[Federal Register Volume 59, Number 198 (Friday, October 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25509]


[[Page Unknown]]

[Federal Register: October 14, 1994]


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Part III





Office of Management and Budget





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Grants and Cooperative Agreements With State and Local Governments; 
Notice
OFFICE OF MANAGEMENT AND BUDGET

 
Grants and Cooperative Agreements With State and Local 
Governments

AGENCY: Office of Management and Budget.

ACTION: Final revisions to OMB Circular A-102.

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SUMMARY: The Office of Management and Budget is revising Circular A-102 
to include references to the requirements in three executive orders and 
four statutory provisions issued or enacted since the last issuance of 
the Circular in March 1988. The revisions relate to: use of the metric 
system of measurement, cash management, infrastructure investment, 
purchase of recycled products, and disclosure of the Federal 
contribution in procurement of goods and services.

DATES: The revisions to the Circular are effective October 14, 1994.

FOR FURTHER INFORMATION CONTACT: Thomas Cocozza, Financial Standards 
and Reporting Branch, Office of Federal Financial Management, Office of 
Management and Budget, (202) 395-3993.

SUPPLEMENTARY INFORMATION:

A. Background

    On August 5, 1992, the Office of Management and Budget (OMB) 
published a notice in the Federal Register (57 FR 34599) requesting 
comments on proposed revisions to OMB Circular A-102, ``Grants and 
Cooperative Agreements with State and Local Governments.'' The proposed 
revisions referenced three statutory provisions and an executive order. 
These relate to: (a) A requirement that encourages recipients of 
federally-funded grants and cooperative agreements to use the metric 
system of measurement in their assistance programs; (b) a reference to 
the Department of the Treasury's regulations to implement the Cash 
Management Improvement Act of 1990; (c) a requirement that State and 
local governments comply with section 6002 of the Resource Conservation 
and Recovery Act (RCRA), as amended; and (d) a requirement that Federal 
agencies comply with Executive Order 12803, ``Infrastructure 
Privatization.''
    Interested parties were invited to submit comments on the revisions 
by October 5, 1992. Federal agencies submitted two comments.

B. Comments and Responses

    Comment: One commenter said, in accordance with Section 6002(a) of 
RCRA, procurement items under $10,000 are not covered. The commenter 
recommended that the $10,000 ceiling be noted in the Circular. The same 
commenter said that RCRA provides that ``each procuring agency shall 
procure items * * * consistent with maintaining a satisfactory level of 
competition.''
    Response: The substance of these provisions in Section 6002 are 
included in the Environmental Protection Agency's (EPA's) guidelines 
found at 40 CFR 247-253. Since EPA's guidelines are referenced in 
paragraph 2.h. of the Circular, it is not necessary to make a specific 
reference in the Circular to the particular provisions within Section 
6002.
    Comment: One commenter recommended that OMB add language to the 
Circular which states that the Metric Conversion Act requires each 
Federal agency to establish a date(s) when the metric system of 
measurement will be used in that agency's procurement, grants and other 
business-related activities.
    Response: OMB has added language which cites to the requirement for 
each agency to establish dates showing when the metric system of 
measurement will be used. This paragraph was also expanded to explain 
procedures for obtaining exceptions from metric usage.

