[Federal Register Volume 60, Number 143 (Wednesday, July 26, 1995)]
[Rules and Regulations]
[Pages 38241-38256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18157]



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DEPARTMENT OF JUSTICE

Office of Justice Programs

28 CFR Part 70

[OJP No. 1004; AG Order No. 1980-95]
RIN 1121-AA18


Uniform Administrative Requirements for Grants and Agreements 
With Institutions of Higher Education, Hospitals and Other Non-Profit 
Organizations

January 23, 1995.
AGENCY: Department of Justice.

ACTION: Final rule.

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SUMMARY: On November 29, 1993, the Office of Management and Budget 
(OMB) published a revision of OMB Circular A-110. The Circular is 
applicable to awards made by Federal agencies and subawards made by 
States to nongovernmental entities. This rule implements the OMB 
Circular A-110.

FOR FURTHER INFORMATION CONTACT:Cynthia J. Schwimer, Director, 
Financial Management Division, Office of the Comptroller, Office of 
Justice Programs at 202-307-3186.

EFFECTIVE DATE: July 26, 1995.

SUPPLEMENTARY INFORMATION: This final rule amends 28 CFR by setting 
forth a new part 70 to enact the changes established by revised OMB 
Circular A-110, ``Uniform Administrative Requirements for Grants and 
Agreements with Institutions of Higher Education, Hospitals and Other 
Non-Profit Institutions,'' published by OMB on November 29, 1993 (58 FR 
62992).

    In November 1990, OMB established an interagency task force to 
revise Circular A-110. The task force developed a proposed revision of 
the Circular, which OMB published with a request for comments on August 
27, 1992 (57 FR 39018). After considering the over 200 comments from a 
wide variety of Federal and non-Federal respondents, OMB published the 
final revised Circular in the Federal Register on November 29, 1993 (58 
FR 62992).
    OMB Circular A-110 sets forth government-wide standards governing 
Federal agency administration of grants and other agreements with 
institutions of higher education, hospitals and other non-profit 
organizations. Federal agencies must apply the provisions of the 
Circular in making awards to the covered entities; all primary 
recipients (including governments) of Federal awards must also apply 
the Circular's provisions to any subawards they make to such entities. 
Those provisions that affect Federal agencies were effective on 
December 29, 1993 (58 FR 62992-93). With respect to the Circular's 
application to recipients of Federal agency awards, OMB's notice 
directed each agency to promulgate its own rules adopting the 
provisions of the Circular (58 FR 62992-93).
    Agency specific rules must follow the provisions of the Circular 
unless OMB has granted the agency an exception for classes of 
recipients of awards from a particular requirement of the Circular (58 
FR 62992, 62995). The terms of the Circular, however, permit Federal 
awarding agencies to make exceptions on an award-by-award basis without 
prior OMB approval and to apply less restrictive requirements in the 
case of small awards. Where a conflict exists between a provision of 
the Circular and 

[[Page 38242]]
a statute, the statute governs (58 FR 62992-93, 62995).
    With respect to our implementation of the Circular, in general, we 
have faithfully followed its provisions. However, in several instances 
we have either elaborated on a provision or modified it to make it 
pertain more clearly to the Department of Justice's (the Department) 
environment. Directives made strictly to the Federal agencies and not 
to grantees have been deleted.
    A notice of proposed rulemaking is not necessary for this 
regulation because OMB obtained public comments in the development of 
the Circular, and the Circular was written in a regulatory format. 
Furthermore, OMB requires that Federal agencies implement the Circular 
within six months of its publication.

Impact Analysis

1. Executive Order 12866

    This regulation has been drafted and reviewed in accordance with 
Executive Order 12866, 1(b), Principles of Regulation. This rule is not 
a significant regulatory action under Executive Order 12866, 3(f), 
Regulatory Planning and Review, and accordingly, this rule has not been 
reviewed by OMB.

2. Regulatory Flexibility Act

    This rule has been reviewed in accordance with the requirements of 
the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) The 
Attorney General has determined that compliance with 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.
3. Paperwork Reduction Act

    The information collection requirements contained in this rule are 
cleared by OMB as Standard Forms.

Catalog of Federal Domestic Assistance

    This rule affects all of the grant programs administered by the 
Department.

List of Subjects in 28 CFR Part 70

    Accounting; Administrative practice and procedures; Grant 
programs--health; Grant programs--social programs; Grants 
administration; and Reporting and recordkeeping requirements.

    For the reasons set out in the preamble, Title 28, Chapter I of the 
Code of Federal Regulations is amended by adding the new part 70 as set 
forth below.

PART 70--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND 
AGREEMENTS (INCLUDING SUBAWARDS) WITH INSTITUTIONS OF HIGHER 
EDUCATION, HOSPITALS AND OTHER NON-PROFIT ORGANIZATIONS

Subpart A--General

Sec.
70.1  Purpose and applicability.
70.2  Definitions.
70.3  Effect on other issuances.
70.4  Deviations.
70.5  Subawards.

Subpart B--Pre-Award Requirements

70.10  Purpose.
70.11  Pre-award policies.
70.12  Forms for applying for Federal assistance.
70.13  Debarment and suspension.
70.14  Special award conditions.
70.15  Metric system of measurement.
70.16  Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-580 
Codified at 42 U.S.C. 6962).
70.17  Certifications and representations.

Subpart C--Post-Award Requirements

Financial and Program Management

70.20  Purpose of financial and program management.
70.21  Standards for financial management systems.
70.22  Payment.
70.23  Cost sharing or matching.
70.24  Program income.
70.25  Revision of budget and program plans.
70.26  Non-Federal audits.
70.27  Allowable costs.
70.28  Period of availability of funds.

Property Standards

70.30  Purpose of property standards.
70.31  Insurance coverage.
70.32  Real property.
70.33  Federally-owned and exempt property.
70.34  Equipment.
70.35  Supplies and other expendable property.
70.36  Intangible property.
70.37  Property trust relationship.

Procurement Standards

70.40  Purpose of procurement standards.
70.41  Recipient responsibilities.
70.42  Codes of conduct.
70.43  Competition.
70.44  Procurement procedures.
70.45  Cost and price analysis.
70.46  Procurement records.
70.47  Contract administration.
70.48  Contract provisions.

Reports and Records

70.50  Purpose of reports and records.
70.51  Monitoring and reporting program performance.
70.52  Financial reporting.
70.53  Retention and access requirements for records.

Termination and Enforcement

70.60  Purpose of termination and enforcement.
70.61  Termination.
70.62  Enforcement.

Subpart D--After-the-Award Requirements

70.70  Purpose.
70.71  Closeout procedures.
70.72  Subsequent adjustments and continuing responsibilities.
70.73  Collection of amounts due.

