[Federal Register Volume 60, Number 24 (Monday, February 6, 1995)]
[Notices]
[Pages 7104-7105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2872]




[[Page 7103]]

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Part III





Office of Management and Budget





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Cost Principles for Educational Institutions; Proposed Revisions to 
Circular A-21 and Proposed Recission of Circular A-88; Notices

  Federal Register / Vol. 60, No. 24 / Monday, February 6, 1995 / 
Notices   
[[Page 7104]] 

OFFICE OF MANAGEMENT AND BUDGET


Cost Principles for Educational Institutions

AGENCY: Office of Management and Budget.

ACTION: Proposed revision of OMB Circular A-21.

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SUMMARY: The Office of Management and Budget (OMB) proposes to revise 
OMB Circular A-21, ``Cost Principles for Educational Institutions'' by 
extending the applicability of certain Cost Accounting Standards Board 
(CASB) Cost Accounting Standards (CAS) and the CASB Disclosure 
Statement for sponsored agreements received by certain educational 
institutions, and amending the definition of equipment at educational 
institutions receiving Federal funds and covered by this Circular.

DATES: Comments should be received on or before March 8, 1995.

ADDRESSES: Financial Standards and Reporting Branch, Office of Federal 
Financial Management, Office of Management and Budget, Room 6025, New 
Executive Office Building, Washington, DC 20503.

FOR FURTHER INFORMATION CONTACT: Federal agencies should contact the 
Financial Standards and Reporting Branch, Office of Management and 
Budget, (202) 395-3993. Non-Federal organizations should contact the 
organization's cognizant Federal funding agency.

SUPPLEMENTARY INFORMATION:

A. Purpose of Circular A-21

    Office of Management and Budget (OMB) Circular A-21, ``Cost 
Principles for Educational Institutions,'' establishes principles for 
determining costs applicable to Federal grants, contracts, and other 
sponsored agreements with educational institutions.

B. Recent Prior Revisions

    Circular A-21 was last amended in 1991 and 1993. The 1991 revisions 
excluded certain specified costs from reimbursements paid to colleges 
and universities receiving Federal awards and placed a limit on the 
amount of reimbursable administrative costs. That revision also 
required a certification to accompany each indirect cost proposal. The 
1991 revision also added an exhibit containing a list of colleges and 
universities subject to Section J.9.F of Circular A-21. The 1993 
revisions further clarified and standardized the Circular's principles 
for determining applicable costs.

