[Federal Register Volume 60, Number 12 (Thursday, January 19, 1995)]
[Rules and Regulations]
[Pages 3743-3760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-975]



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AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Part 226


Administration of Assistance Awards to U.S. Non-Governmental 
Organizations

AGENCY: Agency for International Development (USAID).

ACTION: Interim final rule.

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SUMMARY: This interim final rule adds a new 22 CFR part 226 which 
implements Office of Management and Budget (OMB) Circular A-110 
establishing uniform administrative requirements for Federal grants and 
agreements awarded to institutions of higher education, hospitals, and 
other non-profit organizations. In keeping with existing USAID policy, 
this rule is also being made applicable to commercial organizations.

EFFECTIVE DATE: This rule is effective February 21, 1995. Comments must 
be submitted before March 20, 1995.

FOR FURTHER INFORMATION CONTACT:
Diana Joan Esposito, Office of Procurement, Procurement Policy and 
Evaluation (M/OP/P), USAID, SA-14 Rm.1600I, 320 21st Street, Washington 
DC 20523. Telephone 703 875-1529, Fax 703 875-1243.

SUPPLEMENTARY INFORMATION: On August 27, 1992, OMB published a proposed 
version of Circular A-110 (57 FR 39018). Over 200 comments were 
received from Federal agencies, non-profit organizations, professional 
organizations, and others. OMB addressed these comments in the final 
version of the Circular published November 29, 1993.
    The revised Circular was developed by an interagency task force for 
government-wide use in a common rule format to facilitate regulatory 
adoption by executive departments and agencies. This interim final rule 
essentially adopts the Government-wide common rule format and 
provisions of the Circular with some minor changes to the Circular to 
add clarity and some agency-specific technical changes.
    I. The Circular provides agencies with a certain discretion in 
implementing its provisions. USAID has exercised this discretion as 
follows:

[[Page 3744]]

    USAID has decided to include commercial organizations as recipients 
and subrecipients covered by this rule and not to include foreign or 
international organizations. The definitions have been revised to 
reflect this.
    The Circular states in ____.22(c) that advance payment mechanisms 
include, but are not limited to, Treasury check and electronic funds 
transfer. Because USAID frequently issues agency letters of credit for 
advances, a USAID letter of credit is also referenced in 226.22.
    In Section 226.23(b), USAID has determined that unrecovered 
indirect costs may be included as part of cost sharing without 
additional approval from USAID.
    Section 226.24(d) is amended to reflect USAID's policy 
determination that commercial organizations may not use the additive 
formula for program income.
    In Section 226.24(f), USAID provides that costs incident to the 
generation of program income may be deducted from gross income when 
they are in keeping with the applicable cost principles.
    II. 22 CFR Part 226 includes the following additions and changes to 
A-110 that have been submitted for OMB review and approval as 
deviations:
    Section 226.22(g) is revised to provide that it does not apply to 
funds earned in foreign currency.
    Section 226.22(i) is revised to state that separate depository 
accounts may be required by the terms of an award where specifically 
required under USAID's guidance covering endowment funds.
    Section 226.22(l) is revised to provide that interest earned shall 
be remitted to USAID, not HHS, and that USAID may authorize recipients 
to retain all interest earned in accordance with USAID's statutory 
authority.
    Sections 226.32 and 226.34 are revised to allow for USAID to vest 
title in an entity other than the recipient (e.g., so that the 
recipient country government may take title when the award is funded 
under a bilateral project agreement between USAID and a developing 
country).
    Section 226.44(b) is expanded to provide that certain procurement 
information be sent to the USAID Office of Small Disadvantaged Business 
Utilization in accordance with established USAID practice and Section 
602 of the Foreign Assistance Act of 1961, as amended.
    Section 226.61 is expanded to incorporate USAID's existing 
authority to suspend or terminate an award where continuation would be 
in violation of applicable law or otherwise not be in the national 
interest of the United States.
    Subpart G contains additional procurement eligibility requirements 
based on USAID's statutory and regulatory requirements. The coverage on 
eligibility of goods and services, local cost financing, air 
transportation, and ocean shipment is currently reserved.
    III. Editorial changes designed to help clarify the provisions for 
USAID recipients and program/agreement officers include the following:
    Section 226.2 adds definitions of ``Agreement Officer'' and 
``USAID.''
    Section 226.15 includes USAID's existing implementation of the 
Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205).
    Subpart E contains additional requirements for awards to commercial 
(for-profit) organizations.
    Subpart F contains coverage of USAID's process for disputes with 
recipients.
    Appendix A contract provisions have been altered to indicate 
applicability to activities conducted in or outside the United States. 
Also in Appendix A, the provision on the Byrd Anti-Lobbying Amendment 
corrects the applicability of the provision which was inadvertently 
misstated in the Circular. The provision applies to awards exceeding 
$100,000 rather than awards of $100,000 or more.

Waiver of Proposed Rulemaking

    It is the practice of USAID to offer interested parties the 
opportunity to comment on proposed regulations. However, USAID has 
determined that further public comment on the common rule portion is 
unnecessary because the substance of the rule received public comment 
when published by OMB. Given the mandatory nature of the bulk of the 
text, USAID has determined that issuance of a Notice of Proposed 
Rulemaking for the modifications would be impractical, unnecessary and 
contrary to the public interest since the changes are relatively few 
and most reflect existing policies and practices. Public comments on 
USAID-specific implementation of this interim final rule are welcome.

Executive Order 12866

    USAID has determined that this is not a significant rule in 
accordance with E.O. 12866.

Regulatory Flexibility Act

    This is a mandatory, Government-wide uniform rule. The limited 
USAID-specific provisions in the rule have been reviewed in accordance 
with the requirements of the Regulatory Flexibility Act of 1980 (5 
U.S.C. Chapter 6). USAID has determined that these portions of the rule 
would not have a significant economic impact on a substantial number of 
small entities and, therefore, a Regulatory Flexibility Analysis is not 
required.
    The information collection requirements contained in this rule have 
been previously cleared by OMB.

List of Subjects in 22 CFR Part 226

    Accounting, Administrative practice and procedures, Grant programs, 
Grant administration, Reporting and recordkeeping requirements.

    Accordingly, Part 226 of Title 22 of the Code of Federal 
Regulations is added, consisting of Subparts A through G and Appendix 
A, to read as follows:

PART 226--ADMINISTRATION OF ASSISTANCE AWARDS TO U.S. NON-
GOVERNMENTAL ORGANIZATIONS

Subpart A--General

Sec.
226.1  Purpose and applicability.
226.2  Definitions.
226.3  Effect on other issuances.
226.4  Deviations.
226.5  Subawards.

Subpart B--Pre-Award Requirements

226.10  Purpose.
226.11  Pre-award policies.
226.12  Forms for applying for Federal assistance.
226.13  Debarment and suspension.
226.14  Special award conditions.
226.15  Metric system of measurement.
226.16  Resource Conservation and Recovery Act.
226.17  Certifications and representations.

Subpart C--Post-Award Requirements

Financial and Program Management

226.20  Purpose of financial and program management.
226.21  Standards for financial management systems.
226.22  Payment.
226.23  Cost sharing or matching.
226.24  Program income.
226.25  Revision of budget and program plans.
226.26  Non-Federal audits.
226.27  Allowable costs.
226.28  Period of availability of funds.

Property Standards

226.30  Purpose of property standards.
226.31  Insurance coverage.
226.32  Real property.
226.33  Federally-owned and exempt property.
226.34  Equipment.
226.35  Supplies and other expendable equipment.
226.36  Intangible property.
226.37  Property trust relationship.

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Procurement Standards

226.40  Purpose of procurement standards.
226.41  Recipient responsibilities.
226.42  Codes of conduct.
226.43  Competition.
226.44  Procurement procedures.
226.45  Cost and price analysis.
226.46  Procurement records.
226.47  Contract administration.
226.48  Contract provisions.
226.49  USAID-Specific procurement requirements.

Reports and Records

226.50  Purpose of reports and records.
226.51  Monitoring and reporting program performance.
226.52  Financial reporting.
226.53  Retention and access requirements for records.

Suspension, Termination and Enforcement

226.60  Purpose of suspension, termination and enforcement.
226.61  Suspension and termination.
226.62  Enforcement.

Subpart D--After-the-Award Requirements

226.70  Purpose.
226.71  Closeout procedures.
226.72  Subsequent adjustments and continuing responsibilities.
226.73  Collection of amounts due.
Subpart E--Special Provisions for Awards to Commercial Organizations
226.80  Scope of subpart.
226.81  Prohibition against profit.
226.82  Program income.

Subpart F--Miscellaneous

226.90  Disputes.

Subpart G--USAID-Specific Requirements

226.1001  Eligibility rules for goods and services. [Reserved]
226.1002  Local cost financing. [Reserved]
226.1003  Air transportation. [Reserved]
226.1004  Ocean shipment of goods. [Reserved]

Appendix A to Part 226--Contract Provisions

    Authority: Sec. 621, Pub. L. 87-195, 75 Stat. 445 (22 U.S.C. 
2381), as amended; E.O. 12163, Sept. 29, 1979, 44 FR 56673; 3 CFR 
1979 Comp., p. 435.

Subpart A--General


Sec. 226.1  Purpose and applicability.

    Except as otherwise authorized by statute, this part establishes 
uniform administrative requirements for grants and cooperative 
agreements awarded by USAID to U.S. institutions of higher education, 
hospitals, and other non-profit organizations, and to U.S. commercial 
organizations; and to subawards thereunder. USAID shall not impose 
additional or inconsistent requirements, except as provided in Sections 
226.4, and 226.14, or unless specifically required by Federal statute 
or executive order. Non-profit and commercial organizations that 
implement Federal programs for the States are also subject to State 
requirements.


Sec. 226.2  Definitions.

