or
other records of recipients that are pertinent to the
awards, in order to make audits, examinations, excerpts,
transcripts and copies of such documents. This right also
includes timely and reasonable access to a recipient' s
personnel for the purpose of interview and discussion
related to such documents. The rights of access in this
paragraph are not limited to the required retention period,
but shall last as long as records are retained.
(f) Unless required by statute, no Federal awarding agency shall
place restrictions on recipients that limit public access to
the records of recipients that are pertinent to an award,
except when the Federal awarding agency can demonstrate that
such records shall be kept confidential and would have been
exempted from disclosure pursuant to the Freedom of
Information Act (5 U.S.C. 552) if the records had belonged
to the Federal awarding agency.
(g) Indirect cost rate proposals, cost allocations plans, etc.
Paragraphs (g) (1) and (g) (2) apply to the following types of
documents, and their supporting records: indirect cost rate
computations or proposals, cost allocation plans, and any
similar accounting computations of the rate at which a
particular group of costs is chargeable (such as computer
usage chargeback rates or composite fringe benefit rates) .
(1) If submitted for negotiation. If the recipient submits
to the Federal awarding agency or the subrecipient
submits to the recipient the proposal, plan, or other
computation to form the basis for negotiation of the
rate, then the 3-year retention period for its
supporting records starts on the date of such
submission.
(2) If not submitted for negotiation. If the recipient is
not required to submit to the Federal awarding agency
or the subrecipient is not required to submit to the
recipient the proposal, plan, or other computation for
negotiation purposes, then the 3-year retention period
for the proposal, plan, or other computation and its
supporting records starts at the end of the fiscal year
(or other accounting period) covered by the proposal,
plan, or other computation.
44
i.
•
Termination and Enforcement
. 60 Purpose of termination and enforcement. Sections
. 61 and . 62 set forth uniform suspension, termination and
enforcement procedures.
. 61 Termination.
(a) Awards may be terminated in whole or in part only if (1) ,
(2) or (3) apply.
(1) By the Federal awarding agency, if a recipient
materially fails to comply with the terms and
conditions of an award.
(2) By the Federal awarding agency with the consent of the
•
recipient, in which case the two parties shall agree
upon the termination conditions, including the
effective date and, in the case of partial termination,
the portion to be terminated.
(3) By the recipient upon sending to the Federal awarding
agency written notification setting forth the reasons
for such termination, the effective date, and, in the
case of partial termination, the portion to be
terminated. However, if the Federal awarding agency
determines in the case of partial termination that the
reduced or modified portion of the grant will not
accomplish the purposes for which the grant was made,
it may terminate the. grant in its entirety under either
paragraphs (a) (1) or (2) .
(b) If costs are allowed under an award, the responsibilities of
the recipient referred to in paragraph .71(a) , including
those for property management as applicable, shall be
considered in the termination of the award, and provision
shall be made for continuing responsibilities of the
recipient after termination, as appropriate.
. 62 Enforcement.
(a) Remedies for noncompliance. If a recipient materially fails
to comply with the terms and conditions of an award, whether
stated in a Federal statute, regulation, assurance,
application, or notice of award, the Federal awarding agency
• may, in addition to imposing any of the special conditions
outlined in Section .14 , take one or more of the
following actions, as appropriate in the circumstances.
(1) Temporarily withhold cash payments pending correction
of the deficiency by the recipient or more severe
enforcement action by the Federal awarding agency.
45
(2) Disallow (that is, deny both use of funds and any
applicable matching credit for) all or part of the cost
of the activity or action not in compliance.
(3) Wholly or partly suspend or terminate the current
award.
(4) Withhold further awards for the project or program.
(5) Take other remedies that may be legally available.
(b) Hearings and appeals. In taking an enforcement action, the
awarding agency shall provide the recipient an opportunity
for hearing, appeal, or other administrative proceeding to
which the recipient is entitled under any statute or
regulation applicable to the action involved.
(c) Effects of suspension and termination. Costs of a recipient
resulting from obligations incurred by the recipient during
a suspension or after termination of an award are not
allowable unless the awarding agency expressly authorizes
them in the notice of suspension or termination or
subsequently. Other recipient costs during suspension or
after termination which are necessary and not reasonably
avoidable are allowable if (1) and (2) apply.
(1) The costs result from obligations which were properly
incurred by the recipient before the effective date of
suspension or termination, are not ,in anticipation of
it, and in the case of a termination, are
noncancellable.
(2) The costs would be allowable if th4 award were not
suspended or expired normally at the end of the funding
period in which the termination takes effect.
(d) Relationship to debarment and suspension. The enforcement
remedies identified in this section, including suspension
and termination, do not preclude a recipient from being
subject to debarment and suspension under E.O.s 12549 and
12689 and the Federal awarding agency implementing
regulations (see Section . 13) .
•
SUBPART D - After-the-Award Requirements
.70 Purpose. Sections .71 through .73 contain
closeout procedures and other procedures for subsequent
disallowances and adjustments.
•
•
• 46
•
•
.71 Closeout procedures.
•
(a) Recipients shall submit, 1./ .thin 90 calendar days after the
date. of completion of the award, all financial, performance,
and other reports as required by the terms and conditions of
the award. The Federal awarding agency may approve
extensions when requested by the recipient.
(b) Unless the Federal awarding agency authorizes an extension,
a recipient shall liquidate all obligations incurred under
the award not later than 90 calendar days after the funding
period or the date of completion as specified in the terms
and conditions of the award or in agency implementing
instructions.
•
(c) The Federal awarding agency shall make prompt payments to a
recipient for allowable reimbursable costs under the award
being closed out.
(d) The recipient shall promptly refund any balances of
unobligated cash that the Federal awarding agency has
advanced or paid and that is not authorized to be retained
by thq 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.
47
•
•
(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.
(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. "
•
48
•
•
Appendix A
Contract Provisions
t
All contracts, awarded by a recipient including small
purchases, shall contain the following provisions as applicable:
1. Eaual. 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 . pavis-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 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
49
for other contracts that involve the employment of mechanics or
laborers shall include a provision for compliance with Sections
102 and 107 of the Contract Work Hours and Safety Standards Act
(40 U.S.C. 327-333) , as supplemented by Department of Labor
regulations (29 CFR part ,5) . Under Section 102 of the Act, each
contractor shall be required to compute the wages of every
mechanic and laborer on the basis of a standard work week of 40
hours. Work in excess of the standard work week is permissible
provided that the worker is compensated at a rate of not less
than 1 1/2 times the basic rate of pay for all hours worked in
excess of 40 hours in the work week. Section 107 of the Act is
applicable to construction work and provides that no laborer or
mechanic shall be required to work in surroundings or under
working conditions which are unsanitary, hazardous or dangerous.
These requirements do not apply to the purchases of supplies or
materials or articles ordinarily available on the open market, or
contracts for transportation or transmission of intelligence.
