Office of the Secretary, Interior §12 - gpo.gov · under existing laws. Subpart B ... taxes, duty or protective in-transit in-surance, ... kinds and frequency of reports, and re-

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Office of the Secretary, Interior § 12.43

agreement or sub-award, if use of a spe-cific provision is desired and generalapplicability to 43 CFR Part 12 is notused instead?

(i) The following provision will be in-corporated into the grant/cooperativeagreement or sub-award:

THE SEAT BELT PROVISION

Recipients of grants/cooperative agree-ments and/or sub-awards are encouraged toadopt and enforce on-the-job seat belt usepolicies and programs for their employeeswhen operating company-owned, rented, orpersonally owned vehicles. These measuresinclude, but are not limited to, conductingeducation, awareness, and other appropriateprograms for their employees about the im-portance of wearing seat belts and the con-sequences of not wearing them.[End of Provision]

(ii) [Reserved]

[50 FR 6176, Feb. 14, 1985, as amended at 53FR 8077, Mar. 11, 1988; 56 FR 45898, Sept. 9,1991; 59 FR 17712, Apr. 14, 1994; 62 FR 45944,Aug. 29, 1997; 65 FR 39822, June 28, 2000]

§ 12.3 Effect on prior issuances.(a) All provisions of Department of

the Interior nonregulatory programmanuals, handbooks and other mate-rials which are inconsistent with theabove OMB Circulars are superseded,except to the extent that they are (1)required by statute, or (2) authorized inaccordance with the exceptions provi-sions of each circular.

(b) Except to the extent inconsistentwith the regulations in 43 CFR part 12,subpart C, all existing Department ofthe Interior regulations in 25 CFRparts 23, 27, 39, 40, 41, 256, 272, 278, and276; 30 CFR parts 725, 735, 884, 886, and890; 36 CFR parts 60, 61, 63, 65, 67, 72,and 800; 43 CFR parts 26 and 32; and 50CFR parts 80, 81, 82, 83, and 401 are notsuperseded by these regulations nor areany paperwork approvals under the Pa-perwork Reduction Act.

[50 FR 6176, Feb. 14, 1985, as amended at 53FR 8077, Mar. 11, 1988]

§ 12.4 Information collection require-ments.

Information collections in additionto those required by applicable OMBCirculars will be cleared by responsiblebureaus and offices on an individualbasis.

§ 12.5 Waiver.

Only OMB can grant exceptions fromthe requirements of these Circularswhen exceptions are not prohibitedunder existing laws.

Subpart B [Reserved]

Subpart C—Uniform AdministrativeRequirements for Grants andCooperative Agreements toState and Local Governments

SOURCE: 53 FR 8077 and 8087, Mar. 11, 1988,unless otherwise noted.

GENERAL

§ 12.41 Purpose and scope of this part.

This part establishes uniform admin-istrative rules for Federal grants andcooperative agreements and subawardsto State, local and Indian tribal gov-ernments.

§ 12.42 Scope of subpart.

This subpart contains general rulespertaining to this part and proceduresfor control of exceptions from thispart.

§ 12.43 Definitions.

As used in this part:Accrued expenditures mean the

charges incurred by the grantee duringa given period requiring the provisionof funds for: (1) Goods and other tan-gible property received; (2) servicesperformed by employees, contractors,subgrantees, subcontractors, and otherpayees; and (3) other amounts becom-ing owed under programs for which nocurrent services or performance is re-quired, such as annuities, insuranceclaims, and other benefit payments.

Accrued income means the sum of: (1)Earnings during a given period fromservices performed by the grantee andgoods and other tangible property de-livered to purchasers, and (2) amountsbecoming owed to the grantee forwhich no current services or perform-ance is required by the grantee.

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43 CFR Subtitle A (10–1–00 Edition)§ 12.43

Acquisition cost of an item of pur-chased equipment means the net in-voice unit price of the property includ-ing the cost of modifications, attach-ments, accessories, or auxiliary appa-ratus necessary to make the propertyusable for the purpose for which it wasacquired. Other charges such as thecost of installation, transportation,taxes, duty or protective in-transit in-surance, shall be included or excludedfrom the unit acquisition cost in ac-cordance with the grantee’s regular ac-counting practices.

Administrative requirements meanthose matters common to grants ingeneral, such as financial management,kinds and frequency of reports, and re-tention of records. These are distin-guished from ‘‘programmatic’’ require-ments, which concern matters that canbe treated only on a program-by-pro-gram or grant-by-grant basis, such askinds of activities that can be sup-ported by grants under a particularprogram.

Awarding agency means (1) with re-spect to a grant, the Federal agency,and (2) with respect to a subgrant, theparty that awarded the subgrant.

Cash contributions means the grant-ee’s cash outlay, including the outlayof money contributed to the grantee orsubgrantee by other public agenciesand institutions, and private organiza-tions and individuals. When authorizedby Federal legislation, Federal fundsreceived from other assistance agree-ments may be considered as grantee orsubgrantee cash contributions.

Contract means (except as used in thedefinitions for ‘‘grant’’ and ‘‘subgrant’’in this section and except where quali-fied by ‘‘Federal’’) a procurement con-tract under a grant or subgrant, andmeans a procurement subcontractunder a contract.

Cost sharing or matching means thevalue of the third party in-kind con-tributions and the portion of the costsof a Federally assisted project or pro-gram not borne by the Federal Govern-ment.

Cost-type contract means a contract orsubcontract under a grant in which thecontractor or subcontractor is paid onthe basis of the costs it incurs, with orwithout a fee.

Equipment means tangible, non-expendable, personal property having auseful life of more than one year andan acquisition cost of $5,000 or moreper unit. A grantee may use its owndefinition of equipment provided thatsuch definition would at least includeall equipment defined above.

Expenditure report means: (1) For non-construction grants, the SF–269 ‘‘Fi-nancial Status Report’’ (or other equiv-alent report); (2) for constructiongrants, the SF–271 ‘‘Outlay Report andRequest for Reimbursement’’ (or otherequivalent report).

Federally recognized Indian tribal gov-ernment means the governing body or agovernmental agency of any Indiantribe, band, nation, or other organizedgroup or community (including anyNative village as defined in section 3 ofthe Alaska Native Claims SettlementAct, 85 Stat 688) certified by the Sec-retary of the Interior as eligible for thespecial programs and services providedby him through the Bureau of IndianAffairs.

Government means a State or localgovernment or a Federally recognizedIndian tribal government.

Grant means an award of financial as-sistance, including cooperative agree-ments, in the form of money, or prop-erty in lieu of money, by the FederalGovernment to an eligible grantee. Theterm does not include technical assist-ance which provides services instead ofmoney, or other assistance in the formof revenue sharing, loans, loan guaran-tees, interest subsidies, insurance, ordirect appropriations. Also, the termdoes not include assistance, such as afellowship or other lump sum award,which the grantee is not required to ac-count for.

Grantee means the government towhich a grant is awarded and which isaccountable for the use of the fundsprovided. The grantee is the entirelegal entity even if only a particularcomponent of the entity is designatedin the grant award document.

Local government means a county,municipality, city, town, township,local public authority (including anypublic and Indian housing agencyunder the United States Housing Act of1937) school district, special district,


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intrastate district, council of govern-ments (whether or not incorporated asa nonprofit corporation under Statelaw), any other regional or interstategovernment entity, or any agency orinstrumentality of a local government.

Obligations means the amounts of or-ders placed, contracts and subgrantsawarded, goods and services received,and similar transactions during a givenperiod that will require payment bythe grantee during the same or a futureperiod.

OMB means the U.S. Office of Man-agement and Budget.

Outlays (expenditures) mean chargesmade to the project or program. Theymay be reported on a cash or accrualbasis. For reports prepared on a cashbasis, outlays are the sum of actualcash disbursement for direct chargesfor goods and services, the amount ofindirect expense incurred, the value ofin-kind contributions applied, and theamount of cash advances and paymentsmade to contractors and subgrantees.For reports prepared on an accrued ex-penditure basis, outlays are the sum ofactual cash disbursements, the amountof indirect expense incurred, the valueof inkind contributions applied, andthe new increase (or decrease) in theamounts owed by the grantee for goodsand other property received, for serv-ices performed by employees, contrac-tors, subgrantees, subcontractors, andother payees, and other amounts be-coming owed under programs for whichno current services or performance arerequired, such as annuities, insuranceclaims, and other benefit payments.

Percentage of completion method refersto a system under which payments aremade for construction work accordingto the percentage of completion of thework, rather than to the grantee’s costincurred.

Prior approval means documentationevidencing consent prior to incurringspecific cost.

Real property means land, includingland improvements, structures and ap-purtenances thereto, excluding mov-able machinery and equipment.

Share, when referring to the awardingagency’s portion of real property,equipment or supplies, means the samepercentage as the awarding agency’sportion of the acquiring party’s total

costs under the grant to which the ac-quisition costs under the grant towhich the acquisition cost of the prop-erty was charged. Only costs are to becounted—not the value of third-partyin-kind contributions.

State means any of the several Statesof the United States, the District ofColumbia, the Commonwealth of Puer-to Rico, any territory or possession ofthe United States, or any agency or in-strumentality of a State exclusive oflocal governments. The term does notinclude any public and Indian housingagency under United States HousingAct of 1937.

Subgrant means an award of financialassistance in the form of money, orproperty in lieu of money, made undera grant by a grantee to an eligible sub-grantee. The term includes financialassistance when provided by contrac-tual legal agreement, but does not in-clude procurement purchases, nor doesit include any form of assistance whichis excluded from the definition of‘‘grant’’ in this part.

Subgrantee means the government orother legal entity to which a subgrantis awarded and which is accountable tothe grantee for the use of the fundsprovided.

Supplies means all tangible personalproperty other than ‘‘equipment’’ asdefined in this part.

Suspension means depending on thecontext, either (1) temporary with-drawal of the authority to obligategrant funds pending corrective actionby the grantee or subgrantee or a deci-sion to terminate the grant, or (2) anaction taken by a suspending official inaccordance with agency regulationsimplementing E.O. 12549 to imme-diately exclude a person from partici-pating in grant transactions for a pe-riod, pending completion of an inves-tigation and such legal or debarmentproceedings as may ensue.

Termination means permanent with-drawal of the authority to obligate pre-viously-awarded grant funds beforethat authority would otherwise expire.It also means the voluntary relinquish-ment of that authority by the granteeor subgrantee. ‘‘Termination’’ does notinclude: (1) Withdrawal of funds award-ed on the basis of the grantee’s under-estimate of the unobligated balance in


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a prior period; (2) Withdrawal of theunobligated balance as of the expira-tion of a grant; (3) Refusal to extend agrant or award additional funds, tomake a competing or noncompetingcontinuation, renewal, extension, orsupplemental award; or (4) voiding of agrant upon determination that theaward was obtained fraudulently, orwas otherwise illegal or invalid frominception.

Terms of a grant or subgrant mean allrequirements of the grant or subgrant,whether in statute, regulations, or theaward document.

Third party in-kind contributions meanproperty or services which benefit aFederally assisted project or programand which are contributed by non-Fed-eral third parties without charge to thegrantee, or a cost-type contractorunder the grant agreement.

Unliquidated obligations for reportsprepared on a cash basis mean theamount of obligations incurred by thegrantee that has not been paid. For re-ports prepared on an accrued expendi-ture basis, they represent the amountof obligations incurred by the granteefor which an outlay has not been re-corded.

Unobligated balance means the por-tion of the funds authorized by theFederal agency that has not been obli-gated by the grantee and is determinedby deducting the cumulative obliga-tions from the cumulative funds au-thorized.

§ 12.44 Applicability.(a) General. Subparts A–D of this part

apply to all grants and subgrants togovernments, except where incon-sistent with Federal statutes or withregulations authorized in accordancewith the exception provision of § 12.46,or:

(1) Grants and subgrants to State andlocal institutions of higher educationor State and local hospitals.