C. Additional Changes

    In addition to revising the Circular to add references to the 
statutory provisions and executive orders described in the August 1992 
Notice, OMB is also revising the Circular to add references to another 
statutory provision and to two other executive orders. OMB is not 
requesting additional comment on these changes before finalization 
because they merely reference new requirements without elaboration.
    In Section 623 of the Treasury, Postal Service, and General 
Government Appropriations Act for fiscal year 1993, Congress provided 
that grantees must specify, in any announcement of the awarding of 
contracts with an aggregate value of $500,000 or more, the amount of 
Federal funds that will be used to finance the acquisitions. In the 
following year, Congress reenacted this provision (see Section 621 of 
the fiscal year 1994 Appropriations Act). Congress is likely to reenact 
this provision for fiscal year 1995 and for subsequent fiscal years. 
Accordingly, a paragraph has been added to this Circular that 
references this requirement.
    In January 1994, the President issued Executive Order No. 12893 
(``Principles for Federal Infrastructure Investment''). A reference to 
this Executive Order, and to OMB's guidance for implementing it, has 
been included in the paragraph that references Executive Order No. 
12803 (``Infrastructure Privatization'').
    Finally, in the proposed paragraph that would reference the Metric 
Conversion Act of 1975, a reference should have also been made to 
Executive Order No. 12770 (``Metric Usage in Federal Government 
Programs''). A reference to the Executive Order has been included in 
this paragraph.
    Locations of the added (or amended) paragraphs and the citations 
for the four statutory provisions and three executive orders are as 
follows:

(1) Paragraph 1.j.--Metric Conversion Act of 1975, as amended (codified 
as amended at 15 U.S.C. 205a-205k), and Executive Order No. 12770 
(``Metric Usage in Federal Government Programs''), 56 FR 35,801 (1991).
(2) Paragraph 2.a.--Cash Management Improvement Act of 1990, as amended 
(codified as amended in scattered sections of Title 31 U.S. Code).
(3) Paragraph 2.g.--Executive Order No. 12803 (``Infrastructure 
Privatization''), 57 FR 19,036 (1992), and Executive Order No. 12893 
(``Principles for Federal Infrastructure Investment''), 59 FR 4233 
(1994).
(4) Paragraph 2.h.--Resource Conservation and Recovery Act of 1976, 
section 6002, as amended (codified as amended at 42 U.S.C. 6962).
(5) Paragraph 2.i.--Treasury, Postal Service, and General Government 
Appropriations Act, 1994, Public Law 103-123, section 621, 107 Stat. 
1226, 1265 (1993).

    No other changes have been made to the Circular, which is being 
reissued in its entirety, as revised.
Darrell A. Johnson,
Deputy Assistant Director for Administration.
    To the Heads of Executive Departments and Establishments
    SUBJECT: Grants and Cooperative Agreements with State and Local 
Governments
    1. Purpose. This Circular establishes consistency and uniformity 
among Federal agencies in the management of grants and cooperative 
agreements with State, local, and federally recognized Indian tribal 
governments. This revision supersedes Office of Management and 
Budget (OMB) Circular No. A-102, dated March 3, 1988.
    2. Authority. This Circular is issued under the authority of the 
Budget and Accounting Act of 1921, as amended; the Budget and 
Accounting Procedures Act of 1950, as amended; Reorganization Plan 
No. 2 of 1970; Executive Order 11541 and the Chief Financial 
Officers Act, 31 U.S.C. 503. Also included in the Circular are 
standards to ensure consistent implementation of sections 202, 203, 
and 204 of the Intergovernmental Cooperation Act of 1968, the Office 
of Federal Procurement Policy Act Amendments of 1983, and sections 
6301-08, title 31, United States Code.
    3. Background. On March 12, 1987, the President directed all 
affected agencies to issue a grants management common rule to adopt 
government-wide terms and conditions for grants to State and local 
governments, and they did so. In 1988, OMB revised the Circular to 
provide guidance to Federal agencies on other matters not covered in 
the common rule.
    4. Required Action. Consistent with their legal obligations, all 
Federal agencies administering programs that involve grants and 
cooperative agreements with State, local and Indian tribal 
governments (grantees) shall follow the policies in this Circular. 
If the enabling legislation for a specific grant program prescribes 
policies or requirements that differ from those in this Circular, 
the provisions of the enabling legislation shall govern.
    5. OMB Responsibilities. OMB may grant deviations from the 
requirements of this Circular when permissible under existing law. 
However, in the interest of uniformity and consistency, deviations 
will be permitted only in exceptional circumstances.
    6. Information Contact. Further information concerning this 
Circular may be obtained from: Office of Federal Financial 
Management, Office of Management and Budget, Room 6025, New 
Executive Office Building, Washington, DC 20503, (202) 395-3993.
    7. Termination Review Date. The Circular will have a policy 
review three years from the date of issuance.
    8. Effective Date. The Circular is effective on publication.
Alice M. Rivlin,
Acting Director.
    Attachment:

Grants and Cooperative Agreements With State and Local Governments

1. Pre-Award Policies

    a. Use of grants and cooperative agreements. Sections 6301-08, 
title 31, United States Code govern the use of grants, contracts and 
cooperative agreements. A grant or cooperative agreement shall be 
used only when the principal purpose of a transaction is to 
accomplish a public purpose of support or stimulation authorized by 
Federal statute. Contracts shall be used when the principal purpose 
is acquisition of property or services for the direct benefit or use 
of the Federal Government. The statutory criterion for choosing 
between grants and cooperative agreements is that for the latter, 
``substantial involvement is expected between the executive agency 
and the State, local government, or other recipient when carrying 
out the activity contemplated in the agreement.''
    b. Advance Public Notice and Priority Setting.--(1) Federal 
agencies shall provide the public with an advance notice in the 
Federal Register, or by other appropriate means, of intended funding 
priorities for discretionary assistance programs, unless funding 
priorities are established by Federal statute. These priorities 
shall be approved by a policy level official.
    (2) Whenever time permits, agencies shall provide the public an 
opportunity to comment on intended funding priorities.
    (3) All discretionary grant awards in excess of $25,000 shall be 
reviewed for consistency with agency priorities by a policy level 
official.
    c. Standard Forms for Applying for Grants and Cooperative 
Agreements.--(1) Agencies shall use the following standard 
application forms unless they obtain Office of Management and Budget 
(OMB) approval under the Paperwork Reduction Act of 1980 (44 U.S.C. 
35) and the 5 CFR Part 1320, ``Controlling Paperwork Burdens on the 
Public'':

 SF-424 Facesheet
 SF-424a Budget Information (Non-Construction)
 SF-424b Standard Assurances (Non-Construction)
 SF-424c Budget Information (Construction)
 SF-424d Standard Assurances (Construction)