5. Rights to Inventions Made Under a Contract or Agreement -
Contracts or agreements for the performance of experimental,
developmental, or research work shall provide for the rights of
the Federal Government and the recipient in any resulting
invention in accordance with 37 CFR part 401, "Rights to
Inventions Made by Nonprofit Organizations and Small Business
Firms Under Government Grants, Contracts and Cooperative
Agreements, " and any implementing regulations issued by the
awarding agency.
6. Clean Air Act (42 U. S. C. 7401 et seg. ) apd the Federal Water
Pollution Control Act (33 U. S. C. 1251 et sea. ) . 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-Lobbvina Amendment 131 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.
50
•
8. pebarment and Suspension (E.-.O. s 12549 and 12689) - No Services
er i
contract shall be made to parties listed on the
General S
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.
4 •
•
•
•
•
•
51
1
°, Manabook 6500
gav
csi
0, � U.S.Department o4 Housing and Urban Development
'44w.°ot's' Office of Community Planning and Development
e
Program Participants
and Departmental
Staff
September 1988 Community
Development Block
Grant Program
Entitle
ment ment Grant
Regulations
CCBE: Distribution:W-1,W-3-1, R-1, R-6, Special (CPO
Field Directors)
•
NA
•
• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary
for
Community Planning and Development
24 CFR Part 570
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
FINAL RULE
as published in the
FEDERAL REGISTER
(53 FR 34437; September 6, 1988]
MorE THE POL C :itt.1G :
( i) The subrecipient does not assume the recipient 's
environmental responsibilities described at § 570.604;
and
(ii) The subrecipient . does not assume the recipient 's
responsibility for initiating the review process under
Executive Order 12372..
•
7. Subpart K of Part 570 is revised to read as follows :
Subpart K -- Other Program Requirements.
Sec.
570.600 General.
570.601 Public Law 88-352 and Public Law 90-284 ; affirmatively
furthering fair housing ; and Executive Order 11063 .
570.602 Section 109 of the Act.
570. 603 Labor standards.
570.604 Environmental standards.
570.605 National Flood Insurance Program.
570.606 Relocation, displacement and acquisition.
570.607 Employment and contracting opportunities.
570. 608 Lead-based paint.
570.609 Use of debarred, suspended , or ineligible contractors or
subrecipients.
570.610 Uniform administrative requirements and cost principles.
570.611 Conflict of interest.
570.612 Executive Order 12372.
Subpart N Other Program Requirements.
S 570.600 General.
(a) Section 104 (b) of the Act provides that any grant under
section 106 of the Act shall be made only if the grantee
certifies to the satisfaction of the Secretary, among other
things, that the grant "will be conducted and administered in
conformity with Public Law 88-352 and Public Law theother
90- 84," a ,
further, that the grantee "will comply with
provisions of this title and with other applicable laws. "
Section 104 (e) (1) of the Act requires that the Secretary
determine with respect to grants made pursuant to section
106 (b) (Entitlement Grants) and 106 (d) (2) (8) (HUD-administered
Small Cities Grants) , at least on an annual basis, among other
things, "whether the grantee has carried out (its)
certifications in compliance with the requirements and the
primary objectives of this title and with other applicable
laws. . . . " Certain other statutes are expressly made
applicable to activities assisted under the Act by the Act
itself, while other laws not referred to in the Act may be
applicable to such activities by their own terms. Certain
statutes or Executive Orders which may be applicable to
activities assisted under the Act by their own terms are
administered or enforced by governmental departments . or
agencies other than the Secretary or the Department. This
Subpart K enumerates laws which the Secretary will treat as
applicable to grants made under section 106 of the Act, other
than grants to States made pursuant to section 106 (d) of the
K-I
9/88
,
1
•
•
•
Act, for purposes of the determinations described above to be
made by the Secretary under section 104 (e) (1) of the Act,
1)
including statutes expressly made applicable by the Act and
certain other statutes and Executive Orders for which the
Secretary has enforcement responsibility. The absence of
mention herein of any other statute for which the Secretary
does not have direct enforcement responsibility is not
intended to be taken as an indication that, in the Secretary's
opinion, such statute or Executive Order is not applicable to
activities assisted under the Act. For laws which the
Secretary will treat as applicable to grants made to States
under section 106 (d) of the Act for purposes of the
determination required to be made by the Secretary pursuant to
section 104 (e) (2) of the Act, see § 570.496.
(b) This subpart also sets forth certain additional program
requirements which the Secretary has determined to be
applicable to grants provided under the Act as a matter of
administrative discretion.
(c) In addition to grants made pursuant to section 106 (b) and
106 (d) (2) (8) of the Act (Subparts D and F, respectively) , the
requirements of this Subpart K are applicable to grants made
pursuant to sections 107 and 119 of the Act (Subparts E and G,
respectively) , and to loans guaranteed pursuant to Subpart M.
S 570.601 Public Law 88-352 and Public Law 90-284; affirmatively
furthering fair housing; Executive Order 11063.
Section 104 (b) of the Act provides that any grant under
section 106 of the Act shall be made only if the grantee certifies
to the satisfaction of the Secretary that the grant "will be
conducted and administered in conformity with Public Law 88-352 and
Public Law 90-284 and the grantee will affirmatively further fair
housing . " Similarly, section 107 provides that no grant may be
made under that section (Secretary's Discretionary Fund) or
section 119 (UDAG) without -satisfactory assurances that the
grantee 's program will be conducted and administered in conformity
with Public Law 88-352 and Public Law 90-284.
(a) "Public Law 88-352" refers to title VI of the Civil Rights Act
of 1964 (42 U.S.C. 2000d et s_g.) , which provides that no
person in the United States shall on the ground of race,
color , or national origin, be excluded from participation in,
be denied the benefits of, or be subjected to discrimination
under any program or activity receiving Federal financial
assistance. Section 602 of the Civil Rights Act of 1964
directs each Federal department and agency empowered to extend
Federal financial assistance to any program or activity by way
of grant to effectuate the foregoing prohibition by issuing
rules, regulations, or orders of general applicability which
. f
K-2 .9/88
ti
•
t .
shall he consistent with achievement of the statute
authorizing the financial assistance. HUD regulations
implementing the requirements of Title VI with respect to HUD
programs are contained in 24 CFR Part 1.
(b) "Public Law 90-284" refers to title VIII of the Civil Rights
Act of 1968 (42 U.S.C. 3601 et .se . ) , popularly known as the
Fair Housing Act , which provides that it is the policy of the
United States to provide, within constitutional limitations,
for fair housing throughout the United States and prohibits
any person from discriminating in the sale or rental of
housing , the financing of housing , or the provision of
brokerage services, including otherwise ;making unavailable or
denying a dwelling to any person, because of race, color ,
religion , sex , or national origin. Title VIII further
requires the Secretary to administer the programs and
activities relating to housing and urban development in a
manner affirmatively to further the policies of Title VIII .