(2) The block grants authorized bythe Omnibus Budget ReconciliationAct of 1981 (Community Services; Pre-ventive Health and Health Services; Al-cohol, Drug Abuse, and Mental HealthServices; Maternal and Child HealthServices; Social Services; Low-IncomeHome Energy Assistance; States’ Pro-gram of Community Development

Block Grants for Small Cities; and Ele-mentary and Secondary Educationother than programs administered bythe Secretary of Education under TitleV, Subtitle D, Chapter 2, Section 583—the Secretary’s discretionary grantprogram) and Titles I–III of the JobTraining Partnership Act of 1982 andunder the Public Health Services Act(Section 1921), Alcohol and Drug AbuseTreatment and Rehabilitation BlockGrant and Part C of Title V, MentalHealth Service for the Homeless BlockGrant).

(3) Entitlement grants to carry outthe following programs of the SocialSecurity Act:

(i) Aid to Needy Families with De-pendent Children (Title IV–A of theAct, not including the Work IncentiveProgram (WIN) authorized by section402(a)19(G); HHS grants for WIN aresubject to this part);

(ii) Child Support Enforcement andEstablishment of Paternity (Title IV–Dof the Act);

(iii) Foster Care and Adoption Assist-ance (Title IV–E of the Act);

(iv) Aid to the Aged, Blind, and Dis-abled (Titles I, X, XIV, and XVI–AABDof the Act); and

(v) Medical Assistance (Medicaid)(Title XIX of the Act) not including theState Medicaid Fraud Control programauthorized by section 1903(a)(6)(B).

(4) Entitlement grants under the fol-lowing programs of The NationalSchool Lunch Act:

(i) School Lunch (section 4 of theAct),

(ii) Commodity Assistance (section 6of the Act),

(iii) Special Meal Assistance (section11 of the Act),

(iv) Summer Food Service for Chil-dren (section 13 of the Act), and

(v) Child Care Food Program (section17 of the Act).

(5) Entitlement grants under the fol-lowing programs of The Child Nutri-tion Act of 1966:

(i) Special Milk (section 3 of the Act),and

(ii) School Breakfast (section 4 of theAct).

(6) Entitlement grants for State Ad-ministrative expenses under The FoodStamp Act of 1977 (section 16 of theAct).


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(7) A grant for an experimental, pilot,or demonstration project that is alsosupported by a grant listed in para-graph (a)(3) of this section.

(8) Grant funds awarded under sub-section 412(e) of the Immigration andNationality Act (8 U.S.C. 1522(e)) andsubsection 501(a) of the Refugee Edu-cation Assistance Act of 1980 (Pub. L.96–422, 94 Stat. 1809), for cash assist-ance, medical assistance, and supple-mental security income benefits to ref-ugees and entrants and the administra-tive costs of providing the assistanceand benefits.

(9) Grants to local education agenciesunder 20 U.S.C. 236 through 241–1(a),and 242 through 244 (portions of the Im-pact Aid program), except for 20 U.S.C.238(d)(2)(c) and 240(f) (Entitlement In-crease for Handicapped Children); and

(10) Payments under the VeteransAdministration’s State Home Per DiemProgram (38 U.S.C. 641(a)).

(b) Entitlement programs. Entitlementprograms enumerated above in § 12.44(a)(3) through (8) are subject to subpart E.

§ 12.45 Effect on other issuances.All other grants administration pro-

visions of codified program regula-tions, program manuals, handbooksand other nonregulatory materialswhich are inconsistent with this partare superseded, except to the extentthey are required by statute, or au-thorized in accordance with the excep-tion provision in § 12.46.

§ 12.46 Additions and exceptions.(a) For classes of grants and grantees

subject to this part, Federal agenciesmay not impose additional administra-tive requirements except in codifiedregulations published in the FEDERALREGISTER.

(b) Exceptions for classes of grants orgrantees may be authorized only byOMB.

(c) Exceptions on a case-by-case basisand for subgrantees may be authorizedby the affected Federal agencies.

PRE-AWARD REQUIREMENTS

§ 12.50 Forms for applying for grants.(a) Scope. (1) This section prescribes

forms and instructions to be used bygovernmental organizations (except

hospitals and institutions of highereducation operated by a government)in applying for grants. This section isnot applicable, however, to formulagrant programs which do not requireapplicants to apply for funds on aproject basis.

(2) This section applies only to appli-cations to Federal agencies for grants,and is not required to be applied bygrantees in dealing with applicants forsubgrants. However, grantees are en-couraged to avoid more detailed or bur-densome application requirements forsubgrants.

(b) Authorized forms and instructionsfor governmental organizations. (1) In ap-plying for grants, applicants shall onlyuse standard application forms or thoseprescribed by the granting agency withthe approval of OMB under the Paper-work Reduction Act of 1980.

(2) Applicants are not required tosubmit more than the original and twocopies of preapplications or applica-tions.

(3) Applicants must follow all appli-cable instructions that bear OMBclearance numbers. Federal agenciesmay specify and describe the programs,functions, or activities that will beused to plan, budget, and evaluate thework under a grant. Other supple-mentary instructions may be issuedonly with the approval of OMB to theextent required under the PaperworkReduction Act of 1980. For any stand-ard form, except the SF–424 facesheet,Federal agencies may shade out or in-struct the applicant to disregard anyline item that is not needed.

(4) When a grantee applies for addi-tional funding (such as a continuationor supplemental award) or amends apreviously submitted application, onlythe affected pages need be submitted.Previously submitted pages with infor-mation that is still current need not beresubmitted.

§ 12.51 State plans.(a) Scope. The statutes for some pro-

grams require States to submit plansbefore receiving grants. Under regula-tions implementing Executive Order12372, ‘‘Intergovernmental Review ofFederal Programs,’’ States are allowedto simplify, consolidate and substituteplans. This section contains additional


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provisions for plans that are subject toregulations implementing the Execu-tive order.

(b) Requirements. A State need meetonly Federal administrative or pro-grammatic requirements for a planthat are in statutes or codified regula-tions.

(c) Assurances. In each plan the Statewill include an assurance that theState shall comply with all applicableFederal statutes and regulations in ef-fect with respect to the periods forwhich it receives grant funding. Forthis assurance and other assurances re-quired in the plan, the State may:

(1) Cite by number the statutory orregulatory provisions requiring the as-surances and affirm that it gives theassurances required by those provi-sions,

(2) Repeat the assurance language inthe statutes or regulations, or

(3) Develop its own language to theextent permitted by law.

(d) Amendments. A State will amend aplan whenever necessary to reflect: (1)New or revised Federal statutes or reg-ulations or (2) a material change in anyState law, organization, policy, orState agency operation. The State willobtain approval for the amendment andits effective date but need submit forapproval only the amended portions ofthe plan.

§ 12.52 Special grant or subgrant con-ditions for ‘‘high-risk’’ grantees.

(a) A grantee or subgrantee may beconsidered ‘‘high risk’’ if an awardingagency determines that a grantee orsubgrantee:

(1) Has a history of unsatisfactoryperformance, or

(2) Is not financially stable, or(3) Has a management system which

does not meet the management stand-ards set forth in this part, or

(4) Has not conformed to terms andconditions of previous awards, or

(5) Is otherwise not responsible; andif the awarding agency determines thatan award will be made, special condi-tions and/or restrictions shall cor-respond to the high risk condition andshall be included in the award.

(b) Special conditions or restrictionsmay include:

(1) Payment on a reimbursementbasis;

(2) Withholding authority to proceedto the next phase until receipt of evi-dence of acceptable performance withina given funding period;

(3) Requiring additional, more de-tailed financial reports;

(4) Additional project monitoring;(5) Requiring the grante or sub-

grantee to obtain technical or manage-ment assistance; or

(6) Establishing additional prior ap-provals.

(c) If an awarding agency decides toimpose such conditions, the awardingofficial will notify the grantee or sub-grantee as early as possible, in writing,of:

(1) The nature of the special condi-tions/restrictions;

(2) The reason(s) for imposing them;(3) The corrective actions which must

be taken before they will be removedand the time allowed for completingthe corrective actions and

(4) The method of requesting recon-sideration of the conditions/restric-tions imposed.

POST-AWARD REQUIREMENTS

Financial Administration

§ 12.60 Standards for financial man-agement systems.

(a) A State must expand and accountfor grant funds in accordance withState laws and procedures for expend-ing and accounting for its own funds.Fiscal control and accounting proce-dures of the State, as well as its sub-grantees and cost-type contractors,must be sufficient to—

(1) Permit preparation of reports re-quired by this part and the statutes au-thorizing the grant, and

(2) Permit the tracing of funds to alevel of expenditures adequate to es-tablish that such funds have not beenused in violation of the restrictionsand prohibitions of applicable statutes.

(b) The financial management sys-tems of other grantees and subgranteesmust meet the following standards:

(1) Financial reporting. Accurate, cur-rent, and complete disclosure of the fi-nancial results of financially assistedactivities must be made in accordance


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with the financial reporting require-ments of the grant or subgrant.

(2) Accounting records. Grantees andsubgrantees must maintain recordswhich adequately identify the sourceand application of funds provided for fi-nancially-assisted activities. Theserecords must contain information per-taining to grant or subgrant awardsand authorizations, obligations, unobli-gated balances, assets, liabilities, out-lays or expenditures, and income.

(3) Internal control. Effective controland accountability must be maintainedfor all grant and subgrant cash, realand personal property, and other as-sets. Grantees and subgrantees mustadequately safeguard all such propertyand must assure that it is used solelyfor authorized purposes.

(4) Budget control. Actual expendi-tures or outlays must be comparedwith budgeted amounts for each grantor subgrant. Financial informationmust be related to performance or pro-ductivity data, including the develop-ment of unit cost information when-ever appropriate or specifically re-quired in the grant or subgrant agree-ment. If unit cost data are required, es-timates based on available documenta-tion will be accepted whenever pos-sible.

(5) Allowable cost. Applicable OMBcost principles, agency program regula-tions, and the terms of grant andsubgrant agreements will be followedin determining the reasonableness, al-lowability, and allocability of costs.

(6) Source documentation. Accountingrecords must be supported by suchsource documentation as cancelledchecks, paid bills, payrolls, time andattendance records, contract andsubgrant award documents, etc.

(7) Cash management. Procedures forminimizing the time elapsing betweenthe transfer of funds from the U.S.Treasury and disbursement by granteesand subgrantees must be followedwhenever advance payment proceduresare used. Grantees must establish rea-sonable procedures to ensure the re-ceipt of reports on subgrantees’ cashbalances and cash disbursements insufficient time to enable them to pre-pare complete and accurate cash trans-actions reports to the awarding agen-cy. When advances are made by letter-

of-credit or electronic transfer of fundsmethods, the grantee must makedrawdowns as close as possible to thetime of making disbursements. Grant-ees must monitor cash drawdowns bytheir subgrantees to assure that theyconform substantially to the samestandards of timing and amount asapply to advances to the grantees.

(c) An awarding agency may reviewthe adequacy of the financial manage-ment system of any applicant for fi-nancial assistance as part of apreaward review or at any time subse-quent to award.

§ 12.61 Payment.

(a) Scope. This section prescribes thebasic standard and the methods underwhich a Federal agency will make pay-ments to grantees, and grantees willmake payments to subgrantees andcontractors.

(b) Basic standard. Methods and pro-cedures for payment shall minimizethe time elapsing between the transferof funds and disbursement by thegrantee or subgrantee, in accordancewith Treasury regulations at 31 CFRpart 205.

(c) Advances. Grantees and sub-grantees shall be paid in advance, pro-vided they maintain or demonstratethe willingness and ability to maintainprocedures to minimize the time elaps-ing between the transfer of the fundsand their disbursement by the granteeor subgrantee.

(d) Reimbursement. Reimbursementshall be the preferred method when therequirements in paragraph (c) of thissection are not met. Grantees and sub-grantees may also be paid by reim-bursement for any construction grant.Except as otherwise specified in regula-tion, Federal agencies shall not use thepercentage of completion method topay construction grants. The granteeor subgrantee may use that method topay its construction contractor, and ifit does, the awarding agency’s pay-ments to the grantee or subgranteewill be based on the grantee’s or sub-grantee’s actual rate of disbursement.