    When different or additional information is needed to comply 
with legislative requirements or to meet specific program needs, 
agencies shall also obtain prior OMB approval.
    (2) A preapplication shall be used for all construction, land 
acquisition and land development projects or programs when the need 
for Federal funding exceeds $100,000, unless the Federal agency 
determines that a preapplication is not needed. A preapplication is 
used to:
    (a) Establish communication between the agency and the 
applicant,
    (b) Determine the applicant's eligibility,
    (c) Determine how well the project can compete with similar 
projects from others, and
    (d) Discourage any proposals that have little or no chance for 
Federal funding before applicants incur significant costs in 
preparing detailed applications.
    (3) Agencies shall use the Budget Information (Construction) and 
Standard Assurances (Construction) when the major purpose of the 
project or program is construction, land acquisition or land 
development.
    (4) Agencies may specify how and whether budgets shall be shown 
by functions or activities within the program or project.
    (5) Agencies should generally include a request for a program 
narrative statement which is based on the following instructions:
    (a) Objectives and need for assistance. Pinpoint any relevant 
physical, economic, social, financial, institutional, or other 
problems requiring a solution. Demonstrate the need for the 
assistance and state the principal and subordinate objectives of the 
project. Supporting documentation or other testimonies from 
concerned interests other than the applicant may be used. Any 
relevant data based on planning studies should be included or 
footnoted.
    (b) Results or Benefits Expected. Identify costs and benefits to 
be derived. For example, show how the facility will be used. For 
land acquisition or development projects, explain how the project 
will benefit the public.
    (c) Approach. Outline a plan of action pertaining to the scope 
and detail how the proposed work will be accomplished for each 
assistance program. Cite factors which might accelerate or 
decelerate the work and reasons for taking this approach as opposed 
to others. Describe any unusual features of the project, such as 
design or technological innovations, reductions in cost or time, or 
extraordinary social and community involvements. Provide for each 
assistance program quantitative projections of the accomplishments 
to be achieved, if possible. When accomplishments cannot be 
quantified, list the activities in chronological order to show the 
schedule of accomplishments and target expected completion dates. 
Identify the kinds of data to be collected and maintained, and 
discuss the criteria to be used to evaluate the results and success 
of the project. Explain the methodology that will be used to 
determine if the needs identified and discussed are being met and if 
the results and benefits identified are being achieved. List each 
organization, cooperator, consultant, or other key individuals who 
will work on the project along with a short description of the 
nature of their effort or contribution.
    (d) Geographic location. Give a precise location of the project 
and area to be served by the proposed project. Maps or other graphic 
aids may be attached.
    (e) If applicable, provide the following information: for 
research and demonstration assistance requests, present a 
biographical sketch of the program director with the following 
information: name, address, telephone number, background, and other 
qualifying experience for the project. Also, list the name, training 
and background for other key personnel engaged in the project. 
Describe the relationship between this project and other work 
planned, anticipated, or underway under Federal assistance. Explain 
the reason for all requests for supplemental assistance and justify 
the need for additional funding. Discuss accomplishments to date and 
list in chronological order a schedule of accomplishments, progress 
or milestones anticipated with the new funding request. If there 
have been significant changes in the project objectives, location, 
approach or time delays, explain and justify. For other requests for 
changes, or amendments, explain the reason for the change(s). If the 
scope or objectives have changed or an extension of time is 
necessary, explain the circumstances and justify. If the total 
budget has been exceeded or if the individual budget items have 