Pursuant to this statutory direction, the Secretary requires
that grantees administer all programs and activities related
to housing and community development in a manner to
affirmatively further the policies of Title VIII; furthermore,
section 104 (b) (2) of the Act requires that each grantee
receiving funds under section 106 of the Act (entitlement or
small cities grantees) certify to the satisfaction of the
Secretary that it will affirmatively further fair housing.
(I (c) Executive Order 11063, as amended by Executive Order 12259 ,
directs the Department to take all action necessary and
• appropriate to prevent discrimination because of race, color ,
religion (creed) , sex , or national origin, in the sale,
leasing , rental, or other disposition of residential property
and related facilities (including land to be developed for
residential use) , or in the use or occupancy thereof, if such
property and related facilities are, among other things,
provided in whole or in part with the aid of loans, advances,
grants, or contributions agreed to be made by the Federal
Government. HUD regulations implementing Executive Order
11063 are contained in 24 CFR Part 107.
5 570.602 Section 109 of the Act.
(a) Section 109 of the Act requires that no person in the United
States shall on the ground of race , color , national origin or
sex, be excluded from participation in, be denied the benefits
of , or be subjected to discrimination under , any program or
activity funded in whole or in part with community development
funds made available pursuant to the Act. For purposes of
this section "program or activity" is defined as any function
conducted by an identifiable administrative unit of the
recipient, or by any unit of government, subrecipient, or
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private contractor receiving community development funds or
loans from the recipient. "Funded in whole or in part with
community development funds" means that community development
funds in any amount in the form of grants or proceeds from HUD
guaranteed loans have been transferred by the recipient or a
subrecipient to an identifiable administrative unit and
disbursed in a program or activity. In subsection (b) of this
section, "recipient" means recipient as defined in 24 CFR
1.2 (f) .
(b) Specific discriminatory actions prohibited and corrective
actions.
•
(1) A recipient may not, under any program or activity to
which the regulations of this part may apply, directly or
through contractual or other arrangements, on the ground
of race, color , national origin, or sex:
(i) Deny any individual any facilities, services,
financial aid or other benefits provided under the
program or activity.
(ii) Provide any facilities, services, financial aid or
other benefits which are different, or are provided in
a different form, from that provided to others under
the program or activity.
(iii) Subject an individual to segregated or separate
treatment in any facility in, or in any matter of
process related to receipt of any service or benefit
under the program or activity.
(iv) Restrict an individual in any way in access to, or in
the enjoyment of, any advantage or privilege enjoyed
by others in connection with facilities, services,
financial aid or other benefits under the program or
activity.
(v) Treat an individual differently from others in
determining whether the individual satisfies any
admission, enrollment, eligibility, membership, or
other requirement or condition which the individual
must meet in order to be provided any facilities,
services or other benefit provided under the program
or activity.
(vi) Deny an individual an opportunity to participate in a
program or activity as an employee.
(2) A recipient may not use criteria or methods of
administration which have the effect of subjecting persons
to discrimination on the basis of race, color, national
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origin, or sex , , or have the effect of defeating or
substantially impairing accomplishment of the objectives
of the program or activity with respect to persons oC a
particular race, color , national origin, or sex .
(3) A recipient, in determining the site Or location of
housing or facilities provided in whole or in part with
• funds under this part, may not make selections of such
site or location which have the effect of excluding • .
persons from, denying them the benefits of , or subjecting
them to discrimination on the ground of race, color ,
• national origin, or sex; or which have the purpose or
effect of defeating or substantially impairing the
accomplishment of the objectives of the Act and of this
section.
(4)
(i) In administering a program or acti';ity funded in whole
or in part with CDBG funds regarding which the
recipient has previously discriminated against j.ersons
on the ground of race , color , national origin or sex ,
or if .there is sufficient evidence to conclude that
such discriminaticn existed, the recipient . must take
remedial affirmative action to overcome the effects of
prior discrimination. The word "previously" does not
o
exclude current discriminatory practices.
( ,
In the absence of discrimination, a recipient, in
administering a program or activity funded in whole or
in part with funds made available under this part, may
take any nondiscriminatory affirmative action
necessary to ensure that the program or activity is
open to all without regard to race, color, national
origin or sex,
(iii) After a finding of noncompliance or after a recipient
has a firm basis to conclude that discrimination has
occurred , a recipient shall not be prohibited by this
section from taking any action eligible under Subpart
• C to ameliorate an imbalance in services or facilities
provided to any geographic area or specific group of
persons within its jurisdiction, where the purpose of
. such action is to remedy prior discriminatory practice .
or usage. -
- (5) Notwithstanding anything to the contrary in this section,
nothing contained herein shall be construed to prohibit
. any recipient from maintaining or constructing separate
living facilities or rest room facilities for the
different sexes. Furthermore , selectivity on the basis of
sex is not prohibited when institutional or custodial
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services can properly be performed only by a member of the
same sex as the recipients of the services.
(c) Section 109 of the Act further provides that any prohibition
against discrimination on the basis of age under the Age
Discrimination Act of 1975 (42 U.S.C. 6101 et aeg. ) or with
respect to an otherwise qualified handicapped person as
provided in section 504 of the Rehabilitation Act of 1973 (29
U.S.C. 794) shall also apply to any program or activity funded
in whole or in part with funds made available pursuant to the
Act. HUD regulations implementing the Age Discrimination Act
are contained in 24 CFR Part 146 and the regulations
implementing section 504 are contained in 24 CFR Part 8.
S 570.603 Labor standards.
Section 110 of the Act requires that all laborers and
mechanics employed by contractors or subcontractors on construction
work financed in whole or in part with assistance received under
the Act shall be paid wages at rates not less than those prevailing
on similar construction in the locality as determined by the
Secretary of Labor in accordance with the Davis-Bacon Act, as
amended (40 U.S.C. 276a - 276a-5) . By reason of the foregoing
requirement, the Contract Work Hours and Safety Standards Act (40
U.S.C. 327 et seq. ) also applies. However, these requirements
apply to the rehabilitation of residential property only if such
property contains not less than 8 units. With respect to the labor J/%
standards specified in this section, the Secretary of Labor has the
authority and functions set forth in Reorganization Plan Number 14
of 1950 (5 U.S.C. 1332-15) and section 2 of the Act of June 13,
1934 , as amended (40 U.S.C. 276c) .
S 570.604 Environmental standards.