(e) Working capital advances. If agrantee cannot meet the criteria for


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advance payments described in para-graph (c) of this section, and the Fed-eral agency has determined that reim-bursement is not feasible because thegrantee lacks sufficient working cap-ital, the awarding agency may providecash or a working capital advancebasis. Under this procedure the award-ing agency shall advance cash to thegrantee to cover its estimated dis-bursement needs for an initial periodgenerally geared to the grantee’s dis-bursing cycle. Thereafter, the awardingagency shall reimburse the grantee forits actual cash disbursements. Theworking capital advance method ofpayment shall not be used by granteesor subgrantees if the reason for usingsuch method is the unwillingness or in-ability of the grantee to provide timelyadvances to the subgrantee to meet thesubgrantee’s actual cash disburse-ments.

(f) Effect of program income, refunds,and audit recoveries on payment. (1)Grantees and subgrantees shall dis-burse repayments to and interestearned on a revolving fund before re-questing additional cash payments forthe same activity.

(2) Except as provided in paragraph(f)(1) of this section, grantees and sub-grantees shall disburse program in-come, rebates, refunds, contract settle-ments, audit recoveries and interestearned on such funds before requestingadditional cash payments.

(g) Withholding payments. (1) Unlessotherwise required by Federal statute,awarding agencies shall not withholdpayments for proper charges incurredby grantees or subgrantees unless—

(i) The grantee or subgrantee hasfailed to comply with grant award con-ditions, or

(ii) The grantee or subgrantee is in-debted to the United States.

(2) Cash withheld for failure to com-ply with grant award condition, butwithout suspension of the grant, shallbe released to the grantee upon subse-quent compliance. When a grant is sus-pended, payment adjustments will bemade in accordance with § 12.83(c).

(3) A Federal agency shall not makepayment to grantees for amounts thatare withheld by grantees or sub-grantees from payment to contractorsto assure satisfactory completion of

work. Payments shall be made by theFederal agency when the grantees orsubgrantees actually disburse the with-held funds to the contractors or to es-crow accounts established to assuresatisfactory completion of work.

(h) Cash depositories. (1) Consistentwith the national goal of expanding theopportunities for minority business en-terprises, grantees and subgrantees areencouraged to use minority banks (abank which is owned at least 50 percentby minority group members). A list ofminority owned banks can be obtainedfrom the Minority Business Develop-ment Agency, Department of Com-merce, Washington, DC 20230.

(2) A grantee or subgrantee shallmaintain a separate bank account onlywhen required by Federal-State agree-ment.

(i) Interest earned on advances. Exceptfor interest earned on advances offunds exempt under the Intergovern-mental Cooperation Act (31 U.S.C. 6501et seq.) and the Indian Self-Determina-tion Act (23 U.S.C. 450), grantees andsubgrantees shall promptly, but atleast quarterly, remit interest earnedon advances to the Federal agency. Thegrantee or subgrantee may keep inter-est amounts up to $100 per year for ad-ministrative expenses.

§ 12.62 Allowable costs.

(a) Limitation on use of funds. Grantfunds may be used only for:

(1) The allowable costs of the grant-ees, subgrantees and cost-type contrac-tors, including allowable costs in theform of payments to fixed-price con-tractors; and

(2) Reasonable fees or profit to cost-type contractors but not any fee orprofit (or other increment above allow-able costs) to the grantee or sub-grantee.

(b) Applicable cost principles. For eachkind of organization, there is a set ofFederal principles for determining al-lowable costs. Allowable costs will bedetermined in accordance with the costprinciples applicable to the organiza-tion incurring the costs. The followingchart lists the kinds of organizationsand the applicable cost principles.


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For the costs of a— Use the principles in—

State, local or Indian tribalgovernment.

OMB Circular A–87.

Private nonprofit organizationother than an (1) institutionof higher education, (2)hospital, or (3) organizationnamed in OMB Circular A–122 as not subject to thatcircular.

OBM Circular A–122.

Educational institutions. ......... OMB Circular A–21.For-profit organization other

than a hospital and an or-ganization named in OBMCircular A–122 as not sub-ject to that circular.

48 CFR Part 31. ContractCost Principles and Proce-dures, or uniform cost ac-counting standards thatcomply with cost principlesacceptable to the Federalagency.

§ 12.63 Period of availability of funds.(a) General. Where a funding period is

specified, a grantee may charge to theaward only costs resulting from obliga-tions of the funding period unless car-ryover of unobligated balances is per-mitted, in which case the carryoverbalances may be charged for costs re-sulting from obligations of the subse-quent funding period.

(b) Liquidation of obligations. A grant-ee must liquidate all obligations in-curred under the award not later than90 days after the end of the funding pe-riod (or as specified in a program regu-lation) to coincide with the submissionof the annual Financial Status Report(SF–269). The Federal agency may ex-tend this deadline at the request of thegrantee.

§ 12.64 Matching or cost sharing.(a) Basic rule: Costs and contributions

acceptable. With the qualifications andexceptions listed in paragraph (b) ofthis section, a matching or cost shar-ing requirement may be satisfied by ei-ther or both of the following:

(1) Allowable costs incurred by thegrantee, subgrantee or a cost-type con-tractor under the assistance agree-ment. This includes allowable costsborne by non-Federal grants or by oth-ers cash donations from non-Federalthird parties.

(2) The value of third party in-kindcontributions applicable to the periodto which the cost sharing or matchingrequirements applies.

(b) Qualifications and exceptions—(1)Costs borne by other Federal grant agree-ments. Except as provided by Federal

statute, a cost sharing or matching re-quirement may not be met by costsborne by another Federal grant. Thisprohibition does not apply to incomeearned by a grantee or subgrantee froma contract awarded under another Fed-eral grant.

(2) General revenue sharing. For thepurpose of this section, general revenuesharing funds distributed under 31U.S.C. 6702 are not considered Federalgrant funds.

(3) Cost or contributions counted to-wards other Federal costs-sharing require-ments. Neither costs nor the values ofthird party in-kind contributions maycount towards satisfying a cost sharingor matching requirement of a grantagreement if they have been or will becounted towards satisfying a cost shar-ing or matching requirement of an-other Federal grant agreement, a Fed-eral procurement contract, or anyother award of Federal funds.

(4) Costs financed by program income.Costs financed by program income, asdefined in § 12.65, shall not count to-wards satisfying a cost sharing ormatching requirement unless they areexpressly permitted in the terms of theassistance agreement. (This use of gen-eral program income is described in§ 12.65(g).)

(5) Services or property financed by in-come earned by contractors. Contractorsunder a grant may earn income fromthe activities carried out under thecontract in addition to the amountsearned from the party awarding thecontract. No costs of services or prop-erty supported by this income maycount toward satisfying a cost sharingor matching requirement unless otherprovisions of the grant agreement ex-pressly permit this kind of income tobe used to meet the requirement.

(6) Records. Costs and third party in-kind contributions counting towardssatisfying a cost sharing or matchingrequirement must be verifiable fromthe records of grantees and subgranteeor cost-type contractors. These recordsmust show how the value placed onthird party in-kind contributions wasderived. To the extent feasible, volun-teer services will be supported by thesame methods that the organizationuses to support the allocability of reg-ular personnel costs.


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(7) Special standards for third party in-kind contributions. (i) Third party in-kind contributions count towards sat-isfying a cost sharing or matching re-quirement only where, if the party re-ceiving the contributions were to payfor them, the payments would be allow-able costs.

(ii) Some third party in-kind con-tributions are goods and services that,if the grantee, subgrantee, or con-tractor receiving the contribution hadto pay for them, the payments wouldhave been an indirect costs. Costs shar-ing or matching credit for such con-tributions shall be given only if thegrantee, subgrantee, or contractor hasestablished, along with its regular indi-rect cost rate, a special rate for allo-cating to individual projects or pro-grams the value of the contributions.

(iii) A third party in-kind contribu-tion to a fixed-price contract maycount towards satisfying a cost sharingor matching requirement only if it re-sults in:

(A) An increase in the services orproperty provided under the contract(without additional cost to the granteeor subgrantee) or

(B) A cost savings to the grantee orsubgrantee.

(iv) The values placed on third partyin-kind contributions for cost sharingor matching purposes will conform tothe rules in the succeeding sections ofthis part. If a third party in-kind con-tribution is a type not treated in thosesections, the value placed upon it shallbe fair and reasonable.

(c) Valuation of donated services—(1)Volunteer services. Unpaid services pro-vided to a grantee or subgrantee by in-dividuals will be 6valued at rates con-sistent with those ordinarily paid forsimilar work in the grantee’s or sub-grantee’s organization. If the granteeor subgrantee does not have employeesperforming similar work, the rates willbe consistent with those ordinarilypaid by other employers for similarwork in the same labor market. In ei-ther case, a reasonable amount forfringe benefits may be included in thevaluation.

(2) Employees of other organizations.When an employer other than a grant-ee, subgrantee, or cost-type contractorfurnishes free of charge the services of

an employee in the employee’s normalline of work, the services will be valuedat the employee’s regular rate of payexclusive of the employee’s fringe ben-efits and overhead costs. If the servicesare in a different line of work, para-graph (c)(1) of this section applies.

(d) Valuation of third party donatedsupplies and loaned equipment or space.(1) If a third party donates supplies,the contribution will be valued at themarket value of the supplies at thetime of donation.

(2) If a third party donates the use ofequipment or space in a building butretains title, the contribution will bevalued at the fair rental rate of theequipment or space.

(e) Valuation of third party donatedequipment, buildings, and land. If a thirdparty donates equipment, buildings, orland, and title passes to a grantee orsubgrantee, the treatment of the do-nated property will depend upon thepurpose of the grant or subgrant, asfollows:

(1) Awards for capital expenditures. Ifthe purpose of the grant or subgrant isto assist the grantee or subgrantee inthe acquisition of property, the marketvalue of that property at the time ofdonation may be counted as cost shar-ing or matching,

(2) Other awards. If assisting in theacquisition of property is not the pur-pose of the grant or subgrant, para-graphs (e)(2) (i) and (ii) of this sectionapply:

(i) If approval is obtained from theawarding agency, the market value atthe time of donation of the donatedequipment or buildings and the fairrental rate of the donated land may becounted as cost sharing or matching.In the case of a subgrant, the terms ofthe grant agreement may require thatthe approval be obtained from the Fed-eral agency as well as the grantee. Inall cases, the approval may be givenonly if a purchase of the equipment orrental of the land would be approved asan allowable direct cost. If any part ofthe donated property was acquiredwith Federal funds, only the non-Fed-eral share of the property may becounted as cost-sharing or matching.

(ii) If approval is not obtained underparagraph (e)(2)(i) of this section, noamount may be counted for donated


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land, and only depreciation or use al-lowances may be counted for donatedequipment and buildings. The deprecia-tion or use allowances for this propertyare not treated as third party in-kindcontributions. Instead, they are treat-ed as costs incurred by the grantee orsubgrantee. They are computed and al-located (usually as indirect costs) inaccordance with the cost principlesspecified in § 12.62, in the same way asdepreciation or use allowances for pur-chased equipment and buildings. Theamount of depreciation or use allow-ances for donated equipment and build-ings is based on the property’s marketvalue at the time it was donated.

(f) Valuation of grantee or subgranteedonated real property for construction/ac-quisition. If a grantee or subgrantee do-nates real property for a constructionor facilities acquisition project, thecurrent market value of that propertymay be counted as cost sharing ormatching. If any part of the donatedproperty was acquired with Federalfunds, only the non-Federal share ofthe property may be counted as costsharing or matching.

(g) Appraisal of real property. In somecases under paragraphs (d), (e) and (f)of this section, it will be necessary toestablish the market value of land or abuilding or the fair rental rate of landor of space in a building. In these cases,the Federal agency may require themarket value or fair rental value be setby an independent appraiser, and thatthe value or rate be certified by thegrantee. This requirement will also beimposed by the grantee on subgrantees.