changes more than the prescribed limits, explain and justify the 
change and its effect on the project.
    (6) Additional assurances shall not be added to those contained 
on the standard forms, unless specifically required by statute.
    d. Debarment and Suspension. Federal agencies shall not award 
assistance to applicants that are debarred or suspended, or 
otherwise excluded from or ineligible for participation in Federal 
assistance programs under Executive Order 12549. Agencies shall 
establish procedures for the effective use of the List of Parties 
Excluded from Federal Procurement or Nonprocurement programs to 
assure that they do not award assistance to listed parties in 
violation of the Executive Order. Agencies shall also establish 
procedures to provide for effective use and/or dissemination of the 
list to assure that their grantees and subgrantees (including 
contractors) at any tier do not make awards in violation of the 
nonprocurement debarment and suspension common rule.
    e. Awards and Adjustments.--(1) Ordinarily awards shall be made 
at least ten days prior to the beginning of the grant period.
    (2) Agencies shall notify grantees immediately of any 
anticipated adjustments in the amount of an award. This notice shall 
be provided as early as possible in the funding period. Reductions 
in funding shall apply only to periods after notice is provided. 
Whenever an agency adjusts the amount of an award, it shall also 
make an appropriate adjustment to the amount of any required 
matching or cost sharing.
    f. Carryover Balances. Agencies shall be prepared to identify to 
OMB the amounts of carryover balances (e.g., the amounts of 
estimated grantee unobligated balances available for carryover into 
subsequent grant periods). This presentation shall detail the fiscal 
and programmatic (level of effort) impact in the following period.
    g. Special Conditions or Restrictions. Agencies may impose 
special conditions or restrictions on awards to ``high risk'' 
applicants/grantees in accordance with section ____.12 of the grants 
management common rule. Agencies shall document use of the 
``Exception'' provisions of section ____.6 and ``High-risk'' 
provisions of section ____.12 of the grants management common rule.
    h. Waiver of Single State Agency Requirements.--(1) Requests to 
agencies from the Governors, or other duly constituted State 
authorities, for waiver of ``single'' State agency requirements in 
accordance with section 31 U.S.C. 6504, ``Use of existing State or 
multi-member agency to administer grant programs,'' shall be given 
expeditious handling and, whenever possible, an affirmative 
response.
    (2) When it is necessary to refuse a request for waiver of 
``single'' State agency requirements under section 204 of the 
Intergovernmental Corporation Act, the Federal grantor agency shall 
advise OMB prior to informing the State that the request cannot be 
granted. The agency shall indicate to OMB the reasons for the denial 
of the request.
    (3) Legislative proposals embracing grant-in-aid programs shall 
avoid inclusion of proposals for ``single'' State agencies in the 
absence of compelling reasons to do otherwise. In addition, existing 
requirements in present grant-in-aid programs shall be reviewed and 
legislative proposals developed for the removal of these restrictive 
provisions.
    i. Patent Rights. Agencies shall use the standard patent rights 
clause specified in ``Rights to Inventions made by Non-profit 
Organizations and Small Business Firms'' (37 CFR Part 401), when 
providing support for research and development.
    j. Metric System of Measurement. The Metric Conversion Act of 
1975, as amended, declares that the metric system is the preferred 
measurement system for U.S. trade and commerce. The Act requires 
each Federal agency to establish a date(s), in consultation with the 
Secretary of Commerce, when the metric system of measurement will be 
used in the agency's procurement, grants, and other business-related 
activities. Metric implementation may take longer where the use of 
the system is initially impractical or likely to cause significant 
inefficiencies in the accomplishment of federally-funded activities. 
Heads of departments and agencies shall establish a process for a 
policy level and program level review of proposed exceptions to 
metric usage in grants programs. Executive Order 12770 (``Metric 
Usage in Federal Government Programs'') elaborates on implementation 
of the Act.

