[Federal Register Volume 63, Number 48 (Thursday, March 12, 1998)]
[Rules and Regulations]
[Pages 12152-12215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5888]
[[Page 12151]]
_______________________________________________________________________
Part II
Department of Defense
_______________________________________________________________________
32 CFR Parts 21, 22, 23, 28, 32, and 34
DoD Grant and Agreement Regulations; Final Rule
Federal Register / Vol. 63, No. 48 / Thursday, March 12, 1998 / Rules
and Regulations
[[Page 12152]]
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Parts 21, 22, 23, 28, 32, and 34
RIN 0790-AG28
DoD Grant and Agreement Regulations
AGENCY: Office of the Secretary, DoD.
ACTION: Final rule.
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SUMMARY: The Department of Defense (DoD) is completing the
establishment of most of the DoD Grant and Agreement Regulations
(DoDGARs). The DoDGARs provide uniform policies and procedures for DoD
Components' award and administration of grants and cooperative
agreements.
DATES: These final rules are effective on April 13, 1998.
FOR FURTHER INFORMATION CONTACT: Mark Herbst; ODDR&E(R); 3080 Defense
Pentagon; Washington, DC 20301-3080.
SUPPLEMENTARY INFORMATION: The specific regulatory actions that are
being taken are to: (1) adopt four new parts of the DoDGARs (32 CFR
parts 21, 22, 32, and 34); (2) make minor amendments to update one of
the four existing parts of the DoDGARs (32 CFR part 28); and (3)
eliminate another of the existing parts (32 CFR part 23), by
incorporating its contents into one of the four new parts (32 CFR part
22).
The four new parts: address DoD Components' overall management of
grant and agreement functions; set forth DoD Components' and grants
officers' responsibilities related to the award and administration of
grants and agreements; implement administrative requirements in OMB
Circular A-110 for grants and agreements awarded to institutions of
higher education and other nonprofit organizations; and establish
administrative requirements for awards to for-profit organizations.
The minor amendments to the existing part provide DoD-specific
procedures related to Governmentwide restrictions on lobbying.
The part that is being removed, with its contents incorporated into
another part, is the rule implementing a law that prohibits the
Department of Defense from providing funds by grant to institutions of
higher education that have policies of denying, or that effectively
prevent, the Secretary of Defense from obtaining for military
recruiting purposes: entry to campuses; access to students on campuses;
or access to directory information pertaining to students.
A. Background
DoD published a notice in the Federal Register on August 26, 1996
(61 FR 43867) requesting comments on four new DoDGARs parts and updates
to two other parts. DoD received comments from: three universities; an
association of academic institutions; an industry association; an
attorneys' association; the Office of Management and Budget (OMB) and
one other non-DoD Federal agency; and several DoD Components. All
comments were considered in developing the final rule.
Some comments concerned a future DoDGARs part that was mentioned in
the Federal Register preamble to the proposed rules. That future part,
which is not included in this rulemaking, is being developed for a
class of research agreements with for-profit firms that is meant to
help integrate the defense and non-defense portions of the U.S.
technology and industrial bases. The future part therefore will provide
more flexible administrative requirements than those contained in part
34 of this rulemaking. Comments pertaining to that future part are
addressed herein only to the extent that they also relate to parts that
are included in this rulemaking.
The following sections present a summary of the major comments
grouped by subject, and the responses to the comments. Changes in the
rules are discussed in the responses to the comments. Other changes
were made to increase readability.
B. Comments and Responses
Comments on General Matters
Comment: The DoDGARs should be included as a supplement to the
rules for award and administration of procurement contracts, in the
Defense Federal Acquisition Regulation Supplement. That would give DoD
contracting officers a single source for rules on contracts, grants,
and cooperative agreements.
Response: No change. It would be inappropriate to merge regulations
for assistance instruments with the regulations for contracts, which
are used for the very different purpose of acquisition.
Comment: The DoDGARs should include a structured format for grants
and cooperative agreements, which could be similar to the uniform
contract format that is currently in 48 CFR part 15, in the Federal
Acquisition Regulations. The format could be an outline of major
topical headings and specific clauses and provisions that are either
mandatory or optional.
Response: No change. There are efforts currently among DoD
activities, some in coordination with other Federal agencies, to
maintain uniform formats for assistance instruments that are used for
similar purposes (e.g., research). Codifying a single standard format
in the DoDGARs at this time likely would hinder these efforts and also
could impede ongoing initiatives to streamline agency business
practices and eliminate unnecessary burdens on recipients.
Comments on Instrument Types, Authorities, and Applicability
Comment: The definition of the term ``contract'' in Sec. 21.130
should be expanded to include cooperative agreements, which also are
contracts. In some cases, even a grant is a contract.
Response: No change. Federal cooperative agreements and grants
often are viewed as ``contractual instruments'' because they are
binding agreements between two parties. However, under the Federal
Grant and Cooperative Agreement Act (31 U.S.C., Chapter 63), Federal
grants and cooperative agreements are assistance instruments that are
quite distinct from Federal procurement contracts, and the term
``contract'' is used widely to mean procurement contracts in Federal
statutes and rules for procurement instruments. If the DoD Grant and
Agreement Regulations were to define the term ``contract''
inconsistently with the predominant Federal usage, it would create
confusion for DoD Components, other Federal agencies, and Government
contractors.
Comment: The term ``assistance'' should be defined in Sec. 21.130
to exclude ``other transactions.'' ``Other transactions'' can be
written to be in the nature of assistance, but such legal instruments
should not be considered to be ``assistance'' for purposes of
applicable laws and regulations and should not be covered by the
DoDGARs.
Response: No change. ``Other transactions,'' as authorized by 10
U.S.C. 2371, are any transactions other than contracts, grants, and
cooperative agreements. DoD recognizes that there could be different
types of ``other transactions,'' including some for providing
assistance. Therefore, the rule can not state categorically that no
``other transactions'' are subject to the laws and regulations that
apply when a Federal agency provides assistance.
Comment: Paragraph (b) of Sec. 21.110 states that the DoDGARs in
certain situations may include rules that apply to other nonprocurement
instruments, in addition to grants and cooperative agreements. It
should expressly state
[[Page 12153]]
that the DoDGARs do not apply to ``other transactions.''
Response: No change. Depending on the type of instrument it is, a
particular ``other transaction'' may be subject to some DoDGARs rules--
such as the rule at 32 CFR part 25 on nonprocurement debarment and
suspension--that apply to more types of instruments than just
cooperative agreements and grants.
Comment: The title of subpart C, part 21, currently is ``Grants
Information,'' but it should be changed to recognize the applicability
of the subpart to cooperative agreements and other nonprocurement
instruments, as well as grants.
Response: Agree. Changed the title to ``Information Reporting on
Grants, Cooperative Agreements, and Other Nonprocurement Instruments.''
Comment: The use of the term ``transaction'' in Sec. 22.220,
``Exemptions,'' a section that otherwise addresses only grants and
cooperative agreements, may lead to confusion with the term ``other
transaction.''
Response: Revised the first sentence of Sec. 22.220 to make it
clear that the use of the term ``transaction'' in this case directly
follows from the section of the Federal Grant and Cooperative Agreement
Act (31 U.S.C. 6307) that authorizes the Director of the Office of
Management and Budget to exempt an agency transaction.
Comment: The wording of paragraph (b) of Sec. 21.205, on the need
for specific statutory authority to use a grant or cooperative
agreement, may cause confusion. It may cause a grants officer to
believe that an authorizing statute must specifically state that a
grant or cooperative agreement may be used. What is required is that
the intent of the authorizing statute must support the use of an
assistance instrument.
Response: Agree. Revised the paragraph to say that the intent of
the authorizing statute must support the use of an assistance
instrument.
Comment: The last sentence in paragraph (b)(2) of Sec. 21.205
should provide a more general statement about authorizing statutes that
do not require delegation by the Secretary of Defense, consistent with
the paragraph's heading, ``Authorities that rise indirectly as a result
of statute.'' The last sentence merely provides one example.
Response: Added a general statement to the paragraph.
Comment: Paragraph (a)(2) of Sec. 22.205 should be revised to
reflect the intent of 10 U.S.C. 2358, which allows the use of
cooperative agreements for some development projects.
Response: No change. Paragraph (a)(2) of Sec. 22.205 does permit
the use of a cooperative agreement for a development project, in
accordance with the Federal Grant and Cooperative Agreement Act (31
U.S.C., Chapter 63), if the principal purpose of that development
project is assistance. The paragraph correctly notes that the principal
purpose of almost all DoD development projects is acquisition, and that
it therefore is not appropriate to use assistance instruments for
carrying out those projects.
Comment: The last sentence of paragraph (a)(2) of Sec. 22.205
should be revised to recognize that there is statutory authority to use
``other transactions,'' as well as contracts, to carry out prototype
projects relevant to weapons or weapons systems.
Response: Agree. Revised the sentence to recognize the use of
acquisition transactions other than contracts.
Comment: Paragraph (b) of Sec. 22.210 broadens the applicability of
10 U.S.C. 2358. It requires that any research project carried out
through a grant or cooperative agreement must be relevant to defense
missions or interests, even if the grant or cooperative agreement is
awarded under a statutory authority other than 10 U.S.C. 2358. The
paragraph should be modified, to limit this requirement to grants and
cooperative agreements used to carry out research projects under the
authority of 10 U.S.C. 2358.
Response: The requirement for defense relevance in 10 U.S.C. 2358
applies to research projects carried out under other authorities.
Specifically, under paragraph (c) of 10 U.S.C. 2358, any research
project carried out with funds appropriated to a DoD Component must
comply with that requirement. Revised paragraph (b) of Sec. 22.210 to
clarify the broader applicability of the statute.
Comment: The DoD should clarify the relationship of part 32, which
implements OMB Circular A-110, to parts 21 and 22. Doing so will let
university and nonprofit recipients know the extent to which they must
be familiar with those parts.
Response: Agree. Added a new paragraph (b) to Sec. 32.1 to clarify
that parts 21 and 22 provide guidance to DoD Components and grants
officers and do not directly impose any requirements on recipients.
Because that guidance indirectly affects recipients, the information in
those parts concerning internal policies and procedures should be
helpful to recipients of DoD awards.
Comment: Part 34 imposes administrative requirements for awards to
commercial organizations that are burdensome, costly, and different
from normal commercial practice. Commercial firms that cannot meet the
requirements of part 34 should be made subject to the future DoDGARs
part on agreements with more flexible administrative requirements.
Response: Replaced the term ``commercial organization'' throughout
the rule with ``for-profit organization.'' A number of comments
revealed that the rule's use of the term ``commercial organizations''
to include all for-profit organizations confused the many people who
use the term ``commercial firms'' to mean the subset of for-profit
firms that have not traditionally performed under cost-type contracts
or assistance instruments from the Federal Government.
The future DoDGARs part, as described earlier in this preamble,
concerns a class of agreements for use in carrying out research
programs to help integrate the defense and non-defense portions of the
U.S. technology and industrial bases. A prime consideration in
preparing that part is removing obstructions to participation in
defense research by commercial firms that have not traditionally been
Government contractors, where consistent with proper stewardship of
Federal funds. That distinguishes the future DoDGARs part from part 34,
which is intended to apply to the more general case of awards for any
type of program performed by a for-profit firm.
Comments on Payments and Interest
Comment: Paragraph (b)(2) of Sec. 22.810, paragraph (e)(1) of
Sec. 32.22, and paragraph (e) of Sec. 34.12 address the
responsibilities of DoD disbursing officers, as well as grants
officers. The DoD Financial Management Regulation (the FMR, which is
DoD 7000.14-R) addresses DoD disbursing officers' responsibilities.
Therefore, these paragraphs of the DoDGARs should be revised to refer
to the pertinent portions of the FMR, rather than create a duplicative
set of rules.
Response: Agree. Reorganized and revised section 22.810 to specify
requirements only in areas that are grants officers' responsibilities
and refer to DoD 7000.14-R for requirements that are disbursing
officers' responsibilities. Similarly, revised paragraph (e)(1) of
Sec. 32.22 and paragraph (e) of Sec. 34.12 to refer to Sec. 22.810, and
thereby to DoD 7000.14-R.
Comment: Sections 32.21(b)(5) and 32.22(l) should be revised to
include references to the Cash Management Improvement Act (CMIA) that
are contained in the corresponding paragraphs of OMB Circular A-110.
[[Page 12154]]
Response: Agree in part. The final rule restores the Circular A-110
language in Sec. 32.21(b)(5), because some provisions of the CMIA may
apply in rare instances to universities or nonprofit organizations. The
reference to the CMIA in Sec. 32.22(l), however, is not restored; the
Circular should be amended to delete that reference, to conform to
updated Department of the Treasury regulations implementing the CMIA.
Comment: Paragraph (l) of Sec. 32.22 should be revised to provide
details about the data and format requirements for electronically
remitting interest earned on advance payments, to facilitate direct
deposit in the Department of the Treasury account for the Division of
Payment Management of the Department of Health and Human Services'
(DHHS/DPM).
Response: Revised this section to advise recipients that current
information on the format for electronic submissions of interest
payments should be obtained from the administrative grants officer.
This will help to ensure that recipients have up-to-date information.
If the information were codified in the DoDGARs, recipients would
experience delays due to the regulatory process each time that changes
were made in formats or data elements for electronic remittances.
Note: University and nonprofit recipients that are subject to
the DoDGARs part 32 are advised of the following details about the
current format for electronic submissions, to help ensure direct
deposit of electronic remittances to the account of the DHHS/DPM:
the preferred funds transfer format is CCD+; the American Banking
Association routing number 05103670 should appear in the third
field; the check digit in the fourth field is a six (6); and the
account number for the DHHS/DPM, which is 303000, should appear in
the fifth field.
Comment: The rules need to be revised to implement requirements in
the Debt Collection Improvement Act of 1996 (Title 31, Pub. L. 104-134)
to: obtain each recipient's Taxpayer Identification Number (TIN);
include the TIN with each payment authorization forwarded to the
disbursing office; and pay recipients by electronic funds transfer
(EFT).
Response: Paragraph (d) of Sec. 22.420, which contains the
requirement to obtain each recipient's TIN, is revised to conform to
the new law and refer to it. Revisions to Sec. 22.810 implement the
requirements for forwarding TINs with payment authorizations and for
payment by EFT. Section 22.605 and Appendix C to part 22 also are
revised, to ensure that award documents alert recipients and disbursing
officers to the requirement for payment by EFT.
Comment: Section 34.12, ``Payment,'' states that reimbursement is
the preferred method of payment and makes no provision for payments of
fixed amounts for accomplishment of technical milestones. Perhaps the
technical-milestone method of payment is intended to be covered in the
new DoDGARs part, still in draft, on flexible research agreements. Many
commercial companies are unable or unwilling to contract with DoD when
payments will be made on a cost reimbursement basis.
Response: No change. The milestone payment method is associated
with the new type of research agreement that will be covered by a
future DoDGARs part.
Comment: Under Sec. 34.12, for-profit recipients must remit any
interest earned to the DoD Component that made the award. It would be
better to have the recipient remit the interest to the Defense
Contracting Management Command (DCMC) office that has the
responsibility for administering the agreement, by delegation from the
DoD Component that awarded the agreement.
Response: Revised Sec. 34.12 to provide for remittance of interest
to the administrative grants officer that is responsible for post-award
administration of the agreement.
Comments on Debt Collection
Comment: Paragraph (c)(2)(iv) of section 22.820 does not state how
the interest rate will be determined, when a recipient owes the
Government interest on a debt. The paragraph should provide for simple
interest at the rate fixed by the Secretary of the Treasury under Pub.
L. 92-41.
Response: Added a reference in this section to the DoD Financial
Management Regulations (FMR) for rules covering interest costs. The FMR
explains how the interest rate is determined.
Comment: Section 22.820, ``Debt Collection,'' says that the
recipient still may elect to appeal after the grants officer turns over
a debt to the Defense Finance and Accounting Service (DFAS) for
collection. Once a debt is turned over to DFAS, the debt collection
rules in the Financial Management Regulation will apply, and DFAS may
not decide to defer the debt to allow an appeal.
Response: Revised this section to clarify that further action to
collect the debt is deferred, to allow time for an appeal, only when
the recipient notifies the grants officer within the 30-day prescribed
time period of its intent to appeal. If the recipient does not so
notify the grants officer within that period, the debt is transferred
to DFAS for collection.
Comments on Claims, Disputes, and Appeals
Comment: Section 22.815, ``Claims, disputes, and appeals,'' says
that a recipient's appeal of a grants officer's final decision is to be
based solely on the basis of the written record, unless the Grant
Appeal Authority decides to conduct fact-finding procedures or an oral
hearing on the appeal. It would be desirable to give the recipient the
right to a hearing before the Grant Appeal Authority, if requested.
Response: No change. The rules permit the Grant Appeal Authority to
conduct an oral hearing, and a reasonable request from a recipient
would be a basis for doing so. However, creating the right to a hearing
is a step toward instituting a more formal appeals process, and there
is no current problem that justifies the increased Government
administration, with attendant burdens and costs, that is associated
with a more formal process. Instituting a more formal process also runs
counter to the direction taken in the rule, to strongly encourage
Alternative Dispute Resolution and other less cumbersome means of
resolving disputes.
Comment: Under Sec. 22.820, ``Debt collection,'' a debt owed by a
recipient, based on a DoD Component's claim, bears interest and may
include penalties and other administrative costs. Recommend adding a
provision that recipient claims also bear interest.
Response: No change. A Federal agency may pay interest on claims
only when it has statutory authority to do so.
Comment: Paragraph (d)(2) of Sec. 22.815, ``Claims, disputes, and
appeals,'' states that a grants officer's decision is final, but then
goes on to say that it can be appealed. A decision that can be appealed
isn't final.
Response: Revised the paragraph to clarify that the decision is
final, unless the recipient decides to appeal.
Comments on Cost Sharing, Budget Revisions, and Other Cost-Related
Matters
Comment: Paragraph (b) of section 32.23, ``Cost sharing and
matching,'' requires the grants officer's prior approval for a
university's or nonprofit organization's use of unrecovered indirect
costs as cost sharing or matching. Recipients should be authorized, as
a matter of DoD policy, to so use unrecovered indirect costs.
Response: Revised this paragraph to remove the prior approval
requirement.
[[Page 12155]]
Comment: Paragraph (c)(2) of Sec. 32.23, ``Cost sharing and
matching,'' specifies ``current fair market value'' as one metric for
valuing buildings or land donated by a recipient as cost sharing or
matching. The paragraph should include a statement that the DoD
Component may use any reasonable basis for determining the fair market
value.
Response: Revised the paragraph to add the suggested statement.
Comment: Paragraph (d)(1) of Sec. 32.25, ``Revision of budget and
program plans,'' gives DoD Components the option to waive certain cost-
related and administrative prior approvals required by OMB Circulars A-
110, A-21, and A-122. It would be preferable for these waivers to be
made the standard practice, rather than optional.
Response: No change. DoD awards grants and agreements to university
and nonprofit recipients for various types of programs. Some recipients
and programs need more oversight than others. DoD Components therefore
need the flexibility provided by the OMB circulars to judge on a case-
by-case basis whether they can waive these prior approvals.
Furthermore, some of the prior approvals in the cost principles (OMB
Circulars A-21 and A-122) relate to system-wide methods for handling
indirect costs that should not be waived without first consulting with
the cognizant agency responsible for negotiating the recipient's
indirect cost rate.
Comment: Paragraph (d) of Sec. 32.25, ``Revision of budget and
program plans,'' does not include the language from the corresponding
section of OMB Circular A-110 that permits a university or nonprofit
recipient to initiate a one-time extension of the expiration date of an
award, without the Federal agency's prior approval, if the extension
requires no additional Federal funds (i.e., it is a ``no-cost
extension''). Recommend that DoD include language authorizing
recipients to initiate no-cost extensions, with the requirement that
the recipients notify DoD of the actions. Regardless of the final
resolution of the matter, Sec. 32.25 should clearly state whether DoD
requires prior approvals for no-cost extensions, rather than remaining
silent and leaving university and nonprofit recipients in doubt about
the policy.
Response: Revised the section to state that DoD Components may
waive the prior approval requirement on a case-by-case basis, when the
Components judge that doing so would not cause them to fail to comply
with DoD incremental programming and budgeting policies. Those policies
specify the period during which a given fiscal year's appropriations
are to be used (e.g., that one fiscal year's research funds usually are
to support effort only through the first three months of the next
fiscal year).
Comment: It is unnecessary to give DoD Components the option to
require university or nonprofit recipients to obtain the agency's prior
approval for rebudgeting between direct cost categories on awards in
excess of $100,000, as provided in paragraph (e) of Sec. 32.25,
``Revision of budget and program plans.'' Paragraph (e) even appears to
contradict paragraphs (c) (1) through (5) of Sec. 32.25, which specify
prior approval requirements for other budget revisions related to
nonconstruction awards.
Response: DoD Components need the flexibility provided by OMB
Circular A-110 to require prior approvals for such budget changes,
because some types of programs for which DoD Components use grants and
agreements require more oversight than others. Nonetheless, this prior
approval requirement generally is not appropriate for grants to support
research, the likely object of the comment. Paragraph (e) of Sec. 32.25
is revised to include a statement to that effect. While there are no
apparent contradictions between paragraphs (c) and (e) of Sec. 32.25,
also revised paragraph (c) to refer to paragraph (e), to help prevent
confusion about prior approval requirements for rebudgeting actions
related to nonconstruction awards.
Comment: The DoD should restore to paragraph (c) of Sec. 32.25 the
requirement in the corresponding paragraph of OMB Circular A-110 for
recipients to obtain prior approval before revising the budget in a way
that transfers amounts budgeted for indirect costs to absorb increases
in direct costs, or vice versa, if the awarding office wishes to
approve such transfers.
Response: Agree in part. The language is restored in that paragraph
of the final rule, but with a caveat that requiring prior approval for
such budget revisions should be required only in exceptional
circumstances. That change addresses the rare cases in which an
assistance program may require more Government oversight.
Comment: Section 34.13, ``Cost sharing or matching,'' should be
revised to address for-profit recipients' use of Independent Research
and Development (IR&D) costs to meet cost sharing or matching
requirements. The section should conform with Federal Acquisition
Regulation (FAR) coverage for procurement contracts, at 48 CFR 31.205-
18(e), which says that contributions of IR&D costs under certain types
of cooperative arrangements may be treated as allowable indirect costs,
if the work performed would have been allowed as IR&D had there been no
cooperative arrangement.
Response: Revised this section to provide coverage for assistance
instruments that conforms with the FAR coverage for procurement
contracts.
Comment: Section 34.16, ``Audits,'' should state that a for-profit
recipient's audit costs are allowable as direct charges to the
agreement. Also, the section should state whether audit costs are
subject to cost sharing requirements.
Response: Added language to clarify that audit costs are allowable
as direct or indirect costs, as appropriate. Cost sharing requirements
apply to total project costs, of which audit costs are an element;
there is no need to include language in the rule to specifically
address the applicability of cost sharing requirements to audit costs
or the many other specific types of direct or indirect cost that
comprise the total project costs.
Comment: Section 34.11, ``Standards for financial management
systems,'' seems to not require for-profit recipients to do employee
time reporting more frequently than monthly and permits reports to
coincide with one or more pay periods. Many firms keep daily records
for their DoD contract business--is the difference intended?
Response: The intent of the standards is to have records that
accurately reflect the distribution of the actual activity of each
employee that has salary or wages charged to DoD awards, and to keep
paperwork burdens to the minimum that is necessary for that purpose.
The rule provides flexibility for the recipient because the reporting
frequency needed to ensure accurate records may vary, depending upon
the circumstances. For example, if an employee works on just one
project, there probably is no need to record time spent on various
tasks more frequently than monthly. However, if an employee works on
many projects, it is likely that more frequent recording of time spent
on specific tasks is necessary.
Comment: Section 34.17, ``Allowable costs,'' provides that for-
profit recipients of prime awards, as well as for-profit subrecipients
under prime awards, determine the allowability of costs in accordance
with the Federal Acquisition Regulation (FAR). Section 32.27 similarly
requires university and nonprofit recipients to flow down the FAR cost
principles to for-profit subrecipients under their prime awards. Most
commercial firms are unable to comply with these requirements--
[[Page 12156]]
Generally Accepted Accounting Principles (GAAP) should be applied,
instead.
Response: DoD recognizes that alternatives to the FAR cost
principles may be appropriate for use with certain types of research
investment agreements that involve for-profit firms, due to cost
matching and other characteristics of the agreements--such agreements
will be covered by a future part of the DoDGARs. One change is made at
this time in Sec. 32.27 of the final rule. The provisions of part 34
will be revised, as needed, when that future part is adopted. At this
time, those provisions are appropriate because part 34 applies to any
type of program, not just research, that is performed by for-profit
firms, not just commercial firms that have not traditionally done
business with the Government.
Comment: Requirements for the allowability of costs for for-profit
firms appear in paragraph (f) of Sec. 32.27 in part 32, but part 32
applies to awards to universities and other nonprofit organizations,
rather than to awards to for-profit firms. This is confusing.
Response: For-profit firms are mentioned in part 32 because they
may be subawardees under prime awards to universities and nonprofit
organizations, and the prime awardees need to know which requirements
apply to those subawards.
Comment: The definition of ``third-party in-kind contributions'' in
Sec. 34.2, ``Definitions,'' is confusing to commercial firms. The rule
should clarify how third parties would contribute to the project and
what their rights and responsibilities are.
Response: No change. The definition relates to Sec. 34.13, ``Cost
sharing or matching,'' which specifies how one values third-party
contributions, which include services of others' employees, volunteer
services, and property donated by third parties. The definition and
rules in part 34 on valuing third-party in-kind contributions parallel
the Governmentwide guidance in OMB Circular A-110, as implemented in
part 32 of the DoDGARs, for university and nonprofit recipients. While
third-party contributions are not expected to be encountered as often
by for-profit recipients as they are by university and nonprofit
recipients, they can occur and it therefore is useful to include rules
on how to value the contributions. It would be inappropriate for DoD
rules to specify rights or responsibilities of third parties making
such contributions--those properly would be worked out by the
recipients and third parties.
Comments on Program Income and Revisions of Program Plans
Comment: The definition of ``program income'' in section 34.2 is
too broad because it includes gross income that is ``earned as a result
of the award,'' and not just income earned by a for-profit recipient
that is ``directly generated by a supported activity.'' This is
especially problematic when coupled with the requirement in paragraph
(b)(2) of Sec. 34.14 for the grants officer to consider whether the
recipient has any obligation for program income generated after the
project period is over. The purpose of many agreements is to stimulate
development of technology that will generate income into the U.S.
economy long after the project's end, thereby benefiting the
Government.
Response: No change. This section applies mainly to program income
earned during the project period. Any Federal interest in program
income earned after that period must be provided for in the award,
based on an understanding between the recipient and the Government at
the time the award is negotiated. These rules apply to various
programs, not just research; even for research, one can not rule out in
all cases the appropriateness of a recipient's obligation to the
Government with respect to program income that is generated after the
project period. In cases where it is appropriate, the grants officer
must have the same flexibility as a firm's representatives to negotiate
agreement terms that are fair and equitable to both the firm and the
Government.
Comment: The requirement in paragraph (c) of Sec. 34.15 to
immediately request and gain prior approval when making decisions
regarding key personnel exceeds the provisions of most procurement
contracts. The recipient should only have a requirement to promptly
notify the Government when a change in key personnel is made.
Response: No change. The prior approval requirement applies only to
key personnel specified in the application or award document. Usually,
the experience and qualifications of such key personnel are prime
considerations in making an assistance award, and the Government should
be consulted before the recipient makes changes in those personnel.
This is a standard requirement in Federal agency rules governing
assistance awards, providing one illustration of the ways in which
assistance relationships differ from acquisition relationships that are
consummated through procurement contracts.
Comments on Property
Comment: It is not clear why some of the terms related to property
in part 32, which implements OMB Circular A-110, are used or defined
differently than in the Circular.
Response: Part 32 of the proposed rule included some nonsubstantive
technical improvements to the language of the Circular. For example,
the proposed rule replaced the term ``supplies and other expendable
property'' with the term ``supplies'' in two places (in Sec. 32.35 and
in the definition in Sec. 32.2 of ``third party in-kind
contributions'') because the term ``supplies'' includes all expendable
property. Similarly, the proposed rule deleted the term ``expendable
equipment'' in Sec. 32.23(f) because the term is self-contradictory
(given that ``equipment,'' as defined, is nonexpendable property).
Comment: Paragraph (b) of Sec. 32.35, ``Supplies,'' states that
university and nonprofit recipients shall not use supplies acquired
with Federal funds to provide services to non-Federal outside
organizations for a fee that is less than private companies charge for
equivalent services. Suggest adding another provision to address
recipients providing commercially acquired services.
Response: No change. DoD is not aware of any instance in which a
university or nonprofit recipient has provided to outside organizations
commercially acquired services that were obtained under a Federal
award. If a problem arises in this area, it should be addressed through
a revision to the Governmentwide guidance in OMB Circular A-110, so
that it will be implemented by all Federal agencies.
Comment: Paragraph (b) of Sec. 34.21 provides that for-profit
recipients receive only a conditional title to equipment purchased in
whole or in part with Federal funds. Among the conditions, which are
specified in Secs. 34.21 and 34.23, are that the recipient: Keep track
of real property or equipment for a project; make the property
available for use on other projects on a non-interfering basis and in a
certain order of priority; assess charges for the property's use to
Federal contracts or projects not supported by any Federal agency,
treating those use charges as program income; and handle the
disposition of the property at project's end, compensating the
Government for its share of the current fair market value. These are
burdensome requirements; the provisions of Sec. 34.23, for example,
will require commercial firms to establish costly property management
systems. Recommend
[[Page 12157]]
instead that recipients be given unconditional title to any equipment
purchased in part with recipient funds and in part with Federal funds.
Response: No change. A Federal agency needs specific authority to
vest title to equipment unconditionally. Therefore, the section
correctly states that the title shall be a conditional title unless a
statute specifically authorizes a DoD Component to vest title in the
recipient without further obligation to the Government, and the DoD
Component elects to do so. The conditions of the title are reasonable,
because they apply specifically to property in which the Federal
Government has a continuing financial interest. The provisions of
Sec. 34.23, for example, which are based on OMB Circular A-110's
Governmentwide guidance for assistance awards, maintain accountability
for Federally owned property and for equipment that is acquired with
Federal funds under an award.
Comment: Under paragraph (c) of Sec. 34.21, a for-profit recipient
may offer real property or equipment that is purchased with recipient
funds or donated by a third party to meet a portion of any required
cost share or match. However, the Government then has a financial
interest in the property, a share of the value attributable to the
Federal participation in the project. The property then is subject to
provisions of the rule concerning the property's encumbrance, disposal,
tracking, and use for projects other than the one for which it is being
used to meet cost sharing requirements. This policy is inequitable,
unnecessary, and will discourage commercial firms from entering into
cooperative arrangements with the Department of Defense. We are not
aware of any Federal agency taking this position for real property or
equipment purchased by recipients or donated by third parties.