C. Current revisions

    The proposed revision incorporates the cost accounting standards 
for educational institutions published by the Cost Accounting Standards 
Board (CASB) on November 8, 1994, in the Federal Register (59 FR 
55770), and extends the applicability of these standards to all 
sponsored agreements subject to this Circular (See Sections A.3 and 
B.2. of Circular A-21). This proposed revision also extends the 
applicability of the CASB Disclosure Statement (Form CASB DS-2 (REV 10/
94)), published by the CASB on November 8, 1994, in the Federal 
Register (59 FR 55758), to such sponsored agreements. This proposed 
revision is reflected as Section C.10.a-e of Circular A-21.
    By applying these CASB Standards and the CASB Disclosure Statement 
to sponsored agreements, OMB will: promote uniformity and consistency 
in the cost accounting practices followed by educational institutions 
when they estimate, accumulate, and report costs under sponsored 
agreements; facilitate the award and administration process; and, 
reduce the potential for disagreements concerning the cost accounting 
practices used to estimate, accumulate and report the costs of 
sponsored agreements.
    On October 8, 1991, the CASB published a staff discussion paper (56 
FR 50737). After consideration of the public comments received in 
response to the discussion paper, the CASB published an Advanced Notice 
of Proposed Rulemaking on June 2, 1992 (57 FR 23189). On December 21, 
1992, after consideration of the public comments received in response 
to the advanced notice, the CASB published a Notice of Proposed 
Rulemaking (57 FR 60503). Seventy sets of public comments were received 
in response to the proposed rule and were fully considered. On November 
8, 1994, the CASB published a Final Rule (59 FR 55746).
    On July 26, 1993, OMB, in the preamble to a proposal making certain 
final revisions to Circular A-21 (58 FR 39997), stated that 
``Consistent with the Board's stated expectations, OMB plans to extend 
the CASB's regulations and Standards applicable to educational 
institutions to all awards (contracts and grants) made to institutions 
that are major recipients of Federal research funds.'' At this time, 
public comments are invited on applying to sponsored agreements the 
CASB's Disclosure Statement Form, CASB DS-2, and the cost accounting 
standards (CAS) pertaining to educational institutions, contained in 
Chapter 99 of Title 48 of the Code of Federal Regulations (48 CFR 
Chapter 99), as amended, published on November 8, 1994 (59 FR 55746), 
effective January 9, 1995.
    This proposed revision also amends the definition of equipment in 
Section J.16. by increasing the monetary threshold from $500 to $5000. 
This proposed revision conforms Circular A-21 to Circular A-110, 
``Uniform Administrative Requirements for Grants with Institutions of 
Higher Education, Hospitals, and Non-Profit Organizations,'' published 
in the Federal Register (58 FR 62992) on November 29, 1993, and lessens 
the administrative burden associated with accounting for property.
    In today's edition of the Federal Register, OMB is also proposing 
for 60 days of public comment a set of proposed revisions to Circular 
A-21 on which separate public comment is especially invited.
John B. Arthur,
Associate Director for Administration.