Appendix A to Part 70--Contract Provisions

    Authority: 5 U.S.C. 301; the Omnibus Crime Control and Safe 
Streets Act of 1968, 42 U.S.C. 3711, et seq. (as amended); Juvenile 
Justice and Delinquency Prevention Act of 1974, 42 U.S.C. 5601, et 
seq. (as amended); Victims of Crime Act of 1984, 42 U.S.C. 10601, et 
seq. (as amended); 18 U.S.C. 4042, 4351-4353.

Subpart A--General


Sec. 70.1  Purpose and applicability.

    This part establishes uniform administrative requirements for the 
Department grants and agreements awarded to institutions of higher 
education, hospitals, and other non-profit organizations. It also 
establishes rules governing how State, local and Indian tribal 
governments shall administer subawards to nongovernmental entities.
Sec. 70.2  Definitions.

    (a) 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.
    (b) Accrued income means the sum of:
    (1) Earnings during a given period from
    (i) Services performed by the recipient, and
    (ii) Goods and other tangible property delivered to purchasers, and
    (2) Amounts becoming owed to the recipient for which no current 
services or performance is required by the recipient.
    (c) Acquisition cost of 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 

[[Page 38243]]
be included or excluded from the unit acquisition cost in accordance 
with the recipient's regular accounting practices.
    (d) Advance means a payment made by Treasury check or other 
appropriate payment mechanism to a recipient upon its request either 
before outlays are made by the recipient or through the use of 
predetermined payment schedules.
    (e) Award means financial assistance that provides support or 
stimulation to accomplish a public purpose. Awards include grants and 
other agreements in the form of money or property in lieu of money, by 
the Department to an eligible recipient. The term does not include: 
Technical assistance, which provides services instead of money; other 
assistance in the form of loans, loan guarantees, interest subsidies, 
or insurance; direct payments of any kind to individuals; and, 
contracts which are required to be entered into and administered under 
procurement laws and regulations.
    (f) Cash contributions means the recipient's cash outlay, including 
the outlay of money contributed to the recipient by third parties.
    (g) Closeout means the process by which the Department determines 
that all applicable administrative actions and all required work of the 
award have been completed by the recipient and the Department.
    (h) Contract means a procurement contract under an award or 
subaward, and a procurement subcontract under a recipient's or 
subrecipient's contract.
    (i) Cost sharing or matching means the portion of project or 
program costs not borne by the Federal Government.
    (j) The Department refers to the United States Department of 
Justice awarding agencies, which include the Office of Justice Programs 
(OJP), Community Relation Service (CRS), United States Marshals Service 
(USMS), National Institute of Corrections (NIC), Office of Special 
Counsel (OSC), and the Civil Rights Division (CRD).
    (k) 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 the Department sponsorship ends.
    (l) Disallowed costs means those charges to an award that the 
Department determines to be unallowable, in accordance with the 
applicable Federal cost principles or other terms and conditions 
contained in the award.
    (m) Equipment means tangible nonexpendable personal property 
including exempt property charged directly to the award having a useful 
life of more than one year and an acquisition cost of $5000 or more per 
unit. However, consistent with recipient policy, lower limits may be 
established.
    (n) Excess property means property under the control of the 
Department that, as determined by the head thereof, is no longer 
required for its needs or the discharge of its responsibilities.
    (o) Exempt property means tangible personal property acquired in 
whole or in part with Federal funds, where the Department 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.
    (p) Federal funds authorized means the total amount of Federal 
funds obligated by the Federal Government for use by the recipient. 
This amount may include any authorized carryover of unobligated funds 
from prior funding periods when permitted by agency regulations or 
agency implementing instructions.
    (q) Federal share of real property, equipment, or supplies means 
that percentage of the property's acquisition costs and any improvement 
expenditures paid with Federal funds.
    (r) Funding period means the period of time when Federal funding is 
available for obligation by the recipient.
    (s) Independent Research and Development costs means research and 
development conducted by an organization which is not sponsored by 
Federal or non-Federal awards, contracts, or other agreements.
    (t) 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.
    (u) 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.
    (v) Outlays or expenditures means charges made to the project or 
program. They may be reported on a cash or accrual basis. For reports 
prepared on a cash basis, outlays are the sum of cash disbursements for 
direct charges for goods and services, the amount of indirect expense 
charged, the value of third party in-kind contributions applied and the 
amount of cash advances and payments made to subrecipients. For reports 
prepared on an accrual basis, outlays are the sum of cash disbursements 
for direct charges for goods and services, the amount of indirect 
expense incurred, the value of in-kind contributions applied, and the 
net increase (or 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.
    (w) 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.
    (x) Prior approval means written approval by an authorized official 
evidencing prior consent.
    (y) 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 Sec. 70.24 (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, interest on loans made with award funds, and income from 
asset forfeitures accounted for from the time of seizure. Interest 
earned on advances of Federal funds is not program income. Except as 
otherwise provided in the Department 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.
    (z) Project costs means all allowable costs, as set forth in the 
applicable Federal costs 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.
    (aa) Project period means the period established in the award 
document during which Federal sponsorship begins and ends.
    (bb) Property means, unless otherwise stated, real property, 
equipment, intangible property and debt instruments.
    (cc) Real property means land, including land improvements, 
structures and appurtenances thereto, 

[[Page 38244]]
but excludes movable machinery and equipment.
    (dd) Recipient means an organization receiving financial assistance 
directly from the Department to carry out a project or program. The 
term includes public and private institutions of higher education, 
public and private hospitals, and other quasi-public and private non-
profit organizations such as, but not limited to, community action 
agencies, research institutes, educational associations, and health 
centers. The term may include commercial organizations, foreign or 
international organizations (such as agencies of the United Nations) 
which are recipients, subrecipients, or contractors or subcontractors 
of recipients or subrecipients at the discretion of the Department. 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 
designed as Federally-funded research and development centers.
    (ee) 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.
    (ff) Small awards means a grant or cooperative agreement not 
exceeding the small purchase threshold fixed at 41 U.S.C. 403(11) 
(currently $25,000).
    (gg) 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 Sec. 70.2(e).
    (hh) Subrecipient means the legal entity to which a subaward is 
made and which is accountable to the recipient for the use of the funds 
provided. The term may include foreign or international organizations 
(such as agencies of the United Nations) at the discretion of the 
Department.
    (ii) 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.''
    (jj) Suspension means an action by the Department that temporarily 
withdraws the Department sponsorship under an award, pending corrective 
action by the recipient or pending a decision to terminate the award by 
the Department. Suspension of an award is a separate action from 
suspension under the Department regulations implementing Exec. Order 
No. 12549 and 12689, ``Debarment and Suspension.''
    (kk) Termination means the cancellation of the Department 
sponsorship, in whole or in part, under an agreement at any time prior 
to the date of completion.
    (ll) Third party in-kind contributions means the value of non-cash 
contributions provided by non-Federal third parties. Third party in-
kind contributions may be in the form of real property, equipment, 
supplies and other expendable property, and the value of goods and 
services directly benefiting and specifically identifiable to the 
project or program.
    (mm) 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.
    (nn) Unobligated balance means the portion of the funds authorized 
by the Department that has not been obligated by the recipient and is 
determined by deducting the cumulative obligations from the cumulative 
funds authorized.
    (oo) 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.
    (pp) Working capital advance means a procedure where by funds are 
advanced to the recipient to cover its estimated disbursement needs for 
a given initial period.