Response: Revised the section to clarify that these provisions
apply to property acquired with recipient funds or donated by a third
party only when the full value of the property is accepted as the value
of the contribution toward cost sharing or matching. With that
clarification, the provisions of this section are based on
Governmentwide policies established by OMB Circulars A-110 and A-102
for assistance awards to universities and nonprofit organizations and
certain awards to State and local governments--Circular A-110 also
states that its provisions may be used for awards to for-profit
organizations, and DoD understands that other Federal agencies do so.
It is important to note that accepting the full value of property
as the value to be counted for purposes of cost sharing or matching is
the exception rather than the rule. Usually, one only would count the
depreciation of the property during the project period or the cost of
using the property, either of which normally is a fraction of the full
value. There is no issue with title in those cases, because the
recipient owns unconditionally any property purchased with its own
funds or donated to it by a third party.
In the exceptional cases where the full value is used for cost
sharing or matching purposes, the recipient is effectively donating the
property to a project that it and the Government are jointly
supporting. It would defeat the purpose of cost sharing in such cases
if the recipient kept the asset, free and clear, after contributing the
asset's full value toward its share of the support for the project. The
provisions of the rule to which the property is subject in those
exceptional cases (e.g., that the recipient keep track of the property
and not encumber it without the grants officer's approval) are
reasonable.
Comment: Upon completion of a project, if there is an inventory of
leftover unused supplies that are not needed for other Federal projects
and the inventory's value exceeds $5,000, Sec. 34.24 states that a for-
profit recipient is to reimburse the Federal Government for its share
of the value. This means that supplies will be subject to controls that
are very costly and administratively burdensome, such as the
requirements in Sec. 34.23 for the recipient's property management
system.
Response: No change. Normally, recipients should be buying supplies
as needed for the project and expensing them when used. Therefore,
large inventories of unused supplies should not be left over at the end
of the project. If the value of unused supplies equals that of an item
of equipment, it should reimburse the Government for its share of the
cost of those supplies. With respect to the applicability of the
specific requirements in Sec. 34.23 for the recipient's property
management system, that section applies to equipment acquired under the
award, but not supplies; the rule only states the requirement
concerning large inventories of unused supplies charged to the project,
and the recipient determines what system it will use to comply with the
requirement.
Comment: Section 34.25 states that the Government has the right,
unless it is waived by the DoD Component, to obtain, reproduce, publish
or otherwise use the data first produced under an award. This section
should be revised to state that the data may be used only for Federal
Government purposes.
Response: Revised this section to clarify that the data may be used
only for Federal Government purposes.
Comment: The intellectual property rights accorded the Government
under assistance awards to for-profit firms, in Sec. 34.25, are a
disincentive to industry to participate in cooperative agreements. The
regulations should not set a rigid minimum set of rights which the
Government must obtain in every case. Instead, the regulation should
state that the grants officer may negotiate an allocation of rights
that is fair and equitable depending upon the circumstances of the
particular agreement.
Response: No change other than the clarification on data rights
described in the response to the preceding comment. For patents, the
rule provides the grants officer with all of the flexibility in current
statute and executive order applicable to grants and cooperative
agreements. For copyrights, data, and software, the rule's provisions
are appropriate for intellectual property generated with Federal
support under most assistance awards, and grants officers can handle
the exceptional cases through the usual deviation procedure. One class
of instruments that DoD plans to handle differently is the class of
research investment agreements, with cost matching and other
distinguishing features, that will be the subject of a future DoDGARs
part.
Comment: Section 34.25 states that awards are to include the patent
clause specified by Department of Commerce (DoC) regulations at 37 CFR
401.14. The section should be modified to allow for-profit firms to
obtain rights in subject inventions of subawardees that are small
businesses or nonprofit organizations. Otherwise, the patent clause in
the DoC regulations will preclude a firm from doing so, even if the
for-profit awardee has paid in part for the subawardees' effort as part
of its cost share.
Response: No change. The comment relates primarily to the new class
of research investment agreements that will be the subject of a future
DoDGARs part. For cooperative agreements covered by part 34, grants
officers already can handle any individual cases where alternative
provisions are justified, by making determinations of exceptional
circumstances under 37 CFR 401.3(a)(2) in the DoC regulations.
Comment: Section 34.25 should be revised to provide an
``authorization and consent'' clause to be included in cooperative
agreements with for-profit
[[Page 12158]]
recipients. The clause would say that the Government authorizes and
consents to all use and manufacture by the recipient, in the
performance of the cooperative agreement or any subaward, of any
invention described in and covered by a United States patent.
Response: No change. It would not be appropriate to include a
clause in cooperative agreements authorizing a recipient's or
subrecipient's infringement of U.S. patents held by other parties.
Comments on Procurement
Comment: Section 34.31, which specifies requirements for
procurements made by for-profit recipients of DoD assistance awards,
contains requirements that often differ significantly from standard
commercial practices. For example, the section provides that preaward
documents may be subject to preaward review by the grants officer.
Also, this section requires certain Government flowdown and audit
provisions. The requirements will require commercial firms to draft
Government terms and conditions for subcontracts, and to establish
Government-unique purchasing requirements. Recommend these requirements
be eliminated.
Response: In response to the general comment, the few requirements
in this section were carefully selected from the much larger set of
requirements specified by OMB Circular A-110 for university and other
nonprofit recipients of Federal assistance. They are judged to be the
minimal set of requirements that are needed to ensure proper
stewardship of Federal assistance.
In response to the first specific comment on preaward review of a
recipient's procurement documents, the word ``exceptional'' was added
to the sentence that advises the grants officer that preaward review is
the exception rather than the rule. The sentence now states that
recipients will only be required to provide such documents for the
grants officer's pre-award review in exceptional cases where the grants
officer judges that there is a compelling need to do so. For those
projects where there is substantial involvement by the Government and a
procurement is central to the success of the project (e.g., the
purchase of a large computer to be used jointly by a recipient and
Government researchers), DoD believes that the Government's right to a
preaward review of the procurement documents can be essential.
With respect to the second specific comment on flowdown of
Government-unique requirements to contracts under assistance awards,
many of the requirements are required by law, regulation, or executive
order--DoD therefore cannot waive them and they must be included when
they are applicable, as the rule states. The few other requirements are
those carefully selected as the minimal set for proper stewardship for
most financial assistance, such as the standard access to records by
DoD, the Comptroller General, and their duly authorized
representatives. As it prepares the future DoDGARs part for a specific
class of research investment agreements, DoD will consider which
requirements might be waived in light of the substantial cost sharing
and other special features of that class of instruments.
Comment: The Office of Management and Budget expressed concern that
Sec. 32.44 included a $10 million threshold, below which a recipient
would not have to maintain its procurement procedures in writing. The
concern is that the threshold would create substantive differences
between requirements of the DoD and those in other Federal agencies'
implementation of OMB Circular A-110.
Response: The provision was revised, as requested. The Office of
Management and Budget has agreed to explore the possibility of amending
OMB Circular A-110 to establish for all Federal agencies' awards a
dollar threshold below which recipients would be relieved of the
requirement to maintain procurement procedures in writing.
Comment: The definition of ``contract'' in Sec. 21.130 refers to it
as an instrument reflecting a certain type of relationship between the
Federal Government and a State, a local government, or other person.
Suggest adding the words ``or entity'' after the word ``person.''
Response: Replaced the word ``person'' with ``recipient,'' which is
the term used at 31 U.S.C. 6303 in the Federal Grant and Cooperative
Agreement Act, the defining statute that specifies when it is
appropriate for Federal agencies to use contracts. The term
``recipient'' covers persons and other entities.
Comment: Change the wording of the definition of ``contract'' in
Sec. 34.2 to clarify that there can be subcontracts under a grant or
cooperative agreement.
Response: Revised the wording to clarify that the term ``contract''
includes: Recipients' procurement contracts under DoD assistance
awards; subrecipients' procurement contracts under assistance
subawards; and procurement subcontracts under contracts awarded by
recipients or subrecipients.
Comments on Records Retention
Comment: The first and second sentences in paragraph (e) of
Sec. 34.42 provide that: (1) DoD Components, the Inspector General,
Comptroller General of the United States, or any of their duly
authorized representatives, have the right of timely and unrestricted
access to certain records of for-profit recipients that are pertinent
to awards; and (2) this right includes timely and reasonable access to
a recipient's personnel for the purpose of interview and discussion
related to such documents. In the first sentence, recommend replacing
the words ``duly authorized representatives'' and the words
``unrestricted access'' with ``duly authorized Government
representatives'' and ``access during normal working hours,''
respectively. Recommend deleting the second sentence, which goes beyond
what is authorized in existing law.
Response: No change. The wording of this section mirrors that of
the Governmentwide guidance in OMB Circular A-110 for assistance awards
to nonprofit organizations, guidance issued after legal review by all
major Federal agencies and with the benefit of public review and
comment. It is not necessary to add the words ``during normal working
hours'' to clarify what is meant by ``reasonable access to a
recipient's personnel,'' because it rarely would be reasonable to
insist upon access at other times. Adding the word ``Government'' to
``duly authorized representatives'' could be contrary to the increased
reliance upon non-Federal auditors that accompanies the Governmentwide
emphasis on the single-audit concept, which is broadened to for-profit
recipients by the rule's Sec. 34.16. Finally, there is no intent to
have the word ``interview'' interpreted in an extreme way that would
appear to give the Government access that exceeds its statutory
authority.
Comment: In light of the increasing transfer of records from hard
copy to electronic media, recommend including language similar to that
in the Federal Acquisition Regulation at 48 CFR 4.703(d), which
implemented Pub. L. 103-335's requirements concerning such transfers
for procurement contracts.
Response: Added new paragraphs to both Sec. 32.53, for awards to
university and other nonprofit recipients, and Sec. 34.42, for awards
to for-profit firms.
[[Page 12159]]
Comments on Termination and Enforcement
Comment: Paragraph (a)(1) of Sec. 34.51 provides that the grants
officer may terminate awards to a for-profit firm if the recipient
``fails to comply with the terms and conditions of an award.'' It
should be amended to say ``fails to comply with the material terms and
conditions.''
Response: No change. The provision already says ``materially fails
to comply with the terms and conditions.''
Comment: Section 34.51 should be revised to provide the Government
the same flexibility it has with procurement contracts to unilaterally
terminate awards to for-profit firms for reasons other than non-
performance or non-compliance.
Response: No change. This is an example of a basic difference
between procurement and assistance relationships. Other than
terminations for cause, the Government should be able to terminate
assistance awards only by mutual agreement with the recipient, as the
rule provides.
Comment: It should be expressly specified in paragraph (a) of
Sec. 34.52 that a for-profit recipient is to be paid all of the
allowable costs that it incurred prior to termination if the award is
terminated for failure to comply with a material provision of the
award.
Response: Revised paragraph (a)(3) of Sec. 34.52 to state that, in
the case of termination, the recipient will be reimbursed for allowable
costs it incurred prior to termination, with the possible exception of
costs for activities or actions not in compliance.
Comments on National Policy Requirements
Comment: Appendix B to part 22 contains a requirement for the
grants officer to include an award clause implementing the ``officials
not to benefit'' statute. That statute (41 U.S.C. 22) was amended by
section 6004 of the Federal Acquisition Streamlining Act (FASA), to
eliminate the requirement to include a clause. This is an unnecessary
clause and should be deleted.
Response: No change. Due to FASA's amendment of 41 U.S.C. 22, the
statute itself no longer requires an ``officials not to benefit''
clause in Federal awards. However, recipients of Federal awards still
must comply with the ``officials not to benefit'' requirement in 41
U.S.C. 22, just as they must comply with all other applicable U.S.
statutes and Federal regulations. Compliance with those requirements is
inherently a condition of the award; while a general award clause could
require compliance with all applicable Federal statutes and
regulations, without identifying any of them, fairness dictates that
recipients be informed about specific requirements whenever possible.
For that reason, Appendix B to part 22 offers clauses that the grants
officer may use to communicate the requirements to recipients.
Comment: Appendix B to part 22 flows down to subrecipients a number
of requirements for which that flowdown apparently is not required by
law. They include nondiscrimination items a., b., d., and e., as well
as the Cargo Preference and Clean Air and Water Acts.
Response: No change. Each of these requirements does flow down to
subrecipients, as stated in the appendix, due to the implementation of
the statute in Federal regulation. By helping to clarify the
applicability to awards and subawards of the most common national
policy requirements, the appendix should be useful to both grants
officers and recipients.
Comment: Appendix B to part 22 states that the Architectural
Barriers Act applies to awards for the construction or alteration of
buildings or facilities which will require public accessibility. There
is no basis in law or regulation for limiting the applicability of the
Act to buildings that require public accessibility (employees, for
example, may be disabled and usually are not considered members of the
public). The only statutory exemption is for certain types of
facilities that are restricted to use only by able-bodied military
personnel.
Response: Corrected the statement in the appendix on the
applicability of the Act.
Comment: Section 22.510(a)(2)(ii) states that grants officers may
allow recipients to incorporate certifications into a provision that
cites them by reference, rather than providing the full text of the
certification with each proposal or award document. In accordance with
statute or codified regulations, certain certifications cannot be
incorporated by reference.
Response: No substantive change. For the three certifications
(debarment and suspension, drug-free workplace, and lobbying) that
currently are required, the Department has concluded that the pertinent
statutes, Executive order, and DoD regulations (32 CFR parts 25 and 28)
do not presently preclude incorporation of the certifications by
reference. For clarity, the final rule includes additional statements
that certifications may be incorporated by reference to the extent
consistent with statute and codified regulation.
Comment: Section 22.510 states that Appendix A to part 22 includes
``suggested'' language for incorporating certifications by reference.
However, this is not permitted because the certification language is
required, not suggested.
Response: The language in Appendix A incorporates by reference the
exact certification language that is required to comply with statute
and codified regulation. To alleviate the confusion, the term
``suggested'' is removed from Sec. 22.510 and Appendix A. Section
22.510 now states that Appendix A ``includes language that may be used
for incorporating certifications by reference.''
Comment: Section 22.510(a)(2)(ii)(C) states that grants officers
may obtain the certification concerning debarment and suspension at the
time of award, notwithstanding the regulatory requirement at 32 CFR
25.510(a) to obtain that certification at the time of proposal
submission. The Office of Management and Budget is concerned that
adoption of this provision would grant the DoD a deviation from the
Governmentwide common rule on debarment and suspension, creating a
nonuniformity with other Federal agencies.
Response: The provision is revised, as suggested.
C. Other Changes
Changes for Audit Requirements and Conditional Exemptions
On August 29, 1997 (62 FR 45934 ff.), subsequent to the DoD's
proposal of these rules for comment, the Office of Management and
Budget made two changes to OMB Circular A-110. The first change was to
delete references to OMB Circular A-128, ``Audits of State and Local
Governments,'' which recently was rescinded, and to refer instead to
the revised OMB Circular A-133, ``Audits of States, Local Governments,
and Non-Profit Organizations.'' Part 32 in these final rules, which is
the DoD's implementation of OMB Circular A-110, includes this change.
Conforming changes also were made in part 22 of these final rules.
The second change made by the Office of Management and Budget to
OMB Circular A-110 was to add a new section that addresses conditional
exemptions. The applicability of that new section to the DoD is under
review and will be addressed in a future rulemaking action.
[[Page 12160]]
Deferral of Final Action on Proposed Changes to 32 CFR Part 33
As requested by the Office of Management and Budget, the DoD agreed
to defer final action on the two proposed amendments to part 33,
``Uniform Administrative Requirements for Grants and Cooperative
Agreements to State and Local Governments,'' which is the DoD's
implementation of a Governmentwide rule. Those two proposed changes
were to implement: (1) The Resource Conservation and Recovery Act (42
U.S.C. 6962); and (2) changes made by the Federal Acquisition
Streamlining Act of 1994 to the Contract Work Hours and Safety
Standards Act (40 U.S.C. 327-330, as amended). The deferral enables the
Office of Management and Budget to coordinate these amendments with
other Federal agencies and request that the agencies amend the
Governmentwide rule.
Changes for Military Recruiting
As stated in the DoD's preamble when these rules were proposed, the
rule previously codified at 32 CFR part 23, ``Grants and Agreements--
Military Recruiting on Campus,'' is moved by this final rulemaking to
section 22.520 in part 22. A few, nonsubstantive technical corrections
are made to the language that previously appeared in part 23, to allow
its incorporation into part 22.
Executive Order 12866
Part 32 was determined to be a ``significant regulatory action,''
as defined by Executive Order 12866, by the Administrator of the Office
of Management and Budget's Office of Information and Regulatory
Affairs. The Department of Defense believes that none of the rules
will: (1) Have an annual effect on the economy of $100 million or more
or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in Executive Order
12866.
Unfunded Mandates Reform Act (Sec. 202, Pub. L. 104-4)
These regulatory actions do not contain a Federal mandate that may
result in the expenditure by State, local and tribal governments, in
aggregate, or by the private sector, of $100 million or more in any one
year.
Regulatory Flexibility Act of 1980 (5 U.S.C. 605(b))
These regulatory actions will not have a significant adverse impact
on a substantial number of small entities.
Paperwork Reduction Act of 1995 (44 U.S.C. 3500 et seq.)
These regulatory actions will not impose any new reporting or
recordkeeping requirements under the Paperwork Reduction Act. Reporting
and recordkeeping requirements in parts 32 and 34 are those promulgated
by the updated OMB Circular A-110, which the Office of Management and
Budget proposed in August 1992 (57 FR 39018), asking for public
comments, and finalized in November 1993 (58 FR 62992).
List of Subjects
32 CFR Part 21
Grant programs, Grants administration.
32 CFR Part 22
Accounting, Grant programs, Grants administration,
Intergovernmental relations, Reporting and recordkeeping requirements.
32 CFR Part 23
Colleges and universities, Grant programs, Grants administration,
Penalties.
32 CFR Part 28
Grant programs, Loan programs, Lobbying, Penalties, Reporting and
recordkeeping requirements.
32 CFR Part 32
Accounting, Colleges and universities, Grant programs, Grants
administration, Hospitals, Nonprofit organizations, Reporting and
recordkeeping requirements.
32 CFR Part 34
Accounting, Business and industry, Grant programs, Grants
administration, Reporting and recordkeeping requirements.
Accordingly, title 32 of the Code of Federal Regulations, chapter
I, subchapter B, is revised as follows.
1. The heading of subchapter B is revised to read as follows:
SUBCHAPTER B--DoD GRANT AND AGREEMENT REGULATIONS
2. Part 21 is added to read as follows:
PART 21--DoD GRANTS AND AGREEMENTS--GENERAL MATTERS
Subpart A--Defense Grant and Agreement Regulatory System
Sec.
21.100 Scope.
21.105 Authority, purpose, and issuance.
21.110 Applicability and relationship to acquisition regulations.
21.115 Compliance and implementation.
21.120 Publication and maintenance.
21.125 Deviations.
21.130 Definitions.
Subpart B--Authorities and Responsibilities
21.200 Purpose.
21.205 DoD Components' authorities.
21.210 Vesting and delegation of authority.
21.215 Contracting activities.
21.220 Grants officers.
Subpart C--Information Reporting on Grants, Cooperative Agreements, and
Other Nonprocurement Instruments
21.300 Purpose.
21.305 Defense Assistance Awards Data System.
21.310 Catalog of Federal Domestic Assistance.
21.315 Uniform grants and agreements numbering system.
Authority: 5 U.S.C. 301 and 10 U.S.C. 113.
Subpart A--Defense Grant and Agreement Regulatory System
Sec. 21.100 Scope.
The purposes of this part, which is one portion of the DoD Grant
and Agreement Regulations (DoDGARs), are to:
(a) Provide general information about the DoDGARs.
(b) Set forth general policies and procedures related to DoD
Components' overall management of functions related to grants and
cooperative agreements.
Sec. 21.105 Authority, purpose, and issuance.
(a) DoD Directive 3210.6\1\ established the Defense Grant and
Agreement Regulatory System (DGARS). The directive authorized
publication of policies and procedures comprising the DGARS in the DoD
Grant and Agreement Regulations (DoDGARs), in DoD instructions, and in
other DoD publications, as appropriate. Thus, the
[[Page 12161]]
DoDGARs are one element of the DGARS.
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\1\ Copies may be obtained, at cost, from the National Technical
Information Service, 5285 Port Royal Road, Springfield, VA 22161.
Authorized users may also obtain copies from the Defense Technical
Information Center, 8725 John J. Kingman Rd., Suite 0944, Fort
Belvoir, VA 22060-6218.
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(b) The purposes of the DoDGARs, in conjunction with other elements
of the DGARS, are to provide uniform policies and procedures for grants
and cooperative agreements awarded by DoD Components, in order to meet
DoD needs for:
(1) Efficient program execution, effective program oversight, and
proper stewardship of Federal funds.
(2) Compliance with relevant statutes; Executive orders; and
applicable guidance, such as Office of Management and Budget (OMB)
circulars.
(3) Collection from DoD Components, retention, and dissemination of
management and fiscal data related to grants and agreements.
(c) The Director of Defense Research and Engineering, or his or her
designee:
(1) Develops and implements DGARS policies and procedures.
(2) Issues and maintains the DoD Grant and Agreement Regulations
and other DoD publications that comprise the DGARS.
Sec. 21.110 Applicability and relationship to acquisition regulations.
(a) Applicability to grants and cooperative agreements. The DoD
Grant and Agreement Regulations (DoDGARs) apply to all DoD grants and
cooperative agreements.
(b) Applicability to other nonprocurement instruments. (1) In
accordance with DoD Directive 3210.6, the DoDGARs may include rules
that apply to other nonprocurement instruments, when specifically
required in order to implement a statute, Executive order, or
Governmentwide rule that applies to other nonprocurement instruments,
as well as to grants and cooperative agreements. For example, the rule
on nonprocurement debarment and suspension in 32 CFR part 25, subparts
A through E, applies to all nonprocurement transactions, including
grants, cooperative agreements, contracts of assistance, loans and loan
guarantees (see definition of ``primary covered transaction'' at 32 CFR
25.110(a)(1)(i)).
(2) The following is a list of DoDGARs rules that apply not only to
grants and cooperative agreements, but also to other types of
nonprocurement instruments:
(i) Requirements for reporting to the Defense Assistance Award Data
System, in subpart C of this part.
(ii) The rule on nonprocurement debarment and suspension in 32 CFR
part 25, subparts A through E.
(iii) Drug-free workplace requirements in 32 CFR part 25, subpart
F.
(iv) Restrictions on lobbying in 32 CFR part 28.
(v) Administrative requirements for grants, cooperative agreements,
and other financial assistance to:
(A) Universities and other nonprofit organizations, in 32 CFR part
32.
(B) State and local governments, in 32 CFR part 33.
(3) Grants officers should be aware that each rule that applies to
other types of nonprocurement instruments (i.e., other than grants and
cooperative agreements) states its applicability to such instruments.
However, grants officers must exercise caution when determining the
applicability of some Governmentwide rules that are included in the
DoDGARs, because a term may be defined differently in a Governmentwide
rule than it is defined elsewhere in the DoDGARs. For example, the
Governmentwide implementation of the Drug-Free Workplace Act of 1988
(32 CFR part 25, subpart F) states that it applies to grants, but
defines ``grants'' to include cooperative agreements and other forms of
financial assistance.
(c) Relationship to acquisition regulations. The Federal
Acquisition Regulation (FAR) (48 CFR parts 1-53), the Defense Federal
Acquisition Regulation Supplement (DFARS) (48 CFR parts 201-270), and
DoD Component supplements to the FAR and DFARS apply to DoD Components'
procurement contracts used to acquire goods and services for the direct
benefit or use of the Federal Government. Policies and procedures in
the FAR and DFARS do not apply to grants, cooperative agreements, or
other nonprocurement transactions unless the DoDGARs specify that they
apply.
Sec. 21.115 Compliance and implementation.
The Head of each DoD Component that awards or administers grants
and cooperative agreements, or his or her designee:
(a) Is responsible for ensuring compliance with the DoDGARs within
that DoD Component.
(b) May authorize the issuance of regulations, procedures, or
instructions that are necessary to implement DGARS policies and
procedures within the DoD Component, or to supplement the DoDGARs to
satisfy needs that are specific to the DoD Component, as long as such
regulations, procedures, or instructions do not impose additional costs
or administrative burdens on recipients or potential recipients. Heads
of DoD Components or their designees shall establish policies and
procedures in areas where uniform policies and procedures throughout
the DoD Component are required, such as for:
(1) Requesting class deviations from the DoDGARs (see Sec. 21.125)
or exemptions from the provisions of 31 U.S.C. 6301 et seq., that
govern the appropriate use of contracts, grants, and cooperative
agreements (see 32 CFR 22.220).
(2) Designating one or more Grant Appeal Authorities to resolve
claims, disputes, and appeals (see 32 CFR 22.815).
(3) Reporting data on assistance awards and programs, as required
by 31 U.S.C. chapter 61 (see subpart C of this part).
(4) Prescribing requirements for use and disposition of real
property acquired under awards, if the DoD Component makes any awards
to institutions of higher education or to other nonprofit organizations
under which real property is acquired in whole or in part with Federal
funds (see 32 CFR 32.32).
Sec. 21.120 Publication and maintenance.
(a) The DoDGARs are published as chapter I, subchapter B, title 32
of the Code of Federal Regulations (CFR) and in a separate loose-leaf
edition. The loose-leaf edition is divided into parts, subparts, and
sections, to parallel the CFR publication. Cross-references within the
DoDGARs are stated as CFR citations (e.g., a reference to Sec. 21.115
in part 21 would be to 32 CFR 21.115).
(b) Updates to the DoDGARs are published in the Federal Register.
When finalized, updates also are published as Defense Grant and
Agreement Circulars, with revised pages for the separate, loose-leaf
edition.
(c) Revisions to the DoDGARs are recommended to the Director of
Defense Research and Engineering (DDR&E) by a standing working group.
The DDR&E, Director of Defense Procurement, and each Military
Department shall be represented on the working group. Other DoD
Components that use grants or cooperative agreements may also nominate
representatives. The working group meets when necessary.
Sec. 21.125 Deviations.
(a) The Head of the DoD Component or his or her designee may
authorize individual deviations from the DoDGARs, which are deviations
that affect only one grant or cooperative agreement, if such deviations
are not prohibited by statute, executive order or regulation.
(b) Class deviations that affect more than one grant or cooperative
agreement must be approved in advance by the Director, Defense Research
and
[[Page 12162]]
Engineering (DDR&E) or his or her designee. Note that OMB concurrence
also is required for deviations from two parts of the DoDGARs, 32 CFR
parts 32 and 33, in accordance with 32 CFR 32.4 and 33.6, respectively.
(c) Copies of justifications and agency approvals for individual
deviations and written requests for class deviations shall be submitted
to: Deputy Director, Defense Research and Engineering, ATTN: Research,
3080 Defense Pentagon, Washington DC 20301-3080.
(d) Copies of requests and approvals for individual and class
deviations shall be maintained in award files.
Sec. 21.130 Definitions.
Acquisition. The acquiring (by purchase, lease, or barter) of
property or services for the direct benefit or use of the United States
Government (see more detailed definition at 48 CFR 2.101). In
accordance with 31 U.S.C. 6303, procurement contracts are the
appropriate legal instruments for acquiring such property or services.
Assistance. The transfer of a thing of value to a recipient to
carry out a public purpose of support or stimulation authorized by a
law of the United States (see 31 U.S.C. 6101(3)). Grants and
cooperative agreements are examples of legal instruments used to
provide assistance.
Contract. See the definition for procurement contract in this
section.
Contracting activity. An activity to which the Head of a DoD
Component has delegated broad authority regarding acquisition
functions, pursuant to 48 CFR 1.601.
Contracting officer. A person with the authority to enter into,
administer, and/or terminate contracts and make related determinations
and findings. A more detailed definition of the term appears at 48 CFR
2.101.
Cooperative agreement. A legal instrument which, consistent with 31
U.S.C. 6305, is used to enter into the same kind of relationship as a
grant (see definition ``grant''), except that substantial involvement
is expected between the Department of Defense and the recipient when
carrying out the activity contemplated by the cooperative agreement.
The term does not include ``cooperative research and development
agreements'' as defined in 15 U.S.C. 3710a.
Deviation. The issuance or use of a policy or procedure that is
inconsistent with the DoDGARs.
DoD Components. The Office of the Secretary of Defense, the
Military Departments, the Defense Agencies, and DoD Field Activities.
Grant. A legal instrument which, consistent with 31 U.S.C. 6304, is
used to enter into a relationship:
(1) The principal purpose of which is to transfer a thing of value
to the recipient to carry out a public purpose of support or
stimulation authorized by a law of the United States, rather than to
acquire property or services for the Department of Defense's direct
benefit or use.
(2) In which substantial involvement is not expected between the
Department of Defense and the recipient when carrying out the activity
contemplated by the grant.
Grants officer. An official with the authority to enter into,
administer, and/or terminate grants or cooperative agreements.
Nonprocurement instrument. A legal instrument other than a
procurement contract. Examples include instruments of financial
assistance, such as grants or cooperative agreements, and those of
technical assistance, which provide services in lieu of money.
Procurement contract. A legal instrument which, consistent with 31
U.S.C. 6303, reflects a relationship between the Federal Government and
a State, a local government, or other recipient when the principal
purpose of the instrument is to acquire property or services for the
direct benefit or use of the Federal Government. See the more detailed
definition for contract at 48 CFR 2.101.
Recipient. An organization or other entity receiving a grant or
cooperative agreement from a DoD Component.
Subpart B--Authorities and Responsibilities
Sec. 21.200 Purpose.
This subpart describes the sources and flow of authority to use
grants and cooperative agreements, and assigns the broad
responsibilities associated with DoD Components' use of such
instruments.
Sec. 21.205 DoD Components' authorities.
(a) In accordance with 31 U.S.C. 6301 et seq., DoD Components shall
use grants and cooperative agreements as legal instruments reflecting
assistance relationships between the United States Government and
recipients.
(b) Unlike the use of a procurement contract (for which Federal
agencies have inherent, Constitutional authority), use of a grant or
cooperative agreement to carry out a program requires authorizing
legislation, the intent of which supports the use of an assistance
instrument (e.g., the intent of the legislation authorizing a program
supports a judgment that the principal purpose of the program is
assistance, rather than acquisition). DoD Components may award grants
and cooperative agreements under a number of statutory authorities that
fall into three categories:
(1) Authorities that statutes provide to the Secretary of Defense.
These authorities generally are delegated by the Secretary of Defense
to Heads of DoD Components, usually through DoD directives,
instructions, or policy memoranda that are not part of the Defense
Grant and Agreement Regulatory System. Examples of statutory
authorities in this category are:
(i) Authority under 10 U.S.C. 2391 to make grants or conclude
cooperative agreements to assist State and local governments in
planning and carrying out community adjustments and economic
diversification required by changes in military installations or in DoD
contracts or spending that may have a direct and significant adverse
consequence on the affected community.
(ii) Authority under 10 U.S.C. 2413 to enter into cooperative
agreements with entities that furnish procurement technical assistance
to businesses.