    Accrued expenditures means the charges incurred by the recipient 
during a given period requiring the provision of funds for:
    (1) Goods and other tangible property received;
    (2) Services performed by employees, contractors, subrecipients, 
and other payees; and,
    (3) Other amounts becoming owed under programs for which no current 
services or performance is required.
    Accrued income means the sum of:
    (1) Earnings during a given period from services performed by the 
recipient, and goods and other tangible property delivered to 
purchasers, and
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    Acquisition cost of equipment means the net invoice price of the 
equipment, including the cost of modifications, attachments, 
accessories, or auxiliary apparatus necessary to make the property 
usable for the purpose for which it was acquired. Other charges, such 
as the cost of installation, transportation, taxes, duty or protective 
in-transit insurance, shall be included or excluded from the unit 
acquisition cost in accordance with the recipient's regular accounting 
practices.
    Advance means a payment made by Treasury check or other appropriate 
payment mechanism to a recipient upon its request either before outlays 
are made by the recipient or through the use of predetermined payment 
schedules.
    Agreement Officer means a person with the authority to enter into, 
administer, terminate and/or closeout assistance agreements subject to 
this part, and make related determinations and findings on behalf of 
USAID. An Agreement Officer can only act within the scope of a duly 
authorized warrant or other valid delegation of authority. The term 
``Agreement Officer'' includes persons warranted as ``Grant Officers.'' 
It also includes certain authorized representatives of the Agreement 
Officer acting within the limits of their authority as delegated by the 
Agreement Officer.
    Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants, 
cooperative agreements and other agreements in the form of money or 
property in lieu of money, by the Federal Government to an eligible 
recipient. The term does not include: Technical assistance, which 
provides services instead of money; other assistance in the form of 
loans, loan guarantees, interest subsidies, or insurance; direct 
payments of any kind to individuals; and, contracts which are required 
to be entered into and administered under procurement laws and 
regulations.
    Cash contributions means the recipient's cash outlay, including the 
outlay of money contributed to the recipient by third parties.
    Closeout means the process by which the Agreement Officer 
determines that all applicable administrative actions and all required 
work of the award have been completed by the recipient and USAID.
    Contract means a procurement contract under an award or subaward, 
and a procurement subcontract under a recipient's or subrecipient's 
contract.
    Cost sharing or matching means that portion of project or program 
costs not borne by the Federal Government.
    Date of completion means the date on which all work under an award 
is completed or the date on the award document, or any supplement or 
amendment thereto, on which USAID sponsorship ends.
    Disallowed costs means those charges to an award that the USAID 
Agreement Officer determines to be unallowable, in accordance with the 
applicable Federal costs principles or other terms and conditions 
contained in the award.
    Equipment means tangible nonexpendable personal property including 
exempt property charged directly to the award having a useful life of 
more than one year and an acquisition cost of $5,000 or more per unit. 
However, consistent with recipient policy, lower limits may be 
established.
    Excess property means property under the control of USAID that, as 
determined by the head of the Agency, is no longer required for its 
needs or the discharge of its responsibilities.
    Exempt property means tangible personal property acquired in whole 
or in part with Federal funds, where the Federal awarding agency has 
statutory authority to vest title in the recipient without further 
obligation to the Federal Government. An example of exempt property 
authority is contained in the Federal Grant and Cooperative Agreement 
Act (31 U.S.C. 6306), for property acquired under an award to conduct 
basic or applied research by a non-profit institution of higher 
education or non-profit organization whose principal purpose is 
conducting scientific research.

[[Page 3746]]

    Federal awarding agency means the Federal agency that provides an 
award to the recipient.
    Federal funds authorized means the total amount of Federal funds 
obligated by the Federal Government for use by the recipient. This 
amount may include any authorized carryover of unobligated funds from 
prior funding periods when permitted by agency regulations or agency 
implementing instructions.
    Federal share of real property, equipment, or supplies means that 
percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    Intangible property and debt instruments means, but is not limited 
to, trademarks, copyrights, patents and patent applications and such 
property as loans, notes and other debt instruments, lease agreements, 
stock and other instruments of property ownership, whether considered 
tangible or intangible.
    Obligations means the amounts of orders placed, contracts and 
grants awarded, services received and similar transactions during a 
given period that require payment by the recipient during the same or a 
future period.
    Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applies and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or decrease) in the amounts owed by the recipient for 
goods and other property received, for services performed by employees, 
contractors, subrecipients and other payees and other amounts becoming 
owed under programs for which no current services or performance are 
required.
    Personal property means property of any kind except real property. 
It may be tangible, having physical existence, or intangible, having no 
physical existence, such as copyrights, patents, or securities.
    Prior approval means written approval by an authorized official 
evidencing prior consent.
    Program income means gross income earned by the recipient that is 
directly generated by a supported activity or earned as a result of the 
award (see exclusions in Secs. 226.24 (e) and (h)). Program income 
includes, but is not limited to, income from fees for services 
performed, the use or rental of real or personal property acquired 
under federally-funded projects, the sale of commodities or items 
fabricated under an award, license fees and royalties on patents and 
copyrights, and interest on loans made with award funds. Interest 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in USAID regulations or the terms and conditions of 
the award, program income does not include the receipt of principal on 
loans, rebates, credits, discounts, etc., or interest earned on any of 
them.
    Project costs means all allowable costs, as set forth in the 
applicable Federal cost principles, incurred by a recipient and the 
value of the contributions made by third parties in accomplishing the 
objectives of the award during the project period.
    Project period means the period established in the award document 
during which Federal sponsorship begins and ends.
    Property means, unless otherwise stated, real property, equipment, 
supplies, intangible property and debt instruments.
    Real Property means land, including land improvements, structures 
and appurtenances thereto, but excludes movable machinery and 
equipment.
    Recipient means an organization receiving a grant or cooperative 
agreement directly from USAID to carry out a project or program. The 
term includes the following types of U.S. organizations: public and 
private institutions of higher education; public and private hospitals; 
quasi-public and private non-profit organizations such as, but not 
limited to, community action agencies, research institutes, educational 
associations, and health centers; and commercial organizations. The 
term does not include government-owned contractor-operated facilities 
or research centers providing continued support for mission-oriented, 
large-scale programs that are government-owned or controlled, or are 
designated as federally-funded research and development centers.
    Research and development means all research activities, both basic 
and applied, and all development activities that are supported at 
universities, colleges, and other non-profit institutions. ``Research'' 
is defined as a systematic study directed toward fuller scientific 
knowledge or understanding of the subject studied. ``Development'' is 
the systematic use of knowledge and understanding gained from research 
directed toward the production of useful materials, devices, systems, 
or methods, including design and development of prototypes and 
processes. The term research also includes activities involving the 
training of individuals in research techniques where such activities 
utilize the same facilities as other research and development 
activities and where such activities are not included in the 
instruction function.
    Small awards means a grant or cooperative agreement not exceeding 
the small purchase threshold fixed at 41 U.S.C. 403(11).
    Subaward means an award of financial assistance in the form of 
money, or property in lieu of money, made under an award by a recipient 
to an eligible subrecipient or by a subrecipient to a lower tier 
subrecipient. The term includes financial assistance when provided by 
any legal agreement, even if the agreement is called a contract, but 
does not include procurement of goods and services nor does it include 
any form of assistance which is excluded from the definition of 
``award'' in this section.
    Subrecipient means the legal entity to which a subaward is made and 
which is accountable to the recipient for the use of the funds 
provided.
    Supplies means all personal property excluding equipment, 
intangible property, and debt instruments as defined in this section, 
and inventions of a contractor conceived or first actually reduced to 
practice in the performance of work under a funding agreement 
(``subject inventions''), as defined in 37 CFR part 401, ``Rights to 
Inventions Made by Nonprofit Organizations and Small Business Firms 
Under Government Grants, Contracts, and Cooperative Agreements.''
    Suspension means an action by USAID that temporarily withdraws 
Federal sponsorship under an award, pending corrective action by the 
recipient or pending a decision to terminate the award. Suspension of 
an award is a separate action from suspension under USAID regulations 
implementing E.O.s 12549 and 12689, ``Debarment and Suspension.'' See 
22 CFR Part 208.
    Termination means the cancellation of USAID sponsorship, in whole 
or in part, under an agreement at any time prior to the date of 
completion.
    Third party in-kind contributions means the value of non-cash 
contributions provided by non-Federal third parties. Third party in-
kind 

[[Page 3747]]
contributions may be in the form of real property, equipment, supplies 
and other expendable property, and the value of goods and services 
directly benefiting and specifically identifiable to the project or 
program.
    Unliquidated obligations, for financial reports prepared on a cash 
basis, means the amount of obligations incurred by the recipient that 
have not been paid. For reports prepared on an accrued expenditure 
basis, they represent the amount of obligations incurred by the 
recipient for which an outlay has not been recorded.
    Unobligated balance means the portion of the funds authorized by 
USAID that has not been obligated by the recipient and is determined by 
deducting the cumulative obligations from the cumulative funds 
authorized.
    Unrecovered indirect cost means the difference between the amount 
awarded and the amount which could have been awarded under the 
recipient's approved negotiated indirect cost rate.
    USAID means the United States Agency for International Development.
    Working capital advance means a procedure whereby funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.


Sec. 226.3  Effect on other issuances.

    For awards subject to this part, all administrative requirements of 
codified program regulations, program manuals, handbooks and other 
nonregulatory materials which are inconsistent with the requirements of 
this part shall be superseded, except to the extent they are required 
by statute, or authorized in accordance with the deviations provision 
Sec. 226.4.


Sec. 226.4  Deviations.

    The Office of Management and Budget (OMB) may grant exceptions for 
classes of grants or recipients subject to the requirements of this 
part when exceptions are not prohibited by statute. However, in the 
interest of maximum uniformity, exceptions from the requirements of 
this part shall be permitted only in unusual circumstances. USAID may 
apply more restrictive requirements to a class of recipients when 
approved by OMB. USAID may apply less restrictive requirements when 
awarding small awards, except for those requirements which are 
statutory. Exceptions on a case-by-case basis may also be made by the 
USAID Deputy Assistant Administrator for Management.


Sec. 226.5  Subawards.

    Unless sections of this part specifically exclude subrecipients 
from coverage, the provisions of this part shall be applied to 
subrecipients if such subrecipients are organizations which, if 
receiving awards directly from USAID, would fall within the definition 
of recipients. State and local government subrecipients are subject to 
the provisions of regulations implementing the grants management common 
rule, ``Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments,'' as amended.

Subpart B--Pre-award Requirements


Sec. 226.10  Purpose.

    Sections 226.11 through 226.17 prescribe forms and instructions and 
other pre-award matters to be used in applying for USAID awards.


Sec. 226.11  Pre-award policies.

    (a) Use of Grants and Cooperative Agreements, and Contracts. In 
each instance USAID shall decide on the appropriate award instrument 
(i.e., grant cooperative agreement or contract). The Federal Grant and 
Cooperative Agreement Act (31 U.S.C. 6301-08) governs the use of 
grants, cooperative agreements and contracts. A grant or cooperative 
agreement shall be used only when the principal purpose of a 
transaction is to accomplish a public purpose of support or stimulation 
authorized by Federal statute. The statutory criterion for choosing 
between grants and cooperative agreements is that for the latter, 
``substantial involvement is expected between the executive agency and 
the State, local government, or other recipient when carrying out the 
activity contemplated in the agreement.'' Contracts shall be used when 
the principal purpose is acquisition of property or services for the 
direct benefit or use of the Federal Government.
    (b) Public Notice and Priority Setting. USAID shall notify the 
public of its intended funding priorities for discretionary grant 
programs, unless funding priorities are established by Federal statute.


Sec. 226.12  Forms for applying for Federal assistance.