Section 104 (g) expresses the intent that "the policies of the
National Environmental Policy Act of 1969 and other provisions of
law which further the purposes of such Act (as specified in
regulations issued by the Secretary) . . . [be] most effectively
implemented in connection with the expenditure of funds under" the
Act. Such other provisions of law which further the purposes of
the National Environmental Policy Act of 1969 are specified in
regulations issued pursuant to section 104 (g) of the Act and
contained in 24 CFR Part 58. Section 104 (g) also provides that, in
lieu of the environmental protection procedures otherwise
applicable, the Secretary may under regulations provide for the
release of funds for particular projects to grantees who assume all
of the responsibilities for environmental review, decisionmaking,
and action pursuant to the National Environmental Policy Act of
1969 , and the other provisions of law specified by the Secretary as
described above , that would apply to the Secretary were he/she to
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undertake such projects as Federal. projects. Grantees assume such
environmental review, decisionmaking , and action responsibilities
by execution of grant agreements with the. Secretary. The
procedures for carrying out such environmental responsibilities are
contained in 24 CFR Part 58.
S 570.605 National Flood Insurance Program.
Section 202 (a) of the Flood Di aster Protection Act of ]:973
(42 U.S.C. 4106) provides that no Federal officer or agency shall
approve any financial assistance for acquisition or construction
purposes (as defined under • section 3 (a) of said Act (42 U.S.C .
4O0 (a) ) , one .year after a community has been formally notified of
its identification as a community containing an area of special
flood hazard , for use in any area that has been identified by the •
Director of the Federal Emergency Management Agency as an area
having special flood hazards unless the community in which such
area is situated is . then participating In the National Flood
Insurance Program. Notwithstanding the date of HUD approval of the
recipient ' s application (or , in the case of grants made under
Subpart D, the date of submission of the grantee' s final statement
pursuant to 5 570. 302) , funds provided under this part shall not be
. expended • for acquisition or construction purposes in an area that
has been identified by the Federal Emergency Management Agency
- (FEMA) as having special flood hazards unless the community in
which the area is situated is participating in the National Flood
' Insurance Program in accordance with 44 CFR Parts 59-79, or less
than a year has passed since FEMA notification to the community
regarding such hazards; and flood insurance is obtained in
1 accordance with section 102 (a) of the Flood Disaster Protection Act
1 of 1973 (42 U.S.C. 4001) .
g 570.606 Relocation, displacement and acquisition.
y
i (a) Uniform-_ Relocation Act.
(1) The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (URA) (42 U.S.0 4601) and
HUD implementing regulations at 24 CFR Part 42 apply to
` the acquisition of real property by a State agency for an
activity assisted under this part and to the displacement
of any family, individual, , business, nonprofit
• organization or farm .that results from such acquisition.
- The grantee' s certification of compliance with. the URA is
required in the grant agreement.
(2) An acquisition and resulting displacement by a State
i agency is "for an assisted activity" if it occurs. on or
after the date of the initial submission of a final
statement under 24 CFR 570. 302 (a) (2) (Entitlement Grants) ;
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the initial submission of an application to MUD by a unit
of general local government under SS 570. 426, 570.430, or
570.435 (d) that is granted for the requested activity
UD
administered Small Cities Program) ; or the submission Hof
an application to HUD by a city or urban county under
S 570.458 that is granted for the requested activity
(UDAG) . However, an acquisition or displacement that
occurs on or after the described date is not subject to
the URA if the grantee determines that the acquisition or
displacement was not carried out for an assisted activity,
and the HUD Field Office concurs in that determination.
An acquisition or displacement that occurs before the
described date is subject to the URA, if the grantee or
the HUD Field Office determines that the acquisition or
displacement was carried out for the assisted activity.
The grantee may, at any time, request a HUD determination
whether an acquisition or displacement will be considered
to be for an assisted activity and thus subject to these
regulations. To be eligible for relocation assistance,
however , a person must also meet the eligibility criteria
in 24 CFR Part 42.
(b) Residential antidisplacement and relocation assistance plan.
Under section 104 (d) of the Act, each grantee must adopt, make
public and certify that it is following a residential
antidisplacement and relocation assistance plan providing one-
for-one replacement units (paragraph (b) (1) of this section) ,
and relocation assistance (paragraph (b) (2) of thisJO
section) . The plan must also indicate the steps that will be
taken consistent with other goals and objectives of this part
to minimize the displacement of persons from their homes as a
result of any activities assisted under this part.
(1) One-for-one replacement units.
(i) All occupied and vacant occupiable low/moderate-income
dwelling units that are demolished or converted to a
use other than as low/moderate-income dwelling units
as a direct result of an activity assisted under this
part must be replaced by governmental agencies or
private developers with low/moderate-income dwelling
units. Replacement low/moderate-income dwelling units
may include public housing, or existing housing
receiving Section 8 project-based assistance under the
United States Housing Act of 1937. The replacement
low/moderate-income dwelling units must be provided
within three years of the commencement of the
demolition or rehabilitation related to the
conversion, and must meet the following requirements:
(A) The units must be located within the grantee 's
jurisdiction.
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(B) The units must be sufficient in number and size to
house at least the number of occupants that could
have been housed in the units that are demolished or
converted. The number of occupants that may he
housed in units shall be determined in accordance
with local housing occupancy codes.
(C) The units must be provided in standard condition.
Replacement low/moderate-income dwelling units may
include units that have been raised to standard from
substandard condition.
(0) The units must be designed to remain low/moderate-
income dwelling units for at least 10 years from the
date of initial occupancy.
(ii) Before obligating or expending funds provided under
this part for any activity that will directly result
in the demolition of low/moderate-income dwelling
units or the conversion of low/moderate-income
dwelling units to another use , the grantee must make
public, and submit the following information in
writing to HUD:
(A) A description of the proposed assisted activity;
(B) The general location on a map and approximate number
of dwelling units by size (number of bedrooms) that
will be demolished or converted to a use other than
for low/moderate-income dwelling units as a direct
result of the assisted activity;
(C) A time schedule for the c;,nmencement and completion
of the demolition or conversion;
(D) The general location on a map and approximate number
of dwelling units by size (number of bedrooms) that
will be provided as replacement dwelling units;
(E) The source of funding and a time schedule for the
.
provision of replacement dwelling units;
(F) The basis .for concluding that each replacement
dwelling unit will remain a low/moderate-income
dwelling unit for at least 10 years from the date of
initial occupancy.
1 (iii)
(A) The requirements of paragraph (b) (1) of this section
do not apply if the HUD Field Office determines ,
based upon objective data, that there is an adequate
supply of vacant low/moderate-income dwelling units
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in standard condit
ion available
on a
nondiscriminatory basis within the grantee 's
jurisdiction. In making this determination, the HUD
Field Office will consider the housing vacancy rate
for the jurisdiction, the number of vacant
low/moderate-income dwelling units in the
jurisdiction (excluding units that will be demolished
or converted) and the number of eligible families on
waiting lists for housing assisted under the United
States Housing Act of 1937 in the jurisdiction.
(B) The HUD Field Office may consider the supply of
vacant low/moderate-income dwelling units in standard
condition available on a nondiscriminatory basis in
an area that is larger than the grantee's
jurisdiction. Such additional dwelling units shall
be considered if the HUD Field Office determines that
the units would be suitable to serve the needs of the
low- and moderate income households that could be
served by the low/moderate-income dwelling units that
are to be demolished or converted to another use.