(2) Authorities that statutes may provide directly to Heads of DoD
Components. When a statute authorizes the head of a DoD Component to
use a grant or cooperative agreement or to carry out a program with a
principal purpose of assistance, use of that authority requires no
delegation by the Secretary of Defense. For example, 10 U.S.C. 2358
authorizes the Secretaries of the Military Departments, in addition to
the Secretary of Defense, to perform research and development projects
through grants and cooperative agreements. A Military Department's use
of the authority of 10 U.S.C. 2358 therefore requires no delegation by
the Secretary of Defense.
(3) Authorities that arise indirectly as the result of statute. For
example, authority to use a grant or cooperative agreement may result
from:
(i) A federal statute authorizing a program that is consistent with
an assistance relationship (i.e., the support or stimulation of a
public purpose, rather than the acquisition of a good or service for
the direct benefit of the Department of Defense). In accordance with 31
U.S.C. chapter 63, such a program would appropriately be carried out
through the use of grants or cooperative agreements.
(ii) Exemptions requested by the Department of Defense and granted
by the Office of Management and Budget
[[Page 12163]]
under 31 U.S.C. 6307, as described in 32 CFR 22.220.
Sec. 21.210 Vesting and delegation of authority.
(a) The authority and responsibility for awarding grants and
cooperative agreements is vested in the Head of each DoD Component that
has such authority.
(b) The Head of each such DoD Component, or his or her designee,
may delegate to the heads of contracting activities (HCAs) within that
Component, authority to award grants or cooperative agreements, to
appoint grants officers (see Sec. 21.220(c)), and to broadly manage the
DoD Component's functions related to grants and cooperative agreements.
An HCA is the same official (or officials) designated as the head of
the contracting activity for procurement contracts, as defined at 48
CFR 2.101--the intent is that overall management responsibilities for a
DoD Component's functions related to nonprocurement instruments be
assigned only to officials that have similar responsibilities for
procurement contracts.
Sec. 21.215 Contracting activities.
When designated by the Head of the DoD Component or his or her
designee (see 32 CFR 21.210(b)), the HCA is responsible for the grants
and cooperative agreements made by or assigned to that activity. He or
she shall supervise and establish internal policies and procedures for
that activity's assistance awards.
Sec. 21.220 Grants officers.
(a) Authority. Only grants officers are authorized to sign grants
or cooperative agreements, or to administer or terminate such legal
instruments on behalf of the Department of Defense. Grants officers may
bind the Government only to the extent of the authority delegated to
them.
(b) Responsibilities. Grants officers should be allowed wide
latitude to exercise judgment in performing their responsibilities.
Grants officers are responsible for ensuring that:
(1) Individual grants and cooperative agreements are used
effectively in the execution of DoD programs, and are awarded and
administered in accordance with applicable laws, Executive orders,
regulations, and DoD policies.
(2) Sufficient funds are available for obligation.
(3) Recipients of grants and cooperative agreements receive
impartial, fair, and equitable treatment.
(c) Selection, appointment and termination of appointment of grants
officers. Each DoD Component that awards grants or enters into
cooperative agreements shall have a formal process (see Sec. 21.210(b))
to select and appoint grants officers and terminate their appointments.
DoD Components are not required to maintain a selection process for
grants officers separate from the selection process for contracting
officers, and written statements of appointment or termination for
grants officers may be integrated into the necessary documentation for
contracting officers, as appropriate.
(1) Selection. In selecting grants officers, appointing officials
shall consider the complexity and dollar value of the grants and
cooperative agreements to be assigned and judge whether candidates
possess the necessary experience, training, education, business acumen,
judgment, and knowledge of contracts and assistance instruments to
function effectively as grants officers.
(2) Appointment. Statements of appointment shall be in writing and
shall clearly state the limits of grants officers' authority, other
than limits contained in applicable laws or regulations. Information on
the limits of a grants officer's authority shall be readily available
to the public and agency personnel.
(3) Termination. Written statements of termination are required,
unless the written statement of appointment provides for automatic
termination. No termination shall be retroactive.
Subpart C--Information Reporting on Grants, Cooperative Agreements,
and Other Nonprocurement Instruments
Sec. 21.300 Purpose.
This subpart prescribes policies and procedures for compiling and
reporting data related to grants, cooperative agreements, and other
nonprocurement instruments subject to information reporting
requirements of 31 U.S.C. chapter 61.
Sec. 21.305 Defense Assistance Awards Data System.
(a) Purposes of the system. Data from the Defense Assistance Awards
Data System (DAADS) are used to provide:
(1) DoD inputs to meet statutory requirements for Federal
Governmentwide reporting of data related to obligations of funds by
grant, cooperative agreement, or other nonprocurement instrument.
(2) A basis for meeting Governmentwide requirements to report to
the Federal Assistance Awards Data System maintained by the Department
of Commerce and for preparing other recurring and special reports to
the President, the Congress, the General Accounting Office, and the
public.
(3) Information to support policy formulation and implementation
and to meet management oversight requirements related to the use of
grants, cooperative agreements, and other nonprocurement instruments.
(b) Responsibilities. (1) The Deputy Director, Defense Research and
Engineering (DDDR&E), or his or her designee, shall issue the manual
described in paragraph (b)(2)(ii) of this section.
(2) The Director for Information Operations and Reports, Washington
Headquarters Services (DIOR, WHS) shall, consistent with guidance
issued by the DDDR&E:
(i) Process DAADS information on a quarterly basis and prepare
recurring and special reports using such information.
(ii) Prepare, update, and disseminate ``Department of Defense
Assistance Awards Data System,'' an instruction manual for reporting
information to DAADS. The manual, which shall be issued by the office
of the DDR&E, shall specify procedures, formats, and editing processes
to be used by DoD Components, including magnetic tape layout and error
correction schedules.
(3) The following offices shall serve as central points for
collecting DAADS information from contracting activities within the DoD
Components:
(i) For the Army: As directed by the U.S. Army Contracting Support
Agency.
(ii) For the Navy: As directed by the Office of Naval Research.
(iii) For the Air Force: As directed by SAF/AQCP.
(iv) For the Office of the Secretary of Defense, Defense Agencies,
and DoD Field Activities: Each Defense Agency shall identify a central
point for collecting and reporting DAADS information to the DIOR, WHS,
at the address given in paragraph (c)(2) of this section. DIOR, WHS
shall serve as the central point for offices and activities within the
Office of the Secretary of Defense and for DoD Field Activities.
(4) The office that serves, in accordance with paragraph (b)(3) of
this section, as the central point for collecting DAADS information
from contracting activities within each DoD Component shall:
(i) Establish internal procedures to ensure reporting by
contracting activities that use grants, cooperative agreements or other
nonprocurement instruments subject to 31 U.S.C. chapter 61.
(ii) Collect information required by DD Form 2566, ``DoD Assistance
Award
[[Page 12164]]
Action Report,'' from those contracting activities, and report it to
DIOR, WHS, in accordance with paragraph (d) of this section.
(iii) Submit to the DDDR&E, at the address given in Sec. 21.125(c),
any recommended changes to the DAADS or to the instruction manual
described in paragraph (b)(2)(ii) of this section.
(c) Reporting procedures. The data required by the DD Form 2566
shall be:
(1) Collected for each individual grant, cooperative agreement, or
other nonprocurement action that is subject to 31 U.S.C. chapter 61 and
involves the obligation or deobligation of Federal funds. Each action
is reported as an obligation under a specific program listed in the
Catalog of Federal Domestic Assistance (CFDA, see Sec. 21.310). The
program to be shown is the one that provided the funds being obligated
(i.e., if a grants officer in one DoD Component obligates
appropriations of a second DoD Component's program, the grants officer
would show the CFDA program of the second DoD Component on the DD Form
2566).
(2) Reported on a quarterly basis to DIOR, WHS by the offices that
are designated pursuant to paragraph (b)(3) of this section. For the
first three quarters of the Federal fiscal year, the data are due by
close-of-business (COB) on the 15th day after the end of the quarter
(i.e., first-quarter data are due by COB on January 15th, second-
quarter data by COB April 15th, and third-quarter data by COB July
15th). Fourth-quarter data are due by COB October 25th, the 25th day
after the end of the quarter. If any due date falls on a weekend or
holiday, the data are due on the next regular workday. The mailing
address for DIOR, WHS is 1215 Jefferson Davis Highway, Suite 1204,
Arlington, VA 22202-4302.
(3) Reported on a computer tape, floppy diskette or by other means
permitted by the instruction manual described in paragraph (b)(2)(ii)
of this section. The data shall be reported in the format specified in
the instruction manual.
(d) Report control symbol. DoD Components' reporting of DAADS data
is used by DoD to satisfy Governmentwide requirements to report to the
Federal Assistance Awards Data System, which is assigned Interagency
Report Control Number 0252-DOC-QU.
Sec. 21.310 Catalog of Federal Domestic Assistance.
(a) Purpose and scope of the reporting requirement. (1) Under the
Federal Program Information Act (31 U.S.C. 6101 et seq.), as
implemented through OMB Circular A-89,\2\ the Department of Defense is
required to provide certain information about its domestic assistance
programs to OMB and the General Services Administration (GSA). GSA
makes this information available to the public by publishing it in the
Catalog of Federal Domestic Assistance (CFDA) and maintaining the
Federal Assistance Programs Retrieval System, a computerized data base
of the information.
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\2\ Contact the Office of Management and Budget, EOP
Publications, 725 17th St. N.W., New Executive Office Building,
Washington, D.C. 20503.
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(2) The CFDA covers all domestic assistance programs and
activities, regardless of the number of awards made under the program,
the total dollar value of assistance provided, or the duration. In
addition to programs using grants and cooperative agreements, covered
programs include those providing assistance in other forms, such as
payments in lieu of taxes or indirect assistance resulting from Federal
operations.
(b) Responsibilities. (1) Each DoD Component that provides domestic
financial assistance shall:
(i) Report to the Director for Information Operations and Reports,
Washington Headquarters Services (DIOR, WHS) all new programs and
changes as they occur, or as DIOR, WHS requests annual updates to
existing CFDA information.
(ii) Identify to the DIOR, WHS a point-of-contact who will be
responsible for reporting such program information and for responding
to inquiries related to it.
(2) The DIOR, WHS shall act as the Department of Defense's single
office for collecting, compiling and reporting such program information
to OMB and GSA.
Sec. 21.315 Uniform grants and agreements numbering system.
DoD Components shall assign identifying numbers to all
nonprocurement instruments subject to this subpart, including grants
and cooperative agreements. The numbering system parallels the
procurement instrument identification (PII) numbering system specified
in 48 CFR 204.70 (in the ``Defense Federal Acquisition Regulation
Supplement''), as follows:
(a) The first six alphanumeric characters of the assigned number
shall be identical to those specified by 48 CFR 204.7003(a)(1) to
identify the DoD Component and contracting activity.
(b) The seventh and eighth positions shall be the last two digits
of the fiscal year in which the number is assigned to the grant,
cooperative agreement, or other nonprocurement instrument.
(c) The 9th position shall be a number: ``1'' for grants; ``2'' for
cooperative agreements; and ``3'' for other nonprocurement instruments.
(d) The 10th through 13th positions shall be the serial number of
the instrument. DoD Components and contracting activities need not
follow any specific pattern in assigning these numbers and may create
multiple series of letters and numbers to meet internal needs for
distinguishing between various sets of awards.
3. Part 22 is added to read as follows:
PART 22--DoD GRANTS AND AGREEMENTS--AWARD AND ADMINISTRATION
Subpart A--General
Sec.
22.100 Purpose, relation to other parts, and organization.
22.105 Definitions.
Subpart B--Selecting the Appropriate Instrument
22.200 Purpose.
22.205 Distinguishing assistance from procurement.
22.210 Authority for providing assistance.
22.215 Distinguishing grants and cooperative agreements.
22.220 Exemptions.
Subpart C--Competition
22.300 Purpose.
22.305 General policy and requirement for competition.
22.310 Statutes concerning certain research, development, and
facilities construction grants.
22.315 Merit-based, competitive procedures.
22.320 Special competitions.
22.325 Historically Black colleges and universities (HBCUs) and
other minority institutions (MIs).
Subpart D--Recipient Qualification Matters--General Policies and
Procedures
22.400 Purpose.
22.405 Policy.
22.410 Grants officers' responsibilities.
22.415 Standards.
22.420 Pre-award procedures.
Subpart E--National Policy Matters
22.505 Purpose.
22.510 Certifications, representations, and assurances.
22.515 Provisions of annual appropriations acts.
22.520 Military recruiting on campus.
22.525 Paperwork Reduction Act.
22.530 Metric system of measurement.
Subpart F--Award
22.600 Purpose.
22.605 Grants officers' responsibilities.
22.610 Award instruments.
Subpart G--Field Administration
22.700 Purpose.
22.705 Policy.
[[Page 12165]]
22.710 Assignment of grants administration offices.
22.715 Grants administration office functions.
Subpart H--Post-Award Administration
22.800 Purpose and relation to other parts.
22.805 Post-award requirements in other parts.
22.810 Payments.
22.815 Claims, disputes, and appeals.
22.820 Debt collection.
22.825 Closeout audits.
Appendix A to Part 22--Proposal Provision for Required
Certifications.
Appendix B to Part 22--Suggested Award Provisions for National
Policy Requirements That Often Apply.
Appendix C to Part 22--Administrative Requirements and Issues To Be
Addressed in Award Terms and Conditions.
Authority: 5 U.S.C. 301 and 10 U.S.C. 113.
Subpart A--General
Sec. 22.100 Purpose, relation to other parts, and organization.
(a) This part outlines grants officers' and DoD Components'
responsibilities related to the award and administration of grants and
cooperative agreements.
(b) In doing so, it also supplements other parts of the DoD Grant
and Agreement Regulations (DoDGARs) that are either Governmentwide
rules or DoD implementation of Governmentwide guidance in Office of
Management and Budget (OMB) Circulars. Those other parts of the
DoDGARs, which are referenced as appropriate in this part, are:
(1) Governmentwide rules on debarment, suspension and drug-free
workplace requirements, in 32 CFR part 25.
(2) The Governmentwide rule on lobbying restrictions, in 32 CFR
part 28.
(3) Administrative requirements for grants and agreements awarded
to specific types of recipients:
(i) For State and local governmental organizations, in the
Governmentwide rule at 32 CFR part 33.
(ii) For institutions of higher education and other nonprofit
organizations, at 32 CFR part 32.
(iii) For for-profit organizations, at 32 CFR part 34.
(c) The organization of this part parallels the award and
administration process, from pre-award through post-award matters. It
therefore is organized in the same manner as the parts of the DoDGARs
(32 CFR parts 32, 33, and 34) that prescribe administrative
requirements for specific types of recipients.
Sec. 22.105 Definitions.
Other than the terms defined in this section, terms used in this
part are defined in 32 CFR 21.130.
Administrative offset. An action whereby money payable by the
United States Government to, or held by the Government for, a recipient
is withheld to satisfy a delinquent debt the recipient owes the
Government.
Advanced research. Advanced technology development that creates new
technology or demonstrates the viability of applying existing
technology to new products and processes in a general way. Advanced
research is most closely analogous to precompetitive technology
development in the commercial sector (i.e., early phases of research
and development on which commercial competitors are willing to
collaborate, because the work is not so coupled to specific products
and processes that the results of the work must be proprietary). It
does not include development of military systems and hardware where
specific requirements have been defined. It is typically funded in
Advanced Technology Development (Budget Activity 3 and Research
Category 6.3A) programs within Research, Development, Test and
Evaluation (RDT&E).
Applied research. Efforts that attempt to determine and exploit the
potential of scientific discoveries or improvements in technology such
as new materials, devices, methods and processes. It typically is
funded in Applied Research (Budget Activity 2 and Research Category
6.2) programs within Research, Development, Test and Evaluation
(RDT&E). Applied research normally follows basic research but may not
be fully distinguishable from the related basic research. The term does
not include efforts whose principal aim is the design, development, or
testing of specific products, systems or processes to be considered for
sale or acquisition; these efforts are within the definition of
``development.''
Basic research. Efforts directed toward increasing knowledge and
understanding in science and engineering, rather than the practical
application of that knowledge and understanding. It typically is funded
within Basic Research (Budget Activity 1 and Research Category 6.1)
programs within Research, Development, Test and Evaluation (RDT&E). For
the purposes of this part, basic research includes:
(1) Research-related, science and engineering education, including
graduate fellowships and research traineeships.
(2) Research instrumentation and other activities designed to
enhance the infrastructure for science and engineering research.
Claim. A written demand or written assertion by one of the parties
to a grant or cooperative agreement seeking as a matter of right, the
payment of money in a sum certain, the adjustment or interpretation of
award terms, or other relief arising under or relating to a grant or
cooperative agreement. A routine request for payment that is not in
dispute when submitted is not a claim. The submission may be converted
to a claim by written notice to the grants officer if it is disputed
either as to liability or amount, or is not acted upon in a reasonable
time.
Debt. Any amount of money or any property owed to a Federal Agency
by any person, organization, or entity except another United States
Federal Agency. Debts include any amounts due from insured or
guaranteed loans, fees, leases, rents, royalties, services, sales of
real or personal property, or overpayments, penalties, damages,
interest, fines and forfeitures, and all other claims and similar
sources. Amounts due a nonappropriated fund instrumentality are not
debts owed the United States, for the purposes of this subchapter.
Delinquent debt. A debt:
(1) That the debtor fails to pay by the date specified in the
initial written notice from the agency owed the debt, normally within
30 calendar days, unless the debtor makes satisfactory payment
arrangements with the agency by that date; and
(2) With respect to which the debtor has elected not to exercise
any available appeals or has exhausted all agency appeal processes.
Development. The systematic use of scientific and technical
knowledge in the design, development, testing, or evaluation of
potential new products, processes, or services to meet specific
performance requirements or objectives. It includes the functions of
design engineering, prototyping, and engineering testing.
Electronic commerce. The conduct of business through the use of
automation and electronic media, in lieu of paper transactions, direct
personal contact, telephone, or other means. For grants and cooperative
agreements, electronic commerce can include the use of electronic data
interchange, electronic mail, electronic bulletin board systems, and
electronic funds transfer for: program announcements or solicitations;
applications or proposals; award documents; recipients' requests for
payment; payment authorizations; and payments.
[[Page 12166]]
Electronic data interchange. The exchange of standardized
information communicated electronically between business partners,
typically between computers. It is DoD policy that DoD Component EDI
applications conform to the American National Standards Institute
(ANSI), Accredited Standards Committee (ASC) X-12 standard.\1\
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\1\ Available from Accredited Standards Committee, X-12
Secretariat, Data Interchange Standards Association, 1800 Diagonal
Road, Suite 355, Alexandria, VA 22314-2852; Attention: Manager
Maintenance and Publications.
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Electronic funds transfer. A system that provides the authority to
debit or credit accounts in financial institutions by electronic means
rather than source documents (e.g., paper checks). Processing typically
occurs through the Federal Reserve System and/or the Automated Clearing
House (ACH) computer network. It is DoD policy that DoD Component EFT
transmissions conform to the American National Standards Institute
(ANSI), Accredited Standards Committee (ASC) X-12 standard.
Historically Black colleges and universities. Institutions of
higher education determined by the Secretary of Education to meet the
requirements of 34 CFR 608.2. Each DoD Component's contracting
activities and grants officers may obtain a list of historically Black
colleges and universities from that DoD Component's Small and
Disadvantaged Business Utilization office.
Institution of higher education. An educational institution that
meets the criteria in section 1201(a) of the Higher Education Act of
1965 (20 U.S.C. 1141(a)). Note, however, that institution of higher
education has a different meaning in Sec. 22.520, as given at
Sec. 22.520(b)(2).
Minority institutions. Institutions of higher education that meet
the criteria for minority institutions specified in 10 U.S.C. 2323.
Each DoD Component's contracting activities and grants officers may
obtain copies of a current list of institutions that qualify as
minority institutions under 10 U.S.C. 2323 from that DoD Component's
Small and Disadvantaged Business Utilization office (the list of
minority institutions changes periodically, based on Department of
Education data on institutions' enrollments of minority students).
Research. Basic, applied, and advanced research, as defined in this
section.
Subaward. An award of financial assistance in the form of money, or
property in lieu of money, made under a DoD grant or cooperative
agreement by a recipient to an eligible subrecipient. The term includes
financial assistance for substantive program performance by the
subrecipient of a portion of the program for which the DoD grant or
cooperative agreement was made. It does not include the recipient's
procurement of goods and services needed to carry out the program.
Subpart B--Selecting the Appropriate Instrument
Sec. 22.200 Purpose.
This subpart provides the bases for determining the appropriate
type of instrument in a given situation.
Sec. 22.205 Distinguishing assistance from procurement.
Before using a grant or cooperative agreement, the grants officer
shall make a positive judgment that an assistance instrument, rather
than a procurement contract, is the appropriate instrument, based on
the following:
(a) Purpose. (1) The grants officer must judge that the principal
purpose of the activity to be carried out under the instrument is to
stimulate or support a public purpose (i.e., to provide assistance),
rather than acquisition (i.e., to acquire goods and services for the
direct benefit of the United States Government). If the principal
purpose is acquisition, then the grants officer shall judge that a
procurement contract is the appropriate instrument, in accordance with
31 U.S.C. chapter 63 (``Using Procurement Contracts and Grant and
Cooperative Agreements''). Assistance instruments shall not be used in
such situations, except:
(i) When a statute specifically provides otherwise; or
(ii) When an exemption is granted, in accordance with Sec. 22.220.
(2) For research and development, the appropriate use of grants and
cooperative agreements therefore is almost exclusively limited to the
performance of selected basic, applied, and advanced research projects.
Development projects nearly always shall be performed by contract or
other acquisition transaction because their principal purpose is the
acquisition of specific deliverable items (e.g., prototypes or other
hardware) for the benefit of the Department of Defense.
(b) Fee or profit. Payment of fee or profit is consistent with an
activity whose principal purpose is the acquisition of goods and
services for the direct benefit or use of the United States Government,
rather than an activity whose principal purpose is assistance.
Therefore, the grants officer shall use a procurement contract, rather
than an assistance instrument, in all cases where:
(1) Fee or profit is to be paid to the recipient of the instrument;
or
(2) The instrument is to be used to carry out a program where fee
or profit is necessary to achieving program objectives.
Sec. 22.210 Authority for providing assistance.
(a) Before a grant or cooperative agreement may be used, the grants
officer must:
(1) Identify the program statute, the statute that authorizes the
DoD Component to carry out the activity the principal purpose of which
is assistance (see 32 CFR 21.205(b)).
(2) Review the program statute to determine if it contains
requirements that affect the:
(i) Solicitation, selection, and award processes. For example,
program statutes may authorize assistance to be provided only to
certain types of recipients; may require that recipients meet certain
other criteria to be eligible to receive assistance; or require that a
specific process shall be used to review recipients' proposals.
(ii) Terms and conditions of the award. For example, some program
statutes require a specific level of cost sharing or matching.
(b) The grants officer shall ensure that the award of DoD
appropriations through a grant or cooperative agreement for a research
project meets the standards of 10 U.S.C. 2358, DoD's broad authority to
carry out research, even if the research project is authorized under a
statutory authority other than 10 U.S.C. 2358. The standards of 10
U.S.C. 2358 are that, in the opinion of the Head of the DoD Component
or his or her designee, the projects must be:
(1) Necessary to the responsibilities of the DoD Component.
(2) Related to weapons systems and other military needs or of
potential interest to the DoD Component.
Sec. 22.215 Distinguishing grants and cooperative agreements.
(a) Once a grants officer judges, in accordance with Secs. 22.205
and 22.210, that either a grant or cooperative agreement is the
appropriate instrument, the grants officer shall distinguish between
the two instruments as follows:
(1) Grants shall be used when the grants officer judges that
substantial involvement is not expected between the Department of
Defense and the recipient when carrying out the activity contemplated
in the agreement.
(2) Cooperative agreements shall be used when the grants officer
judges that substantial involvement is expected.
[[Page 12167]]
The grants officer should document the nature of the substantial
involvement that led to selection of a cooperative agreement. Under no
circumstances are cooperative agreements to be used solely to obtain
the stricter controls typical of a contract.
(b) In judging whether substantial involvement is expected, grants
officers should recognize that ``substantial involvement'' is a
relative, rather than an absolute, concept, and that it is primarily
based on programmatic factors, rather than requirements for grant or
cooperative agreement award or administration. For example, substantial
involvement may include collaboration, participation, or intervention
in the program or activity to be performed under the award.
Sec. 22.220 Exemptions.
Under 31 U.S.C. 6307, ``the Director of the Office of Management
and Budget may exempt an agency transaction or program'' from the
requirements of 31 U.S.C. chapter 63. Grants officers shall request
such exemptions only in exceptional circumstances. Each request shall
specify for which individual transaction or program the exemption is
sought; the reasons for requesting an exemption; the anticipated
consequences if the exemption is not granted; and the implications for
other agency transactions and programs if the exemption is granted. The
procedures for requesting exemptions shall be:
(a) In cases where 31 U.S.C. chapter 63 would require use of a
contract and an exemption from that requirement is desired:
(1) The grants officer shall submit a request for exemption,
through appropriate channels established by his or her DoD Component
(see 32 CFR 21.115(b)(1)), to the Director of Defense Procurement
(DDP).
(2) The DDP, after coordination with the Director of Defense
Research and Engineering (DDR&E), shall transmit the request to OMB or
notify the DoD Component that the request has been disapproved.
(b) In other cases, the DoD Component shall submit a request for
the exemption through appropriate channels to the DDR&E. The DDR&E
shall transmit the request to OMB or notify the DoD Component that the
request has been disapproved.
(c) Where an exemption is granted, documentation of the approval
shall be maintained in the award file.
Subpart C--Competition
Sec. 22.300 Purpose.
This subpart establishes DoD policy and implements statutes related
to the use of competitive procedures in the award of grants and
cooperative agreements.
Sec. 22.305 General policy and requirement for competition.
(a) It is DoD policy to maximize use of competition in the award of
grants and cooperative agreements. This also conforms with:
(1) 31 U.S.C. 6301(3), which encourages the use of competition in
awarding all grants and cooperative agreements.
(2) 10 U.S.C. 2374(a), which sets out Congressional policy that any
new grant for research, development, test, or evaluation be awarded
through merit-based selection procedures.
(b) Grants officers shall use merit-based, competitive procedures
(as defined by Sec. 22.315) to award grants and cooperative agreements:
(1) In every case where required by statute (e.g., 10 U.S.C. 2361,
as implemented in Sec. 22.310, for certain grants to institutions of
higher education).
(2) To the maximum extent practicable in all cases where not
required by statute.
Sec. 22.310 Statutes concerning certain research, development, and
facilities construction grants.
(a) Definitions specific to this section. For the purposes of
implementing the requirements of 10 U.S.C. 2374 in this section, the
following terms are defined:
(1) Follow-on grant. A grant that provides for continuation of
research and development performed by a recipient under a preceding
grant. Note that follow-on grants are distinct from incremental funding
actions during the period of execution of a multi-year award.
(2) New grant. A grant that is not a follow-on grant.
(b) Statutory requirement to use competitive procedures. (1) A
grants officer shall not award a grant by other than merit-based,
competitive procedures (as defined by Sec. 22.315) to an institution of
higher education for the performance of research and development or for
the construction of research or other facilities, unless:
(i) In the case of a new grant for research and development, there
is a statute meeting the criteria in paragraph (c)(1) of this section;
(ii) In the case of a follow-on grant for research and development,
or of a grant for the construction of research or other facilities,
there is a statute meeting the criteria in paragraph (c)(2) of this
section; and
(iii) The Secretary of Defense submits to Congress a written notice
of intent to make the grant. The grant may not be awarded until 180
calendar days have elapsed after the date on which Congress received
the notice of intent. Contracting activities must submit a draft notice
of intent with supporting documentation through channels to the Deputy
Director, Defense Research and Engineering.
(2) Because subsequently enacted statutes may, by their terms,
impose different requirements than set out in paragraph (b)(1) of this
section, grants officers shall consult legal counsel on a case-by-case
basis, when grants for the performance of research and development or
for the construction of research or other facilities are to be awarded
to institutions of higher education by other than merit-based
competitive procedures.
(c) Subsequent statutes. In accordance with 10 U.S.C. 2361 and 10
U.S.C. 2374, a provision of law may not be construed as requiring the
award of a grant through other than the merit-based, competitive
procedures described in Sec. 22.315, unless:
(1) Institutions of higher education--new grants for research and
development. In the case of a new grant for research and development to
an institution of higher education, such provision of law specifically:
(i) Identifies the particular institution of higher education
involved;
(ii) States that such provision of law modifies or supersedes the
provisions of 10 U.S.C. 2361 (a requirement that applies only if the
statute authorizing or requiring award by other than competitive
procedures was enacted after September 30, 1989); and
(iii) States that the award to the institution of higher education
involved is required by such provision of law to be made in
contravention of the policy set forth in 10 U.S.C. 2374(a).
(2) Institutions of higher education--follow-on grants for research
and development and grants for the construction of any research or
other facility. In the case of any such grant to an institution of
higher education, such provision of law specifically:
(i) Identifies the particular institution of higher education
involved; and
(ii) States that such provision of law modifies or supersedes the
provisions of 10 U.S.C. 2361 (a requirement that applies only if the
statute authorizing or requiring award by other than competitive
procedures was enacted after September 30, 1989).
(3) Other entities--new grants for research and development--(i)
General. In the case of a new grant for research and development to an
entity other than
[[Page 12168]]
an institution of higher education, such provision of law specifically:
(A) Identifies the particular entity involved;
(B) States that the award to that entity is required by such
provision of law to be made in contravention of the policy set forth in
10 U.S.C. 2374(a).
(ii) Exception. The requirement of paragraph (c)(3)(i) of this
section does not apply to any grant that calls upon the National
Academy of Sciences to:
(A) Investigate, examine, or experiment upon any subject of science
or art of significance to the Department of Defense or any Military
Department; and
(B) Report on such matters to the Congress or any agency of the
Federal Government.
Sec. 22.315 Merit-based, competitive procedures.
Competitive procedures are methods that encourage participation in
DoD programs by a broad base of the most highly qualified performers.
These procedures are characterized by competition among as many
eligible proposers as possible, with a published or widely disseminated
notice. Competitive procedures include, as a minimum:
(a) Notice to prospective proposers. The notice may be a notice of
funding availability or Broad Agency Announcement published in the
Federal Register or Commerce Business Daily, respectively, or a notice
that is made available broadly by electronic means. Alternatively, it
may take the form of a specific notice that is distributed to eligible
proposers (a specific notice must be distributed to at least two
eligible proposers to be considered as part of a competitive
procedure). Notices must include, as a minimum, the following
information:
(1) Programmatic area(s) of interest, in which proposals or
applications are sought.
(2) Eligibility criteria for potential recipients (see subpart D of
this part).
(3) Criteria that will be used to select the applications or
proposals that will be funded, and the method for conducting the
evaluation.
(4) The type(s) of funding instruments (e.g., grants, cooperative
agreements, other assistance instruments, or procurement contracts)
that are anticipated to be awarded pursuant to the announcement.
(5) Instructions for preparation and submission of a proposal or
application, including the time by which it must be submitted.
(b) At least two eligible, prospective proposers.