Sec. 70.3  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 
in Sec. 70.4.


Sec. 70.4  Deviations.

    OMB, after consultation with the Department's Division of Financial 
Management and Grants Administration 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. The Department shall apply 
more restrictive requirements to a class of recipients when approved by 
OMB. The Department 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 
Department.


Sec. 70.5  Subawards.

    Unless sections of this part specifically exclude subrecipients 
from coverage, all of the Department's recipients, including State and 
local governments, shall apply the provisions of this part to 
subrecipients performing work under awards if such subrecipients are 
institutions of higher education, hospitals or other non-profit 
organizations. State and local government subrecipients are subject to 
the provisions of regulations implementing the grants management common 
rule, ``Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments,'' published at 28 CFR part 
66 (3/11/88).

Subpart B--Pre-Award Requirements


Sec. 70.10  Purpose.

    Sections 70.11 through 70.17 prescribe forms and instructions and 
other pre-award matters to be used in applying for the Department's 
awards.

[[Page 38245]]



Sec. 70.11  Pre-award policies.

    (a) Use of grants and cooperative agreements, and contracts. In 
each instance, the Department 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. The Department shall notify 
the public of its intended funding priorities for discretionary grant 
programs, unless funding priorities are established by Federal statute.


Sec. 70.12  Forms for applying for Federal assistance.

    (a) The Department shall comply with the applicable report 
clearance requirements of 5 CFR part 1320, ``Controlling Paperwork 
Burdens on the Public,'' with regard to all forms used by the 
Department as a supplement to the Standard Form 424 (SF-424) series.
    (b) Applicants shall use the SF-424 series and instructions 
prescribed by the Department.
    (c) For the Department's programs covered by Exec. Order No. 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 
``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.


Sec. 70.13  Debarment and suspension.

    Recipients shall comply with the nonprocurement debarment and 
suspension common rule implementing Exec. Order No. 12549 and 12689, 
``Debarment and Suspension.'' 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. 70.14  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 
Department will 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. 70.15  Metric system of measurement.

    The Metric Conversion Act, as amended by the Omnibus Trade and 
Competitiveness Act (15 U.S.C. 205) declares that the metric system is 
the preferred measurement system for U.S. trade and commerce. The Act 
requires each Federal agency to establish a date or dates in 
consultation with the Secretary of Commerce, when the metric system of 
measurement will be used in the agency's procurements, grants, and 
other business-related activities. Metric implementation may take 
longer where the use of the system is initially impractical or likely 
to cause significant inefficiencies in the accomplishment of Federally-
funded activities. The Department will follow the provisions of Exec. 
Order No. 12770, ``Metric Usage in Federal Government Programs.''


Sec. 70.16  Resource Conservation and Recovery Act (RCRA) (Pub. L. No. 
94-580 codified at 42 U.S.C. 6962).

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


Sec. 70.17  Certifications and representations.

    Unless prohibited by statute or codified regulation, the Department 
will 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 must 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. 70.20  Purpose of financial and program management.

    Sections 70.21 through 70.28 prescribe standards for financial 
management systems, methods for making payments and rules for: 
Satisfying cost sharing and matching requirements, accounting for 
program income, budget revision approvals, making audits, determining 
allowability of cost, and establishing fund availability.


Sec. 70.21  Standards for financial management systems.

    (a) Recipients must relate financial data to performance data and 
development unit cost information whenever practical.
    (b) Recipients' financial management systems must 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. 70.52. When the 
Department requires reporting on an accrual basis from a recipient that 
maintains its records on other than an accrual basis, the recipient 
will not be required to establish an accrual accounting system. These 
recipients may develop such accrual data for its reports on the basis 
of an analysis of the documentation on hand.
    (2) Records that identify adequately the source and application of 
funds for Federally-sponsored activities. These records must contain 
information pertaining to Federal awards, authorizations, obligations, 
unobligated balances, assets, outlays, income and interest.

[[Page 38246]]

    (3) Effective control over and accountability for all funds, 
property and other assets. Recipients must 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 must 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) The Department, at its discretion, may require adequate bonding 
and insurance if the bonding and insurance requirements of the 
recipient are not deemed adequate to protect the interest of the 
Federal Government.
    (d) The Department will require adequate fidelity bond coverage 
when the recipient lacks sufficient coverage to protect the Federal 
Government's interest.
    (e) Where bonds are required in the situations described above, the 
bonds must 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. 70.22  Payment.

    (a) Payment methods must 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 must 
be consistent with Treasury-State CMIA agreements or default procedures 
codified at 31 CFR part 205.
    (b) Recipients may be paid in advance, provided they maintain or 
demonstrate the willingness to maintain written procedures that 
minimize the time elapsing between the transfer of funds and 
disbursement by the recipient, and financial management systems that 
meet the standards for fund control and accountability as established 
in Sec. 70.21. Cash advances to a recipient organization will 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 must 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 the Department to the 
recipient.
    (1) Advance payment mechanisms include, but are not limited to, 
Treasury check and electronic funds transfer.
    (2) Advance payment mechanisms are subject to 31 CFR part 205.
    (3) Recipients may 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 must be submitted 
on SF-270, ``Request for Advance or Reimbursement.''
    (e) Reimbursement is the method that will be used when the 
requirements in paragraph (b) of this section cannot be met. The 
Department 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, the Department will make 
payment within 30 days after receipt of the billing, unless the billing 
is improper.
    (2) Recipients will be authorized to submit requests for 
reimbursement at least monthly when electronic funds transfers are not 
used.
    (f) If a recipient cannot meet the criteria for advance payments 
and the Department has determined that reimbursement is not feasible 
because the recipient lacks sufficient working capital, the Department 
may provide cash on a working capital advance basis. Under this 
procedure, the Department will advance cash to the recipient to cover 
its estimated disbursement needs for an initial period generally geared 
to the awardee's disbursing cycle. Thereafter, the Department will 
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 subrecipient to 
meet the subrecipient's actual cash disbursements.
    (g) To the extent available, recipients must disburse funds 
available from repayments to and interest earned on a revolving fund, 
program income, rebates, refunds, contract settlements, audit 
recoveries and interest earned on such funds before requesting 
additional cash payments.
    (h) Unless otherwise required by statute, the Department will not 
withhold payments for proper charges made by recipients at any time 
during the project period unless paragraph (h) (1) or (2) of this 
section apply.
    (1) A recipient has failed to comply with the project objectives, 
the terms and conditions of the award, or the Department's reporting 
requirements.
    (2) The recipient or subrecipient is delinquent in a debt to the 
United States as defined in OMB Circular A-129, ``Managing Federal 
Credit Programs.'' Under such conditions, DOS may, upon reasonable 
notice, inform the recipient that payments must 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, the Department will 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 the Department funds must 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 fifty percent by women or minority 
group members).
    (k) Recipients must maintain advances of the Department's funds in 

