[Federal Register Volume 62, Number 168 (Friday, August 29, 1997)]
[Notices]
[Pages 45934-45936]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22828]
[[Page 45933]]
_______________________________________________________________________
Part III
Office of Management and Budget
_______________________________________________________________________
Governmentwide Grants Management Requirements; Notice; Interim Final
Rules and Proposed Rule
Federal Register / Vol. 62, No. 168 / Friday, August 29, 1997 /
Notices
[[Page 45934]]
=======================================================================
-----------------------------------------------------------------------
OFFICE OF MANAGEMENT AND BUDGET
Governmentwide Grants Management Requirements
AGENCY: Office of Management and Budget.
ACTION: Final Revision of OMB Circulars A-21, A-87, A-102, A-110 and A-
122 and Interim Final Revision of OMB Circular A-110.
-----------------------------------------------------------------------
SUMMARY: The Office of Management and Budget (OMB) is issuing final
revisions to five OMB circulars and, in addition, OMB is issuing
interim final amendments to one of these circulars to reflect the
Single Audit Act Amendments of 1996. The five Circulars are A-21
(``Cost Principles for Educational Institutions''), A-87 (``Cost
Principles for State and Local Governments''), A-102 (``Grants and
Cooperative Agreements with State and Local Governments''), A-110
(``Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations''), and A-122 (``Cost Principles for Non-Profit
Organizations''). The purpose of these revisions is to provide a
conditional exemption from OMB's grants management requirements and a
conditional class deviation from the agencies' Grants Management Common
Rule for certain Federal grant programs with statutorily-authorized
consolidated planning and consolidated administrative funding, that are
identified by a Federal agency and approved by the head of the
Executive department or establishment. Additionally, OMB is issuing
interim final conforming amendments to Circular A-110 to reflect the
enactment of the Single Audit Act Amendments of 1996, the recent
rescission of OMB Circular A-128 (``Audits of State and Local
Governments''), and the consolidation of its provisions in a revised
OMB Circular A-133, ``Audits of States, Local Governments, and Non-
Profit Organizations.''
DATES: The final revisions and interim final amendments are effective
September 29, 1997. All comments on the interim final amendments should
be in writing and must be received by October 28, 1997. Late comments
will be considered to the extent practicable.
ADDRESSES: Comments should be mailed to Grants Management Audit Docket,
Office of Federal Financial Management, Office of Management and
Budget, Room 6025 New Executive Office Building, Washington, DC 20503.
Electronic mail (E-mail) comments may be submitted via the Internet to
[email protected]. Please include the full body of E-mail comments
in the text of the message and not as an attachment. Please include the
name, title, organization, postal address, and E-mail address in the
text of the message.
FOR FURTHER INFORMATION CONTACT: Barbara F. Kahlow, Office of Financial
Federal Financial Management, Office of Management and Budget, (202)
395-3053. The revised OMB Circulars A-21, A-87, A-102, A-110, and A-122
are available electronically on the OMB Home Page at http://
www.whitehouse.gov/WH/EOP/omb. These revised Circulars are also
available in paper format by contacting the OMB Publications Office at
(202) 395-7332.
SUPPLEMENTARY INFORMATION: On May 14, 1997, the Office of Management
and Budget (OMB) proposed a revision (62 FR 26577) of OMB Circulars A-
21, ``Cost Principles for Educational Institutions,'' A-87, ``Cost
Principles for State and Local Governments,'' A-102, ``Grants and
Cooperative Agreements with State and Local Governments,'' A-110,
``Uniform Administrative Requirements for Grants and Agreements with
Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations,'' and A-122, ``Cost Principles for Non-Profit
Organizations.'' The proposal would provide a conditional exemption
from OMB's grants management requirements and a conditional class
deviation from the agencies' Grants Management Common Rule (GMCR) for
certain Federal grant programs with statutorily-authorized consolidated
planning and consolidated administrative funding, that are identified
by a Federal agency and approved by the head of the Executive
department or establishment.
This exemption could be granted to related Federal non-entitlement
grant programs which are administered by State and local governments
and which have the following characteristics: the related programs (1)
serve a common program purpose, (2) have specific statutorily-
authorized consolidated planning and consolidated administrative
funding, and (3) are administered by State agencies which are funded
mostly by non-Federal sources. In order to promote efficiency in the
State and local program administration of such related programs,
Federal agencies could exempt these covered State-administered, non-
entitlement grant programs from Federal grants management requirements
in OMB Circulars A-21, A-87, A-110, and A-122, and the GMCR. The
exemptions would be from all but the allocability-of-costs provisions
of Circulars A-21 (Section C, subpart 4), A-87 (Attachment A,
subsection C.3), and A-122 (Attachment A, subsection A.4), and from all
of the administrative requirements provisions of Circular A-110 and the
GMCR.