The HUD Field Office must base this determination on
geographic and demographic factors, such as location
and access to places of employment and to other
facilities.
(C) The grantee must submit a request for a determination
under paragraph (b) (1) (iii) of this section, directly
to the HUD Field Office.
(2) Relocation assistance.
(i) Each low- or moderate-income household that is
displaced by demolition or by the conversion of a
low/moderate income dwelling unit to another use as a
direct result of an activity assisted under this part
shall be provided with relocation assistance. The
low- or moderate-income household may elect to receive
relocation assistance described at 24 CFR Part 42
(HUD's regulations implementing the URA) , or may elect
to receive the following relocation assistance:
(A) The relocation assistance described at 24 CFR Part
42, Subpart C (General Relocation Requirements) and
Subpart D (Payment for Moving and Related
Expenses) . Relocation notices must be issued
consistent with, and in the manner prescribed under,
24 CFR 42.203. The definition of "comparable
replacement dwelling" used in 24 CFR Part 42 is
modified as described in paragraph (b) (3) (i) of this
section. Displaced households provided with
replacement housing assistance under paragraph
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(b) (2) ( i) (C) this section, in the form of a
certificate or housing voucher under Section 8 of the •
United States Housing Act of 1937 , must be provided
referrals to comparable replacement dwelling units
whose owners are willing to participate in the housing
voucher or certificate program. Tile grantee shall
advise tenants of their rights under the Federal Fair
• Housing Law (Title VIII) and of replacement housing
• opportunities in such a manner that, whenever
feasible, they will have a choice between relocating
within their neighborhoods and other neighborhoods
consistent with the grantee 's responsibility to
affirmatively further fair housing
(3) The reasonable and necessary cost of any security
deposit ' required to rent the replacement dwelling
•
unit, and credit checks required to rent or purchase
• :1 the replacement dwelling unit ; and
(C) Replacement housing assistance. Households are
eligible to receive one of the following forms of
} replacement housing assistance :
(1) Each household must be offered compensation
designed to ensure that, for a five-year period,
the displaced household will not bear, after
• relocation , a ratio of shelter costs to income
that exceeds 30 percent. Such compensation
shall be either :
}
(i) A certificate or housing voucher for
rental assistance provided through the local
Public Housing Agency under Section 8 of the
United State Housing Act of 1937: or
(ii) Cash rental assistance equal to 60 times
the amount that is obtained by subtracting 30
percent of the displaced household 's monthly
gross income (with such adjustments as the
grantee may deem appropriate) from the lesser
of : the monthly cost of rent and utilities at a
• comparable replacement dwelling unit or the
• monthly cost oc rent and utilities at the
decent, safe and sanitary replacement dwelling
to which the household relocates. The grantee
may provide the cash , payment in either a lump
1 sum or in installments. The grantee may at its
discretion offer the household a choice between
the certificate/housing voucher or cash rental
1 assistance.
•
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(2) If the household purchases an interest in a
housing cooperative or mutual housing
association and occupies a decent, safe and ��
sanitary unit in the cooperative or association,
the household may elect to receive a lump sum
payment. This lump sum payment shall be equal
to the capitalized value of 60 monthly
installments of the amount that is obt
ained by
subtracting30
percent of the displaced
household 's monthly gross income (with such
adjustments as the grantee may deem appropriate)
from the monthly cost of rent and utilities at a
comparable replacement dwelling unit. To
compute the capitalized value, the installments
shall be discounted at the rate of interest paid
on passbook savings deposits by a federally-
insured bank or savings and loan institution
conducting business within the grantee's
jurisdiction. To the extent necessary to
minimize hardship to the household, the grantee
shall, subject to appropriate safeguards, issue
a payment in advance of the purchase of the
interest in the housing cooperative or mutual
housing association.
(ii) Eligibility for relocation assistance.
(A) A low- or moderate-income household that is required
Ili)
to move as a direct result of demolition or
conversion of a low/moderate income dwelling unit to
another use, is eligible for relocation assistance
under paragraph (b) (2) of this section if:
(1) The household is required to move from the
dwelling unit on or after the date that the
owner submits a request to the grantee for
financial assistance that is later approved for
the requested activity. (This applies to
dwelling units owned by a person other than a •
Federal or State agency, as defined under the
URA) .
(?) The household is required to move from the
dwelling unit on or after the date of the
initial submission of a final statement under 24
CFR 570.302 (a) (2) (Entitlement Grants) ; the
initial submission of an application to HUD by a
unit of general local government under
SS 570.426, 570.430, or 570.435(d) that is
granted for the requested activity (HUD
administered Small Cities Program) ; or the
submission of an application to HUD by a city •or
urban county under S 570.458 that is granted for
41/
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the requested activity (UDAG) . (This applies to
dwelling units owned by a Federal or State
agency as defined 'under the URA. )
(B) If the displacement occurs on or after the
appropriate date described in paragraph (b) (2) (ii) (A)
of this section, the low- or moderate-income
household is not eligible for relocation assistance
if:
• (1) The household is evicted for cause ;
(2) . The household moved into the property on or
after the date described in paragraph
(b) (2) (ii) (A) of this section, after receiving
written notice of the expected displacement; or
(3) The grantee determines that the
displacement was not a direct result of the
I assisted activity, and the HUD office concurs in
that determination.
(C) If the displacement occurs before the appropriate
date described in paragraph (b) (2) (ii) (A) of this
section, the low- or moderate-income household is
eligible for relocation assistance if the grantee or
HUD determines that the displacement was a direct
result of an activity assisted under this part.
(3) Definitions. For the purposes of paragraph (b) of this
section:
(i) 'Comparable replacement dwelling unit" means a
• dwelling unit that:
(A) Meets the criteria of 24 CFR 42.2 (c) (1) through (4) ; .
and -
(II) Is available at a monthly cost for rent plus
estimated average monthly utility costs that does not
exceed 30 percent of the household's average gross
monthly income (with such adjustments to income as
the grantee may deem appropriate) after taking into
account any rental assistance the household would
receive. Where a certificate or housing voucher is
provided to a household under paragraph
(b) (2) (i) (C) (1) (i) of this section, the dwelling unit
must .be available to the household at a monthly cost
• for rent and estimated average monthly utility cost
that does not exceed the Fair Market Rent or the
payment standard, respectively.
,
c
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(ii) "Decent, safe and sanitary dwelling" means a decent,
safe and sanitary dwelling as defined in 24 CFR
42.2 (e) .
(iii) "Low/moderate income dwelling unit" means a dwelling
unit with a market rental ( including utility costs)
that does not exceed the applicable Fair Market Rent
(FMR) for existing housing and moderate rehabilitation
established under 24 CFR Part 888.