§ 12.65 Program income.(a) General. Grantees are encouraged

to earn income to defray programcosts. Program income includes incomefrom fees for services performed, fromthe use or rental of real or personalproperty acquired with grant funds,from the sale of commodities or itemsfabricated under a grant agreement,and from payments of principal and in-terest on loans made with grant funds.Except as otherwise provided in regula-tions of the Federal agency, programincome does not include interest ongrant funds, rebates, credits, discounts,refunds, etc. and interest earned onany of them.

(b) Definition of program income. Pro-gram income means gross income re-ceived by the grantee or subgrantee di-rectly generated by a grant supportedactivity, or earned only as a result ofthe grant agreement during the grantperiod. ‘‘During the grant period’’ isthe time between the effective date ofthe award and the ending date of theaward reflected in the final financialreport.

(c) Cost of generating program income.If authorized by Federal regulations orthe grant agreement, costs incident tothe generation of program income maybe deducted from gross income to de-termine program income.

(d) Governmental revenues. Taxes, spe-cial assessments, levies, fines, andother such revenues raised by a granteeor subgrantee are not program incomeunless the revenues are specificallyidentified in the grant agreement orFederal agency regulations as programincome.

(e) Royalties. Income from royaltiesand license fees for copyrighted mate-rial, patents, and inventions developedby a grantee or subgrantee is programincome only if the revenues are specifi-cally identified in the grant agreementor Federal agency regulations as pro-gram income. (See § 12.74.)

(f) Property. Proceeds from the sale ofreal property or equipment will be han-dled in accordance with the require-ments of §§ 12.71 and 12.72.

(g) Use of program income. Programincome shall be deducted from outlayswhich may be both Federal and non-Federal as described below, unless theFederal agency regulations or thegrant agreement specify another alter-native (or a combination of the alter-natives). In specifying alternatives, theFederal agency may distinguish be-tween income earned by the granteeand income earned by subgrantees andbetween the sources, kinds, or amountsof income. When Federal agencies au-thorize the alternatives in paragraphs(g) (2) and (3) of this section, programincome in excess of any limits stipu-lated shall also be deducted from out-lays.

(1) Deduction. Ordinarily program in-come shall be deducted from total al-lowable costs to determine the net al-lowable costs. Program income shall be


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used for current costs unless the Fed-eral agency authorizes otherwise. Pro-gram income which the grantee did notanticipate at the time of the awardshall be used to reduce the Federalagency and grantee contributions rath-er than to increase the funds com-mitted to the project.

(2) Addition. When authorized, pro-gram income may be added to thefunds committed to the grant agree-ment by the Federal agency and thegrantee. The program income shall beused for the purposes and under theconditions of the grant agreement.

(3) Cost sharing or matching. When au-thorized, program income may be usedto meet the cost sharing or matchingrequirement of the grant agreement.The amount of the Federal grant awardremains the same.

(h) Income after the award period.There are no Federal requirements gov-erning the disposition of program in-come earned after the end of the awardperiod (i.e., until the ending date of thefinal financial report, see paragraph (a)of this section), unless the terms of theagreement or the Federal agency regu-lations provide otherwise.

§ 12.66 Non-Federal audit.(a) Basic rule. Grantees and sub-

grantees are responsible for obtainingaudits in accordance with the SingleAudit Act Amendments of 1996 (31U.S.C. 7501–7507) and revised OMB Cir-cular A–133, ‘‘Audits of States, LocalGovernments, and Non-Profit Organi-zations.’’ The audits shall be made byan independent auditor in accordancewith generally accepted governmentauditing standards covering financialaudits.

(b) Subgrantees. State or local govern-ments, as those terms are defined forpurposes of the Single Audit ActAmendments of 1996, that provide Fed-eral awards to a subgrantee, which ex-pends $300,000 or more (or otheramount as specified by OMB) in Fed-eral awards in a fiscal year, shall:

(1) Determine whether State or localsubgrantees have met the audit re-quirements of the Act and whether sub-grantees covered by OMB Circular A–110, ‘‘Uniform Administrative Require-ments for Grants and Agreements withInstitutions of Higher Education, Hos-

pitals, and Other Non-Profit Organiza-tions,’’ have met the audit require-ments of the Act. Commercial contrac-tors (private for-profit and private andgovernmental organizations) providinggoods and services to State and localgovernments are not required to have asingle audit performed. State and localgovernments should use their own pro-cedures to ensure that the contractorhas complied with laws and regulationsaffecting the expenditure of Federalfunds;

(2) Determine whether the sub-grantee spent Federal assistance fundsprovided in accordance with applicablelaws and regulations. This may be ac-complished by reviewing an audit ofthe subgrantee made in accordancewith the Act, Circular A–110, orthrough other means (e.g., program re-views) if the subgrantee has not hadsuch an audit;

(3) Ensure that appropriate correc-tive action is taken within six monthsafter receipt of the audit report in in-stance of noncompliance with Federallaws and regulations;

(4) Consider whether subgrantee au-dits necessitate adjustment of thegrantee’s own records; and

(5) Require each subgrantee to permitindependent auditors to have access tothe records and financial statements.

(c) Auditor selection. In arranging foraudit services, § 12.36 shall be followed.

[53 FR 8077 and 8087, Mar. 11, 1988, as amend-ed at 62 FR 45939, 45945, Aug. 29, 1997]

CHANGES, PROPERTY, AND SUBAWARDS

§ 12.70 Changes.

(a) General. Grantees and subgranteesare permitted to rebudget within theapproved direct cost budget to meetunanticipated requirements and maymake limited program changes to theapproved project. However, unlesswaived by the awarding agency, certaintypes of post-award changes in budgetsand projects shall require the priorwritten approval of the awarding agen-cy.

(b) Relation to cost principles. The ap-plicable cost principles (see § 12.62) con-tain requirements for prior approval ofcertain types of costs. Except wherewaived, those requirements apply to all


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grants and subgrants even if para-graphs (c) through (f) of this section donot.

(c) Budget changes—(1) Nonconstruc-tion projects. Except as stated in otherregulations or an award document,grantees or subgrantees shall obtainthe prior approval of the awardingagency whenever any of the followingchanges is anticipated under a non-construction award:

(i) Any revision which would resultin the need for additional funding.

(ii) Unless waived by the awardingagency, cumulative transfers among di-rect cost categories, or, if applicable,among separately budgeted programs,projects, functions, or activities whichexceed or are expected to exceed tenpercent of the current total approvedbudget, whenever the awarding agen-cy’s share exceeds $100,000.

(iii) Transfer of funds allotted fortraining allowances (i.e., from directpayments to trainees to other expensecategories).

(2) Construction projects. Grantees andsubgrantees shall obtain prior writtenapproval for any budget revision whichwould result in the need for additionalfunds.

(3) Combined construction and non-construction projects. When a grant orsubgrant provides funding for both con-struction and nonconstruction activi-ties, the grantee or subgrantee mustobtain prior written approval from theawarding agency before making anyfund or budget transfer from non-construction to construction or viceversa.

(d) Programmatic changes. Grantees orsubgrantees must obtain the prior ap-proval of the awarding agency when-ever any of the following actions is an-ticipated:

(1) Any revision of the scope or objec-tives of the project (regardless ofwhether there is an associated budgetrevision requiring prior approval).

(2) Need to extend the period of avail-ability of funds.

(3) Changes in key persons in caseswhere specified in an application or agrant award. In research projects, achange in the project director or prin-cipal investigator shall always requireapproval unless waived by the award-ing agency.

(4) Under nonconstruction projects,contracting out, subgranting (if au-thorized by law) or otherwise obtainingthe services of a third party to performactivities which are central to the pur-poses of the award. This approval re-quirement is in addition to the ap-proval requirements of § 12.76 but doesnot apply to the procurement of equip-ment, supplies, and general supportservices.

(e) Additional prior approval require-ments. The awarding agency may notrequire prior approval for any budgetrevision which is not described in para-graph (c) of this section.

(f) Requesting prior approval. (1) A re-quest for prior approval of any budgetrevision will be in the same budget for-mal the grantee used in its applicationand shall be accompanied by a nar-rative justification for the proposed re-vision.

(2) A request for a prior approvalunder the applicable Federal cost prin-ciples (see § 12.62) may be made by let-ter.

(3) A request by a subgrantee forprior approval will be addressed inwriting to the grantee. The granteewill promptly review such request andshall approve or disapprove the requestin writing. A grantee will not approveany budget or project revision which isinconsistent with the purpose or termsand conditions of the Federal grant tothe grantee. If the revision, requestedby the subgrantee would result in achange to the grantee’s approvedproject which requires Federal priorapproval, the grantee will obtain theFederal agency’s approval before ap-proving the subgrantee’s request.

§ 12.71 Real property.

(a) Title. Subject to the obligationsand conditions set forth in this section,title to real property acquired under agrant or subgrant will vest upon acqui-sition in the grantee or subgrantee re-spectively.

(b) Use. Except as otherwise providedby Federal statutes, real property willbe used for the originally authorizedpurposes as long as needed for that pur-poses, and the grantee or subgranteeshall not dispose of or encumber itstitle or other interests.


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(c) Disposition. When real property isno longer needed for the originally au-thorized purpose, the grantee or sub-grantee will request disposition in-structions from the awarding agency.The instructions will provide for one ofthe following alternatives:

(1) Retention of title. Retain title aftercompensating the awarding agency.The amount paid to the awarding agen-cy will be computed by applying theawarding agency’s percentage of par-ticipation in the cost of the originalpurchase to the fair market value ofthe property. However, in those situa-tions where a grantee or subgrantee isdisposing of real property acquiredwith grant funds and acquiring replace-ment real property under the same pro-gram, the net proceeds from the dis-position may be used as an offset to thecost of the replacement property.

(2) Sale of property. Sell the propertyand compensate the awarding agency.The amount due to the awarding agen-cy will be calculated by applying theawarding agency’s percentage of par-ticipation in the cost of the originalpurchase to the proceeds of the saleafter deduction of any actual and rea-sonable selling and fixing-up expenses.If the grant is still active, the net pro-ceeds from sale may be offset againstthe original cost of the property. Whena grantee or subgrantee is directed tosell property, sales procedures shall befollowed that provide for competitionto the extent practicable and result inthe highest possible return.

(3) Transfer of title. Transfer title tothe awarding agency or to a third-party designated/approved by theawarding agency. The grantee or sub-grantee shall be paid an amount cal-culated by applying the grantee or sub-grantee’s percentage of participationin the purchase of the real property tothe current fair market value of theproperty.

§ 12.72 Equipment.(a) Title. Subject to the obligations

and conditions set forth in this section,title to equipment acquired under agrant or subgrant will vest upon acqui-sition in the grantee or subgrantee re-spectively.

(b) States. A State will use, manage,and dispose of equipment acquired

under a grant by the State in accord-ance with State laws and procedures.Other grantees and subgrantees willfollow paragraphs (c) through (e) ofthis section.

(c) Use. (1) Equipment shall be usedby the grantee or subgrantee in theprogram or project for which it was ac-quired as long as needed, whether ornot the project or program continuesto be supported by Federal funds. Whenno longer needed for the original pro-gram or project, the equipment may beused in other activities currently orpreviously supported by a Federalagency.

(2) The grantee or subgrantee shallalso make equipment available for useon other projects or programs cur-rently or previously supported by theFederal Government, providing suchuse will not interfere with the work onthe projects or program for which itwas originally acquired. First pref-erence for other use shall be given toother programs or projects supportedby the awarding agency. User feesshould be considered if appropriate.

(3) Notwithstanding the encourage-ment in § 12.65(a) to earn program in-come, the grantee or subgrantee mustnot use equipment acquired with grantfunds to provide services for a fee tocompete unfairly with private compa-nies that provide equivalent services,unless specifically permitted or con-templated by Federal statute.

(4) When acquiring replacementequipment, the grantee or subgranteemay use the equipment to be replacedas a trade-in or sell the property anduse the proceeds to offset the cost ofthe replacement property, subject tothe approval of the awarding agency.