[[Page 38247]]
    interest bearing accounts, unless paragraphs (k) (1), (2) or (3) of 
this section apply.
    (1) The recipient receives less than $120,000 in Federal awards per 
year.
    (2) The best reasonably available interest bearing account would 
not be expected to earn interest in excess of $250 per year on Federal 
cash balances.
    (3) The depository would require an average or minimum balance so 
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
    (l) For those entities where CMIA and its implementing regulations 
do not apply, interest earned on Federal advances deposited in interest 
bearing accounts must be remitted annually to Department of Health and 
Human Services, (HHS), Payment Management System, P.O. Box 6021, 
Rockville, MD 20852. Interest amounts up to $250 per year may be 
retained by the recipient for administrative expense. State 
universities and hospitals must 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 Department, it waives its right to recover the interest under 
CMIA. In keeping with Electronic Funds Transfer rules, (31 CFR part 
206), interest should be remitted to the HHS Payment Management System 
through an electronic medium such as the FEDWIRE Deposit System. 
Recipients which do not have this capability should use a check.
    (m) Recipients must use the SF-270, Request for Advance or 
Reimbursement or other standard form for all nonconstruction programs 
when electronic funds transfer is not used.
Sec. 70.23  Cost sharing or matching.

    (a) All contributions, including cash and third party in-kind, will 
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.
    (b) Unrecovered indirect costs may be included as part of cost 
sharing or matching only with the prior approval of the Department.
    (c) Values for recipient contributions of services and property 
must be established in accordance with the applicable cost principles. 
If the Department 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 must be the 
lesser of paragraph (c) (1) or (2) of this section.
    (1) The certified value of the remaining life of the property 
recorded in the recipient's accounting records at the time of donation.
    (2) The current fair market value. However, when there is 
sufficient justification, the Department 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 must be consistent with those paid for similar work in the 
recipient's organization. In those instances in which the required 
skills are not found in the recipient organization, rates must 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 must 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 skills for which the 
employee would normally be 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 must be reasonable and must 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 
paragraph (g) (1) or (2) of this section apply.
    (1) If the purpose of the award is to assist the recipient in the 
acquisition of equipment, buildings or land, the total value of the 
donated property may be claimed as cost sharing or matching.
    (2) If the purpose of the award is to support activities that 
require the use of equipment, buildings or land, normally only 
depreciation or use charges for equipment and buildings may be made. 
However, the full value of equipment or other capital assets and fair 
rental charges for land may be allowed, provided that the Department 
has approved the charges.
    (h) The value of donated property must be determined in accordance 
with the usual accounting policies of the recipient, with the following 
qualifications.
    (1) The value of donated land and buildings must 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 must 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 must 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 must not exceed its fair rental 
value.
    (5) The following requirements pertain to the recipient's 
supporting records for in-kind contributions from third parties.
    (i) Volunteer services must be documented and, to the extent 
feasible, supported by the same methods used by the recipient for its 
own employees.
    (ii) The basis for determining the valuation for personal service, 
material, equipment, buildings and land must be documented.


Sec. 70.24  Program income.

    (a) The standards set forth in this section requiring recipient 
organizations to account for program income related to projects 
financed in whole or in part with Department funds.
    (b) Except as provided in paragraph (h) of this section, program 
income earned during the project period must be retained by the 
recipient and, in 

[[Page 38248]]
accordance with the Department regulations or the terms and conditions 
of the award, must be used in one or more of the ways listed in the 
following:
    (1) Added to funds committed to the project by the Department and 
recipient and used to further eligible project or program objectives.
    (2) Used to finance the non-Federal share of the project or 
program.
    (3) Deducted from the total project or program allowable cost in 
determining the net allowable costs on which the Federal share of costs 
is based.
    (c) When the Department authorizes the disposition of program 
income as described in paragraphs (b)(1) or (b)(2), of this section, 
program income in excess of any limits stipulated must be used in 
accordance with paragraph (b)(3) of this section.
    (d) In the event that the Department does not specify in its 
regulations or the terms and conditions of the award how program income 
is to be used, paragraph (b)(3), of this section applies automatically 
to all projects or programs.
    (e) Unless the Department's regulations or the terms and conditions 
of the award provide otherwise, recipients will have no obligation to 
the Federal Government regarding program income earned after the end of 
the project period.
    (f) If authorized by the terms and conditions of the award, costs 
incident to the generation of program income may be deducted from gross 
income to determine program income, provided these costs have not been 
charged to the award.
    (g) Proceeds from the sale of property must be handled in 
accordance with the requirements of the Property Standards (See 
Secs. 70.30 through 70.37).
    (h) Unless the terms and conditions of the award provide otherwise, 
recipients will 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.
    (i) Recipients must account for seized assets from the date of 
seizure until forfeiture and liquidation of funds occur.


Sec. 70.25  Revision of budget and program plans.

    (a) The budget plan is the financial expression of the project or 
program as approved during the award process. It may include either the 
Federal and non-Federal share, or only the Federal share, depending 
upon the Department's requirements. It must 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 must request in writing 
prior approval from the Department 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, approval is required by the 
Department.
    (6) The inclusion, unless waived by the Department, 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 
awards, the subaward, transfer or contracting out of any work under an 
award. This provision does not apply to the purchase of supplies, 
material, equipment or general support services.
    (d) The Department restricts the transfer of funds among direct 
cost categories or programs, functions and activities, without prior 
written approval 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 ten percent of the total budget as last approved 
by the Department. The Department will 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.
    (e) All other changes to nonconstruction budgets, except for the 
changes described in paragraph (h) of this section, do not require 
prior approval.
    (f) For construction awards, recipients must request prior written 
approval promptly from the Department for budget revisions whenever 
paragraph (e) (1), (2) or (3) of this section apply.
    (1) The revision results from changes in the scope or the objective 
of the project or program.
    (2) The need arises for additional Department funds to complete the 
project.
    (3) A revision is desired which involves specific costs for which 
prior written approval requirements may be imposed consistent with 
applicable OMB cost principles listed in Sec. 70.27.
    (g) When the Department makes an award that provides support for 
both construction and nonconstruction work, the Department will require 
the recipient to request prior approval from the Department before 
making any fund or budget transfers between the two types of work 
supported.
    (h) For both construction and nonconstruction awards, the 
Department will require recipients to notify the Department 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 award, whichever is greater. This 
notification will not be required if an application for additional 
funding is submitted for a continuation award.
    (i) When requesting approval for budget revisions, recipients must 
use the budget forms that were used in the application unless the 
Department indicates a letter of request suffices.
    (j) Within thirty of the request for budget revisions, the 
Department will 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 thirty calendar days, the Department will 
inform the recipient in writing of the date when the recipient may 
expect the decision.