A Federal agency would have the discretion to exempt a Federal
grant program from the Federal grants management requirements. A
Federal agency shall consult with OMB during its consideration of
whether to grant such an exemption.
If a Federal agency exempts a Federal grant program from these
requirements, a State would only qualify if it adopts its own written
fiscal and administrative requirements for expending and accounting for
all funds, which are consistent with the provisions of OMB Circular A-
87, and extends such requirements to all subrecipients. These fiscal
and administrative requirements must be sufficiently specific to ensure
that: funds are used in compliance with all applicable Federal
statutory and regulatory provisions, costs are reasonable and necessary
for operating these programs, and funds are not to be used for general
expenses required to carry out other responsibilities of a State or its
subrecipients. If a State does not adopt such fiscal and administrative
requirements, then it would continue to be subject to the Federal
grants management requirements.
Response to Comments
OMB received eight comment letters: three from Federal agencies,
one from a local government, two from universities, one from a non-
profit organization, and one from an interest group. Four of the
letters did not address the substance of the proposed revisions. The
letter from the local government asked if the proposal had any
relationship to the recent revision of OMB Circular A-133, ``Audits of
States, Local Governments, and Non-Profit Organizations,'' on June 24,
1997 (62 FR 35278); in response to this question, these revisions are
not related to that revision of Circular A-133. The letter from the
non-profit organization raised concerns about certain other provisions
in OMB Circular A-122 which are unrelated to the proposal; OMB will
consider these concerns in connection with its review of Circular A-
122. A letter from one of the Federal agencies requested an unrelated
change to the GMCR and OMB Circular A-110; the issue raised will be
considered during OMB's future review of those provisions. A letter
from another Federal agency raised concerns
[[Page 45935]]
about OMB's denial of certain other, unrelated waiver requests from
that agency which would have been applicable only to that agency's
grant programs.
The other four letters addressed the substance of the proposed
revisions. The interest group commenter supported the proposed
revisions and recommended that the flexibility afforded to State-
administered programs be extended to local-administered programs. This
recommendation for flexibility for local-administered programs will be
considered during OMB's future review of the five circulars.
The two university commenters objected to the proposal because of
its possible effect on those subrecipients, including subcontractors,
that are universities. Specifically, the university commenters
preferred to be subject only to OMB Circulars A-21 and A-110 (and not
also to State grants management requirements) because ``We have found
that state government does not always do a good job communicating to us
what the guidelines are for a given program.'' The university
commenters stated that they are familiar with Circulars A-21 and A-110
and ``have systems in place to deal with them.'' Finally, the Federal
agency commenter found the proposal unclear and felt that ``the funding
agency needs to have not only accountability, but also the consistent
accountability afforded by currently imposed Federal cost principles
and uniform administrative requirements.'' The commenter raised a
concern about the possible inefficiency of having more than one State
grants management system, with one for exempted grant programs (and
other State programs), and one for the rest of the Federal grant
programs.
OMB would also be concerned if the proposed changes increased
burden on State grantees or their subrecipients, as the three
commenters apparently believed. However, State grants management
requirements instead of Federal grants management requirements
currently apply to several previously-exempted Federal programs as well
as to State-funded programs which have no Federal funding. In 1981 and
1982, OMB waived the application of Circulars A-21, A-87, A-102, A-110,
and A-122 for certain, selective State-administered programs. As a
consequence, OMB believes that the addition of programs with shared,
statutorily-authorized consolidated planning and consolidated
administrative funding with these already-exempted programs would not
result in additional burden on subrecipients and would not result in
increased inefficiency. Since OMB does not believe that any negative
effects on grantees or subrecipients will ensue from the proposed
revisions, OMB is finalizing them.
Accordingly, to provide such a conditional exemption, OMB is
adopting the proposed revisions and amending: Section A.3 of Circular
A-21; Attachment A Section A.3 of Circular A-87; Section 2 of Circular
A-102; Subpart C of Circular A-110 (as a new Section ____.29 instead of
as Section ____.45 as proposed); and, Attachment A Section A of
Circular A-122. The amendments are set forth below.
Interim Final Conforming Amendments
In addition to adopting the proposed revisions to the five
circulars, OMB is also making conforming amendments to Circular A-110
to reflect the enactment of the Single Audit Act Amendments of 1996
(Public Law 104-156, 110 Stat. 1396) and OMB's rescission of Circular
A-128 (``Audits of State and Local Governments'') and its issuance of
the June 24, 1997, revision of OMB Circular A-133 (62 FR 35278, June
30, 1997). The provisions of the 1996 Act and of the revised Circular
A-133 apply to audits of fiscal years beginning after June 30, 1996.
The revised Circular A-133 co-locates audit requirements for States,
local governments, and non-profit organizations. As a consequence, OMB
rescinded OMB Circular A-128.