    Circular A-21 is proposed to be revised as follows:
    Amend Section ``C, Basic Considerations,'' by adding a new 
paragraph 10 as follows:
    10. Cost Accounting Standards and Disclosure.
    a. Applicability of Cost Accounting Standards Board's Disclosure 
Statement and Standards. The Cost Accounting Standards Board's (CASB) 
Disclosure Statement Form, CASB DS-2, and the cost accounting standards 
(CAS) pertaining to educational institutions contained in Chapter 99 of 
Title 48 of the Code of Federal Regulations (48 CFR Chapter 99), as 
amended, are incorporated herein by reference and are to be applied to 
sponsored agreements as specified below.
    (1) Disclosure Statement.
    (i) Educational institutions subject to this Circular shall 
disclose their cost accounting practices by filing a Disclosure 
Statement Form, CASB DS-2, which is reproduced in Appendix A, whenever 
the total awards received under sponsored agreements during the prior 
fiscal year equals or exceeds $25 million. An educational institution 
may meet the Disclosure Statement submission requirement by submitting 
the statement for each component unit that receives awards that in the 
aggregate equal or exceed $25 million under sponsored agreements, with 
the approval of the cognizant Federal agency responsible for indirect 
cost rate negotiations. [[Page 7105]] 
    (ii) Required Disclosure Statements shall be filed with the 
cognizant Federal agency responsible for indirect cost rate 
negotiations within three months after the end of the fiscal year in 
which the educational institution meets the criteria in (i), except for 
educational institutions that establish a specific due date in 
accordance with paragraph (iii), or that are required to file a 
Disclosure Statement earlier under the terms and conditions of a CAS-
covered contract.
    (iii) Prior to December 31, 1995, those educational institutions 
meeting the criteria of (i) for the most recently completed fiscal year 
occurring during 1994, the cognizant Federal agency and the educational 
institution should establish, in writing, a specific due date for the 
first time submission of the required Disclosure Statement, as follows:
    (a) Educational institutions listed as number 1-20 in Exhibit A of 
this Circular, or unlisted educational institutions that received more 
than $50 million under sponsored agreements during a fiscal year ending 
in calendar year 1994, shall file the required Disclosure Statement no 
later than June 30, 1996.
    (b) Educational institutions listed as numbers 21-50 in Exhibit A 
of this Circular, or unlisted educational institutions that receive 
more than $25 but less than $50 million under sponsored agreements 
during a fiscal year ending in calendar year 1994, shall file the 
required Disclosure Statement no later than December 31, 1996.
    (c) Educational institutions listed as numbers 51-99 in Exhibit A 
of this Circular shall file the required Disclosure Statement no later 
than June 30, 1997.
    (iv) Amendments and revisions. Educational institutions are 
responsible for maintaining accurate Disclosure Statements and 
complying with disclosed practices. Educational institutions must amend 
required Disclosure Statements when disclosed practices are changed to 
comply with a new or modified Standard, or when practices are changed 
with or without agreement of the cognizant Federal agency. Amendments 
and revisions to Disclosure Statements may be submitted at any time and 
may be proposed by either the institution or the cognizant Federal 
agency. Resubmission of complete, updated Disclosure Statements is 
discouraged except when extensive changes require it to assist the 
review process.
    (2) Cost Accounting Standards (CAS). An educational institution's 
cost accounting practices used to estimate, accumulate and report costs 
for sponsored agreements shall conform with the CAS specified in Part 
9905 (48 CFR Part 9905), except for contracts incorporating the full 
CAS coverage specified in Part 9904 (48 CFR Part 9904). Those CAS in 
Part 9904 are not incorporated in this Circular. The applicability of 
the CAS under Circular A-21 will not be effective on the effective date 
specified in 9905.506-63 (January 9, 1995).
    b. Cost and Funding Adjustments. Cost, price, and funding 
adjustments shall be made by the cognizant Federal agency if an 
institution fails to comply with an applicable CAS or fails to 
consistently follow its established or disclosed cost accounting 
practices when:
    (1) Estimating costs in contract proposals and the resultant 
contract provides funds materially in excess of the amounts that would 
have been provided had the estimated costs been based on compliant cost 
accounting practices. In such cases, the contract prices or cost 
allowances shall be appropriately adjusted.
    (2) Accumulating and reporting costs under a sponsored agreement. 
In such cases, the institution shall correct the noncompliance by 
changing to a compliant cost accounting practice and by adjusting the 
accumulated and reported costs to reflect a compliant practice.
    c. Overpayments. Excess amounts paid in the aggregate by the 
Federal Government under sponsored agreements due to a noncompliant 
cost accounting practice used to estimate, accumulate, or report costs 
shall be credited or refunded, as deemed appropriate by the cognizant 
Federal agency. Interest applicable to the excess amounts paid in the 
aggregate during the period of noncompliance shall also be determined 
and collected in accordance with applicable Federal agency regulations.
    d. Compliant cost accounting practice changes. Changes from one 
compliant cost accounting practice to another compliant practice that 
are approved by the cognizant Federal agency may require cost or 
funding adjustments if deemed appropriate by the cognizant Federal 
agency.
    e. Responsibilities. The cognizant Federal agency shall:
    (1) Determine cost or funding adjustments for all sponsored 
agreements in the aggregate on behalf of the Federal Government. 
Actions of the cognizant Federal agency official in making cost or 
funding adjustment determinations shall be coordinated with all 
affected Federal agencies to the extent necessary.
    (2) Prescribe regulations and establish internal procedures to 
promptly determine on behalf of the Federal Government that a 
Disclosure Statement adequately discloses the educational institution's 
cost accounting practices and that the disclosed practices are 
compliant with applicable Cost Accounting Standards and the 
requirements of this Circular. The determination of adequacy and 
compliance shall be distributed to all affected agencies.
    Amend Section J, paragraph 16.a.(1), ``General Provisions for 
Selected Items of Cost,'' to read as follows:
    ``Equipment'' means an article of nonexpendable, tangible personal 
property having a useful life of more than one year and an acquisition 
cost which exceeds the lesser of (a) the capitalization level 
established by the organization for financial statement purposes, or 
(b) $5000.

[FR Doc. 95-2872 Filed 2-3-95; 8:45 am]
BILLING CODE 3110-01-P