(d) Management requirements. Proce-dures for managing equipment (includ-ing replacement equipment), whetheracquired in whole or in part with grantfunds, until disposition takes placewill, as a minimum, meet the followingrequirements:

(1) Property records must be main-tained that include a description of theproperty, a serial number or otheridentification number, the source ofproperty, who holds title, the acquisi-tion date, and cost of the property, per-centage of Federal participation in thecost of the property, the location, use


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and condition of the property, and anyultimate disposition data including thedate of disposal and sale price of theproperty.

(2) A physical inventory of the prop-erty must be taken and the results rec-onciled with the property records atleast once every two years.

(3) A control system must be devel-oped to ensure adequate safeguards toprevent loss, damage, or theft of theproperty. Any loss, damage, or theftshall be investigated.

(4) Adequate maintenance proceduresmust be developed to keep the propertyin good condition.

(5) If the grantee or subgrantee is au-thorized or required to sell the prop-erty, proper sales procedures must beestablished to ensure the highest pos-sible return.

(e) Disposition. When original or re-placement equipment acquired under agrant or subgrant is no longer neededfor the original project or program orfor other activities currently or pre-viously supported by a Federal agency,disposition of the equipment will bemade as follows:

(1) Items of equipment with a currentper-unit fair market value of less than$5,000 may be retained, sold or other-wise disposed of with no further obliga-tion to the awarding agency.

(2) Items of equipment with a currentper unit fair market value in excess of$5,000 may be retained or sold and theawarding agency shall have a right toan amount calculated by multiplyingthe current market value or proceedsfrom sale by the awarding agency’sshare of the equipment.

(3) In cases where a grantee or sub-grantee fails to take appropriate dis-position actions, the awarding agencymay direct the grantee or subgranteeto take excess and disposition actions.

(f) Federal equipment. In the event agrantee or subgrantee is provided Fed-erally-owned equipment:

(1) Title will remain vested in theFederal Government.

(2) Grantees or subgrantees will man-age the equipment in accordance withFederal agency rules and procedures,and submit an annual inventory list-ing.

(3) When the equipment is no longerneeded, the grantee or subgrantee will

request disposition instructions fromthe Federal agency.

(g) Right to transfer title. The Federalawarding agency may reserve the rightto transfer title to the Federal Govern-ment or a third part named by theawarding agency when such a thirdparty is otherwise eligible under exist-ing statutes. Such transfers shall besubject to the following standards:

(1) The property shall be identified inthe grant or otherwise made known tothe grantee in writing.

(2) The Federal awarding agencyshall issue disposition instructionwithin 120 calendar days after the endof the Federal support of the projectfor which it was acquired. If the Fed-eral awarding agency fails to issue dis-position instructions within the 120calendar-day period the grantee shallfollow 12.72(e).

(3) When title to equipment is trans-ferred, the grantee shall be paid anamount calculated by applying the per-centage of participation in the pur-chase to the current fair market valueof the property.

§ 12.73 Supplies.(a) Title. Title to supplies acquired

under a grant or subgrant will vest,upon acquisition, in the grantee or sub-grantee respectively.

(b) Disposition. If there is a residualinventory of unused supplies exceeding$5,000 in total aggregate fair marketvalue upon termination or completionof the award, and if the supplies arenot needed for any other Federallysponsored programs or projects, thegrantee or subgrantee shall com-pensate the awarding agency for itsshare.

§ 12.74 Copyrights.The Federal awarding agency re-

serves a royalty-free, nonexclusive, andirrevocable license to reproduce, pub-lish or otherwise use, and to authorizeothers to use, for Federal Governmentpurposes:

(a) The copyright in any work devel-oped under a grant, subgrant, or con-tract under a grant or subgrant; and

(b) Any rights of copyright to whicha grantee, subgrantee or a contractorpurchases ownership with grant sup-port.


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§ 12.75 Subawards to debarred andsuspended parties.

Grantees and subgrantees must notmake any award or permit any award(subgrant or contract) at any tier toany party which is debarred or sus-pended or is otherwise excluded from orineligible for participation in Federalassistance programs under ExecutiveOrder 12549, ‘‘Debarment and Suspen-sion.’’

§ 12.76 Procurement.(a) States. When procuring property

and services under a grant, a State willfollow the same policies and proceduresit uses for procurements from its non-Federal funds. The State will ensurethat every purchase order or other con-tract includes any clauses required byFederal statutes and executive ordersand their implementing regulations.Other grantees and subgrantees willfollow paragraphs (b) through (i) inthis section.

(b) Procurement standards. (1) Grant-ees and subgrantees will use their ownprocurement procedures which reflectapplicable State and local laws andregulations, provided that the procure-ments conform to applicable Federallaw and the standards identified in thissection.

(2) Grantees and subgrantees willmaintain a contract administrationsystem which ensures that contractorsperform in accordance with the terms,conditions, and specifications of theircontracts or purchase orders.

(3) Grantees and subgrantees willmaintain a written code of standards ofconduct governing the performance oftheir employees engaged in the awardand administration of contracts. Noemployee, officer or agent of the grant-ee or subgrantee shall participate in se-lection, or in the award or administra-tion of a contract supported by Federalfunds if a conflict of interest, real orapparent, would be involved. Such aconflict would arise when:

(i) The employee, officer or agent,(ii) Any member of his immediate

family,(iii) His or her partner, or(iv) An organization which employs,

or is about to employ, any of theabove, has a financial or other interestin the firm selected for award. The

grantee’s or subgrantee’s officers, em-ployees or agents will neither solicitnor accept gratuities, favors or any-thing of monetary value from contrac-tors, potential contractors, or partiesto subagreements. Grantee and sub-grantees may set minimum rules wherethe financial interest is not substantialor the gift is an unsolicited item ofnominal intrinsic value. To the extentpermitted by State or local law or reg-ulations, such standards or conductwill provide for penalties, sanctions, orother disciplinary actions for viola-tions of such standards by the grant-ee’s and subgrantee’s officers, employ-ees, or agents, or by contractors ortheir agents. The awarding agency mayin regulation provide additional prohi-bitions relative to real, apparent, orpotential conflicts of interest.

(4) Grantee and subgrantee proce-dures will provide for a review of pro-posed procurements to avoid purchaseof unnecessary or duplicative items.Consideration should be given to con-solidating or breaking out procure-ments to obtain a more economicalpurchase. Where appropriate, an anal-ysis will be made of lease versus pur-chase alternatives, and any other ap-propriate analysis to determine themost economical approach.

(5) To foster greater economy and ef-ficiency, grantees and subgrantees areencouraged to enter into State andlocal intergovernmental agreementsfor procurement or use of commongoods and services.

(6) Grantees and subgrantees are en-couraged to use Federal excess and sur-plus property in lieu of purchasing newequipment and property whenever suchuse is feasible and reduces projectcosts.

(7) Grantees and subgrantees are en-couraged to use value engineeringclauses in contracts for constructionprojects of sufficient size to offer rea-sonable opportunities for cost reduc-tions. Value engineering is a system-atic and creative anaylsis of each con-tract item or task to ensure that its es-sential function is provided at theoverall lower cost.

(8) Grantees and subgrantees willmake awards only to responsible con-tractors possessing the ability to per-form successfully under the terms and


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conditions of a proposed procurement.Consideration will be given to suchmatters as contractor integrity, com-pliance with public policy, record ofpast performance, and financial andtechnical resources.

(9) Grantees and subgrantees willmaintain records sufficient to detailthe significant history of a procure-ment. These records will include, butare not necessarily limited to the fol-lowing: rationale for the method ofprocurement, selection of contracttype, contractor selection or rejection,and the basis for the contract price.

(10) Grantees and subgrantees willuse time and material type contractsonly—

(i) After a determination that noother contract is suitable, and

(ii) If the contract includes a ceilingprice that the contractor exceeds at itsown risk.

(11) Grantees and subgrantees alonewill be responsible, in accordance withgood administrative practice and soundbusiness judgment, for the settlementof all contractual and administrativeissues arising out of procurements.These issues include, but are not lim-ited to source evaluation, protests, dis-putes, and claims. These standards donot relieve the grantee or subgranteeof any contractual responsibilitiesunder its contracts. Federal agencieswill not substitute their judgment forthat of the grantee or subgrantee un-less the matter is primarily a Federalconcern. Violations of law will be re-ferred to the local, State, or Federalauthority having proper jurisdiction.

(12) Grantees and subgrantees willhave protest procedures to handle andresolve disputes relating to their pro-curements and shall in all instancesdisclose information regarding the pro-test to the awarding agency. Aprotestor must exhaust all administra-tive remedies with the grantee and sub-grantee before pursuing a protest withthe Federal agency. Reviews of pro-tests by the Federal agency will be lim-ited to:

(i) Violations of Federal law or regu-lations and the standards of this sec-tion (violations of State or local lawwill be under the jurisdiction of Stateor local authorities) and

(ii) Violations of the grantee’s or sub-grantee’s protest procedures for failureto review a complaint or protest. Pro-tests received by the Federal agencyother than those specified above will bereferred to the grantee or subgrantee.

(c) Competition. (1) All procurementtransactions will be conducted in amanner providing full and open com-petition consistent with the standardsof § 12.76. Some of the situations con-sidered to be restrictive of competitioninclude but are not limited to:

(i) Placing unreasonable require-ments on firms in order for them toqualify to do business,

(ii) Requiring unnecessary experienceand excessive bonding,

(iii) Noncompetitive pricing practicesbetween firms or between affiliatedcompanies,

(iv) Noncompetitive awards to con-sultants that are on retainer contracts,

(v) Organizational conflicts of inter-est,

(vi) Specifying only a ‘‘brand name’’product instead of allowing ‘‘an equal’’product to be offered and describingthe performance of other relevant re-quirements of the procurement, and

(vii) Any arbitrary action in the pro-curement process.

(2) Grantees and subgrantees willconduct procurements in a mannerthat prohibits the use of statutorily oradministratively imposed in-State orlocal geographical preferences in theevaluation of bids or proposals, exceptin those cases where applicable Federalstatutes expressly mandate or encour-age geographic preference. Nothing inthis section preempts State licensinglaws. When contracting for architec-tural and engineering (A/E) services,geographic location may be a selectioncriteria provided its application leavesan appropriate number of qualifiedfirms, given the nature and size of theproject, to compete for the contract.

(3) Grantees will have written selec-tion procedures for procurement trans-actions. These procedures will ensurethat all solicitations:

(i) Incorporate a clear and accuratedescription of the technical require-ments for the material, product, orservice to be procured. Such descrip-tion shall not, in competitive procure-ments, contain features which unduly


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restrict competition. The descriptionmay include a statement of the quali-tative nature of the material, productor service to be procured, and whennecessary, shall set forth those min-imum essential characteristics andstandards to which it must conform ifit is to satisfy its intended use. De-tailed product specifications should beavoided if at all possible. When it isimpractical or uneconomical to make aclear and accurate description of thetechnical requirements, a ‘‘brand nameor equal’’ description may be used as ameans to define the performance orother salient requirements of a pro-curement. The specific features of thenamed brand which must be met byofferors shall be clearly stated; and

(ii) Identify all requirements whichthe offerors must fulfill and all otherfactors to be used in evaluating bids orproposals.

(4) Grantees and subgrantees will en-sure that all prequalified lists of per-sons, firms, or products which are usedin acquiring goods and services are cur-rent and include enough qualifiedsources to ensure maximum open andfree competition. Also, grantees andsubgrantees will not preclude potentialbidders from qualifying during the so-licitation period.

(d) Methods of procurement to be fol-lowed—(1) Procurement by small purchaseprocedures. Small purchase proceduresare those relatively simple and infor-mal procurement methods for securingservices, supplies, or other propertythat do not cost more than the sim-plified acquisition threshold fixed at 41U.S.C. 403(11) (currently set at $100,000).If small purchase procedures are used,price or rate quotations shall be ob-tained from an adequate number ofqualified sources.

(2) Procurement by sealed bids (for-mal advertising). Bids are publicly so-licited and a firm-fixed-price contract(lump sum or unit price) is awarded tothe responsible bidder whose bid, con-forming with all the material termsand conditions of the invitation forbids, is the lowest in price. The sealedbid method is the preferred method forprocuring construction, if the condi-tions in § 12.76(d)(2)(i) apply.