(c) Impartial review of the merits of applications or proposals
received in response to the notice, using the evaluation method and
selection criteria described in the notice. For research and
development awards, in order to be considered as part of a competitive
procedure, the two principal selection criteria, unless statute
provides otherwise, must be the:
(1) Technical merits of the proposed research and development; and
(2) Potential relationship of the proposed research and development
to Department of Defense missions.
Sec. 22.320 Special competitions.
Some programs may be competed for programmatic or policy reasons
among specific classes of potential recipients. An example would be a
program to enhance U.S. capabilities for academic research and
research-coupled graduate education in defense-critical, science and
engineering disciplines, a program that would be competed specifically
among institutions of higher education. All such special competitions
shall be consistent with program representations in the President's
budget submission to Congress and with subsequent Congressional
authorizations and appropriations for the programs.
Sec. 22.325 Historically Black colleges and universities (HBCUs) and
other minority institutions (MIs).
Increasing the ability of HBCUs and MIs to participate in federally
funded, university programs is an objective of Executive Order 12876 (3
CFR, 1993 Comp., p. 671) and 10 U.S.C. 2323. Grants officers shall
include appropriate provisions in Broad Agency Announcements (BAAs) or
other announcements for programs in which awards to institutions of
higher education are anticipated, in order to promote participation of
HBCUs and MIs in such programs. Also, whenever practicable, grants
officers shall reserve appropriate programmatic areas for exclusive
competition among HBCUs and MIs when preparing announcements for such
programs.
Subpart D--Recipient Qualification Matters--General Policies and
Procedures
Sec. 22.400 Purpose.
The purpose of this subpart is to specify policies and procedures
for grants officers' determination of recipient qualifications prior to
award.
Sec. 22.405 Policy.
(a) General. Grants officers normally shall award grants or
cooperative agreements only to qualified recipients that meet the
standards in Sec. 22.415. This practice conforms with the
Governmentwide policy, stated at 32 CFR 25.115(a), to do business only
with responsible persons.
(b) Exception. In exceptional circumstances, grants officers may
make awards to recipients that do not fully meet the standards in
Sec. 22.415 and include special award conditions that are appropriate
to the particular situation, in accordance with 32 CFR 32.14, 33.12, or
34.4.
Sec. 22.410 Grants officers' responsibilities.
The grants officer is responsible for determining a recipient's
qualification prior to award. The grants officer's signature on the
award document shall signify his or her determination that either:
(a) The potential recipient meets the standards in Sec. 22.415 and
is qualified to receive the grant or cooperative agreement; or
(b) An award is justified to a recipient that does not fully meet
the standards, pursuant to Sec. 22.405(b). In such cases, grants
officers shall document in the award file the rationale for making an
award to a recipient that does not fully meet the standards.
Sec. 22.415 Standards.
To be qualified, a potential recipient must:
(a) Have the management capability and adequate financial and
technical resources, given those that would be made available through
the grant or cooperative agreement, to execute the program of
activities envisioned under the grant or cooperative agreement.
(b) Have a satisfactory record of executing such programs or
activities (if a prior recipient of an award).
(c) Have a satisfactory record of integrity and business ethics.
(d) Be otherwise qualified and eligible to receive a grant or
cooperative agreement under applicable laws and regulations (see
Sec. 22.420(c)).
Sec. 22.420 Pre-award procedures.
(a) The appropriate method to be used and amount of effort to be
expended in deciding the qualification of a potential recipient will
vary. In deciding on the method and level of effort, the grants officer
should consider factors such as:
(1) DoD's past experience with the recipient;
(2) Whether the recipient has previously received cost-type
contracts, grants, or cooperative agreements from the Federal
Government; and
(3) The amount of the prospective award and complexity of the
project to be carried out under the award.
[[Page 12169]]
(b) There is no DoD-wide requirement to obtain a pre-award credit
report, audit, or any other specific piece of information. On a case-
by-case basis, the grants officer will decide whether there is a need
to obtain any such information to assist in deciding whether the
recipient meets the standards in Sec. 22.415 (a), (b), and (c).
(1) Should the grants officer in a particular case decide that a
pre-award credit report, audit, or survey is needed, he or she should
consult first with the appropriate grants administration office
(identified in Sec. 22.710), and decide whether pre-existing surveys or
audits of the recipient, such as those of the recipient's internal
control systems under OMB Circular A-133 \2\ will satisfy the need (see
Sec. 22.715(a)(1)).
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\2\ Contact the Office of Management and Budget, EOP
Publications, 725 17th St. NW, New Executive Office Building,
Washington, DC 20503.
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(2) If, after consulting with the grants administration office, the
grants officer decides to obtain a credit report, audit, or other
information, and the report or other information discloses that a
potential recipient is delinquent on a debt to an agency of the United
States Government, then:
(i) The grants officer shall take such information into account
when determining whether the potential recipient is qualified with
respect to the grant or cooperative agreement; and
(ii) If the grants officer decides to make the award to the
recipient, unless there are compelling reasons to do otherwise, the
grants officer shall delay the award of the grant or cooperative
agreement until payment is made or satisfactory arrangements are made
to repay the debt.
(c) In deciding whether a recipient is otherwise qualified and
eligible in accordance with the standard in Sec. 22.415(d), the grants
officer shall ensure that the potential recipient:
(1) Is not identified on the Governmentwide ``List of Parties
Excluded from Federal Procurement and Nonprocurement Programs'' as
being debarred, suspended, or otherwise ineligible to receive the
award. The grants officer shall check the list of such parties for:
(i) Potential recipients of prime awards, as described at 32 CFR
25.505(d);
(ii) A recipient's principals (e.g., officers, directors, or other
key employees, as defined at 32 CFR 25.105); and
(iii) Potential recipients of subawards, where DoD Component
approval of such principals or lower-tier recipients is required under
the terms of the award (see 32 CFR 25.505(e)).
(2) Has provided all certifications and assurances required by
Federal statute, Executive order, or codified regulation, unless they
are to be addressed in award terms and conditions at the time of award
(see Sec. 22.510).
(3) Meets any eligibility criteria that may be specified in the
statute authorizing the specific program under which the award is being
made (see Sec. 22.210(a)(2)).
(d) Grants officers shall obtain each recipient's Taxpayer
Identification Number (TIN, which may be the Social Security Number for
an individual and Employer Identification Number for a business or non-
profit entity) and notify the recipient that the TIN is being obtained
for purposes of collecting and reporting on any delinquent amounts that
may arise out of the recipient's relationship with the Government.
Obtaining the TIN and so notifying the recipient is a statutory
requirement of 31 U.S.C. 7701, as amended by the Debt Collection
Improvement Act of 1996 (section 31001(i)(1), Pub. L. 104-134).
Subpart E--National Policy Matters
Sec. 22.505 Purpose.
The purpose of this subpart is to supplement other regulations that
implement national policy requirements, to the extent that it is
necessary to provide additional guidance to DoD grants officers. The
other regulations that implement national policy requirements include:
(a) The other parts of the DoDGARs (32 CFR parts 32, 33, and 34)
that implement the Governmentwide guidance in OMB Circulars A-102 \3\
and A-110 \4\ on administrative requirements for grants and cooperative
agreements. Those parts address some national policy matters that
appear in the OMB Circulars.
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\3\ See footnote 2 to Sec. 22.420(b)(1).
\4\ See footnote 2 to Sec. 22.420(b)(1).
---------------------------------------------------------------------------
(b) DoD regulations other than the DoDGARs.
(c) Other Federal agencies' regulations.
Sec. 22.510 Certifications, representations, and assurances.
(a) Certifications--(1) Policy. Certifications of compliance with
national policy requirements are to be obtained from recipients only
for those national policies where a statute, Executive order, or
codified regulation specifically states that a certification is
required. Other national policy requirements may be addressed by
obtaining representations or assurances (see paragraph (b) of this
section). Grants officers should utilize methods for obtaining
certifications, in accordance with Executive Order 12866 (3 CFR, 1993
Comp., p. 638), that minimize administration and paperwork.
(2) Procedures. (i) When necessary, grants officers may obtain
individual, written certifications.
(ii) Whenever possible, and to the extent consistent with statute
and codified regulation, grants officers should identify the
certifications that are required for the particular type of recipient
and program, and consolidate them into a single certification provision
that cites them by reference.
(A) Appendix A to this part lists the common certifications and
cites their applicability. Because some certifications (e.g., the
certification on lobbying in Appendix A to this part) are required by
law to be submitted at the time of proposal, rather than at the time of
award, Appendix A to this part includes language that may be used for
incorporating common certifications by reference into a proposal.
(B) If a grants officer elects to have proposers incorporate
certifications by reference into their proposals, he or she must do so
in one of the two following ways. When required by statute or codified
regulation, the solicitation must include the full text of the
certifications that proposers are to provide by reference. In other
cases, the grants officer may include language in the solicitation that
informs the proposers where the full text may be found (e.g., in
documents or computer network sites that are readily available to the
public) and offers to provide it to proposers upon request.
(C) Grants officers may incorporate certifications by reference in
award documents when doing so is consistent with statute and codified
regulation. Note that a statute requires submission of the lobbying
certification in Appendix A to this part at the time of proposal, and
that 32 CFR 25.510(a) requires submission of certifications regarding
debarment and suspension at the time of proposal. The provision that a
grants officer would use to incorporate certifications in award
documents, when consistent with statute and codified regulation, would
be similar to the provision in Appendix A to this part, except that it
would be modified to state that the recipient is providing the required
certifications by signing the award document or by accepting funds
under the award.
(b) Representations and assurances. Many national policies, either
in statute or in regulation, require recipients of grants and
cooperative agreements to make representations or provide
[[Page 12170]]
assurances (rather than certifications) that they are in compliance
with the policies. As discussed in Sec. 22.610(b), Appendix B to this
part suggests award terms and conditions that may be used to address
several of the more commonly applicable national policy requirements.
These terms and conditions may be used to obtain required assurances
and representations, if the grants officer wishes to do so at the time
of award, rather than through the use of the standard application form
(SF-424 \5\) or other means at the time of proposal.
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\5\ For copies of Standard Forms listed in this part, contact
regional grants administration offices of the Office of Naval
Research. Addresses for the offices are listed in the ``DoD
Directory of Contract Administration Services Components,'' DLAH
4105.4, which can be obtained either from: Defense Logistics Agency,
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman
Rd., Suite 0119, Fort Belvoir, VA 22060-6220; or from the Defense
Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.''
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Sec. 22.515 Provisions of annual appropriations acts.
An annual appropriations act can include general provisions stating
national policy requirements that apply to the use of funds (e.g.,
obligation through a grant or cooperative agreement) appropriated by
the act. Because these requirements are of limited duration (the period
during which a given year's appropriations are available for
obligation), and because they can vary from year to year and from one
agency's appropriations act to another agency's, the grants officer
must know the agency(ies) and fiscal year(s) of the appropriations
being obligated by a given grant or cooperative agreement, and may need
to consult legal counsel if he or she does not know the requirements
applicable to those appropriations.
Sec. 22.520 Military recruiting on campus.
(a) Purpose. The purpose of this section is to implement section
558 of the National Defense Authorization Act for Fiscal Year 1995
(Pub. L. 103-337), as it specifically affects grants and cooperative
agreements (note that section 558 appears as a note to 10 U.S.C. 503).
This section thereby supplements DoD's primary implementation of
section 558, in 32 CFR part 216, ``Military Recruiting and Reserve
Officer Training Corps Program Access to Institutions of Higher
Education.''
(b) Definitions specific to this section. In this section:
(1) Directory information has the following meaning, given in
section 558(c) of Pub. L. 103-337. It means, with respect to a student,
the student's name, address, telephone listing, date and place of
birth, level of education, degrees received, and the most recent
previous educational institution enrolled in by the student.
(2) Institution of higher education has a different meaning in this
section than it does in the rest of this part. The meaning of the term
in other sections of this part is given at Sec. 22.105. In this
section, ``institution of higher education'' (IHE) has the following
meaning, given at 32 CFR 216.3. The term means a domestic college,
university, or subelement thereof providing postsecondary school
courses of study, including foreign campuses of such domestic
institutions. The term includes junior colleges, community colleges,
and institutions providing courses leading to undergraduate and post-
graduate degrees. The term does not include entities that operate
exclusively outside the United States, its territories, and
possessions. A subelement of an IHE is a discrete (although not
necessarily autonomous) organizational entity that may establish policy
or practices affecting military recruiting and related actions (e.g.,
an undergraduate school, law school, medical school, or other graduate
school).
(c) Statutory requirement. No funds available to the Department of
Defense may be provided by grant to any institution of higher education
that either has a policy of denying or that effectively prevents the
Secretary of Defense from obtaining, for military recruiting purposes,
entry to campuses or access to students on campuses or access to
directory information pertaining to students.
(d) Policy.--(1) Applicability to subordinate elements of
institutions of higher education. 32 CFR part 216, DoD's primary
implementation of section 558, establishes procedures by which the
Department of Defense identifies institutions of higher education that
have a policy or practice described in paragraph (c) of this section.
In cases where those procedures lead to a determination that specific
subordinate elements of an institution of higher education have such a
policy or practice, rather than the institution as a whole, 32 CFR part
216 provides that the prohibition on use of DoD funds applies only to
those subordinate elements.
(2) Applicability to cooperative agreements. As a matter of DoD
policy, the restrictions of section 558, as implemented by 32 CFR part
216, apply to cooperative agreements, as well as grants.
(3) Deviations. Grants officers may not deviate from any provision
of this section without obtaining the prior approval of the Director of
Defense Research and Engineering. Requests for deviations shall be
submitted, through appropriate channels, to: Director for Research,
ODDR&E(R), 3080 Defense Pentagon, Washington, DC 20301-3080.
(e) Grants officers' responsibilities. A grants officer shall:
(1) Not award any grant or cooperative agreement to an institution
of higher education that has been identified pursuant to the procedures
of 32 CFR part 216. Such institutions are identified on the
Governmentwide ``List of Parties Excluded from Federal Procurement and
Nonprocurement Programs,'' as being ineligible to receive awards of DoD
funds (note that 32 CFR 25.505(d) requires the grants officer to check
the list prior to determining that a recipient is qualified to receive
an award).
(2) [Reserved].
(3) Not consent to any subaward of DoD funds to such an
organization, under a grant or cooperative agreement to any recipient,
if such subaward requires the grants officer's consent.
(4) Include the clause in paragraph (f) of this section in each
grant or cooperative agreement with an institution of higher education.
Note that this requirement does not flow down (i.e., recipients are not
required to include the clause in subawards).
(5) If an institution of higher education refuses to accept the
clause in paragraph (f) of this section:
(i) Determine that the institution is not qualified with respect to
the award. The grants officer may award to an alternative recipient.
(ii) Transmit the name of the institution, through appropriate
channels, to the Director for Accession Policy, Office of the Assistant
Secretary of Defense for Force Management Policy, OASD(FMP), 4000
Defense Pentagon, Washington, DC 20301-4000. This will allow OASD(FMP)
to decide whether to initiate an evaluation of the institution under 32
CFR part 216, to determine whether it is an institution that has a
policy or practice described in paragraph (c) of this section.
(f) Clause for award documents. The following clause is to be
included in grants and cooperative agreements with institutions of
higher education:
``As a condition for receipt of funds available to the Department of
Defense (DoD) under this award, the recipient agrees that it is not
an institution of higher education (as defined in 32 CFR part 216)
that has a policy of denying, and that it is not an institution of
higher education that effectively prevents, the Secretary of Defense
from obtaining for
[[Page 12171]]
military recruiting purposes: (A) Entry to campuses or access to
students on campuses; or (B) access to directory information
pertaining to students. If the recipient is determined, using the
procedures in 32 CFR part 216, to be such an institution of higher
education during the period of performance of this agreement, and
therefore to be in breach of this clause, the Government will cease
all payments of DoD funds under this agreement and all other DoD
grants and cooperative agreements to the recipient, and it may
suspend or terminate such grants and agreements unilaterally for
material failure to comply with the terms and conditions of award.''
Sec. 22.525 Paperwork Reduction Act.
Grants officers shall include appropriate award terms or
conditions, if a recipient's activities under an award will be subject
to the Paperwork Reduction Act of 1995 (44 U.S.C. 3500, et seq.):
(a) Generally, the Act only applies to Federal agencies--it
requires agencies to obtain clearance from the Office of Management and
Budget before collecting information using forms, schedules,
questionnaires, or other methods calling either for answers to:
(1) Identical questions from ten or more persons other than
agencies, instrumentalities, or employees of the United States.
(2) Questions from agencies, instrumentalities, or employees of the
United States which are to be used for statistical compilations of
general public interest.
(b) The Act applies to similar collections of information by
recipients of grants or cooperative agreements only when:
(1) A recipient collects information at the specific request of the
awarding Federal agency; or
(2) The terms and conditions of the award require specific approval
by the agency of the information collection or the collection
procedures.
Sec. 22.530 Metric system of measurement.
(a) Statutory requirement. The Metric Conversion Act of 1975, as
amended by the Omnibus Trade and Competitiveness Act of 1988 (15 U.S.C.
205) and implemented by Executive Order 12770 (3 CFR, 1991 Comp., p.
343), states that:
(1) The metric system is the preferred measurement system for U.S.
trade and commerce.
(2) The metric system of measurement will be used, to the extent
economically feasible, in federal agencies' procurements, grants, and
other business-related activities.
(3) Metric implementation shall not be required to the extent that
such use is likely to cause significant inefficiencies or loss of
markets to United States firms.
(b) Responsibilities. DoD Components shall ensure that the metric
system is used, to the maximum extent practicable, in measurement-
sensitive activities supported by programs that use grants and
cooperative agreements, and in measurement-sensitive outputs of such
programs.
Subpart F--Award
Sec. 22.600 Purpose.
This subpart sets forth grants officers' responsibilities relating
to the award document and other actions at the time of award.
Sec. 22.605 Grants officers' responsibilities.
At the time of award, the grants officer is responsible for
ensuring that:
(a) The award instrument contains the appropriate terms and
conditions, in accordance with Sec. 22.610.
(b) Information about the award is provided to the office
responsible for preparing reports for the Defense Assistance Award Data
System (DAADS), to ensure timely and accurate reporting of data
required by 31 U.S.C. 6101-6106 (see 32 CFR part 21, subpart C).
(c)(1) In addition to the copy of the award document provided to
the recipient, a copy is forwarded to the office designated to
administer the grant or cooperative agreement, and another copy is
forwarded to the finance and accounting office designated to make the
payments to the recipient.
(2) For any award subject to the electronic funds transfer (EFT)
requirement described in Sec. 22.810(b)(2), the grants officer shall
include a prominent notification of that fact on the first page of the
copies forwarded to the recipient, the administrative grants officer,
and the finance and accounting office. On the first page of the copy
forwarded to the recipient, the grants officer also shall include a
prominent notification that the recipient, to be paid, must submit a
Payment Information Form (Standard Form SF-3881\6\) to the responsible
DoD payment office, if that payment office does not currently have the
information (e.g., bank name and account number) needed to pay the
recipient by EFT.
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\6\ See footnote 5 to Sec. 22.510(b).
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Sec. 22.610 Award instruments.
(a) Each award document shall include terms and conditions that:
(1) Address programmatic requirements (e.g., a statement of work or
other appropriate terms or conditions that describe the specific goals
and objectives of the project). The grants officer shall develop such
terms and conditions in coordination with program officials.
(2) Provide for the recipient's compliance with:
(i) Pertinent Federal statutes or Executive orders that apply
broadly to Federal or DoD assistance awards.
(ii) Any program-specific requirements that are prescribed in the
program statute (see Sec. 22.210(a)(2)), or appropriation-specific
requirements that are stated in the pertinent Congressional
appropriations (see Sec. 22.515).
(iii) Pertinent portions of the DoDGARs or other Federal
regulations, including those that implement the Federal statutes or
Executive orders described in paragraphs (a)(2) (i) and (ii) of this
section.
(3) Specify the grants officer's instructions for post-award
administration, for any matter where the post-award administration
provisions in 32 CFR part 32, 33, or 34 give the grants officer options
for handling the matter. For example, under 32 CFR 32.24(b), the grants
officers must choose among possible methods for the recipient's
disposition of program income. It is essential that the grants officer
identify the option selected in each case, to provide clear
instructions to the recipient and the grants officer responsible for
post-award administration of the grant or cooperative agreement.
(b) To assist grants officers:
(1) Appendix B to this part provides model clauses to implement
certain Federal statutes, Executive orders, and regulations (see
paragraph (a)(2)(i) of this section) that frequently apply to DoD
grants and cooperative agreements. Grants officers may incorporate the
model clauses into award terms and conditions, as appropriate. It
should be noted that Appendix B to this part is an aid, and not an
exhaustive list of all requirements that apply in all cases. Depending
on the circumstances of a given award, other statutes, Executive
orders, or codified regulations also may apply (e.g., Appendix B to
this part does not list program-specific requirements described in
paragraph (a)(2)(ii) of this section).
(2) Appendix C to this part is a list of administrative
requirements that apply to awards to different types of recipients. It
also identifies post-award administration issues that the grants
officer must address in the award terms and conditions.
[[Page 12172]]
Subpart G--Field Administration
Sec. 22.700 Purpose.
This subpart prescribes policies and procedures for administering
grants and cooperative agreements. It does so in conjunction with 32
CFR parts 32, 33, and 34, which prescribe administrative requirements
for particular types of recipients.
Sec. 22.705 Policy.
(a) DoD policy is to have each recipient deal with a single office,
to the maximum extent practicable, for post-award administration of its
grants and cooperative agreements. This reduces burdens on recipients
that can result when multiple DoD offices separately administer grants
and cooperative agreements they award to a given recipient. It also
minimizes unnecessary duplication of field administration services.
(b) To further reduce burdens on recipients, the office responsible
for performing field administration services for grants and cooperative
agreements to a particular recipient shall be, to the maximum extent
practicable, the same office that is assigned responsibility for
performing field administration services for contracts awarded to that
recipient.
(c) Contracting activities and grants officers therefore shall use
cross-servicing arrangements whenever practicable and, to the maximum
extent possible, delegate responsibility for post-award administration
to the cognizant grants administration offices identified in
Sec. 22.710.
Sec. 22.710 Assignment of grants administration offices.
In accordance with the policy stated in Sec. 22.705(b), the DoD
offices (referred to in this part as ``grants administration offices'')
that are assigned responsibility for performing field administration
services for grants and cooperative agreements are (see the ``DoD
Directory of Contract Administration Services Components,'' DLAH
4105.4,\7\ for specific addresses of administration offices):
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\7\ Copies may be obtained either from the Defense Logistics
Agency, Publications Distribution Division (DASC-WDM), 8725 John J.
Kingman Rd., Suite 0119, Fort Belvoir, VA 22060-6220, or from the
Defense Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.
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(a) Regional offices of the Office of Naval Research, for grants
and cooperative agreements with:
(1) Institutions of higher education and laboratories affiliated
with such institutions, to the extent that such organizations are
subject to the university cost principles in OMB Circular A-21.\8\
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\8\ See footnote 2 to Sec. 22.420(b)(1).
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(2) Nonprofit organizations that are subject to the cost principles
in OMB Circular A-122,\9\ if their principal business with the
Department of Defense is research and development.
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\9\ See footnote 2 to Sec. 22.420(b)(1).
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(b) Field offices of the Defense Contract Management Command, for
grants and cooperative agreements with all other entities, including:
(1) For-profit organizations.
(2) Nonprofit organizations identified in Attachment C of OMB
Circular A-122 that are subject to for-profit cost principles in 48 CFR
part 31.
(3) Nonprofit organizations subject to the cost principles in OMB
Circular A-122, if their principal business with the Department of
Defense is other than research and development.
(4) State and local governments.
Sec. 22.715 Grants administration office functions.
The primary responsibility of cognizant grants administration
offices shall be to advise and assist grants officers and recipients
prior to and after award, and to help ensure that recipients fulfill
all requirements in law, regulation, and award terms and conditions.
Specific functions include:
(a) Conducting reviews and coordinating reviews, audits, and audit
requests. This includes:
(1) Advising grants officers on the extent to which audits by
independent auditors (i.e., public accountants or Federal auditors)
have provided the information needed to carry out their
responsibilities. If a recipient has had an independent audit in
accordance with OMB Circular A-133, and the audit report disclosed no
material weaknesses in the recipient's financial management and other
management and control systems, additional preaward or closeout audits
usually will not be needed (see Secs. 22.420(b) and 22.825(b)).
(2) Performing pre-award surveys, when requested by a grants
officer, after providing advice described in paragraph (a)(1) of this
section.
(3) Reviewing recipients' systems and compliance with Federal
requirements, in coordination with any reviews and compliance audits
performed by independent auditors under OMB Circular A-133, or in
accordance with the terms and conditions of the award. This includes:
(i) Reviewing recipients' financial management, property
management, and purchasing systems, to determine the adequacy of such
systems.
(ii) Determining that recipients have drug-free workplace programs,
as required under 32 CFR part 25.
(4) Notifying the Office of the Assistant Inspector General for
Policy and Oversight (OAIG(P&O)), 400 Army-Navy Drive, Arlington, VA
22202, if either of the following is not available within a reasonable
period of time (e.g., six months) after the date on which a recipient
of DoD grants and agreements was to have submitted its audit report
under OMB Circular A-133 to the OAIG(P&O):
(i) The recipient's audit report under OMB Circular A-133.
(ii) The OAIG(P&O)'s desk review of the recipient's audit report,
or a letter stating that the OAIG(P&O) has decided not to conduct a
desk review.
(b) Performing property administration services for Government-
owned property, and for any property acquired by a recipient, with
respect to which the recipient has further obligations to the
Government.
(c) Ensuring timely submission of required reports.
(d) Executing administrative closeout procedures.
(e) Establishing recipients' indirect cost rates, where the
Department of Defense is the cognizant or oversight Federal agency with
the responsibility for doing so.
(f) Performing other administration functions (e.g., receiving
recipients' payment requests and transmitting approved payment
authorizations to payment offices) as delegated by applicable cross-
servicing agreements or letters of delegation.
Subpart H--Post-Award Administration
Sec. 22.800 Purpose and relation to other parts.
This subpart sets forth grants officers' and DoD Components'
responsibilities for post-award administration, by providing DoD-
specific requirements on payments; debt collection; claims, disputes
and appeals; and closeout audits.
Sec. 22.805 Post-award requirements in other parts.
Grants officers responsible for post-award administration of grants
and cooperative agreements shall administer such awards in accordance
with the following parts of the DoDGARs, as supplemented by this
subpart:
(a) Awards to domestic recipients. Standard administrative
requirements for grants and cooperative agreements with domestic
recipients are specified in other parts of the DoDGARs, as follows:
[[Page 12173]]
(1) For awards to domestic institutions of higher education and
other nonprofit organizations, requirements are specified in 32 CFR
part 32, which is the DoD implementation of OMB Circular A-110.
(2) For awards to State and local governments, requirements are
specified in 32 CFR part 33, which is the DoD codification of the
Governmentwide common rule to implement OMB Circular A-102.
(3) For awards to domestic for-profit organizations, requirements
are specified in 32 CFR part 34, which is modeled on the requirements
in OMB Circular A-110.
(b) Awards to foreign recipients. DoD Components shall use the
administrative requirements specified in paragraph (a) of this section,
to the maximum extent practicable, for grants and cooperative
agreements to foreign recipients.
Sec. 22.810 Payments.
(a) Purpose. This section prescribes policies and grants officers'
post-award responsibilities, with respect to payments to recipients of
grants and cooperative agreements.
(b) Policy. (1) It is Governmentwide policy to minimize the time
elapsing between any payment of funds to a recipient and the
recipient's disbursement of the funds for program purposes (see 32 CFR
32.22(a) and 33.21(b), and the implementation of the Cash Management
Improvement Act at 31 CFR part 205).
(2) It also is a Governmentwide requirement to use electronic funds
transfer (EFT) in the payment of any grant for which an application or
proposal was submitted or renewed on or after July 26, 1996, unless the
recipient has obtained a waiver by submitting to the head of the
pertinent Federal agency a certification that it has neither an account
with a financial institution nor an authorized payment agent. This
requirement is in 31 U.S.C. 3332, as amended by the Debt Collection
Improvement Act of 1996 (section 31001(x)(1)(A), Pub. L. 104-134), and
as implemented by Department of Treasury regulations at 31 CFR part
208. As a matter of DoD policy, this requirement applies to cooperative
agreements, as well as grants. Within the Department of Defense, the
Defense Finance and Accounting Service implements this EFT requirement,
and grants officers have collateral responsibilities at the time of
award, as described in Sec. 22.605(c), and in postaward administration,
as described in Sec. 22.810(c)(3)(iv).
(3) Expanding on these Governmentwide policies, DoD policy is for
DoD Components to use electronic commerce, to the maximum extent
practicable, in the portions of the payment process for grants and
cooperative agreements for which grants officers are responsible. In
cases where recipients submit each payment request to the grants
officer, this includes using electronic methods to receive recipients'
requests for payment and to transmit authorizations for payment to the
DoD payment office. Using electronic methods will improve timeliness
and accuracy of payments and reduce administrative burdens associated
with paper-based payments.
(c) Post-award responsibilities. In cases where the recipient
submits each payment request to the grants officer, the administrative
grants officer designated to handle payments for a grant or cooperative
agreement is responsible for:
(1) Handling the recipient's requests for payments in accordance
with DoD implementation of Governmentwide guidance (see 32 CFR 32.22,
33.21, or 34.12, as applicable).
(2) Reviewing each payment request to ensure that:
(i) The request complies with the award terms.
(ii) Available funds are adequate to pay the request.
(iii) The recipient will not have excess cash on hand, based on
expenditure patterns.
(3) Maintaining a close working relationship with the personnel in
the finance and accounting office responsible for making the payments.
A good working relationship is necessary, to ensure timely and accurate
handling of financial transactions for grants and cooperative
agreements. Administrative grants officers:
(i) Should be generally familiar with policies and procedures for
disbursing offices that are contained in Chapter 19 of Volume 10 of the
DoD Financial Management Regulation (the FMR, DoD 7000.14-R\10\).
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\10\ Copies may be obtained, at cost, from the National
Technical Information Service, 5285 Port Royal Road, Springfield, VA
22161. Authorized users may also obtain copies from the Defense
Technical Information Center, 8725 John J. Kingman Rd., Suite 0944,
Fort Belvoir, VA 22060-6218.
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(ii) Shall forward authorizations to the designated payment office
expeditiously, so that payments may be made in accordance with the
timely payment guidelines in Chapter 19 of Volume 10 of the FMR. Unless
alternative arrangements are made with the payment office,
authorizations should be forwarded to the payment office at least 3
working days before the end of the period specified in the FMR. The
period specified in the FMR is:
(A) No more than seven calendar days after receipt of the
recipient's request by the administrative grants officer, whenever
electronic commerce is used (i.e., EDI to request and authorize
payments and electronic funds transfer (EFT) to make payments).
(B) No more than thirty calendar days after receipt of the
recipient's request by the administrative grants officer, when it is
not possible to use electronic commerce and paper transactions are
used.
(C) No more than seven calendar days after each date specified,
when payments are authorized in advance based on a predetermined
payment schedule, provided that the payment schedule was received in
the disbursing office at least 30 calendar days in advance of the date
of the scheduled payment.