2. Post-Award Policies

    a. Cash Management. Agency methods and procedures for 
transferring funds shall minimize the time elapsing between the 
transfer to recipients of grants and cooperative agreements and the 
recipient's need for the funds.
    (1) Such transfers shall be made consistent with program 
purposes, applicable law and Treasury regulations contained in 31 
CFR Part 205, Federal Funds Transfer Procedures.
    (2) Where letters-of-credit are used to provide funds, they 
shall be in the same amount as the award.
    b. Grantee Financial Management Systems. In assessing the 
adequacy of an applicant's financial management system, the awarding 
agency shall rely on readily available sources of information, such 
as audit reports, to the maximum extent possible. If additional 
information is necessary to assure prudent management of agency 
funds, it shall be obtained from the applicant or from an on-site 
review.
    c. Financial Status Reports.--(1) Federal agencies shall require 
grantees to use the SF-269, Financial Status Report-Long Form, or 
SF-269a, Financial Status Report-Short Form, to report the status of 
funds for all non-construction projects or programs. Federal 
agencies need not require the Financial Status Report when the SF-
270, Request for Advance or Reimbursement, or SF-272, Report of 
Federal Cash Transactions, is determined to provide adequate 
information.
    (2) Federal agencies shall not require grantees to report on the 
status of funds by object class category of expenditure (e.g., 
personnel, travel, equipment).
    (3) If reporting on the status of funds by programs, functions 
or activities within the project or program is required by statute 
or regulation, Federal agencies shall instruct grantees to use block 
12, Remarks, on the SF-269, or a supplementary form approved by the 
OMB under the Paperwork Reduction Act of 1980.
    (4) Federal agencies shall prescribe whether the reporting shall 
be on a cash or an accrual basis. If the Federal agency requires 
accrual information and the grantees's accounting records are not 
normally kept on an accrual basis, the grantee shall not be required 
to convert its accounting system but shall develop such accrual 
information through an analysis of the documentation on hand.
    d. Contracting With Small and Minority Firms, Women's Business 
Enterprises and Labor Surplus Area Firms. It is national policy to 
award a fair share of contracts to small and minority business 
firms. Grantees shall take similar appropriate affirmative action to 
support of women's enterprises and are encouraged to procure goods 
and services from labor surplus areas.
    e. Program Income.--(1) Agencies shall encourage grantees to 
generate program income to help defray program costs. However, 
Federal agencies shall not permit grantees to use grant-acquired 
assets to compete unfairly with the private sector.
    (2) Federal agencies shall instruct grantees to deduct program 
income from total program costs as specified in the grants 
management common rule at paragraph ----.25 (g)(1), unless agency 
regulations or the terms of the grant award state otherwise. 
Authorization for recipients to follow the other alternatives in 
paragraph ____.25 (g) (2) and (3) shall be granted sparingly.
    f. Site Visits and Technical Assistance. Agencies shall conduct 
site visits only as warranted by program or project needs. Technical 
assistance site visits shall be provided only (1) In response to 
requests from grantees, (2) based on demonstrated program need, or 
(3) when recipients are designated ``high risk'' under section 
____.12 of the grants management common rule.
    g. Infrastructure Investment. Agencies shall encourage grantees 
to consider the provisions of the common rule at Section ____. 31 
and Executive Order 12803 (``Infrastructure Privatization''). This 
includes reviewing and modifying procedures affecting the management 
and disposition of federally-financed infrastructure owned by State 
and local governments, with their requests to sell or lease 
infrastructure assets, consistent with the criteria in Section 4 of 
the Order. Related guidance contained in Executive Order 12893 
(``Principles for Federal Infrastructure Investments'') requiring 
economic analysis and the development of investment options, 
including public-private partnership, shall also be applied. On 
March 7, 1994, OMB issued guidance on Executive Order 12893 in OMB 
Bulletin No. 94-16.
    h. Resource Conservation and Recovery Act. Agencies shall 
implement the Resource Conservation and Recovery Act of 1976 (RCRA) 
(42 U.S.C. 6962). Any State agency or agency of a political 
subdivision of a State which is using appropriated Federal funds 
must comply with Section 6002 of RCRA. Section 6002 requires that 
preference be given in procurement programs to the purchase of 
specific products containing recycled materials identified in 
guidelines developed by the Environmental Protection Agency (EPA). 
Current guidelines are contained in 40 CFR Parts 247-253. State and 
local recipients of grants, loans, cooperative agreements or other 
instruments funded by appropriated Federal funds shall give 
preference in procurement programs to the purchase of recycled 
products pursuant to the EPA guidelines.
    i. Procurement of Goods and Services. Agencies should be aware 
of and comply with the requirement enacted in Section 623 of the 
Treasury, Postal Service and General Government Appropriations Act, 
1993, and reenacted in Section 621 of the fiscal year 1994 
Appropriations Act. This Section requires grantees to specify in any 
announcement of the awarding of contracts with an aggregate value of 
$500,000 or more, the amount of Federal funds that will be used to 
finance the acquisitions.

3. After-the-grant Policies

    a. Closeout. Federal agencies shall notify grantees in writing 
before the end of the grant period of final reports that shall be 
due, the dates by which they must be received, and where they must 
be submitted. Copies of any required forms and instructions for 
their completion shall be included with this notification. The 
Federal actions that must precede closeout are:
    (1) Receipt of all required reports,
    (2) Disposition or recovery of federally-owned assets (as 
distinct from property acquired under the grant), and
    (3) Adjustment of the award amount and the amount of Federal 
cash paid the recipient.
    b. Annual Reconciliation of Continuing Assistance Awards. 
Federal agencies shall reconcile continuing awards at least annually 
and evaluate program performance and financial reports.
    Items to be reviewed include:
    (1) A comparison of the recipient's work plan to its progress 
reports and project outputs,
    (2) the Financial Status Report (SF-269),
    (3) Request(s) for payment,
    (4) Compliance with any matching, level of effort or maintenance 
of effort requirement, and
    (5) A review of federally-owned property (as distinct from 
property acquired under the grant).

[FR Doc. 94-25509 Filed 10-13-94; 8:45 am]
BILLING CODE 3110-01-P