    (a) USAID shall comply with the applicable report clearance 
requirements of 5 CFR part 1320, ``Controlling Paperwork Burdens on the 
Public,'' with regard to all forms used in place of or as a supplement 
to the Standard Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series or those forms and 
instructions prescribed by USAID.
    (c) For Federal programs covered by E.O. 12372, ``Intergovernmental 
Review of Federal Programs,'' the applicant shall complete the 
appropriate sections of the SF-424 (Application for Federal Assistance) 
indicating whether the application was subject to review by the State 
Single Point of Contact (SPOC). The name and address of the SPOC for a 
particular State can be obtained from the Federal awarding agency or 
the Catalog of Federal Domestic Assistance. The SPOC shall advise the 
applicant whether the program for which application is made has been 
selected by that State for review.
    (d) Federal awarding agencies that do not use the SF-424 form 
should indicate whether the application is subject to review by the 
State under E.O. 12372.


Sec. 226.13  Debarment and suspension.

    USAID and recipients shall comply with the nonprocurement debarment 
and suspension common rule implementing E.O.s 12549 and 12689, 
``Debarment and Suspension,'' 22 CFR Part 208. This common rule 
restricts subawards and contracts with certain parties that are 
debarred, suspended or otherwise excluded from or ineligible for 
participation in Federal assistance programs or activities.


Sec. 226.14  Special award conditions.

    If an applicant or recipient: Has a history of poor performance, is 
not financially stable, has a management system that does not meet the 
standards prescribed in this part, has not conformed to the terms and 
conditions of a previous award, or is not otherwise responsible, the 
USAID Agreement Officer may impose additional requirements as needed, 
provided that such applicant or recipient is notified in writing as to: 
The nature of the additional requirements, the reason why the 
additional requirements are being imposed, the nature of the corrective 
action needed, the time allowed for completing the corrective actions, 
and the method for requesting reconsideration of the additional 
requirements imposed. Any special conditions will be promptly removed 
once the conditions that prompted them have been corrected.


Sec. 226.15  Metric system of measurement.

    (a) The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce.
    (b) Wherever measurements are required or authorized, they shall be 
made, computed, and recorded in metric system units of measurement, 
unless otherwise authorized by the 

[[Page 3748]]
agreement officer in writing when it has been found that such usage is 
impractical or is likely to cause U.S. firms to experience significant 
inefficiencies or the loss of markets. Where the metric system is not 
the predominant standard for a particular application, measurements may 
be expressed in both the metric and the traditional equivalent units, 
provided the metric units are listed first.


Sec. 226.16  Resource Conservation and Recovery Act.

    Under the Act, any U.S. State agency or agency of a political 
subdivision of a State which is using appropriated Federal funds must 
comply with Section 6002. Section 6002 requires that preference be 
given in procurement programs to the purchase of specific products 
containing recycled materials identified in guidelines developed by the 
Environmental Protection Agency (EPA) (40 CFR parts 247-254). 
Accordingly, State and local institutions of higher education and 
hospitals that receive direct Federal awards or other Federal funds 
shall given preference in their procurement programs funded with 
Federal funds to the purchase of recycled products pursuant to the EPA 
guidelines.


Sec. 226.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, USAID may at 
some future date, allow recipients to submit certifications and 
representations required by statute, executive order, or regulation on 
an annual basis, if the recipients have ongoing and continuing 
relationships with the agency. Annual certifications and 
representations shall be signed by responsible officials with the 
authority to ensure recipients' compliance with the pertinent 
requirements.

Subpart C--Post-Award Requirements

Financial and Program Management


Sec. 226.20  Purpose of financial and program management.

    Sections 226.21 through 226.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
Satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of costs and establishing funds availability.


Sec. 226.21  Standards for financial management systems.

    (a) Recipients shall relate financial data to performance data and 
develop unit cost information whenever practical.
    (b) Recipients' financial management systems shall provide for the 
following.
    (1) Accurate, current and complete disclosure of the financial 
results of each federally-sponsored project or program in accordance 
with the reporting requirements set forth in Sec. 226.52. While USAID 
requires reporting on an accrual basis, if the recipient maintains its 
records on other than an accrual basis, the recipient shall not be 
required to establish an accrual accounting system. These recipients 
may develop such accrual data for their reports on the basis of an 
analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for federally-sponsored activities. These records shall contain 
information pertaining to all Federal awards, authorizations, 
obligations, unobligated balances, assets, outlays, income and 
interest.
    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients shall adequately safeguard all 
such assets and assure they are used solely for authorized purposes.
    (4) Comparison of outlays with budget amounts for each award. 
Whenever appropriate, financial information should be related to 
performance and unit cost data.
    (5) Written procedures to minimize the time elapsing between the 
transfer of funds to the recipient from the U.S. Treasury and the 
issuance or redemption of checks, warrants or payments by other means 
for program purposes by the recipient. To the extent that the 
provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-
453) govern, payment methods of State agencies, instrumentalities, and 
fiscal agents shall be consistent with CMIA Treasury-State Agreements 
or the CMIA default procedures codified at 31 CFR part 205, 
``Withdrawal of Cash from the Treasury for Advances under Federal Grant 
and Other Programs.''
    (6) Written procedures for determining the reasonableness, 
allocability and allowability of costs in accordance with the 
provisions of the applicable Federal cost principles and the terms and 
conditions of the award.
    (7) Accounting records, including cost accounting records, that are 
supported by source documentation.
    (c) Where the Federal Government guarantees or insures the 
repayment of money borrowed by the recipient, USAID, at its discretion, 
may require adequate bonding and insurance if the bonding and insurance 
requirements of the recipient are not deemed adequate to protect the 
interest of the Federal Government.
    (d) USAID may require adequate fidelity bond coverage where the 
recipient lacks sufficient coverage to protect the Federal Government's 
interest.
    (e) Where bonds are required in the situations described above, the 
bonds shall be obtained from companies holding certificates of 
authority as acceptable sureties, as prescribed in 31 CFR part 223, 
``Surety Companies Doing Business with the United States.''


Sec. 226.22  Payment

    (a) Payment methods shall minimize the time elapsing between the 
transfer of funds from the United States Treasury and the issuance or 
redemption of checks, warrants, or payment by other means by the 
recipients. Payment methods of State agencies or instrumentalities 
shall be consistent with Treasury-State CMIA agreements or default 
procedures codified at 31 CFR part 205.
    (b)(1) Recipients will be paid in advance, provided they maintain 
or demonstrate the willingness to maintain:
    (i) Written procedures that minimize the time elapsing between the 
transfer of funds and disbursement by the recipient, and
    (ii) financial management systems that meet the standards for fund 
control and accountability as established in Section 226.21.
    (2) Cash advances to a recipient organization shall be limited to 
the minimum amounts needed and be timed to be in accordance with the 
actual, immediate cash requirements of the recipient organization in 
carrying out the purpose of the approved program or project. The timing 
and amount of cash advances shall be as close as is administratively 
feasible to the actual disbursements by the recipient organization for 
direct program or project costs and the proportionate share of any 
allowable indirect costs.
    (c) Whenever possible, advances will be consolidated to cover 
anticipated cash needs for all awards made by USAID to the recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
USAID Letter of Credit, Treasury check and electronic funds transfer.

[[Page 3749]]

    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients will be authorized to submit requests for advances 
and reimbursements at least monthly when electronic fund transfers are 
not used.
    (d) Requests for Treasury check advance payment shall be submitted 
on SF-270, ``Request for Advance or Reimbursement,'' or other forms as 
may be authorized by OMB. This form is not to be used when Treasury 
check advance payments are made to the recipient automatically through 
the use of a predetermined payment schedule or if precluded by special 
USAID instructions for electronic funds transfer.
    (e) Reimbursement is the preferred method when the requirements in 
paragraph (b) of this section cannot be met. USAID may also use this 
method on any construction agreement, or if the major portion of the 
construction project is accomplished through private market financing 
or Federal loans, and the Federal assistance constitutes a minor 
portion of the project.
    (1) When the reimbursement method is used, USAID shall make payment 
within 30 days after receipt of the billing, unless the billing is 
improper.
    (2) Recipients are authorized to submit a request for reimbursement 
at least monthly when electronic funds transfers are not used.
    (f) If a recipient cannot meet the criteria for advance payments 
and USAID has determined that reimbursement is not feasible because the 
recipient lacks sufficient working capital, the USAID Agreement Officer 
may provide cash on a working capital advance basis. Under this 
procedure, USAID shall advance cash to the recipient to cover its 
estimated disbursement needs for an initial period generally geared to 
the recipient's disbursing cycle, normally 30 days. Thereafter, USAID 
shall reimburse the recipient for its actual cash disbursements. The 
working capital advance method of payment will not be used for 
recipients unwilling or unable to provide timely advances to their 
subrecipients to meet the subrecipients' actual cash disbursements.
    (g) To the extent available, recipients shall disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit 
recoveries and interest earned on such funds before requesting 
additional cash payments. This paragraph is not applicable to such 
earnings which are generated as foreign currencies.
    (h) Unless otherwise required by statute, USAID will not withhold 
payments for proper charges made by recipients at any time during the 
project period unless:
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or Federal reporting 
requirements, or
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States as defined in OMB Circular A-129, ``Managing Federal 
Credit Programs.'' Under such conditions, USAID may, upon reasonable 
notice, inform the recipient that payments shall not be made for 
obligations incurred after a specified date until the conditions are 
corrected or the indebtedness to the Federal Government is liquidated.
    (i) Standards governing the use of banks and other institutions as 
depositories of funds advanced under awards are as follows.
    (1) Except for situations described in paragraph (i)(2) of this 
section, or as otherwise provided in USAID regulations or implementing 
guidance governing endowment funds, USAID does not require separate 
depository accounts for funds provided to a recipient or establish any 
eligibility requirements for depositories for funds provided to a 
recipient. However, recipients must be able to account for the receipt, 
obligation and expenditure of funds.
    (2) Advances of Federal funds shall be deposited and maintained in 
insured accounts whenever possible.
    (j) Consistent with the national goal of expanding the 
opportunities for women-owned and minority-owned business enterprises, 
recipients are encouraged to use women-owned and minority-owned banks 
(a bank which is owned at least 50 percent by women or minority group 
members).
    (k) Recipients shall maintain advances of Federal funds in interest 
bearing accounts, unless:
    (1) The recipient receives less than $120,000 in Federal awards per 
year,
    (2) The best reasonably available interest bearing account would 
not be expected to earn interest in excess of $250 per year on Federal 
cash balances, or
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) Except as otherwise provided in the terms and conditions of the 
award in accordance with USAID regulations or other implementing 
guidance, for those entities where CMIA and its implementing 
regulations do not apply, interest earned on Federal advances deposited 
in interest bearing accounts shall be remitted annually to Department 
of Health and Human Services, Payment Management System, Rockville, MD 
20852. Interest amounts up to $250 per year may be retained by the 
recipient for administrative expense. State universities and hospitals 
shall comply with CMIA, as it pertains to interest. If an entity 
subject to CMIA uses its own funds to pay pre-award costs for 
discretionary awards without prior written approval from the Federal 
awarding agency, it waives its right to recover the interest under 
CMIA.
    (m) Except as noted elsewhere in this part, only the following 
forms shall be authorized for the recipients in requesting advances and 
reimbursements. USAID shall not require more than an original and two 
copies of these forms.
    (1) The SF-270, Request for Advance or Reimbursement, is the 
standard form for all nonconstruction programs when electronic funds 
transfer or predetermined advance methods are not used. USAID has the 
option of using this form for construction programs in lieu of the SF-
271, ``Outlay Report and Request for Reimbursement for Construction 
Programs.''
    (2) The SF-271, Outlay Report and Request for Reimbursement for 
Construction Programs, is the standard form to be used for requesting 
reimbursement for construction programs. However, USAID may substitute 
the SF-270 when it determines that it provides adequate information to 
meet Federal needs.