(iii) Shall ensure that the recipients' Taxpayer Identification
Number (TIN) is included with each payment authorization forwarded to
the payment office. This is a statutory requirement of 31 U.S.C. 3325,
as amended by the Debt Collection Improvement Act of 1996 (section
31001(y), Pub. L. 104-134).
(iv) For each award that is required to be paid by EFT (see
Sec. 22.605(c) and (Sec. 22.810(b)(2)), shall prominently indicate that
fact in the payment authorization.
Sec. 22.815 Claims, disputes, and appeals.
(a) Award terms. Grants officers shall include in grants and
cooperative agreements a term or condition that incorporates the
procedures of this section for:
(1) Processing recipient claims and disputes.
(2) Deciding appeals of grants officers' decisions.
(b) Submission of claims--(1) Recipient claims. If a recipient
wishes to submit a claim arising out of or relating to a grant or
cooperative agreement, the grants officer shall inform the recipient
that the claim must:
(i) Be submitted in writing to the grants officer for decision;
(ii) Specify the nature and basis for the relief requested; and
(iii) Include all data that supports the claim.
(2) DoD Component claims. Claims by a DoD Component shall be the
subject of a written decision by a grants officer.
(c) Alternative Dispute Resolution (ADR)--(1) Policy. DoD policy is
to try
[[Page 12174]]
to resolve all issues concerning grants and cooperative agreements by
mutual agreement at the grants officer's level. DoD Components
therefore are encouraged to use ADR procedures to the maximum extent
practicable. ADR procedures are any voluntary means (e.g., mini-trials
or mediation) used to resolve issues in controversy without resorting
to formal administrative appeals (see paragraph (e) of this section) or
to litigation.
(2) Procedures. (i) The ADR procedures or techniques to be used may
either be agreed upon by the Government and the recipient in advance
(e.g., when agreeing on the terms and conditions of the grant or
cooperative agreement), or may be agreed upon at the time the parties
determine to use ADR procedures.
(ii) If a grants officer and a recipient are not able to resolve an
issue through unassisted negotiations, the grants officer shall
encourage the recipient to enter into ADR procedures. ADR procedures
may be used prior to submission of a recipient's claim or at any time
prior to the Grant Appeal Authority's decision on a recipient's appeal
(see paragraph (e)(3)(iii) of this section).
(d) Grants officer decisions. (1) Within 60 calendar days of
receipt of a written claim, the grants officer shall either:
(i) Prepare a written decision, which shall include the reasons for
the decision; shall identify all relevant data on which the decision is
based; shall identify the cognizant Grant Appeal Authority and give his
or her mailing address; and shall be included in the award file; or
(ii) Notify the recipient of a specific date when he or she will
render a written decision, if more time is required to do so. The
notice shall inform the recipient of the reason for delaying the
decision (e.g., the complexity of the claim, a need for more time to
complete ADR procedures, or a need for the recipient to provide
additional information to support the claim).
(2) The decision of the grants officer shall be final, unless the
recipient decides to appeal. If a recipient decides to appeal a grants
officer's decision, the grants officer shall encourage the recipient to
enter into ADR procedures, as described in paragraph (c) of this
section.
(e) Formal administrative appeals--(1) Grant appeal authorities.
Each DoD Component that awards grants or cooperative agreements shall
establish one or more Grant Appeal Authorities to decide formal,
administrative appeals in accordance with paragraph (e)(3) of this
section. Each Grant Appeal Authority shall be either:
(i) An individual at a grade level in the Senior Executive Service,
if civilian, or at the rank of Flag or General Officer, if military; or
(ii) A board chaired by such an individual.
(2) Right of appeal. A recipient has the right to appeal a grants
officer's decision to the Grant Appeal Authority (but note that ADR
procedures, as described in paragraph (c) of this section, are the
preferred means for resolving any appeal).
(3) Appeal procedures--(i) Notice of appeal. A recipient may appeal
a decision of the grants officer within 90 calendar days of receiving
that decision, by filing a written notice of appeal to the Grant Appeal
Authority and to the grants officer. If a recipient elects to use an
ADR procedure, the recipient is permitted an additional 60 calendar
days to file the written notice of appeal to the Grant Appeal Authority
and grants officer.
(ii) Appeal file. Within 30 calendar days of receiving the notice
of appeal, the grants officer shall forward to the Grant Appeal
Authority and the recipient the appeal file, which shall include copies
of all documents relevant to the appeal. The recipient may supplement
the file with additional documents it deems relevant. Either the grants
officer or the recipient may supplement the file with a memorandum in
support of its position. The Grant Appeal Authority may request
additional information from either the grants officer or the recipient.
(iii) Decision. The appeal shall be decided solely on the basis of
the written record, unless the Grant Appeal Authority decides to
conduct fact-finding procedures or an oral hearing on the appeal. Any
fact-finding or hearing shall be conducted using procedures that the
Grant Appeal Authority deems appropriate.
(f) Representation. A recipient may be represented by counsel or
any other designated representative in any claim, appeal, or ADR
proceeding brought pursuant to this section, as long as the
representative is not otherwise prohibited by law or regulation from
appearing before the DoD Component concerned.
(g) Non-exclusivity of remedies. Nothing in this section is
intended to limit a recipient's right to any remedy under the law.
Sec. 22.820 Debt collection.
(a) Purpose. This section prescribes procedures for establishing
debts owed by recipients of grants and cooperative agreements, and
transferring them to payment offices for collection.
(b) Resolution of indebtedness. The grants officer shall attempt to
resolve by mutual agreement any claim of a recipient's indebtedness to
the United States arising out of a grant or cooperative agreement
(e.g., by a finding that a recipient was paid funds in excess of the
amount to which the recipient was entitled under the terms and
conditions of the award).
(c) Grants officer's decision. In the absence of such mutual
agreement, any claim of a recipient's indebtedness shall be the subject
of a grants officer decision, in accordance with Sec. 22.815(b)(2). The
grants officer shall prepare and transmit to the recipient a written
notice that:
(1) Describes the debt, including the amount, the name and address
of the official who determined the debt (e.g., the grants officer under
Sec. 22.815(d)), and a copy of that determination.
(2) Informs the recipient that:
(i) Within 30 calendar days of the grants officer's decision, the
recipient shall either pay the amount owed to the grants officer (at
the address that was provided pursuant to paragraph (c)(1) of this
section) or inform the grants officer of the recipient's intention to
appeal the decision.
(ii) If the recipient elects not to appeal, any amounts not paid
within 30 calendar days of the grants officer's decision will be a
delinquent debt.
(iii) If the recipient elects to appeal the grants officer's
decision the recipient has 90 calendar days, or 150 calendar days if
ADR procedures are used, after receipt of the grants officer's decision
to file the appeal, in accordance with Sec. 22.815(e)(3)(i).
(iv) The debt will bear interest, and may include penalties and
other administrative costs, in accordance with the debt collection
provisions in Chapters 29, 31, and 32 of Volume 5 and Chapters 18 and
19 of Volume 10 of the DoD Financial Management Regulation (DoD
7000.14-R). No interest will be charged if the recipient pays the
amount owed within 30 calendar days of the grants officer's decision.
Interest will be charged for the entire period from the date the
decision was mailed, if the recipient pays the amount owed after 30
calendar days.
(d) Follow-up. Depending upon the response from the recipient, the
grants officer shall proceed as follows:
(1) If the recipient pays the amount owed within 30 calendar days
to the grants officer, the grants officer shall forward the payment to
the responsible payment office.
[[Page 12175]]
(2) If within 30 calendar days the recipient elects to appeal the
grants officer's decision, further action to collect the debt is
deferred, pending the outcome of the appeal. If the final result of the
appeal is a determination that the recipient owes a debt to the Federal
Government, the grants officer shall send a demand letter to the
recipient and transfer responsibility for further debt collection to a
payment office, as described in paragraph (d)(3) of this section.
(3) If within 30 calendar days the recipient has neither paid the
amount due nor provided notice of intent to file an appeal of the
grants officer's decision, the grants officer shall send a demand
letter to the recipient, with a copy to the payment office that will be
responsible for collecting the delinquent debt. The payment office will
be responsible for any further debt collection activity, including
issuance of additional demand letters (see Chapter 19 of volume 10 of
the DoD Financial Management Regulation, DoD 7000.14-R). The grants
officer's demand letter shall:
(i) Describe the debt, including the amount, the name and address
of the official that determined the debt (e.g., the grants officer
under Sec. 22.815(d)), and a copy of that determination.
(ii) Notify the recipient that the debt is a delinquent debt that
bears interest from the date of the grants officer's decision, and that
penalties and other administrative costs may be assessed.
(iii) Identify the payment office that is responsible for the
collection of the debt, and notify the recipient that it may submit a
proposal to that payment office to defer collection, if immediate
payment is not practicable.
(e) Administrative offset. In carrying out the responsibility for
collecting delinquent debts, a disbursing officer may need to consult
grants officers, to determine whether administrative offset against
payments to a recipient owing a delinquent debt would interfere with
execution of projects being carried out under grants or cooperative
agreements. Disbursing officers may also ask grants officers whether it
is feasible to convert payment methods under grants or cooperative
agreements from advance payments to reimbursements, to facilitate use
of administrative offset. Grants officers therefore should be familiar
with guidelines for disbursing officers, in Chapter 19 of Volume 10 of
the Financial Management Regulation (DoD 7000.14-R), concerning
withholding and administrative offset to recover delinquent debts.
Sec. 22.825 Closeout audits.
(a) Purpose. This section establishes DoD policy for obtaining
audits at closeout of individual grants and cooperative agreements. It
thereby supplements the closeout procedures specified in:
(1) 32 CFR 32.71 and 32.72, for awards to institutions of higher
education and other nonprofit organizations.
(2) 32 CFR 33.50 and 33.51, for awards to State and local
governments.
(3) 32 CFR 34.61 and 34.62, for awards to for-profit entities.
(b) Policy. Grants officers shall use their judgment on a case-by-
case basis, in deciding whether to obtain an audit prior to closing out
a grant or cooperative agreement (i.e., there is no specific DoD
requirement to obtain an audit prior to doing so). Factors to be
considered include:
(1) The amount of the award.
(2) DoD's past experience with the recipient, including the
presence or lack of findings of material deficiencies in recent:
(i) Audits of individual awards; or
(ii) Systems-wide financial audits and audits of the compliance of
the recipient's systems with Federal requirements, under OMB Circular
A-133, where that Circular is applicable. (See Sec. 22.715(a)(1)).
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BILLING CODE 5000-04-C
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PART 23--[REMOVED]
4. Under the authority of 5 U.S.C. 301, Part 23 is removed.
PART 28--[AMENDED]
5. Part 28 is amended as follows:
a. The authority citation for part 28 continues to read as follows:
Authority: Sect. 319, Pub. L. 102-121 (31 U.S.C. 1352); 5 U.S.C.
301; 10 U.S.C. 113.
b. Section 28.500 is revised to read as follows:
Sec. 28.500 Secretary of Defense.
(a) Exemption authority. The Secretary of Defense may exempt, on a
case-by-case basis, a covered Federal action from the prohibition
whenever the Secretary determines, in writing, that such an exemption
is in the national interest. The Secretary shall transmit a copy of
each such written exemption to Congress immediately after making such a
determination.
(b) Policy. It is the policy of the Department of Defense that
exemptions under paragraph (a) of this section shall be requested only
rarely and in exceptional circumstances.
(c) Procedures. Each DoD Component that awards or administers
Federal grants, Federal cooperative agreements, or Federal loans
subject to this part shall establish procedures whereby:
(1) A grants officer wishing to request an exemption for a grant,
cooperative agreement, or loan shall transmit such request through
appropriate channels to: Director for Research, ODDR&E(R), 3080 Defense
Pentagon, Washington, DC. 20301-3080.
(2) Each such request shall explain why an exemption is in the
national interest, a justification that must be transmitted to Congress
for each exemption that is approved.
6. Part 32 is added to read as follows:
PART 32--ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH
INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT
ORGANIZATIONS
Subpart A--General
Sec.
62.1 Purpose.
32.2 Definitions
32.3 Effect on other issuances.
32.4 Deviations.
32.5 Subawards.
Subpart B--Pre-Award Requirements
32.10 Purpose.
32.11 Pre-award policies.
32.12 Forms for applying for Federal assistance.
32.13 Debarment and suspension.
32.14 Special award conditions.
32.15 Metric system of measurement.
32.16 Resource Conservation and Recovery Act (RCRA).
32.17 Certifications and representations.
Subpart C--Post-Award Requirements
Financial and Program Management
32.20 Purpose of financial and program management.
32.21 Standards for financial management systems.
32.22 Payment.
32.23 Cost sharing or matching.
32.24 Program income.
32.25 Revision of budget and program plans.
32.26 Non-Federal audits.
32.27 Allowable costs.
32.28 Period of availability of funds.
Property Standards
32.30 Purpose of property standards.
32.31 Insurance coverage.
32.32 Real property.
32.33 Federally-owned and exempt property.
32.34 Equipment.
32.35 Supplies.
32.36 Intangible property.
32.37 Property trust relationship.
Procurement Standards
32.40 Purpose of procurement standards.
32.41 Recipient responsibilities.
32.42 Codes of conduct.
32.43 Competition.
32.44 Procurement procedures.
32.45 Cost and price analysis.
32.46 Procurement records.
32.47 Contract administration.
32.48 Contract provisions.
32.49 Resource Conservation and Recovery Act.
Reports and Records
32.50 Purpose of reports and records.
32.51 Monitoring and reporting program performance.
32.52 Financial reporting.
32.53 Retention and access requirements for records.
Termination and Enforcement
32.60 Purpose of termination and enforcement.
32.61 Termination.
32.62 Enforcement.
Subpart D--After-the-Award Requirements
32.70 Purpose.
32.71 Closeout procedures.
32.72 Subsequent adjustments and continuing responsibilities.
32.73 Collection of amounts due.
Appendix A to Part 32--Contract Provisions
Authority: 5 U.S.C. 301 and 10 U.S.C. 113.
Subpart A--General
Sec. 32.1 Purpose.
(a) General. This part implements OMB Circular A-110 \1\ and
establishes uniform administrative requirements for awards and
subawards to institutions of higher education, hospitals, and other
non-governmental, non-profit organizations.
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\1\ For copies of the Circular, contact the Office of Management
and Budget, EOP Publications, 725 17th St. NW, New Executive Office
Building, Washington, DC 20503.
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(b) Relationship to other parts. This part is an integral part of
the DoD Grant and Agreement Regulations (DoDGARs), which comprise this
subchapter of the Code of Federal Regulations. This part includes
references to other parts of the DoDGARs that implement Governmentwide
guidance and provide uniform internal policies and procedures for DoD
Components that make or administer awards. Although parts 21 and 22 of
this subchapter do not impose any direct requirements on recipients,
and recipients therefore are not required to be familiar with those
parts, the information in those parts concerning internal policies and
procedures should be helpful to recipients of DoD awards.
(c) Prime awards. DoD Components shall apply the provisions of this
part to awards to recipients that are institutions of higher education,
hospitals, and other non-profit organizations. DoD Components shall not
impose additional or inconsistent requirements, except as provided in
Secs. 32.4 and 32.14, or unless specifically required by Federal
statute or executive order.
(d) Subawards. Any legal entity that receives an award from a DoD
Component shall apply the provisions of this part to subawards with
institutions of higher education, hospitals, and other non-profit
organizations. Thus, a governmental or for-profit organization, whose
prime award from a DoD Component is subject to 32 CFR part 33 or part
34, respectively, applies this part to subawards with institutions of
higher education, hospitals, or other non-profit organizations. It
should be noted that subawards are for the performance of substantive
work under awards, and are distinct from contracts for procuring goods
and services. It should be further noted that non-profit organizations
that implement Federal programs for the States are also subject to
State requirements.
Sec. 32.2 Definitions.
The following are definitions of terms used in this part. Grants
officers are cautioned that terms may be defined differently in this
part than they are in other parts of the DoD Grant and Agreement
Regulations, because this part implements OMB Circular A-110 and uses
definitions as stated in that
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Circular. In such cases, the definition given in this section applies
to the term as it is used in this part, and the definition given in
other parts applies to the term as it is used in those parts. For
example, suspension is defined in this section to mean temporary
withdrawal of Federal sponsorship under an award, but is defined at 32
CFR 25.105 to be an action taken to exclude a person from participating
in a grant, cooperative agreement, or other covered transaction.
Accrued expenditures. The charges incurred by the recipient during
a given period requiring the provision of funds for:
(1) Goods and other tangible property received;
(2) Services performed by employees, contractors, subrecipients,
and other payees; and
(3) Other amounts becoming owed under programs for which no current
services or performance is required.
Accrued income. 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.
(2) Amounts becoming owed to the recipient for which no current
services or performance is required by the recipient.
Acquisition cost of equipment. The net invoice price of the
equipment, including the cost of modifications, attachments,
accessories, or auxiliary apparatus necessary to make the property
usable for the purpose for which it was acquired. Other charges, such
as the cost of installation, transportation, taxes, duty or protective
in-transit insurance, shall be included or excluded from the unit
acquisition cost in accordance with the recipient's regular accounting
practices.
Advance. 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.
Award. 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 Federal
Government to an eligible recipient. The term does not include:
Technical assistance, which provides services instead of money; other
assistance in the form of loans, loan guarantees, interest subsidies,
or insurance; direct payments of any kind to individuals; and,
contracts which are required to be entered into and administered under
procurement laws and regulations.
Cash contributions. The recipient's cash outlay, including the
outlay of money contributed to the recipient by third parties.
Closeout. The process by which the grants officer administering an
award made by a DoD Component determines that all applicable
administrative actions and all required work of the award have been
completed by the recipient and DoD Component.
Contract. A procurement contract under an award or subaward, and a
procurement subcontract under a recipient's or subrecipient's contract.
Cost sharing or matching. That portion of project or program costs
not borne by the Federal Government.
Date of completion. 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 Federal sponsorship ends.
Disallowed costs. Those charges to an award that the grants officer
administering an award made by a DoD Component determines to be
unallowable, in accordance with the applicable Federal cost principles
or other terms and conditions contained in the award.
DoD Component. A Military Department, Defense Agency, DoD field
activity, or organization within the Office of the Secretary of Defense
that provides or administers an award to a recipient.
Equipment. Tangible nonexpendable personal property including
exempt property charged directly to the award having a useful life of
more than one year and an acquisition cost of $5,000 or more per unit.
However, consistent with recipient policy, lower limits may be
established.
Excess property. Property under the control of any DoD Component
that, as determined by the head thereof, is no longer required for its
needs or the discharge of its responsibilities.
Exempt property. Tangible personal property acquired in whole or in
part with Federal funds, where the DoD Component 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.
Federal funds authorized. The total amount of Federal funds
obligated by a DoD Component for use by the recipient. This amount may
include any authorized carryover of unobligated funds from prior
funding periods when permitted by agency regulations or agency
implementing instructions.
Federal share (of real property, equipment, or supplies). That
percentage of the property's acquisition costs and any improvement
expenditures paid with Federal funds.
Funding period. The period of time when Federal funding is
available for obligation by the recipient.
Intangible property and debt instruments. Property that includes,
but is not limited to, trademarks, copyrights, patents and patent
applications and such property as loans, notes and other debt
instruments, lease agreements, stock and other instruments of property
ownership, whether considered tangible or intangible.
Obligations. The amounts of orders placed, contracts and grants
awarded, services received and similar transactions during a given
period that require payment by the recipient during the same or a
future period.
Outlays or expenditures. 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.
Personal property. Property of any kind except real property. It
may be tangible, having physical existence, or intangible, having no
physical existence, such as copyrights, patents, or securities.
Prior approval. Written approval by an authorized official
evidencing prior consent.
Program income. Gross income earned by the recipient that is
directly generated by a supported activity or
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earned as a result of the award (see exclusions in Sec. 32.24(e) and
(h)). Program income includes, but is not limited to, income from fees
for services performed, the use or rental of real or personal property
acquired under federally-funded projects, the sale of commodities or
items fabricated under an award, license fees and royalties on patents
and copyrights, and interest on loans made with award funds. Interest
earned on advances of Federal funds is not program income. Except as
otherwise provided in program regulations or the terms and conditions
of the award, program income does not include the receipt of principal
on loans, rebates, credits, discounts, etc., or interest earned on any
of them.
Project costs. All allowable costs, as set forth in the applicable
Federal cost principles, incurred by a recipient and the value of the
contributions made by third parties in accomplishing the objectives of
the award during the project period.
Project period. The period established in the award document during
which Federal sponsorship begins and ends.
Property. Real property and personal property (equipment, supplies,
intangible property and debt instruments), unless stated otherwise.
Real property. Land, including land improvements, structures and
appurtenances thereto, but excluding movable machinery and equipment.
Recipient. An organization receiving financial assistance directly
from DoD Components 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 also includes consortia comprised of any combination of
universities, other nonprofit organizations, governmental
organizations, for-profit organizations, and other entities, to the
extent that the consortia are legally incorporated as nonprofit
organizations. The term does not include Government-owned contractor-
operated facilities or research centers providing continued support for
mission-oriented, large-scale programs that are Government-owned or
controlled, or are designated as federally-funded research and
development centers.
Research and development. All research activities, both basic and
applied, and all development activities that are supported at
universities, colleges, and other non-profit institutions. Research is
defined as a systematic study directed toward fuller scientific
knowledge or understanding of the subject studied. Development is the
systematic use of knowledge and understanding gained from research
directed toward the production of useful materials, devices, systems,
or methods, including design and development of prototypes and
processes. The term research also includes activities involving the
training of individuals in research techniques where such activities
utilize the same facilities as other research and development
activities and where such activities are not included in the
instruction function.
Small award. An award not exceeding the simplified acquisition
threshold fixed at 41 U.S.C. 403(11) (currently $100,000).
Subaward. An award of financial assistance in the form of money, or
property in lieu of money, made under an award by a recipient to an
eligible subrecipient or by a subrecipient to a lower tier
subrecipient. The term includes financial assistance when provided by
any legal agreement, even if the agreement is called a contract, but
does not include procurement of goods and services nor does it include
any form of assistance which is excluded from the definition of
``award'' in this section.
Subrecipient. The legal entity to which a subaward is made and
which is accountable to the recipient for the use of the funds
provided.
Supplies. All personal property excluding equipment, intangible
property, and debt instruments as defined in this section, and
inventions of a contractor conceived or first actually reduced to
practice in the performance of work under a funding agreement
(``subject inventions''), as defined in 37 CFR part 401, ``Rights to
Inventions Made by Nonprofit Organizations and Small Business Firms
Under Government Grants, Contracts, and Cooperative Agreements.''
Suspension. An action by a DoD Component that temporarily withdraws
Federal sponsorship under an award, pending corrective action by the
recipient or pending a decision to terminate the award by the DoD
Component. Suspension of an award is a separate action from suspension
of a participant under 32 CFR part 25.
Termination. The cancellation of an award, in whole or in part, at
any time prior to the date of completion.
Third party in-kind contributions. 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 the value of goods and services directly benefiting and
specifically identifiable to the project or program.
Unliquidated obligations. The amount of obligations incurred by the
recipient:
(1) That have not been paid, if financial reports are prepared on a
cash basis.
(2) For which an outlay has not been recorded, if reports are
prepared on an accrued expenditure basis.
Unobligated balance. The portion of the funds authorized by a DoD
Component that has not been obligated by the recipient and is
determined by deducting the cumulative obligations from the cumulative
funds authorized.
Unrecovered indirect cost. The difference between the amount
awarded and the amount which could have been awarded under the
recipient's approved negotiated indirect cost rate.
Working capital advance. A procedure whereby funds are advanced to
the recipient to cover its estimated disbursement needs for a given
initial period.
Sec. 32.3 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. 32.4.
Sec. 32.4 Deviations.
(a) Individual deviations. Individual deviations affecting only one
award may be approved by DoD Components in accordance with procedures
stated in 32 CFR 21.125(a) and (c).
(b) Small awards. DoD Components may apply less restrictive
requirements than the provisions of this part when awarding small
awards, except for those requirements which are statutory.
(c) Other class deviations. (1) For classes of awards other than
small awards, the Director of Defense Research and Engineering (DDR&E),
or his or her designee, may grant exceptions from the requirements of
this part:
(i) With the written concurrence of the Office of the Management
and Budget (OMB). The DDR&E, or his or her designee, shall provide
written notification to OMB of the Department of Defense's intention to
grant a class deviation; and
(ii) When exceptions are not prohibited by statute.
(2) DoD Components shall request approval for such deviations in
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accordance with 32 CFR 21.125(b) and (c). However, in the interest of
maximum uniformity, exceptions from the requirements of this part shall
be permitted only in unusual circumstances.
Sec. 32.5 Subawards.
Unless sections of this part specifically exclude subrecipients
from coverage, the provisions of this part shall be applied 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 32 CFR part 33. Subrecipients that are for-profit
organizations are subject to 32 CFR part 34.
Subpart B--Pre-Award Requirements
Sec. 32.10 Purpose.
Sections 32.11 through 32.17 prescribe application forms and
instructions and other pre-award matters.
Sec. 32.11 Pre-award policies.
(a) Use of grants, cooperative agreements, and contracts. (1) OMB
Circular A-110 states that:
(i) In each instance, the Federal awarding agency shall decide on
the appropriate award instrument (i.e., grant, cooperative agreement,
or contract).
(ii) The Federal Grant and Cooperative Agreement Act (31 U.S.C.
6301-6308) governs the use of grants, cooperative agreements, and
contracts. Under that Act:
(A) 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.
(B) Contracts shall be used when the principal purpose is
acquisition of property or services for the direct benefit or use of
the Federal Government.
(C) 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.''
(2) In selecting the appropriate award instruments, DoD Components'
grants officers shall comply with the DoD implementation of the Federal
Grant and Cooperative Agreement Act at 32 CFR 21.205(a) and 32 CFR part
22, subpart B.
(b) Public notice and priority setting. As a matter of
Governmentwide policy, Federal awarding agencies shall notify the
public of intended funding priorities for programs that use
discretionary awards, unless funding priorities are established by
Federal statute. For DoD Components, compliance with competition
policies and statutory requirements implemented in 32 CFR part 22,
subpart C, shall constitute compliance with this Governmentwide policy.
Sec. 32.12 Forms for applying for Federal assistance.
(a) DoD Components shall comply with the applicable report
clearance requirements of 5 CFR part 1320, ``Controlling Paperwork
Burdens on the Public,'' with regard to all forms used in place of or
as a supplement to the Standard Form 424 2 (SF-424) series.
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\2\ For copies of Standard Forms listed in this part, contact
regional grants administration offices of the Office of Naval
Research. Addresses for the offices are listed in the ``DoD
Directory of Contract Administration Services Components,'' DLAH
4105.4, which can be obtained from: Defense Logistics Agency,
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman
Rd., Suite 0119, Fort Belvoir, VA 22060-6220.
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(b) Applicants shall use the SF-424 series or those forms and
instructions prescribed by DoD Components.
(c) For Federal programs covered by E.O. 12372 (3 CFR, 1982 Comp.,
p. 197), ``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 DoD Component or the Catalog of Federal Domestic Assistance.
The SPOC shall advise the applicant whether the program for which
application is made has been selected by that State for review.
(d) DoD Components that do not use the SF-424 form should indicate
whether the application is subject to review by the State under E.O.
12372.
Sec. 32.13 Debarment and suspension.
DoD Components and recipients shall comply with the nonprocurement
debarment and suspension common rule at 32 CFR part 25. 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. 32.14 Special award conditions.
(a) DoD Components may impose additional requirements as needed,
over and above those provided in this part, if an applicant or
recipient:
(1) Has a history of poor performance;
(2) Is not financially stable;
(3) Has a management system that does not meet the standards
prescribed in this part;
(4) Has not conformed to the terms and conditions of a previous
award; or
(5) Is not otherwise responsible.
(b) Before imposing additional requirements, DoD Components shall
notify the applicant or recipient in writing as to:
(1) The nature of the additional requirements;
(2) The reason why the additional requirements are being imposed;
(3) The nature of the corrective action needed;
(4) The time allowed for completing the corrective actions; and
(5) The method for requesting reconsideration of the additional
requirements imposed.
(c) Any special conditions shall be promptly removed once the
conditions that prompted them have been corrected.
(d) Grants officers:
(1) Should coordinate the imposition and removal of special award
conditions with the cognizant grants administration office identified
in 32 CFR 22.710.
(2) Shall include in the award file the written notification to the
recipient, described in paragraph (b) of this section, and the
documentation required by 32 CFR 22.410(b).
Sec. 32.15 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, and for
Federal agencies' procurements, grants, and other business-related
activities. DoD grants officers shall comply with requirements
concerning the use of the metric system at 32 CFR 22.530.
Sec. 32.16 Resource Conservation and Recovery Act (RCRA).
Recipients' procurements shall comply with applicable requirements
of the Resource Conservation and Recovery Act (RCRA), as described at
Sec. 32.49.
Sec. 32.17 Certifications and representations.
(a) OMB Circular A-110 authorizes and encourages each Federal
agency, unless prohibited by statute or codified regulation, to allow
recipients to submit
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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. The Circular further
states that annual certifications and representations, when used, shall
be signed by responsible officials with the authority to ensure
recipients' compliance with the pertinent requirements.
(b) DoD grants officers shall comply with the provisions concerning
certifications and representations at 32 CFR 22.510. Those provisions
ease burdens on recipients to the extent possible, given current
statutory and regulatory impediments to obtaining all certifications on
an annual basis. The provisions thereby also comply with the intent of
OMB Circular A-110, to use less burdensome methods for obtaining
certifications and representations, as such methods become feasible.
Subpart C--Post-Award Requirements
Financial and Program Management
Sec. 32.20 Purpose of financial and program management.
Sections 32.21 through 32.28 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. 32.21 Standards for financial management systems.
(a) DoD Components shall require recipients to relate financial
data to performance data and develop unit cost information whenever
practical. For awards that support research, it should be noted that it
is generally not appropriate to develop unit cost information.
(b) Recipients' financial management systems shall provide for the
following.
(1) Accurate, current and complete disclosure of the financial
results of each federally-sponsored project or program in accordance
with the reporting requirements set forth in Sec. 32.52. If a DoD
Component requires reporting on an accrual basis from a recipient that
maintains its records on other than an accrual basis, the recipient
shall not be required to establish an accrual accounting system. These
recipients may develop such accrual data for 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 shall contain
information pertaining to Federal awards, authorizations, obligations,
unobligated balances, assets, outlays, income and interest.
(3) Effective control over and accountability for all funds,
property and other assets. Recipients shall adequately safeguard all
such assets and assure they are used solely for authorized purposes.
(4) Comparison of outlays with budget amounts for each award.
Whenever appropriate, financial information should be related to
performance and unit cost data. As discussed in paragraph (a) of this
section, unit cost data is generally not appropriate for awards that
support research.
(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 should 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 (see Sec. 32.27)
and the terms and conditions of the award.
(7) Accounting records including cost accounting records that are
supported by source documentation.
(c) Where the Federal Government guarantees or insures the
repayment of money borrowed by the recipient, the DoD Component, 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 DoD Component may require adequate fidelity bond coverage
where the recipient lacks sufficient coverage to protect the Federal
Government's interest.