Sec. 70.26  Non-Federal audits.

    (a) Recipients and subrecipients that are institutions of higher 
education or other non-profit organizations are subject to the audit 
requirements contained in OMB Circular A-133, ``Audits of Institutions 
of Higher 

[[Page 38249]]
Education and Other Non-Profit Institutions.''
    (b) State and local governments are subject to the audit 
requirements contained in the Single Audit Act (31 U.S.C. 7501-7) and 
the Department's 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 and commercial organizations must follow the audit thresholds in 
OMB Circular A-133 in determining whether to conduct an audit in 
accordance with Government Auditing Standards.


Sec. 70.27  Allowable costs.

    (a) For each kind of recipient, there is a set of Federal 
principles for determining allowable costs. Allowability of costs must 
be determined 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 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.
    (b) OMB Circular A-122 does not cover the treatment of bid and 
proposal costs or independent research and development costs. The 
following rules apply to these costs for non-profit organizations 
subject to the Circular.
    (1) Bid and proposal costs. Bid and proposal costs are the 
immediate costs of preparing bids, proposals, and applications for 
Federal and non-Federal awards, contracts, and agreements, including 
the development of scientific, costs, and other data needed to support 
the bids, proposals, and applications. Bid and proposal costs of the 
current accounting period are all allowable as indirect costs. Bid and 
proposal costs of past accounting periods are unallowable in the 
current period. However, if the recipient's established practice is to 
treat these costs by some other method, they may be accepted if they 
are found to be reasonable and equitable. Bid and proposal costs do not 
include independent research and development costs covered by paragraph 
(b)(2) of this section, or preaward costs covered by Attachment B, 
Paragraph 33 of OMB Circular A-122.
    (2) Independent Research and Development costs. Independent 
research and development shall must be allocated its proportionate 
share of indirect costs on the same basis as the allocation of indirect 
costs to sponsored research and development. The costs of independent 
research and development, including its proportionate share of indirect 
costs, are unallowable.


Sec. 70.28  Period of availability of funds.

    Where a funding period is specified, a recipient must charge to the 
grant only allowable costs resulting from obligations incurred during 
the funding period and any pre-award costs authorized by the 
Department.
Property Standards


Sec. 70.30  Purpose of property standards.

    Sections 70.31 through 70.37 sets forth uniform standards governing 
management and disposition of property furnished by the Federal 
Government whose cost was charged to a project supported by a Federal 
award. The Department will require recipients to observe these 
standards under awards and will not impose additional requirements, 
unless specifically required by Federal statute. The recipient may use 
its own property management standards and procedures provided it 
observes the provisions of Secs. 70.31 through 70.37.


Sec. 70.31  Insurance coverage.

    Recipients must, 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. 70.32  Real property.

    (a) Title to real property will vest in the recipient subject to 
the condition that the recipient use the real property for the 
authorized purpose of the project as long as it is needed and will not 
encumber the property without approval of the Department.
    (b) The recipient must obtain written approval by the Department 
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 will be limited 
to those under Federally-sponsored projects (i.e., awards) or programs 
that have purposes consistent with those authorized for support by the 
Department.
    (c) When the real property is no longer needed as provided in 
paragraphs (a) and (b) of this section, the recipient must request 
disposition instructions from the Department. The Department will 
observe one or more of the following disposition instructions.
    (1) The recipient may be permitted to retain title without further 
obligation to the Federal Government after it compensates the Federal 
Government for that percentage of the current fair market value of the 
property attributable to the Federal participation in the project.
    (2) The recipient may be directed to sell the property under 
guidelines provided by the Department 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 must 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. 70.33  Federally-owned and exempt property.

    (a) Federally-owned property. (1) Title to Federally-owned property 
remains vested in the Federal Government. Recipients may be required by 
the terms and conditions of the award, to submit annually an inventory 
listing of Federally-owned property in their custody to the Department. 
Upon completion of the award or when the property is no longer needed, 
the recipient must report the property to the Department for further 
Federal agency utilization.
    (2) If the Department has no further need for the property, it will 
be declared excess and reported to the General Services Administration, 
unless the Department has statutory authority to dispose of the 
property by alternative methods (e.g., the authority provided by the 
Federal Technology Transfer Act (15 

[[Page 38250]]
U.S.C. 3710 (I)) to donate research equipment to educational and non-
profit organizations in accordance with Exec. Order No. 12821, 
``Improving Mathematics and Science Education in Support of the 
National Education Goals.'') Appropriate instructions shall be issued 
to the recipient by the Department.
    (b) Exempt property. The Department will vest title to property 
acquired with Federal funds in the recipient without further obligation 
to the Federal Government when such property is ``exempt property.''
Sec. 70.34  Equipment.

    (a) Title to equipment acquired by a recipient with Federal funds 
will vest in the recipient, subject to conditions of this section.
    (b) The recipient must not use equipment acquired with Federal 
funds to provide services to non-Federal outside organizations for a 
fee that is less than private companies charge for equivalent services, 
unless specifically authorized by Federal statute, for as long as the 
Federal Government retains an interest in the equipment.
    (c) The recipient must 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 must not 
encumber the property without approval of the Department. When no 
longer needed for the original project or program, the recipient must 
use the equipment in connection with its other Federally-sponsored 
activities, in the following order of priority:
    (1) Activities sponsored by the Department which funded the 
original project, then
    (2) Activities sponsored by other Federal awarding agencies.
    (d) During the time that equipment is used on the project or 
program for which it was acquired, the recipient must 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 
must be given to other projects or programs sponsored by the 
Department. Second preference must be given to projects or programs 
sponsored by other Federal awarding agencies. If the equipment is owned 
by the Federal Government, use on other activities not sponsored by the 
Federal Government may be permissible if authorized in writing by the 
Department. User charges must 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 written approval of the Department.
    (f) The recipient's property management standards for equipment 
acquired with Federal funds and Federally-owned equipment must include 
all of the following:
    (1) Equipment records must be maintained accurately and must 
include the following information:
    (i) A description of the equipment.
    (ii) Manufacturer's serial number, model number, Federal stock 
number, national stock number, or other identification number.
    (iii) Source of the equipment, including the award number.
    (iv) Whether title vests in the recipient or the Federal 
Government.
    (v) Acquisition date (or date received, if the equipment was 
furnished by the Federal Government) and cost.
    (vi) Information from which one can calculate the percentage of 
Federal participation in the cost of the equipment (not applicable to 
equipment furnished by the Federal Government).
    (vii) Location and condition of the equipment and the date the 
information was reported.
    (viii) Unit acquisition cost.
    (ix) Ultimate disposition data, including date of disposal and 
sales price or the method used to determine current fair market value 
where a recipient compensates the Department for its share.
    (2) Equipment owned by the Federal Government must be identified to 
indicate Federal ownership.
    (3) A physical inventory of equipment must be taken and the results 
reconciled with the equipment records annually. Any differences between 
quantities determined by the physical inspection and those shown in the 
accounting records must be investigated to determine the causes of the 
difference. The recipient must, in connection with the inventory, 
verify the existence, current utilization, and continued need for the 
equipment.
    (4) A control system must be in effect to insure adequate 
safeguards to prevent loss, damage, or theft of the equipment. Any 
loss, damage, or theft of equipment must be investigated and fully 
documented; if the equipment was owned by the Federal Government, the 
recipient must promptly notify the Department.
    (5) Adequate maintenance procedures must be implemented to keep the 
equipment in good condition.
    (6) Where the recipient is authorized or required to sell the 
equipment, proper sales procedures must 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 
$5,000 or more, the recipient may retain the equipment for other uses 
provided that compensation is made to the Department or its successor. 
The amount of compensation must be computed by applying the percentage 
of Federal participation in the cost of the original project or program 
to the current fair market value of the equipment. If the recipient has 
no need for the equipment, the recipient must request disposition 
instructions from the Department. The Department will determine whether 
the equipment can be used to meet the agency's requirements. If no 
requirement exists within that agency, the availability of the 
equipment must be reported to the General Services Administration by 
the Department to determine whether a requirement for the equipment 
exists in other Federal agencies. The Department will issue 
instructions to the recipient no later than 120 calendar days after the 
recipient's request and the following procedures will govern.
    (1) If so instructed or if disposition instructions are not issued 
within 120 calendar days after the recipient's request, the recipient 
may sell the equipment and reimburse the Department 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 may 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 may 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 may be reimbursed by the Department for such 
costs incurred in its disposition.