Sec. 226.23  Cost sharing or matching.

    (a) All contributions, including cash and third party inkind, shall 
be accepted as part of the recipient's cost sharing or matching when 
such contributions meet all of the following criteria.
    (1) Are verifiable from the recipient's records.
    (2) Are not included as contributions for any other federally-
assisted project or program.
    (3) Are necessary and reasonable for proper and efficient 
accomplishment of project or program objectives.
    (4) Are allowable under the applicable cost principles.
    (5) Are not paid by the Federal Government under another award, 
except where authorized by Federal statute to be used for cost sharing 
or matching.
    (6) Are provided for in the approved budget.
    (7) Conform to other provisions of this part, as applicable.

[[Page 3750]]

    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching.
    (c) Values for recipient contributions of services and property 
shall be established in accordance with the applicable cost principles. 
If USAID authorizes recipients to donate buildings or land for 
construction/facilities acquisition projects or long-term use, the 
value of the donated property for cost sharing or matching shall be the 
lesser of:
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation, 
or
    (2) The current fair market value. However, when there is 
sufficient justification, the USAID Agreement Officer may approve the 
use of the current fair market value of the donated property, even if 
it exceeds the certified value at the time of donation to the project.
    (d) Volunteer services furnished by professional and technical 
personnel, consultants, and other skilled and unskilled labor may be 
counted as cost sharing or matching if the service is an integral and 
necessary part of an approved project or program. Rates for volunteer 
services shall be consistent with those paid for similar work in the 
recipient's organizations. In those instances in which the required 
skills are not found in the recipient organization, rates shall be 
consistent with those paid for similar work in the labor market in 
which the recipient competes for the kind of services involved. In 
either case, paid fringe benefits that are reasonable, allowable, and 
allocable may be included in the valuation.
    (e) When an employer other than the recipient furnishes the 
services of an employee, these services shall be valued at the 
employee's regular rate of pay (plus an amount of fringe benefits that 
are reasonable, allowable, and allocable, but exclusive of overhead 
costs), provided these services are in the same skill for which the 
employee is normally paid.
    (f) Donated supplies may include such items as expendable 
equipment, office supplies, laboratory supplies or workshop and 
classroom supplies. Value assessed to donated supplies included in the 
cost sharing or matching share shall be reasonable and shall not exceed 
the fair market value of the property at the time of the donation.
    (g) The method used for determining cost sharing or matching for 
donated equipment, buildings and land for which title passes to the 
recipient may differ according to the purpose of the award, if:
    (1) If the purpose of the award is to assist the recipient in the 
acquisition of equipment, buildings or land, the total value of the 
donated property may be claimed as cost sharing or matching, or
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the USAID 
Agreement Officer has approved the charges.
    (h) The value of donated property shall be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings shall not exceed its 
fair market value at the time of donation to the recipient as 
established by an independent appraiser (e.g., certified real property 
appraiser or General Services Administration representative) and 
certified by a responsible official of the recipient.
    (2) The value of donated equipment shall not exceed the fair market 
value of equipment of the same age and condition at the time of 
donation.
    (3) The value of donated space shall not exceed the fair rental 
value of comparable space as established by an independent appraisal of 
comparable space and facilities in a privately-owned building in the 
same locality.
    (4) The value of loaned equipment shall not exceed its fair rental 
value.
    (i) The following requirements pertain to the recipient's 
supporting records for in-kind contributions from third parties.
    (1) Volunteer services shall be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees,
    (2) The basis for determining the valuation for personal services, 
material, equipment, buildings and land shall be documented.


Sec. 226.24  Program income.

    (a) Recipients shall apply the standards set forth in this section 
to account for program income related to projects financed in whole or 
in part with Federal funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period shall be retained by the 
recipient and, in accordance with USAID regulations, other implementing 
guidance, or the terms and conditions of the award, shall be used in 
one or more of the following ways:
    (1) Added to funds committed by USAID and the recipient to the 
project or program, and used to further eligible project or program 
objectives.
    (2) Used to finance the non-Federal share of the project or 
program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When the agreement authorizes the disposition of program income 
as described in paragraph (b)(1) or (b)(2) of this section, program 
income in excess of any limits stipulated shall be used in accordance 
with paragraph (b)(3) of this section.
    (d) If the terms and conditions of the award do not specify how 
program income is to be used, paragraph (b)(3) of this section shall 
apply automatically to all projects or programs except research. For 
awards that support research, paragraph (b)(1) of this section shall 
apply automatically unless the terms and conditions of the award 
provide another alternative, or the recipient is subject to special 
award conditions, as indicated in Sec. 226.14. Recipients which are 
commercial organizations may not apply paragraph (b)(1) of this 
section, in accordance with Sec. 226.82 of this part.
    (e) Unless the terms and conditions of the award provide otherwise, 
recipients shall have no obligation to the Federal Government regarding 
program income earned after the end of the project period.
    (f) Costs incident to the generation of program income may be 
deducted from gross income to determine program income, provided these 
costs have not been charged to the award and they comply with the cost 
principles applicable to the award funds.
    (g) Proceeds from the sale of property shall be handled in 
accordance with the requirements of the Property Standards (See 
Secs. 226.30 through 226.37).
    (h) Unless the terms and condition of the award provide otherwise, 
recipients shall have no obligation to the Federal Government with 
respect to program income earned from license fees and royalties for 
copyrighted material, patents, patent applications, trademarks, and 
inventions produced under an award. However, Patent and Trademark 
Amendments (35 U.S.C. 18) apply to inventions made under an 
experimental, developmental, or research award.


Sec. 226.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It 

[[Page 3751]]
may include either the sum of the Federal and non-Federal shares, or 
only the Federal share, depending upon USAID requirements as reflected 
in the terms and conditions of the agreement. It shall be related to 
performance for program evaluation purposes whenever appropriate.
    (b) Recipients are required to report deviations from budget and 
program plans, and request prior approvals for budget and program plan 
revisions, in accordance with this section.
    (c) For nonconstruction awards, recipients shall request prior 
approvals from the USAID Agreement Officer for one or more of the 
following program or budget related reasons:
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or award 
document.
    (3) The absence for more than three months, or a 25 percent 
reduction in time devoted to the project, by the approved project 
director or principal investigator.
    (4) The need for additional Federal funding.
    (5) The transfer of amounts budgeted for indirect costs to absorb 
increases in direct costs, or vice versa.
    (6) The inclusion, unless waived in the agreement by USAID, of 
costs that require prior approval in accordance with OMB Circular A-21, 
``Cost Principles for Institutions of Higher Education,'' OMB Circular 
A-122, ``Cost Principles for Non-Profit Organizations,'' or 45 CFR part 
74, Appendix E, ``Principles for Determining Costs Applicable to 
Research and Development under Grants and Contracts with Hospitals,'' 
or 48 CFR part 31, ``Contract Cost Principles and Procedures,'' as 
applicable.
    (7) The transfer of funds allotted for training allowances (direct 
payment to trainees) to other categories of expense.
    (8) Unless described in the application and funded in the approved 
budget of the award, the subaward, transfer or contracting out of any 
work under an award. This provision does not apply to the purchase of 
supplies, material, equipment or general support services.
    (d) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (e) USAID may waive cost-related and administrative prior written 
approvals required by this part and OMB Circulars A-21 and A-122, 
except for requirements listed in paragraphs (c)(1) and (c)(4) of this 
section. Such waivers may authorize recipients to do any one or more of 
the following:
    (1) Incur pre-award costs 90 calendar days prior to award or more 
than 90 calendar days with the prior approval of the USAID Agreement 
Officer. All pre-award costs are incurred at the recipient's risk 
(i.e., USAID is under no obligation to reimburse such costs if for any 
reason the recipient does not receive an award or if the award is less 
than anticipated and inadequate to cover such costs).
    (2) Initiate a one-time extension of the expiration date of the 
award of up to 12 months. For one-time extensions, the recipient must 
notify the USAID Agreement Officer in writing, with the supporting 
reasons and revised expiration date, at least 10 days before the 
expiration date specified in the award. This one-time extension may not 
be exercised merely for the purpose of using unobligated balances. The 
recipient may initiate a one-time extension unless one or more of the 
following conditions apply:
    (i) The terms and conditions of award prohibit the extension.
    (ii) The extension requires additional Federal funds.
    (iii) The extension involves any change in the approved objectives 
or scope of the project.
    (3) Carry forward unobligated balances to subsequent funding 
periods.
    (4) Except for awards under Section 226.14 and Subpart E of this 
part, for awards that support research, unless USAID provides otherwise 
in the award or in its regulations or other implementing guidance, the 
prior approval requirements described in paragraphs (e) (1) through (3) 
of this section are automatically waived (i.e., recipients need not 
obtain such prior approvals) unless one of the conditions included in 
paragraph (e)(2) of this section applies.
    (f) USAID may, at its option, restrict the transfer of funds among 
direct cost categories or programs, functions and activities for awards 
in which the Federal share of the project exceeds $100,000 and the 
cumulative amount of such transfers exceeds or is expected to exceed 10 
percent of the total budget as last approved by the USAID Agreement 
Officer. USAID shall not permit a transfer that would cause any Federal 
appropriation or part thereof to be used for purposes other than those 
consistent with the original intent of the appropriation.
    (g) All other changes to non-construction budgets, except for the 
changes described in paragraph (j) of this section, do not require 
prior approval.
    (h) For construction awards, recipients shall request prior written 
approval promptly from the USAID Agreement Officer for budget revisions 
whenever:
    (1) The revision results from changes in the scope or the objective 
of the project or program,
    (2) The need arises for additional Federal funds to complete the 
project, or
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with the 
applicable cost principles listed in Sec. 226.27.
    (i) No other prior approval requirements for specific items may be 
imposed unless a deviation has been approved by OMB.
    (j) When USAID makes an award that provides support for both 
construction and nonconstruction work, the USAID Agreement Officer may 
require the recipient to request prior approval before making any fund 
or budget transfers between the two types of work supported.
    (k) For both construction and nonconstruction awards, recipients 
shall notify the USAID Agreement Officer in writing promptly whenever 
the amount of Federal authorized funds is expected to exceed the needs 
of the recipient for the project period by more than $5000 or five 
percent of the Federal award, whichever is greater. This notification 
shall not be required if an application for additional funding is 
submitted for a continuation award.
    (l) When requesting approval for budget revisions, recipients shall 
use the budget forms that were used in the application unless the USAID 
Agreement Officer indicates a letter of request suffices.
    (m) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the USAID Agreement Officer shall review the 
request and notify the recipient whether the budget revisions have been 
approved. If the revision is still under consideration at the end of 30 
calendar days, the USAID Agreement Officer shall inform the recipient 
in writing of the date when the recipient may expect the decision.