(e) Where bonds are required in the situations described above, the
bonds shall be obtained from companies holding certificates of
authority as acceptable sureties, as prescribed in 31 CFR part 223,
``Surety Companies Doing Business with the United States.''
Sec. 32.22 Payment.
(a) Payment methods shall minimize the time elapsing between the
transfer of funds from the United States Treasury and the issuance or
redemption of checks, warrants, or payment by other means by the
recipients. Payment methods of State agencies or instrumentalities
shall be consistent with Treasury-State agreements under the Cash
Management Improvement Act (CMIA) (31 U.S.C. 3335 and 6503) or default
procedures in 31 CFR part 205.
(b) Recipients are to be paid in advance, provided they maintain or
demonstrate the willingness to maintain:
(1) Written procedures that minimize the time elapsing between the
transfer of funds and disbursement by the recipient; and
(2) Financial management systems that meet the standards for fund
control and accountability as established in Sec. 32.21. Cash advances
to a recipient organization shall be limited to the minimum amounts
needed and be timed to be in accordance with the actual, immediate cash
requirements of the recipient organization in carrying out the purpose
of the approved program or project. The timing and amount of cash
advances shall be as close as is administratively feasible to the
actual disbursements by the recipient organization for direct program
or project costs and the proportionate share of any allowable indirect
costs.
(c) Whenever possible, advances shall be consolidated to cover
anticipated cash needs for all awards made by the DoD Component 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 shall be authorized to submit requests for advances
and reimbursements at least monthly when electronic fund transfers are
not used.
(d) Requests for Treasury check advance payment shall be submitted
on SF-270,\3\ ``Request for Advance or Reimbursement,'' or other forms
as may be authorized by OMB. This form is not to be used when Treasury
check advance payments are made to the recipient automatically through
the use of a predetermined payment schedule or if inconsistent with DoD
procedures for electronic funds transfer.
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\3\ See footnote 2 to Sec. 32.12(a).
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(e) Reimbursement is the preferred method when the requirements in
paragraph (b) of this section cannot be met. DoD Components may also
use this method on any construction agreement,
[[Page 12193]]
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 responsible DoD
payment office generally makes payment within 30 calendar days after
receipt of the billing by the office designated to receive the billing,
unless the billing is improper (for further information about
timeframes for payments, see 32 CFR 22.810(c)(3)(ii)).
(2) Recipients shall 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 grants officer, in consultation with the program manager, has
determined that reimbursement is not feasible because the recipient
lacks sufficient working capital, the award may provide for cash on a
working capital advance basis. Under this procedure, the award shall
provide for advancing cash to the recipient to cover its estimated
disbursement needs for an initial period generally geared to the
awardee's disbursing cycle. Thereafter, the award shall provide for
reimbursing the recipient for its actual cash disbursements. The
working capital advance method of payment shall 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 shall disburse funds
available from repayments to and interest earned on a revolving fund,
program income, rebates, refunds, contract settlements, audit
recoveries and interest earned on such funds before requesting
additional cash payments.
(h) Unless otherwise required by statute, grants officers shall not
withhold payments for proper charges made by recipients at any time
during the project period unless:
(1) A recipient has failed to comply with the project objectives,
the terms and conditions of the award, or Federal reporting
requirements; or
(2) The recipient or subrecipient is delinquent in a debt to the
United States under OMB Circular A-129, ``Managing Federal Credit
Programs'' (see definitions of ``debt'' and ``delinquent debt,'' at 32
CFR 22.105). Under such conditions, the grants officer may, upon
reasonable notice, inform the recipient that payments shall not be made
for obligations incurred after a specified date until the conditions
are corrected or the indebtedness to the Federal Government is
liquidated (also see 32 CFR 22.420(b)(2) and 22.820).
(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, DoD Components shall not require separate depository accounts
for funds provided to a recipient or establish any eligibility
requirements for depositories for funds provided to a recipient.
However, recipients must be able to account for the receipt, obligation
and expenditure of funds.
(2) Advances of Federal funds shall be deposited and maintained in
insured accounts whenever possible.
(j) Consistent with the national goal of expanding the
opportunities for women-owned and minority-owned business enterprises,
recipients shall be encouraged to use women-owned and minority-owned
banks (a bank which is owned at least 50 percent by women or minority
group members).
(k) Recipients shall maintain advances of Federal funds in interest
bearing accounts, unless:
(1) The recipient receives less than $120,000 in Federal awards per
year;
(2) The best reasonably available interest bearing account would
not be expected to earn interest in excess of $250 per year on Federal
cash balances; or
(3) The depository would require an average or minimum balance so
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
(l)(1) Interest earned on Federal advances deposited in interest
bearing accounts shall be remitted annually to Department of Health and
Human Services, Payment Management System, PO Box 6021, Rockville, MD
20852.
(2) 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 FEDWIR Deposit System.
Electronic remittances should be in the format and should include any
data that are specified by the grants officer as being necessary to
facilitate direct deposit in HHS' account at the Department of the
Treasury.
(3) Recipients that do not have electronic remittance capability
should use a check.
(4) Interest amounts up to $250 per year may be retained by the
recipient for administrative expense.
(m) Except as noted elsewhere in this part, only the following
forms shall be authorized for the recipients in requesting advances and
reimbursements. DoD Components shall not require more than an original
and two copies of these forms.
(1) SF-270, Request for Advance or Reimbursement. Each DoD
Component shall adopt the SF-270 as a standard form for all
nonconstruction programs when electronic funds transfer or
predetermined advance methods are not used. DoD Components, however,
have the option of using this form for construction programs in lieu of
the SF-271,\4\ ``Outlay Report and Request for Reimbursement for
Construction Programs.''
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\4\ See footnote 2 to Sec. 32.12(a).
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(2) SF-271, Outlay Report and Request for Reimbursement for
Construction Programs. Each DoD Component shall adopt the SF-271 as the
standard form to be used for requesting reimbursement for construction
programs. However, a DoD Component may substitute the SF-270 when the
DoD Component determines that it provides adequate information to meet
Federal needs.
Sec. 32.23 Cost sharing or matching.
(a) All contributions, including cash and third party in-kind,
shall be accepted as part of the recipient's cost sharing or matching
when such contributions meet all of the following criteria:
(1) Are verifiable from the recipient's records.
(2) Are not included as contributions for any other federally-
assisted project or program.
(3) Are necessary and reasonable for proper and efficient
accomplishment of project or program objectives.
(4) Are allowable under the applicable cost principles.
(5) Are not paid by the Federal Government under another award,
except where authorized by Federal statute to be used for cost sharing
or matching.
(6) Are provided for in the approved budget when required by the
DoD Component.
(7) Conform to other provisions of this part, as applicable.
(b) Unrecovered indirect costs (see definition in Sec. 32.2) may be
included as part of cost sharing or matching.
(c) Values for recipient contributions of services and property
shall be established in accordance with the applicable cost principles.
If a DoD Component authorizes recipients to donate buildings or land
for construction/facilities acquisition projects or long-term use, the
value of
[[Page 12194]]
the donated property for cost sharing or matching shall be the lesser
of:
(1) The certified value of the remaining life of the property
recorded in the recipient's accounting records at the time of donation;
or
(2) The current fair market value. However, when there is
sufficient justification, the DoD Component 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. The DoD
Component may accept the use of any reasonable basis for determining
the fair market value of the property.
(d) Volunteer services furnished by professional and technical
personnel, consultants, and other skilled and unskilled labor may be
counted as cost sharing or matching if the service is an integral and
necessary part of an approved project or program. Rates for volunteer
services shall be consistent with those paid for similar work in the
recipient's organization. In those instances in which the required
skills are not found in the recipient organization, rates shall be
consistent with those paid for similar work in the labor market in
which the recipient competes for the kind of services involved. In
either case, paid fringe benefits that are reasonable, allowable, and
allocable may be included in the valuation.
(e) When an employer other than the recipient furnishes the
services of an employee, these services shall be valued at the
employee's regular rate of pay (plus an amount of fringe benefits that
are reasonable, allowable, and allocable, but exclusive of overhead
costs), provided these services are in the same skill for which the
employee is normally paid.
(f) Donated supplies may include such items as office supplies,
laboratory supplies or workshop and classroom supplies. Value assessed
to donated supplies included in the cost sharing or matching share
shall be reasonable and shall not exceed the fair market value of the
property at the time of the donation.
(g) The method used for determining cost sharing or matching for
donated equipment, buildings and land for which title passes to the
recipient may differ according to the purpose of the award, if the
purpose of the award is to:
(1) Assist the recipient in the acquisition of equipment, buildings
or land, the total value of the donated property may be claimed as cost
sharing or matching; or
(2) 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 DoD Component has approved the charges.
(h) The value of donated property shall be determined in accordance
with the usual accounting policies of the recipient, with the following
qualifications.
(1) The value of donated land and buildings shall not exceed its
fair market value at the time of donation to the recipient as
established by an independent appraiser (e.g., certified real property
appraiser or General Services Administration representative) and
certified by a responsible official of the recipient.
(2) The value of donated equipment shall not exceed the fair market
value of equipment of the same age and condition at the time of
donation.
(3) The value of donated space shall not exceed the fair rental
value of comparable space as established by an independent appraisal of
comparable space and facilities in a privately-owned building in the
same locality.
(4) The value of loaned equipment shall not exceed its fair rental
value.
(i) The following requirements pertain to the recipient's
supporting records for in-kind contributions from third parties:
(1) Volunteer services shall be documented and, to the extent
feasible, supported by the same methods used by the recipient for its
own employees.
(2) The basis for determining the valuation for personal service
and property shall be documented.
Sec. 32.24 Program income.
(a) DoD Components shall apply the standards set forth in this
section in requiring recipient organizations to account for program
income related to projects financed in whole or in part with Federal
funds.
(b) Except as provided in paragraph (h) of this section, program
income earned during the project period shall be retained by the
recipient and, in accordance with the terms and conditions of the
award, shall be used in one or more of the following ways:
(1) Added to funds committed to the project by the DoD Component
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 a program regulation or award 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 shall be
used in accordance with paragraph (b)(3) of this section.
(d) In the event that program regulations or the terms and
conditions of the award do not specify how program income is to be
used, paragraph (b)(3) of this section shall apply automatically to all
projects or programs except research. For awards that support research,
paragraph (b)(1) of this section shall apply automatically unless the
terms and conditions specify another alternative or the recipient is
subject to special award conditions, as indicated in Sec. 32.14.
(e) Unless program regulations or the terms and conditions of the
award provide otherwise, recipients shall have no obligation to the
Federal Government regarding program income earned after the end of the
project period.
(f) If authorized by program regulations or 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 shall be handled in
accordance with the requirements of the Property Standards (see
Secs. 32.30 through 32.37).
(h) Unless program regulations or the terms and condition of the
award provide otherwise, recipients shall have no obligation to the
Federal Government with respect to program income earned from license
fees and royalties for copyrighted material, patents, patent
applications, trademarks, and inventions produced under an award. Note
that the Patent and Trademark Amendments (35 U.S.C. chapter 18) apply
to inventions made under an experimental, developmental, or research
award.
Sec. 32.25 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
sum of the Federal and non-Federal shares, or only the Federal share,
depending upon DoD Component requirements. It shall be related to
performance for program evaluation purposes whenever appropriate.
(b) Recipients are required to report deviations from budget and
program plans, and request prior approvals for budget and program plan
revisions, in accordance with this section.
[[Page 12195]]
(c) For nonconstruction awards, recipients shall request prior
approvals from the cognizant grants officer for one or more of the
following program or budget related reasons.
(1) Change in the scope or the objective of the project or program
(even if there is no associated budget revision requiring prior written
approval).
(2) Change in a key person specified in the application or award
document.
(3) The absence for more than three months, or a 25 percent
reduction in time devoted to the project, by the approved project
director or principal investigator.
(4) The need for additional Federal funding.
(5) The transfer of amounts budgeted for indirect costs to absorb
increases in direct costs, or vice versa, if approval is required by
the DoD Component. DoD Components should require this prior approval
only in exceptional circumstances. The requirement in each such case
must be stated in the award document.
(6) The inclusion, unless waived by the DoD Component, of costs
that require prior approval in accordance with OMB Circular A-21,\5\
``Cost Principles for Institutions of Higher Education,'' OMB Circular
A-122,\6\ ``Cost Principles for Non-Profit Organizations,'' or Appendix
E to 45 CFR part 74, ``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. However, it should be noted that many of the prior
approvals in these cost principles are appropriately waived only after
consultation with the cognizant federal agency responsible for
negotiating the recipient's indirect costs.
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\5\ See footnote 1 to Sec. 32.1(a).
\6\ See footnote 1 to Sec. 32.1(a).
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(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.
(9) If required by the DoD Component, the transfer of funds among
direct cost categories that is described in paragraph (e) of this
section.
(d) (1) Except for requirements listed in paragraphs (c)(1) and
(c)(4) of this section, OMB Circular A-110 authorizes DoD Components,
at their option, to waive cost-related and administrative prior written
approvals required by this part and OMB Circulars A-21 and A-122 (but
see cautionary note at end of paragraph (c)(5) of this section).
(2) The two prior approvals listed in paragraphs (d)(2)(i) and (ii)
of this section are automatically waived unless the award document
states otherwise. DoD Components should override this automatic waiver
and require the prior approvals, especially for research awards, only
in exceptional circumstances. Absent an override in the award terms and
conditions, recipients need not obtain prior approvals before:
(i) Incurring pre-award costs 90 calendar days prior to award
(incurring pre-award costs more than 90 calendar days prior to award
would still require the prior approval of the DoD Component). All pre-
award costs are incurred at the recipient's risk (i.e., the DoD
Component is under no obligation to reimburse such costs if for any
reason the recipient does not receive an award or if the award is less
than anticipated and inadequate to cover such costs).
(ii) Carrying forward unobligated balances to subsequent funding
periods.
(3) Under certain conditions, a DoD Component may authorize a
recipient to initiate, without prior approval, a one-time, no-cost
extension (i.e., an extension in the expiration date of an award that
does not require additional Federal funds) for a period of up to twelve
months, as long as the no-cost extension does not involve a change in
the approved objectives or scope of the project. The conditions for
waiving this prior approval requirement are that the DoD Component
must:
(i) Judge that the recipient's subsequently initiating a one-time,
no-cost extension would not cause the DoD Component to fail to comply
with DoD funding policies (for further information on the location of
DoD funding policies, grants officers may refer to Appendix C to 32 CFR
part 22).
(ii) Require a recipient that wishes to initiate a one-time, no-
cost extension to so notify the office that made the award at least 10
calendar days before the original expiration date of the award.
(e) The DoD Component may, at its option, restrict the transfer of
funds among direct cost categories, functions and activities for awards
in which the Federal share of the project exceeds $100,000 and the
cumulative amount of such transfers exceeds or is expected to exceed 10
percent of the total budget as last approved by the DoD Component. As a
matter of DoD policy, requiring prior approvals for such transfers
generally is not appropriate for grants to support research. No DoD
Component shall 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.
(f) For construction awards, recipients shall request prior written
approval promptly from grants officers for budget revisions whenever:
(1) The revision results from changes in the scope or the objective
of the project or program;
(2) The need arises for additional Federal funds to complete the
project; or
(3) A revision is desired which involves specific costs for which
prior written approval requirements may be imposed consistent with
applicable OMB cost principles listed in Sec. 32.27.
(g) When a DoD Component makes an award that provides support for
both construction and nonconstruction work, the DoD Component may
require the recipient to request prior approval from the grants officer
before making any fund or budget transfers between the two types of
work supported.
(h) No other prior approval requirements for specific items may be
imposed unless a deviation has been approved, in accordance with the
deviation procedures in Sec. 32.4(c).
(i) For both construction and nonconstruction awards, DoD
Components shall require recipients to notify the grants officer in
writing promptly whenever the amount of Federal authorized funds is
expected to exceed the needs of the recipient for the project period by
more than $5000 or five percent of the Federal award, whichever is
greater. This notification shall not be required if an application for
additional funding is submitted for a continuation award.
(j) When requesting approval for budget revisions, recipients shall
use the budget forms that were used in the application unless the
grants officer indicates a letter of request suffices.
(k) Within 30 calendar days from the date of receipt of the request
for budget revisions, the grants officer shall review the request and
notify the recipient whether the budget revisions have been approved.
If the revision is still under consideration at the end of 30 calendar
days, the grants officer shall inform the recipient in writing of the
date when the recipient may expect the decision.
Sec. 32.26 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
[[Page 12196]]
Circular A-133,\7\ ``Audits of States, Local Governments, and Non-
Profit Organizations.''
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\7\ See footnote 1 to Sec. 32.1(a).
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(b) State and local governments that are subrecipients 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) Hospitals that are subrecipients and are not covered by the
audit provisions of revised OMB Circular A-133 shall be subject to the
audit requirements specified in award terms and conditions.
(d) For-profit organizations that are subrecipients shall be
subject to the audit requirements specified in 32 CFR 34.16.
Sec. 32.27 Allowable costs.
(a) General. For each kind of recipient or subrecipient of a cost-
type assistance award, or each contractor receiving a. cost-type
contract under an assistance award, there is a set of Federal
principles for determining allowable costs. Allowability of costs shall
be determined in accordance with the cost principles applicable to the
entity incurring the costs.
(b) Governmental organizations. Allowability of costs incurred by
State, local or federally-recognized Indian tribal governments that may
be subrecipients or contractors under awards subject to this part is
determined in accordance with the provisions of OMB Circular A-87,\8\
``Cost Principles for State and Local Governments.''
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\8\ See footnote 1 to Sec. 32.1(a).
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(c) Non-profit organizations. The allowability of costs incurred by
non-profit organizations that may be recipients or subrecipients of
awards subject to this part, or contractors under such awards, is
determined in accordance with the provisions of OMB Circular A-122,
``Cost Principles for Non-Profit Organizations.''
(d) Higher educational institutions. The allowability of costs
incurred by institutions of higher education that may be recipients,
subrecipients, or contractors is determined in accordance with the
provisions of OMB Circular A-21, ``Cost Principles for Educational
Institutions.''
(e) Hospitals. The allowability of costs incurred by hospitals that
are recipients, subrecipients, or contractors is determined in
accordance with the provisions of Appendix E to 45 CFR part 74,
``Principles for Determining Costs Applicable to Research and
Development Under Grants and Contracts with Hospitals.''
(f) For-profit organizations. The allowability of costs incurred by
subrecipients or contractors that are either for-profit organizations
or 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; however, the grants officer or the
award terms and conditions may in rare cases authorize a determination
of allowable costs that are in accordance with uniform cost accounting
standards and comply with cost principles acceptable to the Department
of Defense.
Sec. 32.28 Period of availability of funds.
Where a funding period is specified, a recipient may charge to the
award only allowable costs resulting from obligations incurred during
the funding period and any pre-award costs (see Sec. 32.25(d)(2)(i))
authorized by the DoD Component.
Property Standards
Sec. 32.30 Purpose of property standards.
Sections 32.31 through 32.37 set forth uniform standards governing
management and disposition of property furnished by the Federal
Government and property whose cost was charged to a project supported
by a Federal award. DoD Components shall require recipients to observe
these standards under awards and shall 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. 32.31 through 32.37.
Sec. 32.31 Insurance coverage.
Recipients shall, at a minimum, provide the equivalent insurance
coverage for real property and equipment acquired with Federal funds as
provided to property owned by the recipient. Federally-owned property
need not be insured unless required by the terms and conditions of the
award.
Sec. 32.32 Real property.
Each DoD Component that makes awards under which real property is
acquired in whole or in part with Federal funds shall prescribe
requirements for recipients concerning the use and disposition of such
property. Unless otherwise provided by statute, such requirements, at a
minimum, shall contain the following:
(a) Title to real property shall vest in the recipient subject to
the condition that the recipient shall use the real property for the
authorized purpose of the project as long as it is needed and shall not
encumber the property without approval of the DoD Component.
(b) The recipient shall obtain written approval by the grants
officer for the use of real property in other federally sponsored
projects when the recipient determines that the property is no longer
needed for the purpose of the original project. Use in other projects
shall be limited to those under federally sponsored projects (i.e.,
awards) or programs that have purposes consistent with those authorized
for support by the DoD Component.
(c) When the real property is no longer needed as provided in
paragraphs (a) and (b) of this section, the recipient shall request
disposition instructions from the DoD Component or its successor
Federal agency. The responsible Federal agency shall 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 DoD Component and pay the Federal Government
for that percentage of the current fair market value of the property
attributable to the Federal participation in the project (after
deducting actual and reasonable selling and fix-up expenses, if any,
from the sales proceeds). When the recipient is authorized or required
to sell the property, proper sales procedures shall be established that
provide for competition to the extent practicable and result in the
highest possible return.
(3) The recipient may be directed to transfer title to the property
to the Federal Government or to an eligible third party provided that,
in such cases, the recipient shall be entitled to compensation for its
attributable percentage of the current fair market value of the
property.
Sec. 32.33 Federally-owned and exempt property.
(a) Federally-owned property. (1) Title to federally-owned property
remains vested in the Federal Government. Recipients shall submit
annually an inventory listing of federally-owned property in their
custody to the DoD Component that made the award. Upon completion of
the award or when the property is no longer needed, the recipient shall
report the property to the
[[Page 12197]]
DoD Component for further Federal agency utilization.
(2) If the DoD Component that made the award has no further need
for the property, it shall be declared excess and either:
(i) Reported to the General Services Administration, in accordance
with the Federal Property and Administrative Services Act of 1949 (40
U.S.C. 483(b)(2)), as implemented by General Services Administration
regulations at 41 CFR 101-47.202; or
(ii) Disposed of by alternative methods pursuant to other specific
statutory authority. For example, DoD Components are authorized by the
Federal Technology Transfer Act (15 U.S.C. 3710(i)), to donate research
equipment to educational and non-profit organizations for the conduct
of technical and scientific education and research activities--
donations under this Act shall be in accordance with the DoD
implementation of E.O. 12999 (3 CFR, 1996 Comp., p. 180), ``Educational
Technology: Ensuring Opportunity for All Children in the Next
Century,'' as applicable. Appropriate instructions shall be issued to
the recipient by the DoD Component.
(b) Exempt property. (1) When statutory authority exists, a DoD
Component may vest title to property acquired with Federal funds in the
recipient without further obligation to the Federal Government and
under conditions the DoD Component considers appropriate. For example,
under 31 U.S.C. 6306, DoD Components may so vest title to tangible
personal property under a grant or cooperative agreement for basic or
applied research in a nonprofit institution of higher education or a
nonprofit organization whose primary purpose is conducting scientific
research. Such property is ``exempt property.''
(2) As a matter of policy, DoD Components shall make maximum use of
the authority of 31 U.S.C. 6306 to vest title to exempt property in
institutions of higher education, without further obligation to the
Government, to enhance the university infrastructure for future
performance of defense research and related, science and engineering
education.
(3) DoD Components may establish conditions, in regulation or in
award terms and conditions, for vesting title to exempt property.
Should a DoD Component not establish conditions, title to exempt
property upon acquisition shall vest in the recipient without further
obligation to the Federal Government.
Sec. 32.34 Equipment.
(a) Title to equipment acquired by a recipient with Federal funds
shall vest in the recipient, subject to conditions of this section.
(b) The recipient shall not use equipment acquired with Federal
funds to provide services to non-Federal outside organizations for a
fee that is less than private companies charge for equivalent services,
unless specifically authorized by Federal statute, for as long as the
Federal Government retains an interest in the equipment.
(c) The recipient shall use the equipment in the project or program
for which it was acquired as long as needed, whether or not the project
or program continues to be supported by Federal funds and shall not
encumber the property without approval of the DoD Component that made
the award. When no longer needed for the original project or program,
the recipient shall use the equipment in connection with its other
federally-sponsored activities, in the following order of priority:
(1) First, activities sponsored by the DoD Component that funded
the original project.
(2) Second, activities sponsored by other DoD Components.
(3) Then, activities sponsored by other Federal agencies.
(d) During the time that equipment is used on the project or
program for which it was acquired, the recipient shall make it
available for use on other projects or programs if such other use will
not interfere with the work on the project or program for which the
equipment was originally acquired. First preference for such other use
shall be given to other projects or programs sponsored by the DoD
Component that financed the equipment; second preference shall be given
to projects or programs sponsored by other DoD Components; and third
preference shall be given to projects or programs sponsored by other
Federal agencies. If the property is owned by the Federal Government,
use on other activities not sponsored by the Federal Government shall
be permissible if authorized by the DoD Component that financed the
property. User charges shall be treated as program income.
(e) When acquiring replacement equipment, the recipient may use the
equipment to be replaced as trade-in or sell the equipment and use the
proceeds to offset the costs of the replacement equipment subject to
the approval of the DoD Component that financed the equipment.
(f) The recipient's property management standards for equipment
acquired with Federal funds and federally-owned property shall include
all of the following:
(1) Records for equipment and federally-owned property shall be
maintained accurately and shall include the following information:
(i) A description of the equipment or federally-owned property.
(ii) Manufacturer's serial number, model number, Federal stock
number, national stock number, or other identification number.
(iii) Source of the equipment or federally-owned property,
including the award number.
(iv) Whether title vests in the recipient or the Federal
Government.
(v) Acquisition date (or date received, if the property 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
property furnished by the Federal Government).
(vii) Location and condition of the equipment or federally-owned
property 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 DoD Component that made the award for
its share.
(2) Property owned by the Federal Government shall be identified to
indicate Federal ownership.
(3) A physical inventory of equipment and federally-owned property
shall be taken and the results reconciled with the equipment records at
least once every two years. Any differences between quantities
determined by the physical inspection and those shown in the accounting
records shall be investigated to determine the causes of the
difference. The recipient shall, in connection with the inventory,
verify the existence, current utilization, and continued need for the
equipment or federally-owned property.
(4) A control system shall be in effect to insure adequate
safeguards to prevent loss, damage, or theft of the equipment or
federally-owned property. Any loss, damage, or theft of equipment or
federally-owned property shall be investigated and fully documented; if
the property was owned by the Federal Government, the recipient shall
promptly notify the DoD Component.
(5) Adequate maintenance procedures shall be implemented to keep
the equipment or federally-owned property in good condition.
[[Page 12198]]
(6) Where the recipient is authorized or required to sell the
equipment, proper sales procedures shall be established which provide
for competition to the extent practicable and result in the highest
possible return.
(g) When the recipient no longer needs the equipment, the equipment
may be used for other activities in accordance with the following
standards.
(1) 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 DoD Component that originally
made the award or its successor. The amount of compensation shall be
computed by applying the percentage of Federal participation in the
cost of the original project or program to the current fair market
value of the equipment.
(2) If the recipient has no need for the equipment, the recipient
shall request disposition instructions from the DoD Component. The DoD
Component shall issue instructions to the recipient no later than 120
calendar days after the recipient's request and the following
procedures shall govern:
(i) The grants officer, in consultation with the program manager,
shall judge whether the age and nature of the equipment warrant a
screening procedure to determine whether the equipment is useful to a
DoD Component or other Federal agency. If a screening procedure is
warranted:
(A) The DoD Component shall determine whether the equipment can be
used to meet DoD requirements.
(B) If no DoD requirement exists, the availability of the equipment
shall be reported to the General Services Administration by the DoD
Component to determine whether a requirement for the equipment exists
in other Federal agencies.
(ii) If so instructed or if disposition instructions are not issued
within 120 calendar days after the recipient's request, the recipient
shall sell the equipment and reimburse the DoD Component that made the
award an amount computed by applying to the sales proceeds the
percentage of Federal participation in the cost of the original project
or program. However, the recipient shall be permitted to deduct and
retain from the Federal share $500 or ten percent of the proceeds,
whichever is less, for the recipient's selling and handling expenses.
(iii) If the recipient is instructed to ship the equipment
elsewhere, the recipient shall be reimbursed by the Federal Government
by an amount which is computed by applying the percentage of the
recipient's participation in the cost of the original project or
program to the current fair market value of the equipment, plus any
reasonable shipping or interim storage costs incurred.
(iv) If the recipient is instructed to otherwise dispose of the
equipment, the recipient shall be reimbursed by the DoD Component that
made the award for such costs incurred in its disposition.
(h) The DoD Component may reserve the right to transfer the title
to the Federal Government or to a third party named by the Federal
Government when such third party is otherwise eligible under existing
statutes. Such transfer shall be subject to the following standards.
(1) The equipment shall be appropriately identified in the award or
otherwise made known to the recipient in writing. For exempt property,
in accordance with Sec. 32.33(b)(3), note that this identification must
occur by the time of award, or title to the property vests in the
recipient without further obligation to the Government.
(2) The DoD Component shall issue disposition instructions within
120 calendar days after receipt of a final inventory. The final
inventory shall list all equipment acquired with award funds and
federally-owned property. If the DoD Component fails to issue
disposition instructions for equipment within the 120 calendar day
period, the recipient shall apply the standards of paragraph (g) of
this section.
(3) When the DoD Component exercises its right to take title, the
equipment shall be subject to the provisions for federally-owned
property.
Sec. 32.35 Supplies.
(a) Title to supplies shall vest in the recipient upon acquisition.
If there is a residual inventory of unused supplies exceeding $5,000 in
total aggregate value upon termination or completion of the project or
program and the supplies are not needed for any other federally-
sponsored project or program, the recipient shall retain the supplies
for use on non-Federal sponsored activities or sell them, but shall, in
either case, compensate the Federal Government for its share. The
amount of compensation shall be computed in the same manner as for
equipment.
(b) The recipient shall not use supplies acquired with Federal
funds to provide services to non-Federal outside organizations for a
fee that is less than private companies charge for equivalent services,
unless specifically authorized by Federal statute as long as the
Federal Government retains an interest in the supplies.
Sec. 32.36 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. DoD Components reserve 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 Governmentwide regulations issued by
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions
Made by Nonprofit Organizations and Small Business Firms Under
Government Grants, Contracts and Cooperative Agreements.''
(c) Unless waived by the DoD Component making the award, the
Federal Government has the right to:
(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 (rather than developed or produced under the
award or subaward) vests upon acquisition in the recipient. The
recipient shall use that property for the originally-authorized
purpose, and the recipient shall not encumber the property without
approval of the DoD Component that made the award. When no longer
needed for the originally authorized purpose, disposition of the
intangible property shall occur in accordance with the provisions of
Sec. 32.34(g).
Sec. 32.37 Property trust relationship.
Real property, equipment, intangible property and debt instruments
that are acquired or improved with Federal funds shall be held in trust
by the recipient as trustee for the beneficiaries of the project or
program under which the property was acquired or improved. DoD
Components may require recipients 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. 32.40 Purpose of procurement standards.
Sections 32.41 through 32.48 set forth standards for use by
recipients in
[[Page 12199]]
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.
Sec. 32.41 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 DoD Component that made the award, 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. 32.42 Codes of conduct.
The recipient shall maintain written standards of conduct governing
the performance of its employees engaged in the award and
administration of contracts. No employee, officer, or agent shall
participate in the selection, award, or administration of a contract
supported by Federal funds if a real or apparent conflict of interest
would be involved. Such a conflict would arise when the employee,
officer, or agent, any member of his or her immediate family, his or
her partner, or an organization which employs or is about to employ any
of the parties indicated herein, has a financial or other interest in
the firm selected for an award. The officers, employees, and agents of
the recipient shall neither solicit nor accept gratuities, favors, or
anything of monetary value from contractors, or parties to
subagreements. However, recipients may set standards for situations in
which the financial interest is not substantial or the gift is an
unsolicited item of nominal value. The standards of conduct shall
provide for disciplinary actions to be applied for violations of such
standards by officers, employees, or agents of the recipient.