(i) In order for sealed bidding to befeasible, the following conditionsshould be present:

(A) A complete, adequate, and real-istic specification or purchase descrip-tion is available;

(B) Two or more responsible biddersare willing and able to compete effec-tively and for the business; and

(C) The procurement lends itself to afirm fixed price contract and the selec-tion of the successful bidder can bemade principally on the basis of price.

(ii) If sealed bids are used, the fol-lowing requirements apply:

(A) The invitation for bids will bepublicly advertised and bids shall besolicited from an adequate number ofknown suppliers, providing them suffi-cient time prior to the date set foropening the bids;

(B) The invitation for bids, whichwill include any specifications and per-tinent attachments, shall define theitems or services in order for the bidderto properly respond;

(C) All bids will be publicly opened atthe time and place prescribed in the in-vitation for bids;

(D) A firm fixed-price contract awardwill be made in writing to the lowestresponsive and responsible bidder.Where specified in bidding documents,factors such as discounts, transpor-tation cost, and life cycle costs shall beconsidered in determining which bid islowest. Payment discounts will only beused to determine the low bid whenprior experience indicates that suchdiscounts are usually taken advantageof; and

(E) Any or all bids may be rejected ifthere is a sound documented reason.

(3) Procurement by competitive pro-posals. The technique of competitiveproposals is normally conducted withmore than one source submitting anoffer, and either a fixed-price or cost-reimbursement type contract is award-ed. It is generally used when conditionsare not appropriate for the use ofsealed bids. If this method is used, thefollowing requirements apply:

(i) Requests for proposals will be pub-licized and identify all evaluation fac-tors and their relative importance. Anyresponse to publicized requests for pro-posals shall be honored to the max-imum extent practical;


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(ii) Proposals will be solicited froman adequate number of qualifiedsources;

(iii) Grantees and subgrantees willhave a method for conducting tech-nical evaluations of the proposals re-ceived and for selecting awardees;

(iv) Awards will be made to the re-sponsible firm whose proposal is mostadvantageous to the program, withprice and other factors considered; and

(v) Grantees and subgrantees mayuse competitive proposal proceduresfor qualifications-based procurement ofarchitectural/engineering (A/E) profes-sional services whereby competitors’qualifications are evaluated and themost qualified competitor is selected,subject to negotiation of fair and rea-sonable compensation. The method,where price is not used as a selectionfactor, can only be used in procure-ment of A/E professional services. Itcannot be used to purchase other typesof services though A/E firms are a po-tential source to perform the proposedeffort.

(4) Procurement by noncompetitiveproposals is procurement through solic-itation of a proposal from only onesource, or after solicitation of a num-ber of sources, competition is deter-mined inadequate.

(i) Procurement by noncompetitiveproposals may be used only when theaward of a contract is infeasible undersmall purchase procedures, sealed bidsor competitive proposals and one of thefollowing circumstances applies:

(A) The item is available only from asingle source;

(B) The public exigency or emergencyfor the requirement will not permit adelay resulting from competitive solic-itation;

(C) The awarding agency authorizesnoncompetitive proposals; or

(D) After solicitation of a number ofsources, competition is determined in-adequate.

(ii) Cost analysis, i.e., verifying theproposed cost data, the projections ofthe data, and the evaluation of the spe-cific elements of costs and profits, isrequired.

(iii) Grantees and subgrantees maybe required to submit the proposed pro-curement to the awarding agency for

pre-award review in accordance withparagraph (g) of this section.

(e) Contracting with small and minorityfirms, women’s business enterprise andlabor surplus area firms. (1) The granteeand subgrantee will take all necessaryaffirmative steps to assure that minor-ity firms, women’s business enter-prises, and labor surplus area firms areused when possible.

(2) Affirmative steps shall include:(i) Placing qualified small and minor-

ity businesses and women’s businessenterprises on solicitation lists;

(ii) Assuring that small and minoritybusinesses, and women’s business en-terprises are solicited whenever theyare potential sources;

(iii) Dividing total requirements,when economically feasible, into small-er tasks or quantities to permit max-imum participation by small and mi-nority business, and women’s businessenterprises;

(iv) Establishing delivery schedules,where the requirement permits, whichencourage participation by small andminority business, and women’s busi-ness enterprises;

(v) Using the services and assistanceof the Small Business Administration,and the Minority Business Develop-ment Agency of the Department ofCommerce; and

(vi) Requiring the prime contractor,if subcontracts are to be let, to takethe affirmative steps listed in para-graphs (e)(2) (i) through (v) of this sec-tion.

(f) Contract cost and price. (1) Grant-ees and subgrantees must perform acost or price analysis in connectionwith every procurement action includ-ing contract modifications. The meth-od and degree of analysis is dependenton the facts surrounding the particularprocurement situation, but as a start-ing point, grantees must make inde-pendent estimates before receiving bidsor proposals. A cost analysis must beperformed when the offeror is requiredto submit the elements of his esti-mated cost, e.g., under professional,consulting, and architectural engineer-ing services contracts. A cost analysiswill be necessary when adequate pricecompetition is lacking, and for solesource procurements, including con-tract modifications or change orders,


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unless price resonableness can be es-tablished on the basis of a catalog ormarket price of a commercial productsold in substantial quantities to thegeneral public or based on prices set bylaw or regulation. A price analysis willbe used in all other instances to deter-mine the reasonableness of the pro-posed contract price.

(2) Grantees and subgrantees will ne-gotiate profit as a separate element ofthe price for each contract in whichthere is no price competition and in allcases where cost analysis is performed.To establish a fair and reasonable prof-it, consideration will be given to thecomplexity of the work to be per-formed, the risk borne by the con-tractor, the contractor’s investment,the amount of subcontracting, thequality of its record of past perform-ance, and industry profit rates in thesurrounding geographical area forsimilar work.

(3) Costs or prices based on estimatedcosts for contracts under grants will beallowable only to the extent that costsincurred or cost estimates included innegotiated prices are consistent withFederal cost principles (see § 12.62).Grantees may reference their own costprinciples that comply with the appli-cable Federal cost principles.

(4) The cost plus a percentage of costand percentage of construction costmethods of contracting shall not beused.

(g) Awarding agency review. (1) Grant-ees and subgrantees must make avail-able, upon request of the awardingagency, technical specifications on pro-posed procurements where the award-ing agency believes such review isneeded to ensure that the item and/orservice specified is the one being pro-posed for purchase. This review gen-erally will take place prior to the timethe specification is incorporated into asolicitation document. However, if thegrantee or subgrantee desires to havethe review accomplished after a solici-tation has been developed, the award-ing agency may still review the speci-fications, with such review usually lim-ited to the technical aspects of the pro-posed purchase.

(2) Grantees and subgrantees must onrequest make available for awardingagency pre-award review procurement

documents, such as requests for pro-posals or invitations for bids, inde-pendent cost estimates, etc. when:

(i) A grantee’s or subgrantee’s pro-curement procedures or operation failsto comply with the procurement stand-ards in this section; or

(ii) The procurement is expected toexceed the simplified acquisitionthreshold and is to be awarded withoutcompetition or only one bid or offer isreceived in response to a solicitation;or

(iii) The procurement, which is ex-pected to exceed the simplified acquisi-tion threshold, specifies a ‘‘brandname’’ product; or

(iv) The proposed award is more thanthe simplified acquisition thresholdand is to be awarded to other than theapparent low bidder under a sealed bidprocurement; or

(v) A proposed contract modificationchanges the scope of a contract or in-creases the contract amount by morethan the simplified acquisition thresh-old.

(3) A grantee or subgrantee will beexempt from the pre-award review inparagraph (g)(2) of this section if theawarding agency determines that itsprocurement systems comply with thestandards of this section.

(i) A grantee or subgrantee may re-quest that its procurement system bereviewed by the awarding agency to de-termine whether its system meetsthese standards in order for its systemto be certified. Generally, these re-views shall occur where there is a con-tinuous high-dollar funding, and third-party contracts are awarded on a reg-ular basis.

(ii) A grantee or subgrantee may self-certify its procurement system. Suchself-certification shall not limit theawarding agency’s right to survey thesystem. Under a self-certification pro-cedure, awarding agencies may wish torely on written assurances from thegrantee or subgrantee that it is com-plying with these standards. A granteeor subgrantee will cite specific proce-dures, regulations, standards, etc., asbeing in compliance with these require-ments and have its system availablefor review.


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(h) Bonding requirements. For con-struction or facility improvement con-tracts or subcontracts exceeding thesimplified acquisition threshold, theawarding agency may accept the bond-ing policy and requirements of thegrantee or subgrantee provided theawarding agency has made a deter-mination that the awarding agency’sinterest is adequately protected. Ifsuch a determination has not beenmade, the minimum requirements shallbe as follows:

(1) A bid guarantee from each bidderequivalent to five percent of the bid price.The ‘‘bid guarantee’’ shall consist of afirm commitment such as a bid bond,certified check, or other negotiable in-strument accompanying a bid as assur-ance that the bidder will, upon accept-ance of his bid, execute such contrac-tual documents as may be requiredwithin the time specified.

(2) A performance bond on the part ofthe contractor for 100 percent of the con-tract price. A ‘‘performance bond’’ isone executed in connection with a con-tract to secure fulfillment of all thecontractor’s obligations under suchcontract.

(3) A payment bond on the part of thecontractor for 100 percent of the contractprice. A ‘‘payment bond’’ is one exe-cuted in connection with a contract toassure payment as required by law ofall persons supplying labor and mate-rial in the execution of the work pro-vided for in the contract.

(i) Contract provisions. A grantee’sand subgrantee’s contracts must con-tain provisions in paragraph (i) of thissection. Federal agencies are permittedto require changes, remedies, changedconditions, access and records reten-tion, suspension of work, and otherclauses approved by the Office of Fed-eral Procurement Policy.

(1) Administrative, contractual, orlegal remedies in instances where con-tractors violate or breach contractterms, and provide for such sanctionsand penalties as may be appropriate.(Contracts more than the simplified ac-quisition threshold)

(2) Termination for cause and forconvenience by the grantee or sub-grantee including the manner by whichit will be effected and the basis for set-

tlement. (All contracts in excess of$10,000)

(3) Compliance with Executive Order11246 of September 24, 1965, entitled‘‘Equal Employment Opportunity,’’ asamended by Executive Order 11375 ofOctober 13, 1967, and as supplementedin Department of Labor regulations (41CFR chapter 60). (All construction con-tracts awarded in excess of $10,000 bygrantees and their contractors or sub-grantees)

(4) Compliance with the Copeland‘‘Anti-Kickback’’ Act (18 U.S.C. 874) assupplemented in Department of Laborregulations (29 CFR Part 3). (All con-tracts and subgrants for constructionor repair)

(5) Compliance with the Davis-BaconAct (40 U.S.C. 276a to 276a–7) as supple-mented by Department of Labor regu-lations (29 CFR Part 5). (Constructioncontracts in excess of $2000 awarded bygrantees and subgrantees when re-quired by Federal grant program legis-lation)

(6) Compliance with Sections 103 and107 of the Contract Work Hours andSafety Standards Act (40 U.S.C. 327–330)as supplemented by Department ofLabor regulations (29 CFR Part 5).(Construction contracts awarded bygrantees and subgrantees in excess of$2000, and in excess of $2500 for othercontracts which involve the employ-ment of mechanics or laborers)

(7) Notice of awarding agency re-quirements and regulations pertainingto reporting.

(8) Notice of awarding agency re-quirements and regulations pertainingto patent rights with respect to anydiscovery or invention which arises oris developed in the course of or undersuch contract.

(9) Awarding agency requirementsand regulations pertaining to copy-rights and rights in data.

(10) Access by the grantee, the sub-grantee, the Federal grantor agency,the Comptroller General of the UnitedStates, or any of their duly authorizedrepresentatives to any books, docu-ments, papers, and records of the con-tractor which are directly pertinent tothat specific contract for the purposeof making audit, examination, ex-cerpts, and transcriptions.