[[Page 38251]]

    (4) The Department 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 will be subject to the following standards.
    (i) The equipment must be appropriately identified in the award or 
otherwise made known to the recipient in writing.
    (ii) The Department will issue disposition instructions within 120 
calendar days after receipt of a final inventory. The final inventory 
must list all equipment acquired with grant funds and Federally-owned 
equipment. If the Department fails to issue disposition instructions 
within the 120 calendar day period, the recipient may apply the 
standards of this section, as appropriate.
    (iii) When the Department exercises its right to take title, the 
equipment is subject to the provisions for Federally-owned equipment.


Sec. 70.35  Supplies and other expendable property.

    (a) Title to supplies and other expendable property vests in the 
recipient upon acquisition. If there is a 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 may 
retain the supplies for use on non-Federal sponsored activities or sell 
them, but must, in either case, compensate the Federal Government for 
its share. The amount of compensation must be computer in the same 
manner as for equipment.
    (b) The recipient must 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. 70.36  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. The Department 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) The Department, unless expressly waived by the Department, has 
the right to paragraphs (c) (1) and (2) of this section.
    (1) Obtain, reproduce, publish or otherwise use the data first 
produced under an award.
    (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 must use that property for the originally-authorized purpose, 
and the recipient must not encumber the property without approval of 
the Department. When no longer needed for the originally authorized 
purpose, disposition of the intangible property must occur in 
accordance with the provisions of Sec. 70.34(g).


Sec. 70.37  Property trust relationship.

    Real property, equipment, intangible property and debt instruments 
that are acquired or improved with Federal funds must 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 
are required to record liens or other appropriate notices of record to 
indicate that personal or real property has been acquired or improved 
with Federal funds and that use and disposition conditions apply to the 
property.

Procurement Standards


Sec. 70.40  Purpose of procurement standards.

    Sections 70.41 through 70.48 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 will be 
imposed by the Department upon recipients, unless specifically required 
by Federal statute or executive order or approved by OMB.
Sec. 70.41  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 the Department, 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. 70.42  Codes of conduct.

    The recipient must 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 must 
provide for disciplinary actions to be applied for violations of such 
standards by officers, employees, or agents of the recipient.


Sec. 70.43  Competition.

    All procurement transactions must be conducted in a manner to 
provide, to the maximum extent practical, open and free competition. 
The recipient must 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 must be excluded from competing for such procurements. 
Awards must be made to the bidder or offeror whose bid or offer is 
responsive to the solicitation and is most advantageous to the 
recipient, 

[[Page 38252]]
price, quality and other factors considered.
    Solicitations must clearly set forth all requirements that the 
bidder or offeror must 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. 70.44  Procurement procedures.

    (a) All recipients must establish written procurement procedures. 
These procedures must provide for, at a minimum, that paragraphs (a) 
(1), (2), and (3) of this section apply.
    (1) Recipients avoid purchasing unnecessary items.
    (2) Where appropriate, an analysis is made of lease and purchase 
alternatives to determine which would be the most economical and 
practical procurement for the Federal Government.
    (3) Solicitations for goods and services provide for all of the 
following:
    (i) A clear and accurate description of the technical requirements 
for the material, product or service to be procured. In competitive 
procurements, such a description must not contain features which unduly 
restrict competition.
    (ii) Requirements which the bidder/offeror must fulfill and all 
other factors to be used in evaluating bids or proposals.
    (iii) A description, whenever practicable, of 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 must be made by recipients to utilize small 
businesses, minority-owned firms, and women's business enterprises, 
whenever possible. Recipients of Federal awards must 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.
    (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) must be determined by the recipient and must 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 must not 
be used.
    (d) Contracts must be made only with responsible contractors who 
possess the potential ability to perform successfully under the terms 
and conditions of the proposed procurement. Consideration must 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 Exec. Order No. 12549 and 
12689, ``Debarment and Suspension.''
    (e) Recipients must, on request, make available for the Department, 
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 the Department's regulation.
    (2) The procurement is expected to exceed the small purchase 
threshold fixed at 41 U.S.C. 403(11) (currently $25,000) and is to be 
awarded without competition or only one bid or offer is received in 
response to a solicitation.
    (3) The procurement, which is expected to exceed the small purchase 
threshold, specifies a ``brand name'' product.
    (4) The proposed award over the small purchase threshold is to be 
awarded to other than the apparent low bidder under a sealed bid 
procurement.
    (5) A proposed contract modification changes the scope of a 
contract or increases the contract amount by more than the amount of 
the small purchase threshold.


Sec. 70.45  Cost and price analysis.

    Some form of cost or price analysis must 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. 70.46  Procurement records.

    Procurement records and files for purchases in excess of the small 
purchase threshold must 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. 70.47  Contract administration.

    A system for contract administration must 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 must evaluate contractor performance and 
document, as appropriate, whether contractors have met the terms, 
conditions and specifications of the contract.


Sec. 70.48  Contract provisions.