Currently, Circular A-110 refers to the Single Audit Act of 1984
(which was superseded by the 1996 Act), to Circular A-128 (which was
rescinded), and to the former version of OMB Circular A-133 (which
covered only non-profit organizations, and did not cover State and
local governments). These interim final conforming amendments update
these references. Additional conforming changes were made to conform
with the 1996 Act and revised Circular A-133 (e.g., to reflect that,
under the 1996 Act, all non-profit hospitals are now subject to the
Act).
OMB has determined, under 5 U.S.C. 553(b)(B), that good cause
exists to issue these conforming amendments on an interim final basis.
The conforming amendments update the references to the applicable
statute and circulars, by replacing the superseded references with
current ones. Moreover, under the Single Audit Act Amendments of 1996,
the provisions of the 1996 Act (which are reflected in the revised OMB
Circular A-133) provide standards that are effective for audits of
fiscal years beginning after June 30, 1996. Accordingly, OMB has
determined that issuing a proposal for comment on these conforming
amendments would be ``impractical, unnecessary, and contrary to the
public interest.''
Availability of Revised Circulars
OMB has prepared updated versions of the five circulars, as amended
herein. The revised OMB Circulars A-21, A-87, A-102, A-110, and A-122,
as amended herein, are available electronically on the OMB Home Page at
http://www.whitehouse.gov/WH/EOP/omb. These revised Circulars, as
amended herein, are also available in paper format by contacting the
OMB Publications Office at (202) 395-7332.
Joseph J. Minarik,
Acting Director.
1. OMB hereby amends Circulars A-21, A-87, A-102, A-110, and A-122
by adding the three paragraphs that follow, regarding ``Conditional
exemptions,'' at the specified places in each Circular: (1) as a new
paragraph d under A.3 Purpose and Scope, Application of Circular A-21;
(2) as a new paragraph e under Attachment A, A.3 Purpose and Scope,
Application of Circular A-87; (3) as a new paragraph j under Section 2,
Post-award Policies of Circular A-102; (4) as a new Section ____.29
under Subpart C, Post-award Requirements of Circular A-110; and, (5) as
a new paragraph 7 under Attachment A, A. Basic Considerations of
Circular A-122:
Conditional exemptions. (1) OMB authorizes conditional exemption
from OMB administrative requirements and cost principles circulars for
certain Federal programs with statutorily-authorized consolidated
planning and consolidated administrative funding, that are identified
by a Federal agency and approved by the head of the Executive
department or establishment. A Federal agency shall consult with OMB
during its consideration of whether to grant such an exemption.
(2) To promote efficiency in State and local program
administration, when Federal non-entitlement programs with common
purposes have specific statutorily-authorized consolidated planning and
consolidated administrative funding and where most of the State
agency's resources come from non-Federal sources, Federal agencies may
exempt these covered State-administered, non-entitlement grant programs
from certain OMB grants management requirements. The exemptions would
be from all but the allocability of costs provisions of OMB Circulars
A-87 (Attachment A, subsection C.3), ``Cost Principles for State,
Local, and Indian Tribal Governments,'' A-21 (Section C, subpart 4),
``Cost Principles for Educational
[[Page 45936]]
Institutions,'' and A-122 (Attachment A, subsection A.4), ``Cost
Principles for Non-Profit Organizations,'' and from all of the
administrative requirements provisions of OMB Circular A-110, ``Uniform
Administrative Requirements for Grants and Agreements with Institutions
of Higher Education, Hospitals, and Other Non-Profit Organizations,''
and the agencies' grants management common rule.
(3) When a Federal agency provides this flexibility, as a
prerequisite to a State's exercising this option, a State must adopt
its own written fiscal and administrative requirements for expending
and accounting for all funds, which are consistent with the provisions
of OMB Circular A-87, and extend such policies to all subrecipients.
These fiscal and administrative requirements must be sufficiently
specific to ensure that: funds are used in compliance with all
applicable Federal statutory and regulatory provisions, costs are
reasonable and necessary for operating these programs, and funds are
not be used for general expenses required to carry out other
responsibilities of a State or its subrecipients.
2. OMB hereby amends paragraphs (a), (b) and (c) of Section ____.26
of OMB Circular A-110 to read as follows:
____.26 Non-Federal audits.
(a) Recipients and subrecipients that are institutions of higher
education or other non-profit organizations (including hospitals) shall
be subject to the audit requirements contained in the Single Audit Act
Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-
133, ``Audits of States, Local Governments, and Non-Profit
Organizations.''
(b) State and local governments shall be subject to the audit
requirements contained in the Single Audit Act Amendments of 1996 (31
U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States,
Local Governments, and Non-Profit Organizations.''
(c) For-profit hospitals not covered by the audit provisions of
revised OMB Circular A-133 shall be subject to the audit requirements
of the Federal awarding agencies.
[FR Doc. 97-22828 Filed 8-28-97; 8:45 am]
BILLING CODE 3110-01-P