Sec. 226.26  Non-Federal audits.

    (a) Recipients and subrecipients shall be subject to the audit 
requirements contained in OMB Circular A-133, ``Audits of Institutions 
of Higher Education and Other Non-Profit Institutions.''
    (b) State and local governments shall be subject to the audit 
requirements contained in the Single Audit Act (31 

[[Page 3752]]
U.S.C. 7501-7) and Federal awarding agency regulations implementing OMB 
Circular A-128, ``Audits of State and Local Governments.''
    (c) Hospitals not covered by the audit provisions of OMB Circular 
A-133 shall be subject to the audit requirements of USAID.
    (d) Commercial organizations shall be subject to the audit 
requirements of USAID or the prime recipient as incorporated in the 
award document.


Sec. 226.27  Allowable costs.

    For each kind of recipient, there is a set of Federal principles 
for determining allowable costs. Allowability of costs shall be 
determined by the Agreement Officer in accordance with the cost 
principles applicable to the entity incurring the costs. Thus, 
allowability of costs incurred by State, local or federally-recognized 
Indian tribal governments is determined in accordance with the 
provisions of OMB Circular A-87, ``Cost Principles for State and Local 
Governments.'' The allowability of costs incurred by non-profit 
organizations is determined in accordance with the provisions of OMB 
Circular A-122, ``Cost Principles for Non-Profit Organizations.'' The 
allowability of costs incurred by institutions of higher education is 
determined in accordance with the provisions of OMB Circular A-21, 
``Cost Principles for Educational Institutions.'' The allowability of 
costs incurred by hospitals is determined in accordance with the 
provisions of Appendix E of 45 CFR part 74, ``Principles for 
Determining Costs Applicable to Research and Development Under Grants 
and Contracts with Hospitals.'' The allowability of costs incurred by 
commercial organizations and those non-profit organizations listed in 
Attachment C to Circular A-122 is determined in accordance with the 
provisions of the Federal Acquisition Regulation (FAR) at 48 CFR part 
31.


Sec. 226.28  Period of availability of funds.

    Where a funding period is specified, a recipient may charge to the 
award only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by the USAID 
Agreement Officer.

Property Standards


Sec. 226.30  Purpose of property standards.

    Sections 226.31 through 226.37 set forth uniform standards 
governing management and or disposition of property furnished by the 
Federal Government or whose cost was charged to a project supported by 
a Federal award. USAID shall not impose additional requirements unless 
specifically required by statute. The recipient may use its own 
property management standards and procedures provided it observes the 
provisions of Secs. 226.31 through 226.37.


Sec. 226.31  Insurance coverage.

    Recipients shall, at a minimum, provide the equivalent insurance 
coverage for real property and equipment acquired with Federal funds as 
provided to property owned by the recipient. Federally-owned property 
need not be insured unless required by the terms and conditions of the 
award.


Sec. 226.32  Real property.

    (a) Unless the agreement provides otherwise, title to real property 
shall vest in the recipient subject to the condition that the recipient 
shall use the real property for the authorized purpose of the project 
as long as it is needed and shall not encumber the property without 
approval of the Agreement Officer.
    (b) The recipient shall obtain written approval from the Agreement 
Officer for the use of real property in other federally-sponsored 
projects when the recipient determines that the property is no longer 
needed for the purpose of the original project. Use in other projects 
shall be limited to those under federally-sponsored projects (i.e., 
awards) or programs that have purposes consistent with those authorized 
for support by USAID.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient shall request 
disposition instructions from the Agreement Officer. The Agreement 
Officer will give one or more of the following disposition 
instructions:
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by USAID and pay the Federal Government for that 
percentage of the current fair market value of the property 
attributable to the Federal participation in the project (after 
deducting actual and reasonable selling and fix-up expenses, if any, 
from the sales proceeds). When the recipient is authorized or required 
to sell the property, proper sales procedures shall be established that 
provide for competition to the extent practicable and result in the 
highest possible return.
    (3) The recipient may be directed to transfer title to the property 
to the Federal Government or to an eligible third party provided that, 
in such cases, the recipient shall be entitled to compensation for its 
attributable percentage of the current fair market value of the 
property.


Sec. 226.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to federally-owned property 
remains vested in the Federal Government. Recipients shall submit 
annually an inventory listing of federally-owned property in their 
custody to USAID. Upon completion of the award or when the property is 
no longer needed, the recipient shall report the property to USAID for 
further Federal agency utilization.
    (2) If USAID has no further need for the property, it shall be 
declared excess and reported to the General Services Administration, 
unless USAID has statutory authority to dispose of the property by 
alternative methods (e.g., the authority provided by the Federal 
Technology Transfer Act (15 U.S.C. 3710(I)) to donate research 
equipment to educational and non-profit organizations in accordance 
with E.O. 12821, ``Improving Mathematics and Science Education in 
Support of the National Education Goals.'') Appropriate instructions 
shall be issued to the recipient by USAID.
    (b) Exempt property. When statutory authority exists, USAID has the 
option to vest title to property acquired with Federal funds in the 
recipient without further obligation to the Federal Government and 
under conditions USAID considers appropriate. Such property is ``exempt 
property'' (see definition in Sec. 226.2). Should USAID not establish 
conditions, title to exempt property upon acquisition shall vest in the 
recipient without further obligation to the Federal Government.


Sec. 226.34  Equipment.

    (a) Unless the agreement provides otherwise, title to equipment 
acquired by a recipient with Federal funds shall vest in the recipient, 
subject to conditions of this part.
    (b) The recipient shall not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.

[[Page 3753]]

    (c) The recipient shall use the equipment in the project or program 
for which it was acquired as long as needed, whether or not the project 
or program continues to be supported by Federal funds and shall not 
encumber the property without approval of USAID. When no longer needed 
for the original project or program, the recipient shall use the 
equipment in connection with its other federally-sponsored activities, 
in the following order of priority:
    (1) Activities sponsored by USAID, then
    (2) Activities sponsored by other Federal agencies.
    (d) During the time that equipment is used on the project or 
program for which it was acquired, the recipient shall make it 
available for use on other projects or programs if such other use will 
not interfere with the work on the project or program for which the 
equipment was originally acquired. First preference for such other use 
shall be given to other projects or programs sponsored by USAID; second 
preference shall be given to projects or programs sponsored by other 
Federal agencies. If the equipment is owned by the Federal Government, 
use on other activities not sponsored by the Federal Government shall 
be permissible if authorized by USAID. User charges shall be treated as 
program income.
    (e) When acquiring replacement equipment, the recipient may use the 
equipment to be replaced as trade-in or sell the equipment and use the 
proceeds to offset the costs of the replacement equipment subject to 
the approval of USAID.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and federally-owned equipment shall include 
all of the following.
    (1) Equipment records shall be maintained accurately and shall 
include the following information.
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient, the Federal Government, 
or other specified entity.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
equipment furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and 
sales price or the method used to determine current fair market value 
where a recipient compensates USAID for its share.
    (2) Equipment owned by the Federal Government shall be identified 
to indicate Federal ownership.
    (3) A physical inventory of equipment shall be taken and the 
results reconciled with the equipment records at least once every two 
years. Any differences between quantities determined by the physical 
inspection and those shown in the accounting records shall be 
investigated to determine the causes of the difference. The recipient 
shall, in connection with the inventory, verify the existence, current 
utilization, and continued need for the equipment.
    (4) A control system shall be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment. Any 
loss, damage, or theft of equipment shall be investigated and fully 
documented; if the equipment was owned by the Federal Government, the 
recipient shall promptly notify the Federal awarding agency with whose 
funds the equipment was purchased.
    (5) Adequate maintenance procedures shall be implemented to keep 
the equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures shall be established which provide 
for competition to the extent practicable and result in the highest 
possible return.
    (g) When the recipient no longer needs the equipment, the equipment 
may be used for other activities in accordance with the following 
standards. For equipment with a current per unit fair market value of 
$5000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the original Federal awarding 
agency or its successor. The amount of compensation shall be computed 
by applying the percentage of Federal participation in the cost of the 
original project or program to the current fair market value of the 
equipment. If the recipient has no need for USAID-financed equipment, 
the recipient shall request disposition instructions from the Agreement 
Officer. USAID shall determine whether the equipment can be used to 
meet the agency's requirements. If no requirement exists within USAID, 
the availability of the equipment shall be reported to the General 
Services Administration to determine whether a requirement for the 
equipment exists in other Federal agencies. The USAID Agreement Officer 
shall issue instructions to the recipient no later than 120 calendar 
days after the recipient's request and the following procedures shall 
govern:
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
shall sell the equipment and reimburse USAID an amount computed by 
applying to the sales proceeds the percentage of Federal participation 
in the cost of the original project or program. However, the recipient 
shall be permitted to deduct and retain from the Federal share $500 or 
ten percent of the proceeds, whichever is less, for the recipient's 
selling and handling expenses.
    (2) If the recipient is instructed to ship the equipment elsewhere, 
the recipient shall be reimbursed by the Federal Government by an 
amount which is computed by applying the percentage of the recipient's 
participation in the cost of the original project or program to the 
current fair market value of the equipment, plus any reasonable 
shipping or interim storage costs incurred.
    (3) If the recipient is instructed to otherwise dispose of the 
equipment, the recipient will be reimbursed by USAID for such costs 
incurred in its disposition.
    (h) USAID reserves the right to transfer the title to the Federal 
Government or to a third party named by the Federal Government when 
such third party is otherwise eligible under existing statutes. Such 
transfer shall be subject to the following standards:
    (1) The equipment shall be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (2) USAID shall issue disposition instructions within 120 calendar 
days after receipt of a final inventory. The final inventory shall list 
all equipment acquired with award funds and federally-owned equipment. 
If USAID fails to issue disposition instructions within the 120 
calendar day period, the recipient shall apply the standards of this 
section, as appropriate.
    (3) When USAID exercises its right to take title, the equipment 
shall be subject to the provisions for federally-owned equipment.


Sec. 226.35  Supplies and other expendable equipment.

    (a) Title to supplies and other expendable equipment shall vest in 
the recipient upon acquisition. If there is a 

[[Page 3754]]
residual inventory of unused supplies exceeding $5000 in total 
aggregate value upon termination or completion of the project or 
program and the supplies are not needed for any other federally-
sponsored project or program, the recipient shall retain the supplies 
for use on non-Federal sponsored activities or sell them, but shall, in 
either case, compensate the Federal Government for its share. The 
amount of compensation shall be computed in the same manner as for 
equipment.
    (b) The recipient shall not use supplies acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute as long as the 
Federal Government retains an interest in the supplies.