Sec. 32.43 Competition.
All procurement transactions shall be conducted in a manner to
provide, to the maximum extent practical, open and free competition.
The recipient shall be alert to organizational conflicts of interest as
well as noncompetitive practices among contractors that may restrict or
eliminate competition or otherwise restrain trade. In order to ensure
objective contractor performance and eliminate unfair competitive
advantage, contractors that develop or draft specifications,
requirements, statements of work, invitations for bids and/or requests
for proposals shall be excluded from competing for such procurements.
Awards shall be made to the bidder or offeror whose bid or offer is
responsive to the solicitation and is most advantageous to the
recipient, price, quality and other factors considered. Solicitations
shall clearly set forth all requirements that the bidder or offeror
shall fulfill in order for the bid or offer to be evaluated by the
recipient. Any and all bids or offers may be rejected when it is in the
recipient's interest to do so.
Sec. 32.44 Procurement procedures.
(a) All recipients shall establish written procurement procedures.
These procedures shall provide, at a minimum, that:
(1) Recipients avoid purchasing unnecessary items;
(2) Where appropriate, an analysis is made of lease and purchase
alternatives to determine which would be the most economical and
practical procurement; and
(3) Solicitations for goods and services provide for all of the
following:
(i) A clear and accurate description of the technical requirements
for the material, product or service to be procured. In competitive
procurements, such a description shall not contain features which
unduly restrict competition.
(ii) Requirements which the bidder/offeror must fulfill and all
other factors to be used in evaluating bids or proposals.
(iii) A description, whenever practicable, of technical
requirements in terms of functions to be performed or performance
required, including the range of acceptable characteristics or minimum
acceptable standards.
(iv) The specific features of ``brand name or equal'' descriptions
that bidders are required to meet when such items are included in the
solicitation.
(v) The acceptance, to the extent practicable and economically
feasible, of products and services dimensioned in the metric system of
measurement.
(vi) Preference, to the extent practicable and economically
feasible, for products and services that conserve natural resources and
protect the environment and are energy efficient.
(b) Positive efforts shall be made by recipients to utilize small
businesses, minority-owned firms, and women's business enterprises,
whenever possible. Recipients of Federal awards shall take all of the
following steps to further this goal:
(1) Ensure that small businesses, minority-owned firms, and women's
business enterprises are used to the fullest extent practicable.
(2) Make information on forthcoming opportunities available and
arrange time frames for purchases and contracts to encourage and
facilitate participation by small businesses, minority-owned firms, and
women's business enterprises.
(3) Consider in the contract process whether firms competing for
larger contracts intend to subcontract with small businesses, minority-
owned firms, and women's business enterprises.
(4) Encourage contracting with consortiums of small businesses,
minority-owned firms and women's business enterprises when a contract
is too large for one of these firms to handle individually.
(5) Use the services and assistance, as appropriate, of such
organizations as the Small Business Administration and the Department
of Commerce's Minority Business Development Agency in the solicitation
and utilization of small businesses, minority-owned firms and women's
business enterprises.
(c) The type of procuring instruments used (e.g., fixed price
contracts, cost reimbursable contracts, purchase orders, and incentive
contracts) shall be determined by the recipient but shall be
appropriate for the particular procurement and for promoting the best
interest of the program or project involved. The ``cost-plus-a-
percentage-of-cost'' or ``percentage of construction cost'' methods of
contracting shall not be used.
(d) Contracts shall be made only with responsible contractors who
possess the potential ability to perform successfully under the terms
and conditions of the proposed procurement. Consideration shall be
given to such matters as contractor integrity, record of past
performance, financial and technical resources or accessibility to
other necessary resources. In certain circumstances, contracts with
certain parties are restricted by the DoD implementation, in 32 CFR
part 25, of E.O.s 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR,
1989 Comp., p. 235), ``Debarment and Suspension.''
(e) Recipients shall, on request, make available for the DoD
Component's pre-award review, procurement documents such as request for
proposals or invitations for bids, independent cost
[[Page 12200]]
estimates, etc., when any of the following conditions apply:
(1) A recipient's procurement procedures or operation fails to
comply with the procurement standards in this part.
(2) The procurement is expected to exceed the simplified
acquisition threshold fixed at 41 U.S.C. 403 (11) (currently $100,000)
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 simplified
acquisition threshold, specifies a ``brand name'' product.
(4) The proposed award over the simplified acquisition 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 simplified acquisition threshold.
Sec. 32.45 Cost and price analysis.
Some form of cost or price analysis shall be made and documented in
the procurement files in connection with every procurement action.
Price analysis may be accomplished in various ways, including the
comparison of price quotations submitted, market prices and similar
indicia, together with discounts. Cost analysis is the review and
evaluation of each element of cost to determine reasonableness,
allocability and allowability.
Sec. 32.46 Procurement records.
Procurement records and files for purchases in excess of the
simplified acquisition threshold shall include the following at a
minimum:
(a) Basis for contractor selection;
(b) Justification for lack of competition when competitive bids or
offers are not obtained; and
(c) Basis for award cost or price.
Sec. 32.47 Contract administration.
A system for contract administration shall be maintained to ensure
contractor conformance with the terms, conditions and specifications of
the contract and to ensure adequate and timely follow up of all
purchases. Recipients shall evaluate contractor performance and
document, as appropriate, whether contractors have met the terms,
conditions and specifications of the contract.
Sec. 32.48 Contract provisions.
The recipient shall include, in addition to provisions to define a
sound and complete agreement, the following provisions in all
contracts. The following provisions shall also be applied to
subcontracts:
(a) Contracts in excess of the simplified acquisition threshold
shall contain contractual provisions or conditions that allow for
administrative, contractual, or legal remedies in instances in which a
contractor violates or breaches the contract terms, and provide for
such remedial actions as may be appropriate.
(b) All contracts in excess of the simplified acquisition threshold
shall contain suitable provisions for termination by the recipient,
including the manner by which termination shall be effected and the
basis for settlement. In addition, such contracts shall describe
conditions under which the contract may be terminated for default as
well as conditions where the contract may be terminated because of
circumstances beyond the control of the contractor.
(c) Except as otherwise required by statute, an award that requires
the contracting (or subcontracting) for construction or facility
improvements shall provide for the recipient to follow its own
requirements relating to bid guarantees, performance bonds, and payment
bonds unless the construction contract or subcontract exceeds $100,000.
For those contracts or subcontracts exceeding $100,000, the DoD
Component may accept the bonding policy and requirements of the
recipient, provided the grants officer has made a determination that
the Federal Government's interest is adequately protected. If such a
determination has not been made, the minimum requirements shall be as
follows:
(1) A bid guarantee from each bidder equivalent to five percent of
the bid price. The ``bid guarantee'' shall consist of a firm commitment
such as a bid bond, certified check, or other negotiable instrument
accompanying a bid as assurance that the bidder shall, upon acceptance
of 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 in
Secs. 32.40 through 32.49, the bonds shall be obtained from companies
holding certificates of authority as acceptable sureties pursuant to 31
CFR part 223, ``Surety Companies Doing Business with the United
States.''
(d) All negotiated contracts (except those for less than the
simplified acquisition threshold) awarded by recipients shall include a
provision to the effect that the recipient, the Department of Defense,
the Comptroller General of the United States, or any of their duly
authorized representatives, shall have access to any books, documents,
papers and records of the contractor which are directly pertinent to a
specific program for the purpose of making audits, examinations,
excerpts and transcriptions.
(e) All contracts, including those for amounts less than the
simplified acquisition threshold, by recipients and their contractors
shall contain the procurement provisions of Appendix A to this part, as
applicable.
Sec. 32.49 Resource Conservation and Recovery Act.
Under the Resource Conservation and Recovery Act (RCRA) (section
6002, Pub. L. 94-580, 42 U.S.C. 6962), any State agency or agency of a
political subdivision of a State which is using appropriated Federal
funds must comply with section 6002. 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.
Reports and Records
Sec. 32.50 Purpose of reports and records.
Sections 32.51 through 32.53 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. 32.51 Monitoring and reporting program performance.
(a) Recipients are responsible for managing and monitoring each
project, program, subaward, function or activity
[[Page 12201]]
supported by the award. Recipients shall monitor subawards to ensure
subrecipients have met the audit requirements as delineated in
Sec. 32.26.
(b) The award terms and conditions shall prescribe the frequency
with which the performance reports shall be submitted. Except as
provided in paragraph (f) of this section, performance reports shall
not be required more frequently than quarterly or less frequently than
annually. Annual reports shall be due 90 calendar days after the award
year; quarterly or semi-annual reports shall be due 30 calendar days
after the reporting period. DoD Components may require annual reports
before the anniversary dates of multiple year awards in lieu of these
requirements. The final performance reports are due 90 calendar days
after the expiration or termination of the award.
(c) If inappropriate, a final technical or performance report shall
not be required after completion of the project.
(d) When required, performance reports shall generally contain, for
each award, brief information on each of the following:
(1) A comparison of actual accomplishments with the goals and
objectives established for the period, the findings of the
investigator, or both. Whenever appropriate and the output of programs
or projects can be readily quantified, such quantitative data should be
related to cost data for computation of unit costs. However, unit costs
are generally inappropriate for research (see Sec. 32.21 (a) and
(b)(4)).
(2) Reasons why established goals were not met, if appropriate.
(3) Other pertinent information including, when appropriate,
analysis and explanation of cost overruns or high unit costs.
(e) Recipients shall not be required to submit more than the
original and two copies of performance reports.
(f) Recipients shall immediately notify the grants officer of
developments that have a significant impact on the award-supported
activities. Also, notification shall be given in the case of problems,
delays, or adverse conditions which materially impair the ability to
meet the objectives of the award. This notification shall include a
statement of the action taken or contemplated, and any assistance
needed to resolve the situation.
(g) DoD Components' representatives may make site visits, as
needed.
(h) DoD Components shall comply with applicable clearance
requirements of 5 CFR part 1320 when requesting performance data from
recipients.
Sec. 32.52 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 \9\ or SF-269A,\10\ Financial Status Report. (i) DoD
Components shall require recipients to use the SF-269 or SF-269A to
report the status of funds for all nonconstruction projects or
programs. A DoD Component may, however, have the option of not
requiring the SF-269 or SF-269A when the SF-270, Request for Advance or
Reimbursement, or SF-272,\11\ Report of Federal Cash Transactions, is
determined to provide adequate information to meet agency needs, except
that a final SF-269 or SF-269A shall be required at the completion of
the project when the SF-270 is used only for advances.
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\9\ See footnote 2 to Sec. 32.12(a).
\10\ See footnote 2 to Sec. 32.12(a).
\11\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------
(ii) The DoD Component shall prescribe whether the report shall be
on a cash or accrual basis. If the award requires accrual information
and the recipient's accounting records are not normally kept on the
accrual basis, the recipient shall not be required to convert its
accounting system, but shall develop such accrual information through
best estimates based on an analysis of the documentation on hand.
(iii) The DoD Component shall determine the frequency of the
Financial Status Report for each project or program, considering the
size and complexity of the particular project or program. However, the
report shall not be required more frequently than quarterly or less
frequently than annually. A final report shall be required at the
completion of the award.
(iv) The DoD Component shall require recipients to submit the SF-
269 or SF-269A (an original and no more than two copies) no later than
30 calendar days after the end of each specified reporting period for
quarterly and semi-annual reports, and 90 calendar days for annual and
final reports. Extensions of reporting due dates may be approved by the
grants officer upon request of the recipient.
(2) SF-272, Report of Federal Cash Transactions. (i) When funds are
advanced to recipients the DoD Component shall require each recipient
to submit the SF-272 and, when necessary, its continuation sheet, SF-
272a.\12\ The grants officer shall use this report to monitor cash
advanced to recipients and to obtain disbursement information for each
award to the recipients.
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\12\ See footnote 2 to Sec. 32.12(a).
---------------------------------------------------------------------------
(ii) DoD Components may require forecasts of Federal cash
requirements in the ``Remarks'' section of the report.
(iii) When practical and deemed necessary, DoD Components may
require recipients to report in the ``Remarks'' section the amount of
cash advances received in excess of three working days. Recipients
shall provide short narrative explanations of actions taken to reduce
the excess balances.
(iv) Recipients shall be required to submit not more than the
original and two copies of the SF-272 15 calendar days following the
end of each quarter. DoD Components may require a monthly report from
those recipients receiving advances totaling $1 million or more per
year.
(v) DoD Components may waive the requirement for submission of the
SF-272 for any one of the following reasons:
(A) When monthly advances do not exceed $25,000 per recipient,
provided that such advances are monitored through other forms contained
in this section;
(B) If, in the grants officer's opinion, the recipient's accounting
controls are adequate to minimize excessive Federal advances; or
(C) When electronic payment mechanisms or SF-270 forms provide
adequate data.
(b) When the DoD Component needs additional information or more
frequent reports, the following shall be observed:
(1) When additional information is needed to comply with
legislative requirements, grants officers shall issue instructions to
require recipients to submit such information under the ``Remarks''
section of the reports.
(2) When a grants officer, after consultation with the Federal
agency assigned cognizance for a recipient's audit and audit
resolution, determines that the recipient's accounting system does not
meet the standards in Sec. 32.21, additional pertinent information to
further monitor awards may be obtained upon written notice to the
recipient until such time as the system is brought up to standard. The
grants officer, in obtaining this information, shall comply with
applicable report clearance requirements of 5 CFR part 1320.
(3) Grants officers are encouraged to shade out any line item on
any report if not necessary.
(4) DoD Components are encouraged to accept the identical
information from the recipients in machine readable format or computer
printouts or electronic outputs in lieu of prescribed formats.
[[Page 12202]]
(5) DoD Components may provide computer or electronic outputs to
recipients when it expedites or contributes to the accuracy of
reporting.
Sec. 32.53 Retention and access requirements for records.
(a) This section sets forth requirements for record retention and
access to records for awards to recipients. DoD Components shall not
impose any other record retention or access requirements upon
recipients.
(b) Financial records, supporting documents, statistical records,
and all other records pertinent to an award shall be retained for a
period of three years from the date of submission of the final
expenditure report. The only exceptions are the following:
(1) If any litigation, claim, or audit is started before the
expiration of the 3-year period, the records shall be retained until
all litigation, claims or audit findings involving the records have
been resolved and final action taken.
(2) Records for real property and equipment acquired with Federal
funds shall be retained for 3 years after final disposition.
(3) When records are transferred to or maintained by the DoD
Component that made the award, the 3-year retention requirement is not
applicable to the recipient.
(4) Indirect cost rate proposals, cost allocations plans, and
related records, for which retention requirements are specified in
paragraph (g) of this section.
(c) Copies of original records may be substituted for the original
records if authorized by the grants officer.
(d) The grants officer shall request that recipients transfer
certain records to DoD Component custody when he or she determines that
the records possess long term retention value. However, in order to
avoid duplicate recordkeeping, a grants officer may make arrangements
for recipients to retain any records that are continuously needed for
joint use.
(e) DoD Components, the Inspector General, Comptroller General of
the United States, or any of their duly authorized representatives,
have the right of timely and unrestricted access to any books,
documents, papers, or other records of recipients that are pertinent to
the awards, in order to make audits, examinations, excerpts,
transcripts and copies of such documents. This right also includes
timely and reasonable access to a recipient's personnel for the purpose
of interview and discussion related to such documents. The rights of
access in this paragraph are not limited to the required retention
period, but shall last as long as records are retained.
(f) Unless required by statute, no DoD Component shall place
restrictions on recipients that limit public access to the records of
recipients that are pertinent to an award, except when the DoD
Component can demonstrate that such records shall be kept confidential
and would have been exempted from disclosure pursuant to the Freedom of
Information Act (5 U.S.C. 552) if the records had belonged to the DoD
Component making the award.
(g) Indirect cost rate proposals, cost allocations plans, etc.
Paragraphs (g)(1) and (g)(2) of this section apply to the following
types of documents, and their supporting records: indirect cost rate
computations or proposals, cost allocation plans, and any similar
accounting computations of the rate at which a particular group of
costs is chargeable (such as computer usage chargeback rates or
composite fringe benefit rates).
(1) If submitted for negotiation. If the recipient submits an
indirect-cost proposal, plan, or other computation to the Federal
agency responsible for negotiating the recipient's indirect cost rate,
as the basis for negotiation of the rate, or the subrecipient submits
such a proposal, plan, or computation to the recipient, then the 3-year
retention period for its supporting records starts on the date of such
submission.
(2) If not submitted for negotiation. If the recipient is not
required to submit to the cognizant Federal agency or the subrecipient
is not required to submit to the recipient the proposal, plan, or other
computation for negotiation purposes, then the 3-year retention period
for the proposal, plan, or other computation and its supporting records
starts at the end of the fiscal year (or other accounting period)
covered by the proposal, plan, or other computation.
(h) If the information described in this section is maintained on a
computer, recipients shall retain the computer data on a reliable
medium for the time periods prescribed. Recipients may transfer
computer data in machine readable form from one reliable computer
medium to another. Recipients' computer data retention and transfer
procedures shall maintain the integrity, reliability, and security of
the original computer data. Recipients shall also maintain an audit
trail describing the data transfer. For the record retention time
periods prescribed in this section, recipients shall not destroy,
discard, delete, or write over such computer data.
Termination and Enforcement
Sec. 32.60 Purpose of termination and enforcement.
Sections 32.61 and 32.62 set forth uniform suspension, termination
and enforcement procedures.
Sec. 32.61 Termination.
(a) Awards may be terminated in whole or in part only as follows:
(1) By the grants officer, if a recipient materially fails to
comply with the terms and conditions of an award;
(2) By the grants officer with the consent of the recipient, in
which case the two parties shall agree upon the termination conditions,
including the effective date and, in the case of partial termination,
the portion to be terminated; or
(3) By the recipient upon sending to the grants officer written
notification setting forth the reasons for such termination, the
effective date, and, in the case of partial termination, the portion to
be terminated. The recipient must provide such notice at least 30
calendar days prior to the effective date of the termination. However,
if the grants officer determines in the case of partial termination
that the reduced or modified portion of the award will not accomplish
the purposes for which the award was made, he or she may terminate the
award in its entirety.
(b) If costs are allowed under an award, the responsibilities of
the recipient referred to in Sec. 32.71, including those for property
management as applicable, shall be considered in the termination of the
award, and provision shall be made for continuing responsibilities of
the recipient after termination, as appropriate.
Sec. 32.62 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 grants officer may, in addition to imposing any of the
special conditions outlined in Sec. 32.14, 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
grants officer and DoD Component.
(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.
[[Page 12203]]
(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 DoD
Component shall 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. Award terms or conditions will incorporate the procedures of
32 CFR 22.815 for processing recipient claims and disputes and for
deciding appeals of grants officers' decisions.
(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 grants officer 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 the costs:
(1) Result from obligations which were properly incurred by the
recipient before the effective date of suspension or termination, are
not in anticipation of it, and in the case of a termination, are
noncancellable; and
(2) Would be allowable if the award were not suspended or expired
normally at the end of the funding period in which the termination
takes effect.
(d) Relationship to debarment and suspension. The enforcement
remedies identified in this section, including suspension and
termination, do not preclude a recipient from being subject to
debarment and suspension under 32 CFR part 25.
Subpart D--After-the-Award Requirements
Sec. 32.70 Purpose.
Sections 32.71 through 32.73 contain closeout procedures and other
procedures for subsequent disallowances and adjustments.
Sec. 32.71 Closeout procedures.
(a) Recipients shall submit, within 90 calendar days after the date
of completion of the award, all financial, performance, and other
reports required by the terms and conditions of the award. The grants
officer may approve extensions when requested by the recipient.
(b) Unless the grants officer authorizes an extension, a recipient
shall liquidate all obligations incurred under the award not later than
90 calendar days after the funding period or the date of completion as
specified in the terms and conditions of the award or in agency
implementing instructions.
(c) The responsible grants officer and payment office shall
expedite completion of steps needed to close out awards and make
prompt, final payments to a recipient for allowable reimbursable costs
under the award being closed out.
(d) The recipient shall promptly refund any balances of unobligated
cash that the DoD Component has advanced or paid and that is not
authorized to be retained by the recipient for use in other projects.
OMB Circular A-129\13\ governs unreturned amounts that become
delinquent debts (see 32 CFR 22.820).
---------------------------------------------------------------------------
\13\ See footnote 1 to Sec. 32.1(a).
---------------------------------------------------------------------------
(e) When authorized by the terms and conditions of the award, the
grants officer shall make a settlement for any upward or downward
adjustments to the Federal share of costs after closeout reports are
received.
(f) The recipient shall account for any real and personal property
acquired with Federal funds or received from the Federal Government in
accordance with Secs. 32.31 through 32.37.
(g) In the event a final audit has not been performed prior to the
closeout of an award, the DoD Component shall retain the right to
recover an appropriate amount after fully considering the
recommendations on disallowed costs resulting from the final audit.
Sec. 32.72 Subsequent adjustments and continuing responsibilities.
(a) The closeout of an award does not affect any of the following:
(1) The right of the Department of Defense 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. 32.26.
(4) Property management requirements in Secs. 32.31 through 32.37.
(5) Records retention as required in Sec. 32.53.
(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 grants officer and the recipient, provided the responsibilities of
the recipient referred to in Sec. 32.73(a), including those for
property management as applicable, are considered and provisions made
for continuing responsibilities of the recipient, as appropriate.
Sec. 32.73 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.
(b) OMB Circular A-110 informs each Federal agency that:
(1) If a debt is not paid within a reasonable period after the
demand for payment, the Federal agency may reduce the debt by:
(i) Making administrative offset against other requests for
reimbursement.
(ii) Withholding advance payments otherwise due to the recipient.
(iii) Taking other action permitted by statute.
(2) Except as otherwise provided by law, the Federal awarding
agency shall charge interest on an overdue debt in accordance with 4
CFR Chapter II, ``Federal Claims Collection Standards.''
(c) DoD grants officers shall follow the procedures in 32 CFR
22.820 for issuing demands for payment and transferring debts to DoD
payment offices for collection. Recipients will be informed about
pertinent procedures and timeframes through the written notices of
grants officers' decisions and demands for payment.
Appendix A to Part 32--Contract Provisions
All contracts awarded by a recipient, including those for
amounts less than the simplified acquisition threshold, shall
contain the following provisions as applicable:
1. Equal Employment Opportunity--All contracts shall contain a
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965
Comp., p. 339), ``Equal Employment Opportunity,'' as amended by E.O.
11375 (3 CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order
11246 Relating to Equal Employment Opportunity,'' and as
supplemented by regulations at 41 CFR ch. 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 shall
include a provision for compliance with the Copeland ``Anti-
Kickback'' Act (18 U.S.C. 874), as supplemented by Department of
Labor regulations (29 CFR part 3, ``Contractors and Subcontractors
on Public Building or Public Work Financed in Whole or in Part by
Loans or Grants from the United States''). The Act provides that
each contractor or subrecipient shall be prohibited from inducing,
by any means, any person employed in the construction, completion,
or repair of public work, to give up any part of the compensation to
which he is otherwise entitled. The recipient shall report all
[[Page 12204]]
suspected or reported violations to the responsible DoD Component.
3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--This Act
applies to procurements under awards only when the Federal program
legislation specifically makes it apply (i.e., Davis-Bacon does not
by itself apply to procurements under awards). In cases where
another statute does make the Davis-Bacon Act apply, all
construction contracts awarded by the recipients and subrecipients
of more than $2,000 shall include a provision for compliance with
the Davis-Bacon Act (40 U.S.C. 276a to a-7) and as supplemented by
Department of Labor regulations (29 CFR part 5, ``Labor Standards
Provisions Applicable to Contracts Governing Federally Financed and
Assisted Construction''). Under this Act, contractors shall be
required to pay wages to laborers and mechanics at a rate not less
than the minimum wages specified in a wage determination made by the
Secretary of Labor. In addition, contractors shall be required to
pay wages not less than once a week. The recipient shall place a
copy of the current prevailing wage determination issued by the
Department of Labor in each solicitation and the award of a contract
shall be conditioned upon the acceptance of the wage determination.
The recipient shall report all suspected or reported violations to
the Federal awarding agency.
4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in
excess of $100,000 for construction or other purposes that involve
the employment of mechanics or laborers shall include a provision
for compliance with sections 102 and 107 of the Contract Work Hours
and Safety Standards Act (40 U.S.C. 327-333), as supplemented by
Department of Labor regulations (29 CFR part 5). Under section 102
of the Act, each contractor shall be required to compute the wages
of every mechanic and laborer on the basis of a standard work week
of 40 hours. Work in excess of the standard work week is permissible
provided that the worker is compensated at a rate of not less than
1\1/2\ times the basic rate of pay for all hours worked in excess of
40 hours in the work week. Section 107 of the Act is applicable to
construction work and provides that no laborer or mechanic shall be
required to work in surroundings or under working conditions which
are unsanitary, hazardous or dangerous. These requirements do not
apply to the purchases of supplies or materials or articles
ordinarily available on the open market, or contracts for
transportation or transmission of intelligence.
5. Rights to Inventions Made Under a Contract, Grant or
Cooperative Agreement--Contracts, grants, or cooperative agreements
for the performance of experimental, developmental, or research work
shall provide for the rights of the Federal Government and the
recipient in any resulting invention in accordance with 37 CFR part
401, ``Rights to Inventions Made by Nonprofit Organizations and
Small Business Firms Under Government Grants, Contracts and
Cooperative Agreements.''
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 shall
contain a provision that requires the recipient to agree to comply
with all applicable standards, orders or regulations issued pursuant
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water
Pollution Control Act as amended (33 U.S.C. 1251 et seq.).
Violations shall be reported to the responsible DoD Component 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 shall file the
required certification. Each tier certifies to the tier above that
it will not and has not used Federal appropriated funds to pay any
person or organization for influencing or attempting to influence an
officer or employee of any agency, a member of Congress, officer or
employee of Congress, or an employee of a member of Congress in
connection with obtaining any Federal contract, grant or any other
award covered by 31 U.S.C. 1352. Each tier shall also disclose any
lobbying with non-Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from
tier to tier up to the recipient.
8. Debarment and Suspension (E.O.s 12549 and 12689)--Contract
awards that exceed the simplified acquisition threshold and certain
other contract awards shall not be made to parties listed on the
General Services Administration's Lists of Parties Excluded from
Federal Procurement and Nonprocurement Programs in accordance with
E.O.s 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989
Comp., p. 235), ``Debarment and Suspension.'' This list contains the
names of parties debarred, suspended, or otherwise excluded by
agencies, and contractors declared ineligible under statutory or
regulatory authority other than E.O. 12549. Contractors with awards
that exceed the simplified acquisition threshold shall provide the
required certification regarding its exclusion status and that of
its principals.
7. Part 34 is added to read as follows:
PART 34--ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH
FOR-PROFIT ORGANIZATIONS
Subpart A--General
Sec.
34.1 Purpose.
34.2 Definitions.
34.3 Deviations.
34.4 Special award conditions.
Subpart B--Post-Award Requirements
Financial and Program Management
34.10 Purpose of financial and program management.
34.11 Standards for financial management systems.
34.12 Payment.
34.13 Cost sharing or matching.
34.14 Program income.
34.15 Revision of budget and program plans.
34.16 Audits.
34.17 Allowable costs.
34.18 Fee and profit.
Property Standards
34.20 Purpose of property standards.
34.21 Real property and equipment.
34.22 Federally owned property.
34.23 Property management system.
34.24 Supplies.
34.25 Intellectual property developed or produced under awards.
Procurement Standards
34.30 Purpose of procurement standards.
34.31 Requirements.
Reports and Records
34.40 Purpose of reports and records.
34.41 Monitoring and reporting program and financial performance.
34.42 Retention and access requirements for records.
Termination and Enforcement
34.50 Purpose of termination and enforcement.
34.51 Termination.
34.52 Enforcement.
34.53 Disputes and appeals.
Subpart C--After-the-Award Requirements
34.60 Purpose.
34.61 Closeout procedures.
34.62 Subsequent adjustments and continuing responsibilities.
34.63 Collection of amounts due.
Appendix A to Part 34--Contract Provisions
Authority: 5 U.S.C. 301 and 10 U.S.C. 113.
Subpart A--General
Sec. 34.1 Purpose.
(a) This part prescribes administrative requirements for awards to
for-profit organizations.
(b) Applicability to prime awards and subawards is as follows:
(1) Prime awards. DoD Components shall apply the provisions of this
part to awards to for-profit organizations. DoD Components shall not
impose requirements that are in addition to, or inconsistent with, the
requirements provided in this part, except:
(i) In accordance with the deviation procedures or special award
conditions in Sec. 34.3 or Sec. 34.4, respectively; or
(ii) As required by Federal statute, Executive order, or Federal
regulation implementing a statute or Executive order.
(2) Subawards. (i) Any legal entity (including any State, local
government, university or other nonprofit organization, as well as any
for-profit entity) that receives an award from a DoD Component shall
apply the provisions of this part to subawards with for-profit
organizations. It should be noted that subawards (see definition in
Sec. 34.2) are financial assistance for substantive programmatic
performance
[[Page 12205]]
and do not include recipients' procurement of goods and services.
(ii) For-profit organizations that receive prime awards covered by
this part shall apply to each subaward the administrative requirements
that are applicable to the particular type of subrecipient (e.g., 32
CFR part 33 specifies requirements for subrecipients that are States or
local governments, and 32 CFR part 32 contains requirements for
universities or other nonprofit organizations).
Sec. 34.2 Definitions.
The following are definitions of terms as used in this part. Grants
officers are cautioned that terms may be defined differently in this
part than they are in other parts of the DoD Grant and Agreement
Regulations (DoDGARs).
Advance. 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.
Award. A grant or cooperative agreement.
Cash contributions. The recipient's cash outlay, including the
outlay of money contributed to the recipient by third parties.
Closeout. The process by which the grants officer administering an
award made by a DoD Component determines that all applicable
administrative actions and all required work of the award have been
completed by the recipient and DoD Component.
Contract. Either:
(1) A procurement contract made by a recipient under a DoD
Component's award or by a subrecipient under a subaward; or
(2) A procurement subcontract under a contract awarded by a
recipient or subrecipient.
Cost sharing or matching. That portion of project or program costs
not borne by the Federal Government.
Disallowed costs. Those charges to an award that the grants officer
administering an award made by a DoD Component determines to be
unallowable, in accordance with the applicable Federal cost principles
or other terms and conditions contained in the award.
DoD Component. A Military Department, Defense Agency, DoD Field
Activity, or organization within the Office of the Secretary of Defense
that provides or administers an award to a recipient.
Equipment. Tangible nonexpendable personal property charged
directly to the award having a useful life of more than one year and an
acquisition cost of $5,000 or more per unit. That definition applies
for the purposes of the Federal administrative requirements in this
part. However, the recipient's policy may be to use a lower dollar
value for defining ``equipment,'' and nothing in this part should be
construed as requiring the recipient to establish a higher limit for
purposes other than the administrative requirements in this part.