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(11) Retention of all required recordsfor three years after grantees or sub-grantees make final payments and allother pending matters are closed.

(12) Compliance with all applicablestandards, orders, or requirementsissued under section 306 of the CleanAir Act (42 U.S.C. 1857(h)), section 508of the Clean Water Act (33 U.S.C. 1368),Executive Order 11738, and Environ-mental Protection Agency regulations(40 CFR part 15). (Contracts, sub-contracts, and subgrants of amounts inexcess of $100,000)

(13) Mandatory standards and policiesrelating to energy efficiency which arecontained in the State energy con-servation plan issued in compliancewith the Energy Policy and Conserva-tion Act (Pub. L. 94–163, 89 Stat. 871).

[53 FR 8077 and 8087, Mar. 11, 1988, as amend-ed at 60 FR 19639, 19644, Apr. 19, 1995]

§ 12.77 Subgrants.(a) States. States shall follow State

law and procedures when awarding andadministering subgrants (whether on acost reimbursement or fixed amountbasis) of financial assistance to localand Indian tribal governments. Statesshall:

(1) Ensure that every subgrant in-cludes any clauses required by Federalstatute and executive orders and theirimplementing regulations;

(2) Ensure that subgrantees areaware of requirements imposed uponthem by Federal statute and regula-tion;

(3) Ensure that a provision for com-pliance with § 12.82 is placed in everycost reimbursement subgrant; and

(4) Conform any advances of grantfunds to subgrantees substantially tothe same standards of timing andamount that apply to cash advances byFederal agencies.

(b) All other grantees. All other grant-ees shall follow the provisions of thispart which are applicable to awardingagencies when awarding and admin-istering subgrants (whether on a costreimbursement or fixed amount basis)of financial assistance to local and In-dian tribal governments. Granteesshall:

(1) Ensure that every subgrant in-cludes a provision for compliance withthis part;

(2) Ensure that every subgrant in-cludes any clauses required by Federalstatute and executive orders and theirimplementing regulations; and

(3) Ensure that subgrantees areaware of requirements imposed uponthem by Federal statutes and regula-tions.

(c) Exceptions. By their own terms,certain provisions of this part do notapply to the award and administrationof subgrants:

(1) Section 12.50;(2) Section 12.51;(3) The letter-of-credit procedures

specified in Treasury Regulations at 31CFR part 205, cited in § 12.61; and

(4) Section 12.90.

REPORTS, RECORDS RETENTION, ANDENFORCEMENT

§ 12.80 Monitoring and reporting pro-gram performance.

(a) Monitoring by grantees. Granteesare responsible for managing the day-to-day operations of grant andsubgrant supported activities. Granteesmust monitor grant and subgrant sup-ported activities to assure compliancewith applicable Federal requirementsand that performance goals are beingachieved. Grantee monitoring mustcover each program, function or activ-ity.

(b) Nonconstruction performance re-ports. The Federal agency may, if it de-cides that performance informationavailable from subsequent applicationscontains sufficient information tomeet its programmatic needs, requirethe grantee to submit a performancereport only upon expiration or termi-nation of grant support. Unless waivedby the Federal agency this report willbe due on the same date as the final Fi-nancial Status Report.

(1) Grantees shall submit annual per-formance reports unless the awardingagency requires quarterly or semi-an-nual reports. However, performance re-ports will not be required more fre-quently than quarterly. Annual reportsshall be due 90 days after the grantyear, quarterly or semi-annual reportsshall be due 30 days after the reportingperiod. The final performance reportwill be due 90 days after the expirationor termination of grant support. If a


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justified request is submitted by agrantee, the Federal agency may ex-tend the due date for any performancereport. Additionally, requirements forunnecessary performance reports maybe waived by the Federal agency.

(2) Performance reports will contain,for each grant, brief information on thefollowing:

(i) A comparison of actual accom-plishments to the objectives estab-lished for the period. Where the outputof the project can be quantified, a com-putation of the cost per unit of outputmay be required if that informationwill be useful.

(ii) The reasons for slippage if estab-lished objectives were not met.

(iii) Additional pertinent informationincluding, when appropriate, analysisand explanation of cost overruns orhigh unit costs.

(3) Grantees will not be required tosubmit more than the original and twocopies of performance reports.

(4) Grantees will adhere to the stand-ards in this section in prescribing per-formance reporting requirements forsubgrantees.

(c) Construction performance reports.For the most part, on-site technical in-spections and certified percentage-of-completion data are relied on heavilyby Federal agencies to monitorprogress under construction grants andsubgrants. The Federal agency will re-quire additional formal performancereports only when considered nec-essary, and never more frequently thanquarterly.

(d) Significant developments. Eventsmay occur between the scheduled per-formance reporting dates which havesignificant impact upon the grant orsubgrant supported activity. In suchcases, the grantee must inform theFederal agency as soon as the followingtypes of conditions become known:

(1) Problems, delays, or adverse con-ditions which will materially impairthe ability to meet the objective of theaward. This disclosure must include astatement of the action taken, or con-templated, and any assistance neededto resolve the situation.

(2) Favorable developments which en-able meeting time schedules and objec-tives sooner or at less cost than antici-

pated or producing more beneficial re-sults than originally planned.

(e) Federal agencies may make sitevisits as warranted by program needs.

(f) Waivers, extensions. (1) Federalagencies may waive any performancereport required by this part if not need-ed.

(2) The grantee may waive any per-formance report from a subgranteewhen not needed. The grantee may ex-tend the due date for any performancereport from a subgrantee if the granteewill still be able to meet its perform-ance reporting obligations to the Fed-eral agency.

§ 12.81 Financial reporting.(a) General. (1) Except as provided in

paragraphs (a) (2) and (5) of this sec-tion, grantees will use only the formsspecified in paragraphs (a) through (e)of this section, and such supple-mentary or other forms as may fromtime to time be authorized by OMB,for:

(i) Submitting financial reports toFederal agencies, or

(ii) Requesting advances or reim-bursements when letters of credit arenot used.

(2) Grantees need not apply the formsprescribed in this section in dealingwith their subgrantees. However,grantees shall not impose more burden-some requirements on subgrantees.

(3) Grantees shall follow all applica-ble standard and supplemental Federalagency instructions approved by OMBto the extend required under the Paper-work Reduction Act of 1980 for use inconnection with forms specified inparagraphs (b) through (e) of this sec-tion. Federal agencies may issue sub-stantive supplementary instructionsonly with the approval of OMB. Federalagencies may shade out or instruct thegrantee to disregard any line item thatthe Federal agency finds unnecessaryfor its decisionmaking purposes.

(4) Grantees will not be required tosubmit more than the original and twocopies of forms required under thispart.

(5) Federal agencies may providecomputer outputs to grantees to expe-dite or contribute to the accuracy ofreporting. Federal agencies may acceptthe required information from grantees


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in machine usable format or computerprintouts instead of prescribed forms.

(6) Federal agencies may waive anyreport required by this section if notneeded.

(7) Federal agencies may extend thedue date of any financial report uponreceiving a justified request from agrantee.

(b) Financial Status Report—(1) Form.Grantees will use Standard Form 269 or269A, Financial Status Report, to re-port the status of funds for all non-construction grants and for construc-tion grants when required in accord-ance with § 12.81(e)(2)(iii).

(2) Accounting basis. Each grantee willreport program outlays and programincome on a cash or accrual basis asprescribed by the awarding agency. Ifthe Federal agency requires accrual in-formation and the grantee’s accountingrecords are not normally kept on theaccural basis, the grantee shall not berequired to convert its accounting sys-tem but shall develop such accrual in-formation through and analysis of thedocumentation on hand.

(3) Frequency. The Federal agencymay prescribe the frequency of the re-port for each project or program. How-ever, the report will not be requiredmore frequently than quarterly. If theFederal agency does not specify thefrequency of the report, it will be sub-mitted annually. A final report will berequired upon expiration or termi-nation of grant support.

(4) Due date. When reports are re-quired on a quarterly or semiannualbasis, they will be due 30 days after thereporting period. When required on anannual basis, they will be due 90 daysafter the grant year. Final reports willbe due 90 days after the expiration ortermination of grant support.

(c) Federal Cash Transactions Report—(1) Form. (i) For grants paid by letter orcredit, Treasury check advances orelectronic transfer of funds, the grant-ee will submit the Standard Form 272,Federal Cash Transactions Report, andwhen necessary, its continuation sheet,Standard Form 272a, unless the termsof the award exempt the grantee fromthis requirement.

(ii) These reports will be used by theFederal agency to monitor cash ad-vanced to grantees and to obtain dis-

bursement or outlay information foreach grant from grantees. The formatof the report may be adapted as appro-priate when reporting is to be accom-plished with the assistance of auto-matic data processing equipment pro-vided that the information to be sub-mitted is not changed in substance.

(2) Forecasts of Federal cash require-ments. Forecasts of Federal cash re-quirements may be required in the‘‘Remarks’’ section of the report.

(3) Cash in hands of subgrantees. Whenconsidered necessary and feasible bythe Federal agency, grantees may berequired to report the amount of cashadvances in excess of three days’ needsin the hands of their subgrantees orcontractors and to provide short nar-rative explanations of actions taken bythe grantee to reduce the excess bal-ances.

(4) Frequency and due date. Granteesmust submit the report no later than 15working days following the end of eachquarter. However, where an advance ei-ther by letter of credit or electronictransfer of funds is authorized at anannualized rate of one million dollarsor more, the Federal agency may re-quire the report to be submitted within15 working days following the end ofeach month.

(d) Request for advance or reimburse-ment—(1) Advance payments. Requestsfor Treasury check advance paymentswill be submitted on Standard Form270, Request for Advance or Reimburse-ment. (This form will not be used fordrawdowns under a letter of credit,electronic funds transfer or whenTreasury check advance payments aremade to the grantee automatically ona predetermined basis.)

(2) Reimbursements. Requests for reim-bursement under nonconstructiongrants will also be submitted on Stand-ard Form 270. (For reimbursement re-quests under construction grants, seeparagraph (e)(1) of this section.)

(3) The frequency for submitting pay-ment requests is treated in § 12.81(b)(3).

(e) Outlay report and request for reim-bursement for construction programs—(1)Grants that support construction activi-ties paid by reimbursement method. (i)Requests for reimbursement under con-struction grants will be submitted onStandard Form 271, Outlay Report and


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Request for Reimbursement for Con-struction Programs. Federal agenciesmay, however, prescribe the Requestfor Advance or Reimbursement form,specified in § 12.81(d), instead of thisform.

(ii) The frequency for submitting re-imbursement requests is treated in§ 12.81(b)(3).

(2) Grants that support construction ac-tivities paid by letter of credit, electronicfunds transfer or Treasury check ad-vance. (i) When a construction grant ispaid by letter of credit, electronicfunds transfer or Treasury check ad-vances, the grantee will report its out-lays to the Federal agency usingStandard Form 271, Outlay Report andRequest for Reimbursement for Con-struction Programs. The Federal agen-cy will provide any necessary specialinstruction. However, frequency anddue date shall be governed by § 12.81(b)(3) and (4).

(ii) When a construction grant is paidby Treasury check advances based onperiodic requests from the grantee, theadvances will be requested on the formspecified in § 12.81(d).

(iii) The Federal agency may sub-stitute the Financial Status Reportspecified in § 12.81(b) for the Outlay Re-port and Request for Reimbursementfor Construction Programs.

(3) Accounting basis. The accountingbasis for the Outlay Report and Re-quest for Reimbursement for Construc-tion Programs shall be governed by§ 12.81(b)(2).

§ 12.82 Retention and access require-ments for records.

(a) Applicability. (1) This section ap-plies to all financial and programmaticrecords, supporting documents, statis-tical records, and other records ofgrantees or subgrantees which are:

(i) Required to be maintained by theterms of this part, program regulationsor the grant agreement, or

(ii) Otherwise reasonably consideredas pertinent to program regulations orthe grant agreement.