Sec. 226.36  Intangible property.

    (a) The recipient may copyright any work that is subject to 
copyright and was developed, or for which ownership was purchased, 
under an award. USAID reserves a royalty-free, nonexclusive and 
irrevocable right to reproduce, publish, or otherwise use the work for 
Federal purposes, and to authorize others to do so.
    (b) Recipients are subject to applicable regulations governing 
patents and inventions, including government-wide regulations issued by 
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions 
Made by Nonprofit Organizations and Small Business Firms Under 
Government Grants, Contracts and Cooperative Agreements.''
    (c) Unless waived by USAID, the Federal Government has the right 
to:
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award; and
    (2) Authorize others to receive, reproduce, publish, or otherwise 
use such data for Federal purposes.
    (d) Title to intangible property and debt instruments acquired 
under an award or subaward vests upon acquisition in the recipient. The 
recipient shall use that property for the originally-authorized 
purpose, and the recipient shall not encumber the property without 
approval of USAID. When no longer needed for the originally authorized 
purpose, disposition of the intangible property shall occur in 
accordance with the provisions of Sec. 226.34(g).


Sec. 226.37  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds shall be held in trust 
by the recipient as trustee for the beneficiaries of the project or 
program under which the property was acquired or improved. Recipients 
shall record liens or other appropriate notices of record to indicate 
that personal or real property has been acquired, improved or 
constructed with Federal funds and that use and disposition conditions 
apply to the property.

Procurement Standards


Sec. 226.40  Purpose of procurement standards.

    Sections 226.41 through 226.48 set forth standards for use by 
recipients in establishing procedures for the procurement of supplies 
and other expendable property, equipment, real property and other 
services with Federal funds. These standards are furnished to ensure 
that such materials and services are obtained in an effective manner 
and in compliance with the provisions of applicable Federal statutes 
and executive orders. No additional procurement standards or 
requirements shall be imposed by USAID upon recipients, unless 
specifically required by Federal statute or executive order or approved 
by OMB.


Sec. 226.41  Recipient responsibilities.

    The standards contained in this section do not relieve the 
recipient of the contractual responsibilities arising under its 
contract(s). The recipient is the responsible authority, without 
recourse to USAID, regarding the settlement and satisfaction of all 
contractual and administrative issues arising out of procurements 
entered into in support of an award or other agreement. This includes 
disputes, claims, protests of award, source evaluation or other matters 
of a contractual nature. Matters concerning violation of statute are to 
be referred to such Federal, State or local authority as may have 
proper jurisdiction.


Sec. 226.42  Codes of conduct.

    The recipient shall maintain written standards of conduct governing 
the performance of its employees engaged in the award and 
administration of contracts. No employee, officer, or agent shall 
participate in the selection, award, or administration of a contract 
supported by Federal funds if a real or apparent conflict of interest 
would be involved. Such a conflict would arise when the employee, 
officer, or agent, any member of his or her immediate family, his or 
her partner, or an organization which employs or is about to employ any 
of the parties indicated herein, has a financial or other interest in 
the firm selected for an award. The officers, employees, and agents of 
the recipient shall neither solicit nor accept gratuities, favors, or 
anything of monetary value from contractors, or parties to 
subagreements. However, recipients may set standards for situations in 
which the financial interest is not substantial or the gift is an 
unsolicited item of nominal value. The standards of conduct shall 
provide for disciplinary actions to be applied for violations of such 
standards by officers, employees, or agents of the recipient.


Sec. 226.43  Competition.

    All procurement transactions shall be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. 
The recipient shall be alert to organizational conflicts of interest as 
well as noncompetitive practices among contractors that may restrict or 
eliminate competition or otherwise restrain trade. In order to ensure 
objective contractor performance and eliminate unfair competitive 
advantage, contractors that develop or draft specifications, 
requirements, statements of work, invitations for bids and/or requests 
for proposals shall be excluded from competing for such procurements. 
Awards shall be made to the bidder or offeror whose bid or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, price, quality and other factors considered. Solicitations 
shall clearly establish all requirements that the bidder or offeror 
shall fulfill in order for the bid or offer to be evaluated by the 
recipient. Any and all bids or offers may be rejected when it is in the 
recipient's interest to do so.


Sec. 226.44  Procurement procedures.

    (a) All recipients shall establish written procurement procedures. 
These procedures shall provide, at a minimum, that:
    (1) Recipients avoid purchasing unnecessary items,
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government, and
    (3) Solicitations for goods and services provide for all of the 
following.
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description shall not contain features which 
unduly restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors 

[[Page 3755]]
to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of technical 
requirements in terms of functions to be performed or performance 
required, including the range of acceptable characteristics or minimum 
acceptable standards.
    (iv) The specific features of ``brand name or equal'' descriptions 
that bidders are required to meet when such items are included in the 
solicitation.
    (v) The acceptance, to the extent practicable and economically 
feasible, of products and services dimensioned in the metric system of 
measurement.
    (vi) Preference, to the extent practicable and economically 
feasible, for products and services that conserve natural resources and 
protect the environment and are energy efficient.
    (b) Positive efforts shall be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of USAID awards shall take all of the 
following steps to further this goal.
    (1) Ensure that small businesses, minority-owned firms, and women's 
business enterprises are used to the fullest extent practicable.
    (2) Make information on forthcoming opportunities available and 
arrange time frames for purchases and contracts to encourage and 
facilitate participation by small businesses, minority-owned firms, and 
women's business enterprises. To permit USAID, in accordance with the 
small business provisions of the Foreign Assistance Act of 1961, as 
amended, to give United States small business firms an opportunity to 
participate in supplying commodities and services procured under the 
award, the recipient shall to the maximum extent possible provide the 
following information to the Office of Small Disadvantaged Business 
Utilization (OSDBU/MRC), USAID Washington, DC 20523, at least 45 days 
prior to placing any order or contract in excess of the small purchase 
threshold:
    (i) Brief general description and quantity of goods or services;
    (ii) Closing date for receiving quotations, proposals or bids; and
    (iii) Address where solicitations or specifications can be 
obtained.
    (3) Consider in the contract process whether firms competing for 
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
    (4) Encourage contracting with consortiums of small businesses, 
minority-owned firms and women's business enterprises when a contract 
is too large for one of these firms to handle individually.
    (5) Use the services and assistance, as appropriate, of such 
organizations as the Small Business Administration and the Department 
of Commerce's Minority Business Development Agency in the solicitation 
and utilization of small businesses, minority-owned firms and women's 
business enterprises.
    (c) The type of procuring instruments used (e.g., fixed price 
contracts, cost reimbursable contracts, purchase orders, and incentive 
contracts) shall be determined by the recipient but shall be 
appropriate for the particular procurement and for promoting the best 
interest of the program or project involved. The ``cost-plus-a-
percentage-of-cost'' or ``percentage of construction cost'' methods of 
contracting shall not be used.
    (d) Contracts shall be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration shall be 
given to such matters as contractor integrity, record of past 
performance, financial and technical resources or accessibility to 
other necessary resources. In certain circumstances, contracts with 
certain parties are restricted by agencies' implementation of E.O.s 
12549 and 12689, ``Debarment and Suspension.''
    (e) Recipients shall, on request, make available for USAID, pre-
award review and procurement documents, such as request for proposals 
or invitations for bids, independent cost estimates, etc., when any of 
the following conditions apply.
    (1) A recipient's procurement procedures or operation fails to 
comply with the procurement standards in this part.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403(11) and is to be awarded without 
competition or only one bid or offer is received in response to a 
solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a 
contract or increases the contract amount by more than the amount of 
the small purchase threshold.


Sec. 226.45  Cost and price analysis.

    Some form of cost or price analysis shall be made and documented in 
the procurement files in connection with every procurement action. 
Price analysis may be accomplished in various ways, including the 
comparison of price quotations submitted, market prices and similar 
indicia, together with discounts. Cost analysis is the review and 
evaluation of each element of cost to determine reasonableness, 
allocability and allowability.


Sec. 226.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold shall include the following at a minimum:
    (a) Basis for contractor selection,
    (b) Justification for lack of competition when competitive bids or 
offers are not obtained, and
    (c) Basis for award cost or price.


Sec. 226.47  Contract administration.

    A system for contract administration shall be maintained to ensure 
contractor conformance with the terms, conditions and specifications of 
the contract and to ensure adequate and timely follow up of all 
purchases. Recipients shall evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.


Sec. 226.48  Contract provisions.

    The recipient shall include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all 
contracts. The following provisions shall also be applied to 
subcontracts.
    (a) Contracts in excess of the small purchase threshold shall 
contain contractual provisions or conditions that allow for 
administrative, contractual, or legal remedies in instances in which a 
contractor violates or breaches the contract terms, and provide for 
such remedial actions as may be appropriate.
    (b) All contracts in excess of the small purchase threshold shall 
contain suitable provisions for termination by the recipient, including 
the manner by which termination shall be effected and the basis for 
settlement. In addition, such contracts shall describe conditions under 
which the contract may be terminated for default as well as conditions 
where the contract may be terminated because of circumstances beyond 
the control of the contractor.
    (c) Except as otherwise required by statute, an award that requires 
the contracting (or subcontracting) for construction or facility 
improvements shall provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction 

[[Page 3756]]
contract or subcontract exceeds $100,000. For those contracts or 
subcontracts exceeding $100,000, the USAID Agreement Officer may accept 
the bonding policy and requirements of the recipient, provided that 
USAID determines that the Federal Government's interest is adequately 
protected. In making this determination for contract or subcontracts to 
be performed overseas, the Agreement Officer shall take into 
consideration any established local practices relating to security. If 
such a determination has not been made, the minimum requirements shall 
be as follows.
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' shall consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder shall, upon acceptance 
of its bid, execute such contractual documents as may be required 
within the time specified.
    (2) A performance bond on the part of the contractor for 100 
percent of the contract price. A ``performance bond'' is one executed 
in connection with a contract to secure fulfillment of all the 
contractor's obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required, the bonds shall be obtained from 
companies holding certificates of authority as acceptable sureties 
pursuant to 31 CFR part 223, ``Surety Companies Doing Business with the 
United States.''
    (d) All negotiated contracts (except those for less than the small 
purchase threshold) awarded by recipients shall include a provision to 
the effect that the recipient, USAID, the Comptroller General of the 
United States, or any of their duly authorized representatives, shall 
have access to any books, documents, papers and records of the 
contractor which are directly pertinent to a specific program for the 
purpose of making audits, examinations, excerpts and transcriptions.
    (e) All contracts, including small purchases, awarded by recipients 
and their contractors shall contain the procurement provisions of 
Appendix A to this part, as applicable. Whenever a provision is 
required to be inserted in a contract under an agreement, the recipient 
shall insert a statement in the contract that in all instances where 
the U.S. Government or USAID is mentioned, the recipient's name shall 
be substituted.