(iv) "Occupiable dwelling unit" means a dwelling unit that
is in a standard condition , or is in a substandard •
condition, but is suitable for rehabilitation.
(v) "Standard condition" and "substandard condition
suitable for rehabilitation. " If the grantee has a
HUD-approved Housing Assistance Plan, the definitions
of "standard condition" and "substandard condition
suitable for rehabilitation" established in the plan
will apply. If the grantee does not have a HUD-
approved Housing Assistance Plan, the grantee must
establish and make public its definition of these
terms consistent with the requirements of
S 570.306 (e) (1) .
(4) Effective date. For all grants except those made under
Subpart D of this part (Entitlement Grants) , the �.
provisions of this paragraph (b) are applicable to grants s
made on or after October 1, 1988. For grants made under
Subpart D, these provisions will govern all activities for
which funds are first obligated by the grantee on or after
the date the first grant is made after September 30, 1988,
without regard to the source year of the funds used for
the activity.
(c) Section 104 (k) relocation requirements. Section 104(k) of the
Act requires that reasonable relocation assistance be provided
to persons (families, individuals, businesses, nonprofit
organizations, or farms) displaced (i .e. , moved permanently
and involuntarily) as a result of the use of assistance
received under this part to acquire or substantially
rehabilitate property. If such displacement is subject to
paragraph (a) or (b) of this section, above, this paragraph
does not apply. The grantee must develop, adopt and provide
to persons to be displaced a written notice of the relocation
assistance for which they are eligible. The minimum
requirements for such assistance under the UDAG Program are
described at 5 570.457 (b) . Under CDBG programs, persons
entitled to assistance under this paragraph must be provided
relocation assistance, including at a minimum:
(1) Reasonable moving expenses;
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(2) Advisory services needed to help in relocating . The
grantee shall advise tenants of their rights under the
Federal Fair Housing Law (Title VIII) and of replacement
housing opportunities in such a manner that, whenever
feasible, they will have a choice between relocating
within their neighborhoods and other neighborhoods
consistent with the grantee 's responsibility to
affirmatively further fair housing ; and
(3) Financial assistance sufficient to enable any person
displaced from his or her dwelling to lease and occupy a
suitable, decent, safe and sanitary replacement dwelling
where the cost of rent and utilities does not exceed 30
percent of the household 's gross income.
(d) Optional relocation assistance. Under section 105 (a) (11) of
the Act, the grantee may provide relocation payments and other
relocation assistance for individuals, families, businesses,
nonprofit organizations and farms displaced by an activity not
subject to paragraphs (a) , (b) or (c) of this section, The
grantee may also provide relocation assistance to persons
covered under paragraphs (a) , (b) or (c) of this section
beyond that required. Unless such assistance is provided
pursuant to State or local law, the grantee must provide the
assistance only upon the basis of a written determination that
the assistance is appropriate and must adopt a written policy
available to the public that describes the relocation
assistance that the grantee has elected to provide and that
provides for equal relocation assistance within each class of
displacees.
(e) Appeals. If a person disagrees with the grantee's
determination concerning the person's eligibility for, or the
amount of a relocation payment under this section, the person
may file a written appeal of that determination with the
grantee. The appeal procedures to be followed are described
in 24 CFR 42. 10. A low- or moderate-income household that has
been displaced from a dwelling may file a written request for
review of the grantee decision, to the HUD Field Office.
(f) Responsibility of grantee.
(1) The grantee is responsible for ensuring compliance with
the requirements of this section, notwithstanding any
third party's contractual obligation to the grantee to
comply with the provisions of this part.
(2) The cost of assistance required under this section may be
paid from local public funds, funds provided under this
part, or funds available from other sources.
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(3) The grantee must maintain records in sufficient detail to
demonstrate compliance with the provisions of this
section.
(g) Displacement. For the purposes of this section, a "displaced
person" is a person that is required to move permanently and
involuntarily and includes a residential tenant who moves from
the real property if :
(1) The tenant has not been provided with a reasonable
opportunity to lease and occupy a suitable, decent, safe
and sanitary dwelling in the same building or in a nearby •
building on the real property following the completion of
the assisted activity at a monthly rent and estimated
average cost for utilities that does not exceed the
greater of
(i) 30 percent of the tenant household 's average monthly
gross income; or
(ii) The tenant 's monthly rent and average cost for
utilities before
(A) The date that the owner submits a request to the
grantee for financial assistance that is later
approved for the requested activity. (This applies
to dwelling units owned by a person other than a
Federal or State agency, as defined under the URA) ; __14,
or
(B) The date of the initial submission of a final
statement under S 570.302(a) (2) (Entitlement Grants) ;
the initial submission of an application to HUD by a
unit of general local government under S 570.426,
570.430, or . 570.435 (d) that is granted for the
requested activity (HUD administered Small Cities
Program) ; or the submission of an application to HUD
by a city or urban county under S 570.458 that is
granted for the requested activity (UDAG) . (This
applies to dwelling units owned by a Federal or State
agency as defined under the URA) ; or
(2) The tenant is required to move to another dwelling in the
real property but is not reimbursed for all actual
reasonable out-of-pocket costs incurred in connection with
the move; or
(3) The tenant is required to relocate temporarily and :
( i) Is not reimbursed for all reasonable out-of-pocket
expenses incurred in connection with the temporary
relocation, including moving costs and any increased
rent and utility costs; or
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( ii) Other conditions of the temporary relocation are not
reasonable .
S 570.607 Employment and contracting opportunities.
(a) Grantees shall comply with Executive Order 11246 , as amended
by Executive Order 12086 , and the regulations issued pursuant
thereto (41 CFR Chapter 60) which provide that no person shall
be discriminated against on the basis of race , color ,
religion , sex, or national origin in all phases of employment
during the performance of Federal or . federally assisted
construction contracts. As specified in Executive Order 11246
and the implementing regulations, contractors and
subcontractors on Federal or federally assisted construction
contracts shall take affirmative action to ensure fair
treatment in employment, upgrading , demotion or transfer ,
recruitment or recruitment advertising , layoff or termination,
rates of pay, or other forms of compensation and selection for
• training and apprenticeship.
(b) Section 3 of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701u) requires, in connection with the planning and
carrying out of any project assisted under the Act, that to
the greatest extent feasible opportunities for training and
employment be given to low and moderate income persons
[ residing within the unit of local government or the
1 1f• metropolitan area (or nonmetropolitan county) as determined by
the Secretary, in which the project is located, and that
contracts for work in connection with the project be awarded
1 to eligible business concerns which are located in, or owned
1 in substantial part by persons residing in the same
metropolitan area (or nonmetropolitan county) as the
project. Grantees shall adopt appropriate procedures and
i requirements to assure good faith efforts toward compliance
i with the statutory directive. HUD regulations at 24 CFR Part
( 135 are not applicable to activities assisted under this part
1 but may be referred to as guidance indicative of the
p Secretary's view of the statutory objectives in other
y contexts.