    The recipient must include, in addition to provisions to define a 
sound and complete agreement, the following provisions in all 
contracts. The following provisions must also be applied to 
subcontracts.
    (a) Contracts in excess of the small purchase threshold must 
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 must 
contain suitable provisions for termination by the recipient, including 
the manner by 

[[Page 38253]]
which termination must be effected and the basis for settlement. In 
addition, such contracts must 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 must provide for the recipient to follow its own 
requirements relating to bid guarantees, performance bonds, and payment 
bonds unless the construction contract or subcontract exceeds $100,000. 
For those contracts or subcontracts exceeding $100,000, the Department 
may accept the bonding policy and requirements of the recipient, 
provided the Department has made a determination that the Federal 
Government's interest is adequately protected. If such a determination 
has not been made, the minimum requirements are to be as follows:
    (1) A bid guarantee from each bidder equivalent to five percent of 
the bid price. The ``bid guarantee'' must consist of a firm commitment 
such as a bid bond, certified check, or other negotiable instrument 
accompanying a bid as assurance that the bidder must, upon acceptance 
of his bid, execute such contractual documents as may be required 
within the time specified.
    (2) A performance bond on the part of the contractor for 100 
percent of the contract price. A ``performance bond'' is one executed 
in connection with a contract to secure fulfillment of all the 
contractor's obligations under such contract.
    (3) A payment bond on the part of the contractor for 100 percent of 
the contract price. A ``payment bond'' is one executed in connection 
with a contract to assure payment as required by statute of all persons 
supplying labor and material in the execution of the work provided for 
in the contract.
    (4) Where bonds are required in the situations described herein, 
the bonds must 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 must include a provision to 
the effect that the recipient, the Department, the Comptroller General 
of the United States, or any of their duly authorized representatives, 
must 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 must contain the procurement provisions of 
Appendix A to this part as applicable.
Reports and Records


Sec. 70.50  Purpose of reports and records.

    Sections 70.51 through 70.53 set forth 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. 70.51  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 must monitor subawards to ensure subrecipients have 
met the audit requirements as delineated in Sec. 70.26.
    (b) Performance reports must be submitted based on each calendar 
quarter. Reports are due thirty days after the reporting period, unless 
stated differently in the terms and conditions of the award. The final 
performance reports are due ninety calendar days after the expiration 
or termination of the award.
    (c) Performance reports must 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.
    (d) Recipients are required to submit the original and two copies 
of performance reports.
    (e) Recipients must immediately notify DOS, in writing, of 
developments that have a significant impact on the award-supported 
activities. Also, written notification must 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 must 
include a statement of the action taken or contemplated, and any 
assistance needed to resolve the situation.
    (f) The Department will make site visits, as needed.
    (g) The Department will comply with clearance requirements of 5 CFR 
part 1320 when requesting performance data from recipients.


Sec. 70.52  Financial reporting.

    (a) The following forms or such other forms as may be approved by 
OMB are authorized for obtaining financial information from recipients.
    (1) SF-269 or SF-269A, Financial Status Report.
    (i) Recipients are required to use the SF-269 or SF-269A to report 
the status of funds for all nonconstruction projects or programs.
    (ii) Reports must be on an accrual basis. Recipients are not 
required to convert their accounting system, but must develop such 
accrual information through best estimates based on an analysis of the 
documentation on hand.
    (iii) The Department requires the SF-269, SF-269A, or turnaround 
document to be submitted no later than forty days after the calendar 
quarter. The final report is due ninety days from the end date of the 
award.
    (b) When the Department needs additional information or more 
frequent reports, the following will be observed.
    (1) When additional information is needed to comply with 
legislative requirements, the Department will issue instructions to 
require recipients to submit such information under the ``Remarks'' 
section of the reports.
    (2) When the Department determines that a recipient's accounting 
system does not meet the standards in Sec. 70.21, additional pertinent 
information to further monitor awards will be obtained upon written 
notice to the recipient until such time as the system is brought up to 
standard. The Department, in obtaining this information, will comply 
with report clearance requirements of 5 CFR part 1320.
    (3) The Department will accept the identical information from the 
recipients in machine readable format or computer printouts or 
electronic outputs in lieu of prescribed formats.
    (4) The Department will provide computer or electronic outputs to 
recipients when such expedites or contributes to the accuracy of 
reporting.


Sec. 70.53  Retention and access requirements for records.

    (a) This section sets forth requirements for record retention and 
access to records for awards to recipients. The Department will not 
impose any other record retention or access requirements upon 
recipients.

[[Page 38254]]

    (b) Financial records, supporting documents, statistical records, 
and all other records pertinent to an award must be retained for a 
period of three years from the date of submission of the final 
expenditure report or, for awards that are renewed quarterly or 
annually, from the date of the submission of the quarterly or annual 
financial report, as authorized by the Department. The only exceptions 
are the following:
    (1) If any litigation, claim, or audit is started before the 
expiration of the three year period, the records must 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 must be retained for three years after final disposition.
    (3) When records are transferred to or maintained by DOS, the three 
year retention requirement is not applicable to the recipient.
    (4) Indirect cost rate proposals, cost allocations plans, etc. as 
specified in Sec. 70.53(g).
    (c) Copies of original records may be substituted for the original 
records if authorized by the Department.
    (d) The Department will 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, the Department will make arrangements for recipients to 
retain any records that are continuously needed for joint use.
    (e) The Department, its 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 must last as long as records are retained.
    (f) Unless required by statute, the Department will not place 
restrictions on recipients that limit public access to the records of 
recipients that are pertinent to an award, except when the Department 
can demonstrate that such records must be kept confidential and would 
have been exempted from disclosure pursuant to the Freedom of 
Information Act (5 U.S.C. 552) if the records had belonged to the 
Department.
    (g) Indirect cost rate proposals, cost allocation 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 
Department or the subrecipient submits to the recipient the proposal, 
plan, or other computation to form the basis for negotiation of the 
rate, then the three 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 Department or the subrecipient is not 
required to submit to the recipient the proposal, plan, or other 
computation for negotiation purposes, then the three 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.

Termination and Enforcement


Sec. 70.60  Purpose of termination and enforcement.

    Sections 70.61 and 70.62 set forth uniform suspension, termination 
and enforcement procedures.


Sec. 70.61  Termination.

    (a) Awards may be terminated in whole or in part only if paragraph 
(a) (1), (2) or (3) of this section apply.
    (1) By the Department, if a recipient materially fails to comply 
with the terms and conditions of an award.
    (2) By the Department with the consent of the recipient, in which 
case the two parties must agree upon the termination conditions, 
including the effective date and, in the case of partial termination, 
the portion to be terminated.
    (3) By the recipient upon sending to the Department written 
notification setting forth the reasons for such termination, the 
effective date, and, in the case of partial termination, the portion to 
be terminated. However, if the Department determines in the case of 
partial termination that the reduced or modified portion of the grant 
will not accomplish the purposes for which the grant was made, it may 
terminate the grant in its entirety under either paragraph (a) (1) or 
(2) of this section.
    (b) If costs are allowed under an award, the responsibilities of 
the recipient referred to in Sec. 70.71(a), including those for 
property management as applicable, must be considered in the 
termination of the award, and provision must be made for continuing 
responsibilities of the recipient after termination, as appropriate.