Sec. 226.49  USAID-Specific procurement requirements

    Procurement requirements which are applicable to USAID because of 
statute and regulation are in Subpart G.

Reports and Records


Sec. 226.50  Purpose of reports and records.

    Sections 226.51 through 226.53 establish the procedures for 
monitoring and reporting on the recipient's financial and program 
performance and the necessary standard reporting forms. They also set 
forth record retention requirements.


Sec. 226.51  Monitoring and reporting program performance.

    (a) Recipients are responsible for managing and monitoring each 
project, program, subaward, function or activity supported by the 
award. Recipients shall monitor subawards to ensure subrecipients have 
met the audit requirements as delineated in Section 226.26.
    (b) The terms and conditions of the agreement will prescribe the 
frequency with which the performance reports shall be submitted. Except 
as provided in paragraph 226.51(f), performance reports will not be 
required more frequently than quarterly or, less frequently than 
annually. Annual reports shall be due 90 calendar days after the award 
year; quarterly or semi-annual reports shall be due 30 days after the 
reporting period. USAID may require annual reports before the 
anniversary dates of multiple year awards in lieu of these 
requirements. The final performance reports are due 90 calendar days 
after the expiration or termination of the award.
    (c) If inappropriate, a final technical or performance report shall 
not be required after completion of the project.
    (d) Performance reports shall generally contain, for each award, 
brief information on each of the following:
    (1) A comparison of actual accomplishments with the goals and 
objectives established for the period, the findings of the 
investigator, or both. Whenever appropriate and the output of programs 
or projects can be readily quantified, such quantitative data should be 
related to cost data for computation of unit costs.
    (2) Reasons why established goals were not met, if appropriate.
    (3) Other pertinent information including, when appropriate, 
analysis and explanation of cost overruns or high unit costs.
    (e) Recipients shall submit the original and two copies of 
performance reports.
    (f) Recipients shall immediately notify USAID of developments that 
have a significant impact on the award-supported activities. Also, 
notification shall be given in the case of problems, delays, or adverse 
conditions which materially impair the ability to meet the objectives 
of the award. This notification shall include a statement of the action 
taken or contemplated, and any assistance needed to resolve the 
situation.
    (g) USAID may make site visits, as needed.
    (h) USAID shall comply with clearance requirements of 5 CFR part 
1320 when requesting performance data from recipients.


Sec. 226.52  Financial reporting.

    (a) The following forms are used for obtaining financial 
information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report.
    (i) USAID will require recipients to use either the SF-269 or SF-
269A to report the status of funds for all nonconstruction projects or 
programs. The type of form required will be established in the award. 
USAID may, however, have the option of not requiring the SF-269 or SF-
269A when the SF-270, Request for Advance or Reimbursement, or SF-272, 
Report of Federal Cash Transactions, is determined to provide adequate 
information to meet its needs, except that a final SF-269 or SF-269A 
shall be required at the completion of the project when the SF-270 is 
used only for advances.
    (ii) The type of reporting required will be established in the 
agreement. If USAID requires accrual information and the recipient's 
accounting records are not normally kept on the accrual basis, the 
recipient shall not be required to convert its accounting system, but 
shall develop such accrual information through best estimates based on 
an analysis of the documentation on hand.
    (iii) USAID will determine the frequency of the Financial Status 
Report for each project or program, considering the size and complexity 
of the particular project or program. The frequency of reports will be 
established in the agreement. However, the report shall not be required 
more frequently than quarterly or less frequently than annually. A 
final report shall be required at the completion of the agreement.
    (iv) Recipients shall submit the SF-269 or SF-269A (an original and 
two 

[[Page 3757]]
copies) no later than 30 days after the end of each specified reporting 
period for quarterly and semi-annual reports, and 90 calendar days for 
annual and final reports. Extensions of reporting due dates may be 
approved by USAID upon request of the recipient.
    (2) SF-272, Report of Federal Cash Transactions.
    (i) When funds are advanced to recipients USAID shall require each 
recipient to submit the SF-272 and, when necessary, its continuation 
sheet, SF-272a. USAID shall use this report to monitor cash advanced to 
recipients and to obtain disbursement information for each agreement 
with the recipients.
    (ii) USAID may require forecasts of Federal cash requirements in 
the ``Remarks'' section of the report.
    (iii) When practical and deemed necessary, USAID may require 
recipients to report in the ``Remarks'' section the amount of cash 
advances received in excess of three days. Recipients shall provide 
short narrative explanations of actions taken to reduce the excess 
balances.
    (iv) Recipients shall be required to submit not more than the 
original and two copies of the SF-272 15 calendar days following the 
end of each quarter. USAID may require a monthly report from those 
recipients receiving advances totaling $1 million or more per year.
    (v) USAID may waive the requirement for submission of the SF-272 
for any one of the following reasons:
    (A) When monthly advances do not exceed $25,000 per recipient, 
provided that such advances are monitored through other forms contained 
in this section;
    (B) If, in USAID's opinion, the recipient's accounting controls are 
adequate to minimize excessive Federal advances; or,
    (C) When the electronic payment mechanisms provide adequate data.
    (b) When USAID needs additional information or more frequent 
reports, the following shall be observed.
    (1) When additional information is needed to comply with 
legislative requirements, USAID shall issue instructions to require 
recipients to submit such information under the ``Remarks'' section of 
the reports.
    (2) When USAID determines that a recipient's accounting system does 
not meet the standards in Section 226.21, additional pertinent 
information to further monitor awards may be obtained upon written 
notice to the recipient until such time as the system is brought up to 
standard. USAID, in obtaining this information, shall comply with 
report clearance requirements of 5 CFR part 1320.
    (3) USAID may accept the identical information from the recipients 
in machine readable format or computer printouts or electronic outputs 
in lieu of prescribed formats.
    (4) USAID may provide computer or electronic outputs to recipients 
when such expedites or contributes to the accuracy of reporting.


Sec. 226.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. USAID shall not impose any 
other record retention or access requirements upon recipients.
    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award shall be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report, as authorized by USAID. The only exceptions are the 
following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the 3-year period, the records shall be retained until 
all litigation, claims or audit findings involving the records have 
been resolved and final action taken.
    (2) Records for real property and equipment acquired with Federal 
funds shall be retained for 3 years after final disposition.
    (3) When records are transferred to or maintained by USAID, the 3-
year retention requirements is not applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in paragraph 226.53(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by USAID.
    (d) USAID shall request transfer of certain records to its custody 
from recipients when it determines that the records possess long term 
retention value. However, in order to avoid duplicate recordkeeping, 
USAID may make arrangements for recipients to retain any records that 
are continuously needed for joint use.
    (e) USAID, the Inspector General, Comptroller General of the United 
States, or any of their duly authorized representatives, have the right 
of timely and unrestricted access to any books, documents, papers, or 
other records of recipients that are pertinent to the awards, in order 
to make audits, examinations, excerpts, transcripts and copies of such 
documents. This right also includes timely and reasonable access to a 
recipient's personnel for the purpose of interview and discussion 
related to such documents. The rights of access in this paragraph are 
not limited to the required retention period, but shall last as long as 
records are retained.
    (f) Unless required by statute, USAID will not place restrictions 
on recipients that limit public access to the records of recipients 
that are pertinent to an award, except when USAID can demonstrate that 
such records shall be kept confidential and would have been exempted 
from disclosure pursuant to the Freedom of Information Act (5 U.S.C. 
552) if the records had belonged to USAID.
    (g) Indirect cost rate proposals, cost allocations plans, etc. 
Paragraphs (g)(1) and (g)(2) of this section apply to the following 
types of documents, and their supporting records: indirect cost rate 
computations or proposals, cost allocation plans, and any similar 
accounting computations of the rate at which a particular group of 
costs is chargeable (such as computer usage chargeback rates or 
composite fringe benefit rates).
    (1) If submitted for negotiation. If the recipient submits to the 
Federal awarding agency or the subrecipient submits to the recipient 
the proposal, plan, or other computation to form the basis for 
negotiation of the rate, then the 3-year retention period for its 
supporting records starts on the date of such submission.
    (2) If not submitted for negotiation. If the recipient is not 
required to submit to the Federal awarding agency or the subrecipient 
is not required to submit to the recipient the proposal, plan, or other 
computation for negotiation purposes, then the 3-year retention period 
for the proposal, plan, or other computation and its supporting records 
starts at the end of the fiscal year (or other accounting period) 
covered by the proposal, plan, or other computation.

Suspension, Termination and Enforcement


Sec. 226.60  Purpose of suspension, termination and enforcement.

    Sections 226.61 and 226.62 set forth uniform suspension, 
termination and enforcement procedures.


Sec. 226.61  Suspension and termination.

    (a) Awards may be terminated (or, with respect to paragraphs (a) 
(1) and (3) of this section, suspended) in whole or in part if any of 
the circumstances stated in paragraphs (a)(1) through (4) of this 
section apply.

[[Page 3758]]

    (1) By USAID, if a recipient materially fails to comply with the 
terms and conditions of an award.
    (2) By USAID with the consent of the recipient, in which case the 
two parties shall agree upon the termination conditions, including the 
effective date and, in the case of partial termination, the portion to 
be terminated.
    (3) If at any time USAID determines that continuation of all or 
part of the funding for a program should be suspended or terminated 
because such assistance would not be in the national interest of the 
United States or would be in violation of an applicable law, then USAID 
may, following notice to the recipient, suspend or terminate the award 
in whole or in part and prohibit the recipient from incurring 
additional obligations chargeable to the award other than those costs 
specified in the notice of suspension. If a suspension is effected and 
the situation causing the suspension continues for 60 days or more, 
then USAID may terminate the award in whole or in part on written 
notice to the recipient and cancel any portion of the award which has 
not been disbursed or irrevocably committed to third parties.
    (4) By the recipient upon sending to USAID written notification 
setting forth the reasons for such termination, the effective date, 
and, in the case of partial termination, the portion to be terminated. 
However, if USAID determines in the case of partial termination that 
the reduced or modified portion of the award will not accomplish the 
purposes for which the grant was made, it may terminate the award in 
its entirety under paragraph (a)(1), (a)(2) or (a)(3) of this section.
    (b) If costs are allowed under an award, the responsibilities of 
the recipient referred to in paragraph 226.71(a), including those for 
property management as applicable, shall be considered in the 
termination of the award, and provision shall be made for continuing 
responsibilities of the recipient after termination, as appropriate.