1
4 S 570.608 Lead-based paint.
(a) Prohibition against the use of lead-based paint. Section
401(b) of the Lead-Based Paint Poisoning Prevention Act (42
U.S.C. 4831 (b) ) directs the Secretary to prohibit the use of
lead-based paint in residential structures constructed or
rehabilitated with Federal assistance. Such prohibitions are
( contained in 24 CFR Part 35, Subpart B, and are applicable to
residential structures constructed or rehabilitated with
assistance provided under this part.
K-17 9/88
• t� `1 i
.
•
(b) Notification of hazards of lead-based paint poisoning.
(1) The Secretaryhas
promulgated requirements regarding
notification to purchasers and tenants of HUD-associated
housing constructed prior to 1978 of the hazards of lead-
based paint poisoning at 24 CFR Part 35, Subpart A. This
paragraph is promulgated pursuant to the authorization
granted in 24 CFR 35.5 (c) and supersedes, with respect to
all housing to which it applies, the notification
requirements prescribed by Subpart A of 24 CFR Part 35.
(2) For properties constructed prior to 1978, applicants for •
rehabilitaion ' assistance provided under this part and
tenants or purchasers of properties owned by the grantee
or its subrecipient and acquired or rehabilitated with
assistance provided under this part shall be notified :
(i) That the property may contain lead-based paint;
(ii) of the hazards of lead-based paint;
(iii) of the symptoms and treatment of lead-based poisoning ;
(iv) of the precautions to be taken to avoid lead-based
paint poisoning (including maintenance amd removal
techniques for eliminating such hazards) ;
(v) of the advisability and availability of blood lead
level screening for children under seven years of age;
and
(vi) that in the event lead-based paint is found on the
property, appropriate abatement procedures may be
undertaken.
(c) Elimination of lead-based paint hazards. The purpose of this
paragraph is to implement the provisions of section 302 of the
Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. 4822, by
establishing procedures to eliminate as far as practicable the
hazards due to the presence of paint which may contain lead
and to which children under seven years of age may be exposed
in existing housing which is rehabilitated with assistance
provided under this part. The Secretary has promulgated
requirements regarding the elimination of lead-based paint
hazards in HUD-associated housing at 24 CFR Part 35, Subpart
C. This paragraph is promulgated pursuant to the
authorization granted in 24 CFR 35.24 (b) (4) and supersedes,
with respect to all housing to which it applies, the
requirements prescribed by Subpart C of 24 CFR Part 35.
K-18 9/88
1
(1) Applicability. This paragraph applies to the
rehabilitation of applicable surfaces in existing housing
which is assisted under this part. The following ,
activities assisted under the Community Development Block .
Grant program are not covered by this paragraph :
(i) Emergency repairs (not including lead-based paint-
related emergency repairs) ; i
• (ii) weatherization ;
(iii) water or sewer hook-ups;
1 (iv) installation of security devices;
(v) facilitation of tax exempt bond issuances which
provide funds for rehabilitation;
(vi) other similar types of single-purpose programs that do
I not include physical repairs or remodeling of
applicable surfaces (as defined in 24 CFR 35.22) of
I residential structures; and
I (vii) any non-single purpose rehabilitation that does not
involve applicable surfaces (as defined in 24 CFR
35.22) that does not exceed $3,000 per unit.
(2) Definitions. - Applicable surface. All intact and
nonintact interior and exterior painted surfaces of a
residential structure.
Chewable surface. All chewable protruding painted
surfaces up to five feet from the floor or ground, which
are readily accessible to ,children under seven years of
age , e.g. , protruding corners, windowsills and frames,
doors and frames, and other protruding woodwork.
Defective paint surface. Paint on applicable surfaces
. that is cracking , scaling, chipping, peeling or loose.
Elevated blood lead level or EBL. Excessive absorption of •
• lead, that is, a confirmed concentration of lead in whole .
blood of 25 ug/dl (micrograms of lead per deciliter of
whole blood) or greater.
Lead-based paint surface. A paint surface, whether or not
defective, identified ag having a lead content greater
than or equal to 1 mg/cm •
( (3) Inspection and Testing
l 1
(
K-19 9/88
,_., S
r
i y
•
(i) Defective paint surfaces. The grantee shall inspect
for defective paint surfaces in all units constructed
prior to 1978 which are occupied by families with
children under seven years of age and which are
proposed for rehabilitation assistance. The
inspection shall occur at the same time the
roerty
is being inspected for rehabilitation. Defective
paint conditions will be included in the work write-up
for the remainder of the rehabilitation work.
•
(ii) Chewable surfaces. The grantee shall be required to
test the lead content of chewable surfaces if the
family residing in a unit, constructed prior to 1978
and receiving rehabilitation assistance, includes a
child under seven years of age with an identified EBL
condition. Lead content shall be tested by using an
X-ray fluorescence analyzer (XRF) or other method
approved by HUD. Test readings of 1 mg/cm2 or higher
using an XRF shall be considered positive for presence
of lead-based paint.
(iii) Abatement without testing. In lieu of the procedures
set forth in paragraph (c) (3) (ii) of this section, in
the case of a residential structure constructed prior
to 1978, the grantee may forgo testing and abate all
applicable surfaces in accordance with the methods set
out in 24 CFR 35.24 (b) (2) (ii) . •
(4) Abatement Actions.
(i) For inspections performed under S 570. 608 (c) (3) (i) and
where defective paint surfaces are found, treatment
shall be provided to defective areas. Treatment shall
be performed before final inspection and approval of
the work.
(ii) For testing performed under 5 570.608 (c) (3) (ii) and
where interior chewable surfaces are found to contain
lead-based
faces in
any affectedar room shall betreated. Whereior chewable r exterior
chewable surfaces are found to contain lead-based
paint, the entire exterior chewable surface shall be
treated. Treatment shall be performed before final
inspection and approval of the work.
(iii) When weather prohibits repainting exterior surfaces
before final inspection, the grantee may permit the
owner to abate the defective paint or chewable lead-
based paint as required by
section and aree to
repaint by a specified date. t A s separate inspection is
required.
• i
K-20
9/88
41
(5) Abatement. methods. At a minimum, treatment 'of the
defective areas and chewable lead-based paint surfaces
shall consist of covering or removal of the painted
surface as described in 24 CFR 35 . 24 (b) (2) (ii). .
(6) Funding for inspection, testing and abatement. Program
requirements and local program design will determine
whether the cost of inspection, testing or abatement is to
be borne by the owner/developer, the grantee or a
combination of the owner/developer and the grantee.
(7) Tenant protection. The owner/developer shall take
appropriate action to protect tenants from hazards
associated with abatement procedures. Where necessary,
these actions may include the temporary relocation of
tenants during the abatement process. The owner/developer
shall notify the grantee of all such actions taken.