(2) This section does not apply torecords maintained by contractors orsubcontractors. For a requirement toplace a provision concerning records incertain kinds of contracts, see§ 12.76(i)(10).

(b) Length of retention period. (1) Ex-cept as otherwise provided, recordsmust be retained for three years fromthe starting date specified in paragraph(c) of this section.

(2) If any litigation, claim, negotia-tion, audit or other action involvingthe records has been started before theexpiration of the 3-year period, therecords must be retained until comple-tion of the action and resolution of allissues which arise from it, or until theend of the regular 3-year period, which-ever is later.

(3) To avoid duplicate recordkeeping,awarding agencies may make specialarrangements with grantees and sub-grantees to retain any records whichare continuously needed for joint use.The awarding agency will requesttransfer of records to its custody whenit determines that the records possesslong-term retention value. When therecords are transferred to or main-tained by the Federal agency, the 3-year retention requirement is not ap-plicable to the grantee or subgrantee.

(c) Starting date of retention period—(1)General. When grant support is contin-ued or renewed at annual or other in-tervals, the retention period for therecords of each funding period starts onthe day the grantee or subgrantee sub-mits to the awarding agency its singleor last expenditure report for that pe-riod. However, if grant support is con-tinued or renewed quarterly, the reten-tion period for each year’s recordsstarts on the day the grantee submitsits expenditure report for the last quar-ter of the Federal fiscal year. In allother cases, the retention period startson the day the grantee submits itsfinal expenditure report. If an expendi-ture report has been waived, the reten-tion period starts on the day the reportwould have been due.

(2) Real property and equipmentrecords. The retention period for realproperty and equipment records startsfrom the date of the disposition or re-placement or transfer at the directionof the awarding agency.

(3) Records for income transactionsafter grant or subgrant support. In somecases grantees must report incomeafter the period of grant support.Where there is such a requirement, the


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retention period for the records per-taining to the earning of the incomestarts from the end of the grantee’s fis-cal year in which the income is earned.

(4) Indirect cost rate proposals, cost al-locations plans, etc. This paragraph ap-plies to the following types of docu-ments, and their supporting records:indirect cost rate computations or pro-posals, cost allocation plans, and anysimilar accounting computations ofthe rate at which a particular group ofcosts is chargeable (such as computerusage chargeback rates or compositefringe benefit rates).

(i) If submitted for negotiation. If theproposal, plan, or other computation isrequired to be submitted to the FederalGovernment (or to the grantee) to formthe basis for negotiation of the rate,then the 3-year retention period for itssupporting records starts from the dateof such submission.

(ii) If not submitted for negotiation. Ifthe proposal, plan, or other computa-tion is not required to be submitted tothe Federal Government (or to thegrantee) for negotiation purposes, thenthe 3-year retention period for the pro-posal plan, or computation and its sup-porting records starts from end of thefiscal year (or other accounting period)covered by the proposal, plan, or othercomputation.

(d) Substitution of microfilm. Copiesmade by microfilming, photocopying,or similar methods may be substitutedfor the original records.

(e) Access to records—(1) Records ofgrantees and subgrantees. The awardingagency and the Comptroller General ofthe United States, or any of their au-thorized representatives, shall have theright of access to any pertinent books,documents, papers, or other records ofgrantees and subgrantees which arepertinent to the grant, in order tomake audits, examinations, excerpts,and transcripts.

(2) Expiration of right of access. Therights of access in this section mustnot be limited to the required reten-tion period but shall last as long as therecords are retained.

(f) Restrictions on public access. TheFederal Freedom of Information Act (5U.S.C. 552) does not apply to recordsUnless required by Federal, State, orlocal law, grantees and subgrantees are

not required to permit public access totheir records.

§ 12.83 Enforcement.(a) Remedies for noncompliance. If a

grantee or subgrantee materially failsto comply with any term of an award,whether stated in a Federal statute orregulation, an assurance, in a Stateplan or application, a notice of award,or elsewhere, the awarding agency maytake one or more of the following ac-tions, as appropriate in the cir-cumstances:

(1) Temporarily withhold cash pay-ments pending correction of the defi-ciency by the grantee or subgrantee ormore severe enforcement action by theawarding agency,

(2) Disallow (that is, deny both use offunds and matching credit for) all orpart of the cost of the activity or ac-tion not in compliance,

(3) Wholly or partly suspend or ter-minate the current award for thegrantee’s or subgrantee’s program,

(4) Withhold further awards for theprogram, or

(5) Take other remedies that may belegally available.

(b) Hearings, appeals. In taking an en-forcement action, the awarding agencywill provide the grantee or subgranteean opportunity for such hearing, ap-peal, or other administrative pro-ceeding to which the grantee or sub-grantee is entitled under any statuteor regulation applicable to the actioninvolved.

(c) Effects of suspension and termi-nation. Costs of grantee or subgranteeresulting from obligations incurred bythe grantee or subgrantee during a sus-pension or after termination of anaward are not allowable unless theawarding agency expressly authorizesthem in the notice of suspension or ter-mination or subsequently. Other grant-ee or subgrantee costs during suspen-sion or after termination which arenecessary and not reasonably avoidableare allowable if:

(1) The costs result from obligationswhich were properly incurred by thegrantee or subgrantee before the effec-tive date of suspension or termination,are not in anticipation of it, and, in thecase of a termination, arenoncancellable, and,


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(2) The costs would be allowable ifthe award were not suspended or ex-pired normally at the end of the fund-ing period in which the terminationtakes effect.

(d) Relationship to Debarment and Sus-pension. The enforcement remediesidentified in this section, includingsuspension and termination, do notpreclude grantee or subgrantee frombeing subject to ‘‘Debarment and Sus-pension’’ under E.O. 12549 (see § 12.75).

§ 12.84 Termination for convenience.

Except as provided in § 12.83 awardsmay be terminated in whole or in partonly as follows:

(a) By the awarding agency with theconsent of the grantee or subgrantee inwhich case the two parties shall agreeupon the termination conditions, in-cluding the effective date and in thecase of partial termination, the portionto be terminated, or

(b) By the grantee or subgranteeupon written notification to the award-ing agency, setting forth the reasonsfor such termination, the effectivedate, and in the case of partial termi-nation, the portion to be terminated.However, if, in the case of a partial ter-mination, the awarding agency deter-mines that the remaining portion ofthe award will not accomplish the pur-poses for which the award was made,the awarding agency may terminatethe award in its entirety under either§ 12.83 or paragraph (a) of this section.

AFTER-THE-GRANT REQUIREMENTS

§ 12.90 Closeout.

(a) General. The Federal agency willclose out the award when it determinesthat all applicable administrative ac-tions and all required work of thegrant has been completed.

(b) Reports. Within 90 days after theexpiration or termination of the grant,the grantee must submit all financial,performance, and other reports re-quired as a condition of the grant.Upon request by the grantee, Federalagencies may extend this timeframe.These may include but are not limitedto:

(1) Final performance or progress re-port.

(2) Financial Status Report (SF 269)or Outlay Report and Request for Re-imbursement for Construction Pro-grams (SF–271) (as applicable.)

(3) Final request for payment (SF–270) (if applicable).

(4) Invention disclosure (if applica-ble).

(5) Federally-owned property report: Inaccordance with § 12.72(f), a granteemust submit an inventory of all Feder-ally owned property (as distinct fromproperty acquired with grant funds) forwhich it is accountable and request dis-position instructions from the Federalagency of property no longer needed.

(c) Cost adjustment. The Federal agen-cy will, within 90 days after receipt ofreports in paragraph (b) of this section,make upward or downward adjust-ments to the allowable costs.

(d) Cash adjustments. (1) The Federalagency will make prompt payment tothe grantee for allowable reimbursablecosts.

(2) The grantee must immediately re-fund to the Federal agency any balanceof unobligated (unencumbered) cashadvanced that is not authorized to beretained for use on other grants.

§ 12.91 Later disallowances and adjust-ments.

The closeout of a grant does not af-fect:

(a) The Federal agency’s right to dis-allow costs and recover funds on thebasis of a later audit or other review;

(b) The grantee’s obligation to returnany funds due as a result of later re-funds, corrections, or other trans-actions;

(c) Records retention as required in§ 12.82;

(d) Property management require-ments in §§ 12.71 and 12.72; and

(e) Audit requirements in § 12.66.

§ 12.92 Collection of amounts due.

(a) Any funds paid to a grantee in ex-cess of the amount to which the grant-ee is finally determined to be entitledunder the terms of the award con-stitute a debt to the Federal Govern-ment. If not paid within a reasonableperiod after demand, the Federal agen-cy may reduce the debt by:


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(1) Making an adminstrative offsetagainst other requests for reimburse-ments,

(2) Withholding advance paymentsotherwise due to the grantee, or

(3) Other action permitted by law.(b) Except where otherwise provided

by statutes or regulations, the Federalagency will charge interest on an over-due debt in accordance with the Fed-eral Claims Collection Standards (4CFR Ch. II). The date from which inter-est is computed is not extended by liti-gation or the filing of any form of ap-peal.

ENTITLEMENTS [RESERVED]

Subpart D—Governmentwide De-barment and Suspension(Nonprocurement) and Gov-ernmentwide Requirementsfor Drug-Free Workplace(Grants)

SOURCE: 53 FR 19199, and 19204, May 26, 1988,unless otherwise noted.

GENERAL

§ 12.100 Purpose.(a) Executive Order (E.O.) 12549 pro-

vides that, to the extent permitted bylaw, Executive departments and agen-cies shall participate in a government-wide system for nonprocurement debar-ment and suspension. A person who isdebarred or suspended shall be excludedfrom Federal financial and non-financial assistance and benefits underFederal programs and activities. De-barment or suspension of a participantin a program by one agency shall havegovernmentwide effect.

(b) These regulations implement sec-tion 3 of E.O. 12549 and the guidelinespromulgated by the Office of Manage-ment and Budget under section 6 of theE.O. by:

(1) Prescribing the programs and ac-tivities that are covered by the govern-mentwide system;

(2) Prescribing the governmentwidecriteria and governmentwide minimumdue process procedures that each agen-cy shall use;

(3) Providing for the listing ofdebarred and suspended participants,participants declared ineligible (see

definition of ‘‘ineligible’’ in § 12.105),and participants who have voluntarilyexcluded themselves from participationin covered transactions;

(4) Setting forth the consequences ofa debarment, suspension, determina-tion of ineligibility, or voluntary ex-clusion; and

(5) Offering such other guidance asnecessary for the effective implementa-tion and administration of the govern-mentwide system.

(c) These regulations also implementExecutive Order 12689 (3 CFR, 1989Comp., p. 235) and 31 U.S.C. 6101 note(Public Law 103–355, sec. 2455, 108 Stat.3327) by—

(1) Providing for the inclusion in theList of Parties Excluded from Federal Pro-curement and Nonprocurement Programsall persons proposed for debarment,debarred or suspended under the Fed-eral Acquisition Regulation, 48 CFRPart 9, subpart 9.4; persons againstwhich governmentwide exclusions havebeen entered under this part; and per-sons determined to be ineligible; and

(2) Setting forth the consequences ofa debarment, suspension, determina-tion of ineligibility, or voluntary ex-clusion.

(d) Although these regulations coverthe listing of ineligible participantsand the effect of such listing, they donot prescribe policies and proceduresgoverning declarations of ineligibility.

[60 FR 33040, 33061, June 26, 1995]

§ 12.105 Definitions.The following definitions apply to

this part:Adequate evidence. Information suffi-

cient to support the reasonable beliefthat a particular act or omission hasoccurred.

Affiliate. Persons are affiliates ofeach other if, directly or indirectly, ei-ther one controls or has the power tocontrol the other, or, a third personcontrols or has the power to controlboth. Indicia of control include, but arenot limited to: interlocking manage-ment or ownership, identity of inter-ests among family members, shared fa-cilities and equipment, common use ofemployees, or a business entity orga-nized following the suspension or de-barment of a person which has the


Documents

Office of the Secretary, Interior §12 - gpo.gov · under existing laws. Subpart B ... taxes, duty or protective in-transit in-surance, ... kinds and frequency of reports, and re-