Sec. 226.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of 
award, USAID may, in addition to imposing any of the special conditions 
outlined in Sec. 226.14, take one or more of the following actions, as 
appropriate in the circumstances.
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by USAID.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. The recipient may appeal, in accordance 
with Subpart F, any action taken by USAID on which a dispute exists and 
a decision by the Agreement Officer has been obtained. There is no 
right to a hearing on such an appeal.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a 
suspension or after termination of an award are not allowable unless 
USAID expressly authorizes them in the notice of suspension or 
termination or subsequently. Other recipient costs during suspension or 
after termination which are necessary and not reasonably avoidable are 
allowable if:
    (1) The costs result from obligations which were properly incurred 
by the recipient before the effective date of suspension or 
termination, are not in anticipation of it, and in the case of a 
termination, are noncancellable, and
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.
    (d) Relationship to debarment and suspension. The enforcement 
remedies identified in this section, including suspension and 
termination, do not preclude a recipient from being subject to 
debarment and suspension under E.O.s 12549 and 12689 and USAID's 
implementing regulations (see 22 CFR Part 208).

Subpart D--After-the-Award Requirements


Sec. 226.70  Purpose.

    Sections 226.71 through 226.73 contain closeout procedures and 
other procedures for subsequent disallowances and adjustments.


Sec. 226.71  Closeout procedures.

    (a) Recipients shall submit, within 90 calendar days after the date 
of completion of the award, all financial, performance, and other 
reports as required by the terms and conditions of the award. USAID may 
approve extensions when requested by the recipient.
    (b) Unless USAID authorizes an extension, a recipient shall 
liquidate all obligations incurred under the award not later than 90 
calendar days after the funding period or the date of completion as 
specified in the terms and conditions of the award or in agency 
implementing instructions.
    (c) USAID will make prompt payments to a recipient for allowable 
reimbursable costs under the award being closed out.
    (d) The recipient shall promptly refund any balances of unobligated 
cash that USAID has advanced or paid and that is not authorized to be 
retained by the recipient for use in other projects. OMB Circular A-129 
governs unreturned amounts that become delinquent debts.
    (e) When authorized by the terms and conditions of the award, USAID 
shall make a settlement for any upward or downward adjustments to the 
Federal share of costs after closeout reports are received.
    (f) The recipient shall account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 226.31 through 226.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, USAID retains the right to recover an appropriate 
amount after fully considering the recommendations on disallowed costs 
resulting from the final audit.


Sec. 226.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of USAID to disallow costs and recover funds on the 
basis of a later audit or other review.
    (2) The obligation of the recipient to return any funds due as a 
result of later refunds, corrections, or other transactions.
    (3) Audit requirements in Secs. 226.26.
    (4) Property management requirements in Secs. 226.31 through 
226.37.
    (5) Records retention as required in Sec. 226.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
USAID and the recipient, provided the responsibilities of the recipient 
referred to in paragraph 226.73(a), including those for property 
management as applicable, are considered and provisions made for 
continuing responsibilities of the recipient, as appropriate.

[[Page 3759]]



Sec. 226.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. 
USAID reserves the right to require refund by the recipient of any 
amount which USAID determines to have been expended for purposes not in 
accordance with the terms and condition of the award, including but not 
limited to costs which are not allowable in accordance with the 
applicable Federal cost principles or other terms and conditions of the 
award. If not paid within a reasonable period after the demand for 
payment, USAID may reduce the debt by:
    (1) Making an administrative offset against other requests for 
reimbursements,
    (2) Withholding advance payments otherwise due to the recipient, or
    (3) Taking other action permitted by law.
    (b) Except as otherwise provided by law, USAID will charge interest 
on an overdue debt in accordance with 4 CFR Chapter II, ``Federal 
Claims Collection Standards.''

Subpart E--Additional Provisions For Awards to Commercial 
Organizations


Sec. 226.80  Scope of subpart.

    This subpart contains additional provisions that apply to awards to 
commercial organizations. These provisions supplement and make 
exceptions for awards to commercial organizations from other provisions 
of this part.


Sec. 226.81  Prohibition against profit.

    No funds shall be paid as profit to any recipient that is a 
commercial organization. Profit is any amount in excess of allowable 
direct and indirect costs.


Sec. 226.82  Program income.

    The additional costs alternative described in Sec. 226.24(b)(1) may 
not be applied to program income earned by a commercial organization.

Subpart F--Miscellaneous


Sec. 226.90  Disputes.

    (a) Any dispute under or relating to a grant or agreement shall be 
decided by the USAID Agreement Officer. The Agreement Officer shall 
furnish the recipient a written copy of the decision.
    (b) Decisions of the USAID Agreement Officer shall be final unless, 
within 30 days of receipt of the decision, the grantee appeals the 
decision to USAID's Deputy Assistant Administrator for Management, 
USAID, Washington, DC 20523. Appeals must be in writing with a copy 
concurrently furnished to the Agreement Officer.
    (c) In order to facilitate review on the record by the Deputy 
Assistant Administrator for Management, the recipient shall be given an 
opportunity to submit written evidence in support of its appeal. No 
hearing will be provided.
    (d) Decisions by the Deputy Assistant Administrator for Management 
shall be final.

Subpart G--USAID-Specific Requirements


Sec. 226.1001  Eligibility rules for goods and services. [Reserved]


Sec. 226.1002  Local cost financing. [Reserved]


Sec. 226.1003  Air transportation. [Reserved]


Sec. 226.1004  Ocean shipment of goods. [Reserved]

Appendix A to Part 226--Contract Provisions

    All contracts, awarded by a recipient including small purchases, 
shall contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts to be performed 
in the United States, or to be performed with employees who were 
recruited in the United States, shall contain a provision requiring 
compliance with E.O. 11246, ``Equal Employment Opportunity,'' as 
amended by E.O. 11375, ``Amending Executive Order 11246 Relating to 
Equal Employment Opportunity,'' and as supplemented by regulations 
at 41 CFR Chapter 60, ``Office of Federal Contract Compliance 
Programs, Equal Employment Opportunity, Department of Labor,'' to 
the extent required by the foregoing.
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subawards in excess of $2,000 for 
construction or repair to be performed in the United States awarded 
by recipients and subrecipients shall include a provision for 
compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C. 874), 
as supplemented by Department of Labor regulations (29 CFR part 3, 
``Contractors and Subcontractors on Public Building or Public Work 
Financed in Whole or in Part by Loans or Grants from the United 
States''). The Act provides that each contractor or subrecipient 
shall be prohibited from inducing, by any means, any person employed 
in the construction, completion, or repair of public work, to give 
up any part of the compensation to which he is otherwise entitled. 
The recipient shall report all suspected or reported violations to 
the Federal awarding agency.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction, 
alteration, and/or repair contracts to be performed in the United 
States awarded by the recipients and subrecipients of more than 
$2,000 shall include a provision for compliance with the Davis-Bacon 
Act (40 U.S.C. 276a to a-7) and as supplemented by Department of 
Labor regulations (29 CFR part 5, ``Labor Standards Provisions 
Applicable to Contracts Governing Federally Financed and Assisted 
Construction''). Under this Act, contractors shall be required to 
pay wages to laborers and mechanics at a rate not less than the 
minimum wages specified in a wage determination made by the 
Secretary of Labor. In addition, contractors shall be required to 
pay wages not less than once a week. The recipient shall place a 
copy of the current prevailing wage determination issued by the 
Department of Labor in each solicitation and the award of a contract 
shall be conditioned upon the acceptance of the wage determination. 
The recipient shall report all suspected or reported violations to 
the Federal awarding agency.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in 
excess of $2000 for construction contracts to be performed in the 
United States and in excess of $2500 for other such contracts that 
involve the employment of mechanics or laborers shall include a 
provision for compliance with sections 102 and 107 of the Contract 
Work Hours and Safety Standards Act (40 U.S.C. 327-333), as 
supplemented by Department of Labor regulations (29 CFR part 5). 
Under section 102 of the Act, each contractor shall be required to 
compute the wages of every mechanic and laborer on the basis of a 
standard work week of 40 hours. Work in excess of the standard work 
week is permissible provided that the worker is compensated at a 
rate of not less than 1\1/2\ times the basic rate of pay for all 
hours worked in excess of 40 hours in the work week. Section 107 of 
the Act is applicable to construction work and provides that no 
laborer or mechanic shall be required to work in surroundings or 
under working conditions which are unsanitary, hazardous or 
dangerous. These requirements do not apply to the purchases of 
supplies or materials or articles ordinarily available on the open 
market, or contracts for transportation or transmission of 
intelligence.
    5. Rights to Inventions Made Under a Contract or Agreement--
Contracts or agreements for the performance of experimental, 
developmental, or research work shall provide for the rights of the 
Federal Government and the recipient in any resulting invention in 
accordance with 37 CFR part 401, ``Rights to Inventions Made by 
Nonprofit Organizations and Small Business Firms Under Government 
Grants, Contracts and Cooperative Agreements,'' and any implementing 
regulations issued by the awarding agency.
    6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--
Contracts and subawards of amounts in excess of $100,000 to be 
performed in the United States shall contain a provision that 
requires the recipient to agree to comply with all applicable 
standards, orders or regulations issued pursuant to the Clean Air 
Act (42 

[[Page 3760]]
U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as 
amended (33 U.S.C. 1251 et seq.). Violations shall be reported to 
the Federal awarding agency and the Regional Office of the 
Environmental Protection Agency (EPA).
    7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors 
who apply or bid for an award exceeding $100,000 shall file the 
required certification. Each tier certifies to the tier above that 
it will not and has not used Federal appropriated funds to pay any 
person or organization for influencing or attempting to influence an 
officer or employee of any agency, a member of Congress, officer or 
employee of Congress, or an employee of a member of Congress in 
connection with obtaining any Federal contract, grant or any other 
award covered by 31 U.S.C. 1352. Each tier shall also disclose any 
lobbying with non-Federal funds that takes place in connection with 
obtaining any Federal award. Such disclosures are forwarded from 
tier to tier up to the recipient.
    8. Debarment and Suspension (E.O.s 12549 and 12689)--Certain 
contracts shall not be made to parties listed on the nonprocurement 
portion of the General Services Administration's ``Lists of Parties 
Excluded from Federal Procurement or Nonprocurement Programs'' in 
accordance with E.O.s 12549 and 12689, ``Debarment and Suspension.'' 
This list contains the names of parties debarred, suspended, or 
otherwise excluded by agencies, and contractors declared ineligible 
under statutory or regulatory authority other than E.O. 12549. 
Contractors with awards that exceed the small purchase threshold 
shall provide the required certification regarding its exclusion 
status and that of its principals.
    9. Contracts which require performance outside the United States 
shall contain a provision requiring Worker's Compensation Insurance 
(42 U.S.C. 1651, et seq.). As a general rule, Department of Labor 
waivers will be obtained for persons employed outside the United 
States who are not United States citizens or residents provided 
adequate protection will be given such persons. The recipient should 
refer questions on this subject to the USAID Agreement Officer.
* * * * *
    Dated: January 6, 1995.
Michael D. Sherwin,
Deputy Assistant Administrator for Management.
[FR Doc. 95-975 Filed 1-18-95; 8:45 am]
BILLING CODE 6116-01-M