(8) Records. The grantee shall keep a copy of each inspection
and/or test report for at least three years.
(9) Monitoring and enforcement. HUD field office monitoring
of rehabilitation programs includes reviews for compliance
with applicable program requirements for lead-based
paint. The CPD Field Monitoring Handbook which currently
includes instructions for monitoring lead-based paint
requirements will be amended as appropriate. In cases of
noncompliance, HUD may impose conditions or sanctions on
grantees to encourage prompt compliance.
(10) Compliance with other program requirements, Federal, State
and local laws.
(i) Other program requirements. To the extent that
assistance from any of the programs covered by this
section is used in conjunction with other HUD program
assistance which have lead-based paint requirements
which may have more or less stringent requirements,
the more stringent requirements will prevail.
(ii) HUD responsibility. If HUD determines that a State or
local law, ordinance, code or regulation provides for
lead-based paint testing or hazard abatement in a
manner which provides a level of protection from the
hazards of lead-based paint poisoning at least
comparable to that provided by the requirements of
this section and that adherence to the requirements of
this subpart would be duplicative or otherwise cause
inefficiencies, HUD may modify or waive the
requirements of this section in such manner, as may be
appropriate to promote efficiency while ensuring such
comparable level of protection.
J
K-21 9/88
•
C ',' S r
(iii) Grantee responsibility. Nothing in this section is
intended to relieve any grantee in the programs
covered by this section of any responsibility for
compliance with State br local laws, ordinances, codes
or regulations governing lead-based paint testing or
hazard abatement.
(iv) Disposal of lead-based paint debris. Lead-basd paint
and defective paint debris shall be disposed of in
accordance with applicable Federal, State or local
requirements. (See, e.g . , 40 CFR Parts 260 through
271. )
S 570.609 Use of debarred, suspended, or ineligible contractors o,r
subrecipients.
Assistance under this part shall not be used directly or
indirectly to employ, awatd contracts to, or otherwise engage the
services of, or fund any contractor or subrecipient during any
period of debarment, suspension, or placement in ineligibility
status under the provisions of 24 CPR Part 24.
S 570.610 Uniform administrative requirements and cost principles.
The recipient, its agencies or instrumentalities, and
subrecipients shall comply with the policies, guidelines, and
requirements of 24 CFR Part 85 and OMB Circulars A-87, A-110, A
122, and A-128 (implemented at 24 CFR Part 44) , as applicable, as
they relate to the acceptance and use of Federal funds under this
part. The applicable sections of 24 CFR Part 85 and OMB Circular
A-110 are set forth at S 570.502.
S 570.611 Conflict of interest.
(a) Applicability.
(1) In the procurement of supplies, equipment, construction,
and services by recipients, and by subrecipients
(including those specified at S 570.204 (c) ) , the conflict
of interest provisions in 24 CFR 85.36 and OMB Circular A-
110, respectively, shall apply.
(2) In all cases not governed by 24 CFR 85.36 and OMB Circular
A-110, the provisions of this section shall apply. Such
cases include the acquisition and disposition of real
property and the provision of assistance by the recipient,
by its subrecipients, or to individuals, businesses and
other private entities under eligible activities which
authorize such assistance (e.g . , rehabilitation,
K-22 9/88
1
•
Fr ' . ' • .. ,
preservation, and other improvements of private properties
or facilities pursuant to S 570.202, or grants, loans and
I other assistance to businesses, individuals and other
private entities pursuant to 5 570.203, S 570.204 or
5 570.455) .
(b) Conflicts prohibited. Except for the use of CDBG funds to pay
salaries and other related administrative or personnel costs,
the general rule is that no persons described in paragraph (c)
• of this section who exercise or have exercised any functions
or responsibilities with respect to CDBG activities assisted
.
under this part or who are 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 a CDBG assisted activity, or have an
interest in any contract, subcontract or agreement with
respect thereto, or the proceeds thereunder, either for
themselves or those with whom they have family or business
ties, during their tenure or for one year thereafter. For the
UDAG program, the above restrictions shall apply to all
activities that are a part of the UDAG project, and shall
cover any such interest or benefit during, or at any time
after, such person's tenure.
} (c) Persons covered. The conflict of interest provisions of
paragraph (b) of this section apply to any person who is an
employee, agent, consultant, officer , or elected official or
) appointed official of the recipient, or of any designated
public agencies, or subrecipients which are receiving funds
under this part.
(d) Exceptions : threshold requirements. Upon the written request
of the recipient, HUD may grant an exception to the provisions
of paragraph (b) of this section on a case-by-case basis when
it determines that such an exception will serve to further the
purposes of the Act and the effective and efficient
administration of the recipient's program or project. An
exception may be considered only after the recipient has i
. provided the following:
(1) A disclosure of the nature of the conflict, accompanied by
. an assurance that there has been public disclosure of the
conflict and a description of how the public disclosure
•
was made; and
(2) An opinion of the recipient's attorney that the interest
for which the exception is sought would not violate State
or local law. ,
(e) Factors to be considered for exceptions. In determining '
whether to grant a requested exception after the recipient has
satis.fact.:rily met the requirements of paragraph (d) of this
j K-23 9/83
'I ` ' t \
section, HUD shall consider the cumulative effect of the
following factors , where applicable :
(1) Whether the exception would provide a significant cost
benefit or an essential degree of expertise to the program
• or project which would otherwise not be available;
(2) Whether an opportunity was provided for open competitive
bidding or negotiation; •
•
(3) Whether the person affected is a member of a group or
class of low or moderate income persons intended to be the
beneficiaries of the assisted activity, and the exception
will permit such person to receive generally the same
interests or benefits as are being made available or
provided to the group or class;
(4) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking
process with respect to the specific assisted activity in
question;
fl
(5) Whether the interest or benefit was present before the
affected person was in a position as described in
paragraph (b)' of• this section;
(6) Whether undue hardship will result either to the recipient
or the person affected when weighed against the public
interest served by avoiding the prohibited conflict; and
(7) Any other relevant considerations.
S 570.612 Executive Order 12372.
(a) General. Executive Order 12372, Intergovernmental Review of
Fed Programs, and the Department 's implementing
regulations at 24 CFR Part 52, allow each State to establish
its own process for review and comment on proposed Federal
financial assistance programs.
(b) Applicability. Executive Order 12372 applies to the . CDBG
Entitlement program and the UDAG program. The Executive Order
applies to all activities proposed to be assisted under UDAG,
but it applies to the Entitlement program only where a grantee •
proposes to use funds for the planning or construction
(reconstruction or installation) of water or sewer
facilities. Such facilities include storm sewers as well as
all sanitary sewers, but do not include water and sewer lines
connecting a structure to the lines in the public right-of-way
or easement. It is the responsibility of the grantee to
initiate the Executive Order review process if it proposes to
. use its CDBG or UDAG funds for activities subject to review.
K-24 9/88
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