Sec. 70.62  Enforcement.

    (a) Remedies for noncompliance. If a recipient materially fails to 
comply with the terms and conditions of an award, whether stated in a 
Federal statute, regulation, assurance, application, or notice of 
award, the Department will, in addition to imposing any of the special 
conditions outlined in Sec. 70.14, take one or more of the following 
actions, as appropriate in the circumstances.
    (1) Temporarily withhold cash payments pending correction of the 
deficiency by the recipient or more severe enforcement action by the 
Department.
    (2) Disallow (that is, deny both use of funds and any applicable 
matching credit for) all or part of the cost of the activity or action 
not in compliance.
    (3) Wholly or partly suspend or terminate the current award.
    (4) Withhold further awards for the project or program.
    (5) Take other remedies that may be legally available.
    (b) Hearings and appeals. In taking an enforcement action, the 
Department will provide the recipient an opportunity for hearing, 
appeal, or other administrative proceeding to which the recipient is 
entitled under any statute or regulation applicable to the action 
involved.
    (c) Effects of suspension and termination. Costs of a recipient 
resulting from obligations incurred by the recipient during a 
suspension or after termination of an award are not allowable unless 
the Department 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 paragraphs (c) (1) and (2) of this section apply.
    (1) The costs result from obligations which were properly incurred 
by the recipient before the effective date of suspension or 
termination, are not in anticipation of it, and in the case of a 
termination, are noncancellable.
    (2) The costs would be allowable if the award were not suspended or 
expired normally at the end of the funding period in which the 
termination takes effect.

[[Page 38255]]

    (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 Exec. Order No. 12549 and 12689 and DOS 
implementing regulations (see Sec. 70.13).
Subpart D--After-the-Award Requirements


Sec. 70.70  Purpose.

    Sections 70.71 through 70.73 contain closeout procedures and other 
procedures for subsequent disallowances and adjustments.


Sec. 70.71  Closeout procedures.

    (a) Recipients must 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. The 
Department may approve extensions when requested in writing by the 
recipient.
    (b) Unless the Department authorizes an extension, a recipient must 
liquidate all obligations incurred under the award not later than 
ninety calendar days after the funding period or the date of completion 
as specified in the terms and conditions of the award or in agency 
implementing instructions.
    (c) The Department will make prompt payments to a recipient for 
allowable reimbursable costs under the award being closed out.
    (d) The recipient must promptly refund any balances of unobligated 
cash that the Department 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, the 
Department will make a settlement for any upward or downward 
adjustments to the Federal share of costs after closeout reports are 
received.
    (f) The recipient must account for any real and personal property 
acquired with Federal funds or received from the Federal Government in 
accordance with Secs. 70.31 through 70.37.
    (g) In the event a final audit has not been performed prior to the 
closeout of an award, the Department retains the right to recover an 
appropriate amount after fully considering the recommendations on 
disallowed costs resulting from the final audit.


Sec. 70.72  Subsequent adjustments and continuing responsibilities.

    (a) The closeout of an award does not affect any of the following.
    (1) The right of the Department 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 Sec. 70.26.
    (4) Property management requirements in Secs. 70.31 through 70.37.
    (5) Records retention as required in Sec. 70.53.
    (b) After closeout of an award, a relationship created under an 
award may be modified or ended in whole or in part with the consent of 
the Department and the recipient, provided the responsibilities of the 
recipient referred to in Sec. 70.73(a), including those for property 
management as applicable, are considered and provisions made for 
continuing responsibilities of the recipient, as appropriate.


Sec. 70.73  Collection of amounts due.

    (a) Any funds paid to a recipient in excess of the amount to which 
the recipient is finally determined to be entitled under the terms and 
conditions of the award constitute a debt to the Federal Government. If 
not paid within a reasonable period after the demand for payment, the 
Department may reduce the debt by paragraph (a) (1), (2) or (3) of this 
section.
    (1) Making an administrative offset against other requests for 
reimbursements.
    (2) Withholding advance payments otherwise due to the recipient.
    (3) Taking other action permitted by statute.
    (b) Except as otherwise provided by law, the Department may charge 
interest on an overdue debt in accordance with 4 CFR Chapter II, 
``Federal Claims Collection Standards.''
Appendix A to Part 70--Contract Provisions

    All contracts, awarded by a recipient including small purchases, 
must contain the following provisions as applicable:
    1. Equal Employment Opportunity--All contracts must contain a 
provision requiring compliance with Exec. Order No. 11246, ``Equal 
Employment Opportunity,'' as amended by Exec. Order No. 11375, 
``Amending Executive Order 11246 Relating to Equal Employment 
Opportunity,'' and as supplemented by regulations at 41 CFR part 60, 
``Office of Federal Contract Compliance Programs, Equal Employment 
Opportunity, Department of Labor.''
    2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C. 
276c)--All contracts and subawards in excess of $2000 for 
construction or repair awarded by recipients and subrecipients must 
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 must 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 must report all 
suspected or reported violations to the Department.
    3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When 
required by Federal program legislation, all construction contracts 
awarded by the recipients and subrecipients of more than $2000 must 
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 must 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 are required to pay wages not less 
than once a week. The recipient must place a copy of the current 
prevailing wage determination issued by the Department of Labor in 
each solicitation and the award of a contract must be conditioned 
upon the acceptance of the wage determination. The recipient must 
report all suspected or reported violations to the Department.
    4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in 
excess of $2000 for construction contracts and in excess of $2500 
for other contracts that involve the employment of mechanics or 
laborers must 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 is 
required to compute the wages of every mechanic and laborer on the 
basis of a standard work week of forty hours. Work in excess of the 
standard work week is permissible provided that the worker is 
compensated at a rate of not less than one and one-half times the 
basic rate of pay for all hours worked in excess of forty 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 

[[Page 38256]]
agreements for the performance of experimental, developmental, or 
research work must 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 must 
contain a provision that requires the recipient to agree to comply 
with all applicable standards, orders or regulations issued pursuant 
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water 
Pollution Control Act as amended (33 U.S.C. 1251 et seq.). 
Violations must be reported to the DOS 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 of $100,000 or more must 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 must 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 (Exec. Order No. 12549 and 12689)--
No contract shall be made to parties listed on the General Services 
Administration's List of Parties Excluded from Federal Procurement 
or Nonprocurement Programs in accordance with Exec. Order No. 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 Exec. Order No. 12549. Contractors 
with awards that exceed the small purchase threshold must provide 
the required certification regarding its exclusion status and that 
of its principal employees.

    Dated: July 18, 1995.
Janet Reno,
Attorney General.
[FR Doc. 95-18157 Filed 7-25-95; 8:45 am]
BILLING CODE 4410-18-M