Excess property. Property under the control of any DoD Component
that, as determined by the head thereof, is no longer required for its
needs or the discharge of its responsibilities.
Expenditures. See the definition for outlays in this section.
Federally owned property. Property in the possession of, or
directly acquired by, the Government and subsequently made available to
the recipient.
Funding period. The period of time when Federal funding is
available for obligation by the recipient.
Intellectual property. Intangible personal property such as patents
and patent applications, trademarks, copyrights, technical data, and
software rights.
Obligations. The amounts of orders placed, contracts and grants
awarded, services received and similar transactions during a given
period that require payment by the recipient during the same or a
future period.
Outlays or expenditures. 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.
Personal property. Property of any kind except real property. It
may be:
(1) Tangible, having physical existence (i.e., equipment and
supplies); or
(2) Intangible, having no physical existence, such as patents,
copyrights, data and software.
Prior approval. Written or electronic approval by an authorized
official evidencing prior consent.
Program income. Gross income earned by the recipient that is
directly generated by a supported activity or earned as a result of the
award. Program income includes, but is not limited to, income from fees
for services performed, the use or rental of real or personal property
acquired under federally-funded projects, the sale of commodities or
items fabricated under an award, license fees and royalties on patents
and copyrights, and interest on loans made with award funds. Interest
earned on advances of Federal funds is not program income. Except as
otherwise provided in program regulations or the terms and conditions
of the award, program income does not include the receipt of principal
on loans, rebates, credits, discounts, etc., or interest earned on any
of them.
Project costs. All allowable costs, as set forth in the applicable
Federal cost principles, incurred by a recipient and the value of the
contributions made by third parties in accomplishing the objectives of
the award during the project period.
Project period. The period established in the award document during
which Federal sponsorship begins and ends.
Property. Real property and personal property (equipment, supplies,
and intellectual property), unless stated otherwise.
Real property. Land, including land improvements, structures and
appurtenances thereto, but excludes movable machinery and equipment.
Recipient. A for-profit organization receiving an award directly
from a DoD Component to carry out a project or program.
Research. Basic, applied, and advanced research activities. Basic
research is defined as efforts directed toward increasing knowledge or
understanding in science and engineering. Applied research is defined
as efforts that attempt to determine and exploit the potential of
scientific discoveries or improvements in technology, such as new
materials, devices, methods, and processes. ``Advanced research,''
advanced technology development that creates new technology or
demonstrates the viability of applying existing technology to new
products and processes in a general way, is most closely analogous to
precommercialization or precompetitive technology development in the
commercial sector (it does not include development of military systems
and hardware where specific requirements have been defined).
[[Page 12206]]
Small award. An award not exceeding the simplified acquisition
threshold fixed at 41 U.S.C. 403(11) (currently $100,000).
Small business concern. A concern, including its affiliates, that
is independently owned and operated, not dominant in the field of
operation in which it has applied for an award, and qualified as a
small business under the criteria and size standards in 13 CFR part
121. For more details, grants officers should see 48 CFR part 19 in the
``Federal Acquisition Regulation.''
Subaward. Financial assistance in the form of money, or property in
lieu of money, provided 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 the term
includes neither procurement of goods and services nor any form of
assistance which is excluded from the definition of ``award'' in this
section.
Subrecipient. The legal entity to which a subaward is made and
which is accountable to the recipient for the use of the funds
provided.
Supplies. Tangible expendable personal property that is charged
directly to the award and that has a useful life of less than one year
or an acquisition cost of less than $5000 per unit.
Suspension. An action by a DoD Component that temporarily withdraws
Federal sponsorship under an award, pending corrective action by the
recipient or pending a decision to terminate the award by the DoD
Component. Suspension of an award is a separate action from suspension
of a recipient under 32 CFR part 25.
Termination. The cancellation of an award, in whole or in part,
under an agreement at any time prior to either:
(1) The date on which all work under an award is completed; or
(2) The date on which Federal sponsorship ends, as given on the
award document or any supplement or amendment thereto.
Third party in-kind contributions. 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.
Unobligated balance. The portion of the funds authorized by a DoD
Component that has not been obligated by the recipient and is
determined by deducting the cumulative obligations from the cumulative
funds authorized.
Sec. 34.3 Deviations.
(a) Individual deviations. Individual deviations affecting only one
award may be approved by DoD Components in accordance with procedures
stated in 32 CFR 21.125(a).
(b) Small awards. DoD Components may apply less restrictive
requirements than the provisions of this part when awarding small
awards, except for those requirements which are statutory.
(c) Other class deviations. For classes of awards other than small
awards, the Director, Defense Research and Engineering, or his or her
designee, may grant exceptions from the requirements of this part when
exceptions are not prohibited by statute. DoD Components shall request
approval for such deviations in accordance with 32 CFR 21.125 (b) and
(c).
Sec. 34.4 Special award conditions.
(a) Grants officers may impose additional requirements as needed,
over and above those provided in this part, if an applicant or
recipient:
(1) Has a history of poor performance;
(2) Is not financially stable;
(3) Has a management system that does not meet the standards
prescribed in this part;
(4) Has not conformed to the terms and conditions of a previous
award; or
(5) Is not otherwise responsible.
(b) Before imposing additional requirements, DoD Components shall
notify the applicant or recipient in writing as to:
(1) The nature of the additional requirements;
(2) The reason why the additional requirements are being imposed;
(3) The nature of the corrective action needed;
(4) The time allowed for completing the corrective actions; and
(5) The method for requesting reconsideration of the additional
requirements imposed.
(c) Any special conditions shall be promptly removed once the
conditions that prompted them have been corrected.
(d) Grants officers:
(1) Should coordinate the imposition and removal of special award
conditions with the cognizant grants administration office identified
in 32 CFR 22.710.
(2) Shall include in the award file the written notification to the
recipient, described in paragraph (b) of this section, and the
documentation required by 32 CFR 22.410(b).
Subpart B--Post-award Requirements
Financial and Program Management
Sec. 34.10 Purpose of financial and program management.
Sections 34.11 through 34.17 prescribe standards for financial
management systems; methods for making payments; and rules for cost
sharing and matching, program income, revisions to budgets and program
plans, audits, allowable costs, and fee and profit.
Sec. 34.11 Standards for financial management systems.
(a) Recipients shall be allowed and encouraged to use existing
financial management systems established for doing business in the
commercial marketplace, to the extent that the systems comply with
Generally Accepted Accounting Principles (GAAP) and the minimum
standards in this section. As a minimum, a recipient's financial
management system shall provide:
(1) Effective control of all funds. Control systems must be
adequate to ensure that costs charged to Federal funds and those
counted as the recipient's cost share or match are consistent with
requirements for cost reasonableness, allowability, and allocability in
the applicable cost principles (see Sec. 34.17) and in the terms and
conditions of the award.
(2) Accurate, current and complete records that document for each
project funded wholly or in part with Federal funds the source and
application of the Federal funds and the recipient's required cost
share or match. These records shall:
(i) Contain information about receipts, authorizations, assets,
expenditures, program income, and interest.
(ii) Be adequate to make comparisons of outlays with budgeted
amounts for each award (as required for programmatic and financial
reporting under Sec. 34.41. Where appropriate, financial information
should be related to performance and unit cost data. Note that unit
cost data are generally not appropriate for awards that support
research.
(3) To the extent that advance payments are authorized under
Sec. 34.12, procedures that minimize the time elapsing between the
transfer of funds to the recipient from the Government and the
recipient's disbursement of the funds for program purposes.
(4) The recipient shall have a system to support charges to Federal
awards for salaries and wages, whether treated as direct or indirect
costs. Where employees work on multiple activities
[[Page 12207]]
or cost objectives, a distribution of their salaries and wages will be
supported by personnel activity reports which must:
(i) Reflect an after the fact distribution of the actual activity
of each employee.
(ii) Account for the total activity for which each employee is
compensated.
(iii) Be prepared at least monthly, and coincide with one or more
pay periods.
(b) Where the Federal Government guarantees or insures the
repayment of money borrowed by the recipient, the DoD Component, 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.
(c) The DoD Component may require adequate fidelity bond coverage
where the recipient lacks sufficient coverage to protect the Federal
Government's interest.
(d) Where bonds are required in the situations described above, the
bonds shall be obtained from companies holding certificates of
authority as acceptable sureties, as prescribed in 31 CFR part 223,
``Surety Companies Doing Business with the United States.''
Sec. 34.12 Payment.
(a) Methods available. Payment methods for awards with for-profit
organizations are:
(1) Reimbursement. Under this method, the recipient requests
reimbursement for costs incurred during a time period. In cases where
the recipient submits each request for payment to the grants officer,
the DoD payment office reimburses the recipient by electronic funds
transfer or check after approval of the request by the grants officer
designated to do so.
(2) Advance payments. Under this method, a DoD Component makes a
payment to a recipient based upon projections of the recipient's cash
needs. The payment generally is made upon the recipient's request,
although predetermined payment schedules may be used when the timing of
the recipient's needs to disburse funds can be predicted in advance
with sufficient accuracy to ensure compliance with paragraph
(b)(2)(iii) of this section.
(b) Selecting a method. (1) The preferred payment method is the
reimbursement method, as described in paragraph (a)(1) of this section
(2) Advance payments, as described in paragraph (a)(2) of this
section, may be used in exceptional circumstances, subject to the
following conditions:
(i) The grants officer, in consultation with the program official,
must judge that advance payments are necessary or will materially
contribute to the probability of success of the project contemplated
under the award (e.g., as startup funds for a project performed by a
newly formed company). The rationale for the judgment shall be
documented in the award file.
(ii) Cash advances shall be limited to the minimum amounts needed
to carry out the program.
(iii) Recipients and the DoD Component shall maintain procedures to
ensure that the timing of cash advances is as close as is
administratively feasible to the recipients' disbursements of the funds
for program purposes, including direct program or project costs and the
proportionate share of any allowable indirect costs.
(iv) Recipients shall maintain advance payments of Federal funds in
interest-bearing accounts, and remit annually the interest earned to
the administrative grants officer responsible for post-award
administration (the grants officer shall forward the payment to the
responsible payment office, for return to the Department of Treasury's
miscellaneous receipts account), unless one of the following applies:
(A) The recipient receives less than $120,000 in Federal awards per
year.
(B) The best reasonably available interest bearing account would
not be expected to earn interest in excess of $250 per year on Federal
cash balances.
(C) 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.
(c) Frequency of payments. For either reimbursements or advance
payments, recipients shall be authorized to submit requests for payment
at least monthly.
(d) Forms for requesting payment. DoD Components may authorize
recipients to use the SF-270,1 ``Request for Advance or
Reimbursement;'' the SF-271,2 ``Outlay Report and Request
for Reimbursement for Construction Programs;'' or prescribe other forms
or formats as necessary.
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\1\ For copies of Standard Forms listed in this part, contact
regional grants administration offices of the Office of Naval
Research. Addresses for the offices are listed in the ``DoD
Directory of Contract Administration Services Components,'' DLAH
4105.4, which can be obtained from either: Defense Logistics Agency,
Publications Distribution Division (DASC-WDM), 8725 John J. Kingman
Rd., Suite 0119, Fort Belvoir, VA 22060-6220; or the Defense
Contract Management Command home page at http://
www.dcmc.dcrb.dla.mil.
\2\ See footnote 1 to this paragraph (d).
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(e) Timeliness of payments. Payments normally will be made within
30 calendar days of the receipt of a recipient's request for
reimbursement or advance by the office designated to receive the
request (for further information about timeframes for payments, see 32
CFR 22.810(c)(3)(ii)).
(f) Precedence of other available funds. Recipients shall disburse
funds available from program income, rebates, refunds, contract
settlements, audit recoveries, and interest earned on such funds before
requesting additional cash payments.
(g) Withholding of payments. Unless otherwise required by statute,
grants officers shall not withhold payments for proper charges made by
recipients during the project period for reasons other than the
following:
(1) A recipient has failed to comply with project objectives, the
terms and conditions of the award, or Federal reporting requirements,
in which case the grants officer may suspend payments in accordance
with Sec. 34.52.
(2) The recipient is delinquent on a debt to the United States (see
definitions of ``debt'' and ``delinquent debt'' in 32 CFR 22.105). In
that case, the grants officer may, upon reasonable notice, withhold
payments for obligations incurred after a specified date, until the
debt is resolved.
Sec. 34.13 Cost sharing or matching.
(a) Acceptable contributions. All contributions, including cash
contributions and third party in-kind contributions, shall be accepted
as part of the recipient's cost sharing or matching when such
contributions meet all of the following criteria:
(1) They are verifiable from the recipient's records.
(2) They are not included as contributions for any other federally-
assisted project or program.
(3) They are necessary and reasonable for proper and efficient
accomplishment of project or program objectives.
(4) They are allowable under Sec. 34.17.
(5) They are not paid by the Federal Government under another
award, except:
(i) Costs that are authorized by Federal statute to be used for
cost sharing or matching; or
(ii) Independent research and development (IR&D) costs. In
accordance with the for-profit cost principle in 48 CFR 31.205-18(e),
use of IR&D as cost sharing is permitted, whether or not the Government
decides at a later date to reimburse any of the IR&D as allowable
indirect costs. In such cases, the IR&D must meet all of the criteria
in paragraphs (a) (1) through (4) and (a) (6) through (8) of this
section.
(6) They are provided for in the approved budget, when approval of
the budget is required by the DoD Component.
[[Page 12208]]
(7) If they are real property or equipment, whether purchased with
recipient's funds or donated by third parties, they must have the
grants officer's prior approval if the contributions' value is to
exceed depreciation or use charges during the project period
(paragraphs (b)(1) and (b)(4)(ii) of this section discuss the limited
circumstances under which a grants officer may approve higher values).
If a DoD Component requires approval of a recipient's budget (see
paragraph (a)(6) of this section), the grants officer's approval of the
budget satisfies this prior approval requirement, for real property or
equipment items listed in the budget.
(8) They conform to other provisions of this part, as applicable.
(b) Valuing and documenting contributions--(1) Valuing recipient's
property or services of recipient's employees. Values shall be
established in accordance with the applicable cost principles in
Sec. 34.17, which means that amounts chargeable to the project are
determined on the basis of costs incurred. For real property or
equipment used on the project, the cost principles authorize
depreciation or use charges. The full value of the item may be applied
when the item will be consumed in the performance of the award or fully
depreciated by the end of the award. In cases where the full value of a
donated capital asset is to be applied as cost sharing or matching,
that full value shall be the lesser of the following:
(i) The certified value of the remaining life of the property
recorded in the recipient's accounting records at the time of donation;
or
(ii) The current fair market value. However, when there is
sufficient justification, the grants officer may approve the use of the
current fair market value of the donated property, even if it exceeds
the certified value at the time of donation to the project. The grants
officer may accept the use of any reasonable basis for determining the
fair market value of the property.
(2) Valuing services of others' employees. When an employer other
than the recipient furnishes the services of an employee, those
services shall be valued at the employee's regular rate of pay plus an
amount of fringe benefits and overhead (at an overhead rate appropriate
for the location where the services are performed) provided these
services are in the same skill for which the employee is normally paid.
(3) Valuing volunteer services. Volunteer services furnished by
professional and technical personnel, consultants, and other skilled
and unskilled labor may be counted as cost sharing or matching if the
service is an integral and necessary part of an approved project or
program. Rates for volunteer services shall be consistent with those
paid for similar work in the recipient's organization. In those
instances in which the required skills are not found in the recipient
organization, rates shall be consistent with those paid for similar
work in the labor market in which the recipient competes for the kind
of services involved. In either case, paid fringe benefits that are
reasonable, allowable, and allocable may be included in the valuation.
(4) Valuing property donated by third parties. (i) Donated supplies
may include such items as office supplies or laboratory supplies. Value
assessed to donated supplies included in the cost sharing or matching
share shall be reasonable and shall not exceed the fair market value of
the property at the time of the donation.
(ii) Normally only depreciation or use charges for equipment and
buildings may be applied. However, the fair rental charges for land and
the full value of equipment or other capital assets may be allowed,
when they will be consumed in the performance of the award or fully
depreciated by the end of the award, provided that the grants officer
has approved the charges. When use charges are applied, values shall be
determined in accordance with the usual accounting policies of the
recipient, with the following qualifications:
(A) The value of donated space shall not exceed the fair rental
value of comparable space as established by an independent appraisal of
comparable space and facilities in a privately-owned building in the
same locality.
(B) The value of loaned equipment shall not exceed its fair rental
value.
(5) Documentation. The following requirements pertain to the
recipient's supporting records for in-kind contributions from third
parties:
(i) Volunteer services shall 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 services
and property shall be documented.
Sec. 34.14 Program income.
(a) DoD Components shall apply the standards in this section to the
disposition of program income from projects financed in whole or in
part with Federal funds.
(b) Recipients shall have no obligation to the Government, unless
the terms and conditions of the award provide otherwise, for program
income earned:
(1) From license fees and royalties for copyrighted material,
patents, patent applications, trademarks, and inventions produced under
an award. Note, however, that the Patent and Trademark Amendments (35
U.S.C. Chapter 18), as implemented in Sec. 34.25, apply to inventions
made under a research award.
(2) After the end of the project period. If a grants officer
anticipates that an award is likely to generate program income after
the end of the project period, the grants officer should indicate in
the award document whether the recipient will have any obligation to
the Federal Government with respect to such income.
(c) 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.
(d) Other than any program income excluded pursuant to paragraphs
(b) and (c) of this section, program income earned during the project
period shall be retained by the recipient and used in one or more of
the following ways, as specified in program regulations or the terms
and conditions of the award:
(1) Added to funds committed to the project by the DoD Component
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.
(e) If the terms and conditions of an award authorize the
disposition of program income as described in paragraph (d)(1) or
(d)(2) of this section, and stipulate a limit on the amounts that may
be used in those ways, program income in excess of the stipulated
limits shall be used in accordance with paragraph (d)(3) of this
section.
(f) In the event that the terms and conditions of the award do not
specify how program income is to be used, paragraph (d)(3) of this
section shall apply automatically to all projects or programs except
research. For awards that support research, paragraph (d)(1) of this
section shall apply automatically unless the terms and conditions
specify another alternative or the recipient is subject to special
award conditions, as indicated in Sec. 34.4.
(g) Proceeds from the sale of property that is acquired, rather
than fabricated,
[[Page 12209]]
under an award are not program income and shall be handled in
accordance with the requirements of the Property Standards (see
Secs. 34.20 through 34.25).
Sec. 34.15 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
sum of the Federal and non-Federal shares, or only the Federal share,
depending upon DoD Component requirements. It shall be related to
performance for program evaluation purposes whenever appropriate.
(b) Recipients are required to report deviations from budget and
program plans, and request prior approvals for budget and program plan
revisions, in accordance with this section.
(c) Recipients shall immediately request, in writing, prior
approval from the cognizant grants officer when there is reason to
believe that within the next seven calendar days a programmatic or
budgetary revision will be necessary for certain reasons, as follows:
(1) The recipient always must obtain the grants officer's prior
approval when a revision is necessary for either of the following two
reasons (i.e., these two requirements for prior approval may never be
waived):
(i) A change in the scope or the objective of the project or
program (even if there is no associated budget revision requiring prior
written approval).
(ii) A need for additional Federal funding.
(2) The recipient must obtain the grants officer's prior approval
when a revision is necessary for any of the following six reasons,
unless the requirement for prior approval is waived in the terms and
conditions of the award (i.e., if the award document is silent, these
prior approvals are required):
(i) A change in a key person specified in the application or award
document.
(ii) 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.
(iii) The inclusion of any additional costs that require prior
approval in accordance with applicable cost principles for Federal
funds and recipients' cost share or match, in Sec. 34.17 and
Sec. 34.13, respectively.
(iv) The inclusion of pre-award costs. All such costs are incurred
at the recipient's risk (i.e., the DoD Component is under no obligation
to reimburse such costs if for any reason the recipient does not
receive an award, or if the award is less than anticipated and
inadequate to cover such costs).
(v) A ``no-cost'' extension of the project period that does not
require additional Federal funds and does not change the approved
objectives or scope of the project.
(vi) Any subaward, transfer or contracting out of substantive
program performance under an award, unless described in the application
and funded in the approved awards. This provision does not apply to the
purchase of supplies, material, or general support services, except
that procurement of equipment or other capital items of property always
is subject to the grants officer's prior approval under Sec. 34.21(a),
if it is to be purchased with Federal funds, or Sec. 34.13(a)(7), if it
is to be used as cost sharing or matching.
(3) The recipient also must obtain the grants officer's prior
approval when a revision is necessary for either of the following
reasons, if specifically required in the terms and conditions of the
award document (i.e., if the award document is silent, these prior
approvals are not required):
(i) The transfer of funds among direct cost categories, functions
and activities for awards in which the Federal share of the project
exceeds $100,000 and the cumulative amount of such transfers exceeds or
is expected to exceed 10 percent of the total budget as last approved
by the DoD Component. No DoD Component shall 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.
(ii) For awards that provide support for both construction and
nonconstruction work, any fund or budget transfers between the two
types of work supported.
(d) Within 30 calendar days from the date of receipt of the
recipient's request for budget revisions, the grants officer shall
review the request and notify the recipient whether the budget
revisions have been approved. If the revision is still under
consideration at the end of 30 calendar days, the grants officer shall
inform the recipient in writing of the date when the recipient may
expect the decision.
Sec. 34.16 Audits.
(a) Any recipient that expends $300,000 or more in a year under
Federal awards shall have an audit made for that year by an independent
auditor, in accordance with paragraph (b) of this section. The audit
generally should be made a part of the regularly scheduled, annual
audit of the recipient's financial statements. However, it may be more
economical in some cases to have the Federal awards separately audited,
and a recipient may elect to do so, unless that option is precluded by
award terms and conditions, or by Federal laws or regulations
applicable to the program(s) under which the awards were made.
(b) The auditor shall determine and report on whether:
(1) The recipient has an internal control structure that provides
reasonable assurance that it is managing Federal awards in compliance
with Federal laws and regulations, and with the terms and conditions of
the awards.
(2) Based on a sampling of Federal award expenditures, the
recipient has complied with laws, regulations, and award terms that may
have a direct and material effect on Federal awards.
(c) The recipient shall make the auditor's report available to DoD
Components whose awards are affected.
(d) The requirement for an annual independent audit is intended to
ascertain the adequacy of the recipient's internal financial management
systems and to curtail the unnecessary duplication and overlap that
usually results when Federal agencies request audits of individual
awards on a routine basis. Therefore, a grants officer:
(1) Shall consider whether the independent audit satisfies his or
her requirements, before requesting any additional audits; and
(2) When requesting an additional audit, shall:
(i) Limit the scope of such additional audit to areas not
adequately addressed by the independent audit.
(ii) Coordinate the audit request with the Federal agency with the
predominant fiscal interest in the recipient, as the agency responsible
for the scheduling and distribution of audits. If DoD has the
predominant fiscal interest in the recipient, the Defense Contract
Management Command (DCMC) is responsible for monitoring audits,
ensuring resolution of audit findings, and distributing audit reports.
When an additional audit is requested and DoD has the predominant
fiscal interest in the recipient, DCMC shall, to the extent
practicable, ensure that the additional audit builds upon the
independent audit or other audits performed in accordance with this
section.
(e) There may be instances in which Federal auditors have recently
performed audits, are performing audits, or are planning to perform
audits, of a recipient. In these cases, the recipient and its Federal
cognizant agency should seek to have the non-Federal,
[[Page 12210]]
independent auditors work with the Federal auditors to develop a
coordinated audit approach, to minimize duplication of audit work.
(f) Audit costs (including a reasonable allocation of the costs of
the audit of the recipient's financial statement, based on the relative
benefit to the Government and the recipient) are allowable costs of DoD
awards.
Sec. 34.17 Allowable costs.
Allowability of costs shall be determined in accordance with the
cost principles applicable to the type of entity incurring the costs,
as follows:
(a) For-profit organizations. Allowability of costs incurred by
for-profit organizations that are recipients of prime awards from DoD
Components, and those that are subrecipients under prime awards to
other organizations, is to be determined in accordance with:
(1) The for-profit cost principles in 48 CFR parts 31 and 231 (in
the Federal Acquisition Regulation, or FAR, and the Defense Federal
Acquisition Regulation Supplement, or DFARS, respectively).
(2) The supplemental information on allowability of audit costs, in
Sec. 34.16(f).
(b) Other types of organizations. Allowability of costs incurred by
other types of organizations that may be subrecipients under a prime
award to a for-profit organization is determined as follows:
(1) Institutions of higher education. Allowability is determined in
accordance with OMB Circular A-21,\3\ `` Cost Principles for
Educational Institutions.''
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\3\ For copies of the Circular, contact the Office of Management
and Budget, EOP Publications, 725 17th St. N.W., New Executive
Office Building, Washington, D.C. 20503.
---------------------------------------------------------------------------
(2) Other nonprofit organizations. Allowability is determined in
accordance with OMB Circular A-122,\4\ ``Cost Principles for Non-Profit
Organizations.'' Note that Attachment C of the Circular identifies
selected nonprofit organizations for whom cost allowability is
determined in accordance with the FAR cost principles for for-profit
organizations.
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\4\ See footnote 3 to paragraph (b)(1) of this section.
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(3) Hospitals. Allowability is determined in accordance with the
provisions of 45 CFR part 74, Appendix E, ``Principles for Determining
Costs Applicable to Research and Development Under Grants and Contracts
with Hospitals.''
(4) Governmental organizations. Allowability for State, local, or
federally recognized Indian tribal governments is determined in
accordance with OMB Circular A-87,\5\ ``Cost Principles for State and
Local Governments.''
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\5\ See footnote 3 to paragraph (b)(1) of this section.
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Sec. 34.18 Fee and profit.
In accordance with 32 CFR 22.205(b), grants and cooperative
agreements shall not:
(a) Provide for the payment of fee or profit to the recipient.
(b) Be used to carry out programs where fee or profit is necessary
to achieving program objectives.
Property Standards
Sec. 34.20 Purpose of property standards.
Sections 34.21 through 34.25 set forth uniform standards for
management, use, and disposition of property. DoD Components shall
encourage recipients to use existing property-management systems, to
the extent that the systems meet these minimum requirements.
Sec. 34.21 Real property and equipment.
(a) Prior approval for acquisition with Federal funds. Recipients
may purchase real property or equipment in whole or in part with
Federal funds under an award only with the prior approval of the grants
officer.
(b) Title. Title to such real property or equipment shall vest in
the recipient upon acquisition. Unless a statute specifically
authorizes a DoD Component to vest title in the recipient without
further obligation to the Government, and the DoD Component elects to
do so, the title shall be a conditional title. Title shall vest in the
recipient subject to the conditions that the recipient:
(1) Use the real property or equipment for the authorized purposes
of the project until funding for the project ceases, or until the
property is no longer needed for the purposes of the project.
(2) Not encumber the property without approval of the grants
officer.
(3) Use and dispose of the property in accordance with paragraphs
(d) and (e) of this section.
(c) Federal interest in real property or equipment offered as cost-
share. A recipient may offer the full value of real property or
equipment that is purchased with recipient's funds or that is donated
by a third party to meet a portion of any required cost sharing or
matching, subject to the prior approval requirement in
Sec. 34.13(a)(7). If a recipient does so, the Government has a
financial interest in the property, a share of the property value
attributable to the Federal participation in the project. The property
therefore shall be considered as if it had been acquired in part with
Federal funds, and shall be subject to the provisions of paragraphs
(b)(1), (b)(2) and (b)(3) of this section, and to the provisions of
Sec. 34.23.
(d) Use. If real property or equipment is acquired in whole or in
part with Federal funds under an award, and the award provides that
title vests conditionally in the recipient, the real property or
equipment is subject to the following:
(1) During the time that the real property or equipment is used on
the project or program for which it was acquired, the recipient shall
make it available for use on other projects or programs, if such other
use will not interfere with the work on the project or program for
which the real property or equipment was originally acquired. Use of
the real property or equipment on other projects will be in the
following order of priority:
(i) Activities sponsored by DoD Components' grants, cooperative
agreements, or other assistance awards;
(ii) Activities sponsored by other Federal agencies' grants,
cooperative agreements, or other assistance awards;
(iii) Activities under Federal procurement contracts, or activities
not sponsored by any Federal agency. If so used, use charges shall be
assessed to those activities. For real property or equipment, the use
charges shall be at rates equivalent to those for which comparable real
property or equipment may be leased. The use charges shall be treated
as program income.
(2) After Federal funding for the project ceases, or when the real
property or equipment is no longer needed for the purposes of the
project, the recipient may use the real property or equipment for other
projects, insofar as:
(i) There are Federally sponsored projects for which the real
property or equipment may be used. If the only use for the real
property or equipment is for projects that have no Federal sponsorship,
the recipient shall proceed with disposition of the real property or
equipment, in accordance with paragraph (e) of this section.
(ii) The recipient obtains written approval from the grants officer
to do so. The grants officer shall ensure that there is a formal change
of accountability for the real property or equipment to a currently
funded, Federal award.
(iii) The recipient's use of the real property or equipment for
other projects is in the same order of priority as described in
paragraph (d)(1) of this section.
(e) Disposition. (1) When an item of real property or equipment is
no longer needed for Federally sponsored projects, the recipient shall
proceed as follows:
[[Page 12211]]
(i) If the property that is no longer needed is equipment (rather
than real property), the recipient may wish to replace it with an item
that is needed currently for the project. In that case, the recipient
may use the original equipment as trade-in or sell it and use the
proceeds to offset the costs of the replacement equipment, subject to
the approval of the responsible agency (i.e., the DoD Component or the
Federal agency to which the DoD Component delegated responsibility for
administering the equipment).
(ii) The recipient may elect to retain title, without further
obligation to the Federal Government, by compensating the Federal
Government for that percentage of the current fair market value of the
real property or equipment that is attributable to the Federal
participation in the project.
(iii) If the recipient does not elect to retain title to real
property or equipment (see paragraph (e)(1)(ii) of this section), or
request approval to use equipment as trade-in or offset for replacement
equipment (see paragraph (e)(1)(i) of this section), the recipient
shall request disposition instructions from the responsible agency.
(2) If a recipient requests disposition instructions, in accordance
with paragraph (e)(1)(iii) of this section, the responsible grants
officer shall:
(i) For equipment (but not real property), consult with the Federal
program manager and judge whether the age and nature of the equipment
warrant a screening procedure, to determine whether the equipment is
useful to a DoD Component or other Federal agency. If a screening
procedure is warranted, the responsible agency shall determine whether
the equipment can be used to meet a DoD Component's requirement. If no
DoD requirement is found, the responsible agency shall report the
availability of the equipment to the General Services Administration,
to determine whether a requirement for the equipment exists in other
Federal agencies.
(ii) For either real property or equipment, issue instructions to
the recipient for disposition of the property no later than 120
calendar days after the recipient's request. The grants officer's
options for disposition are to direct the recipient to:
(A) Transfer title to the real property or equipment 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 real property or
equipment, plus any reasonable shipping or interim storage costs
incurred. If title is transferred to the Federal Government, it shall
be subject thereafter to provisions for Federally owned property in
Sec. 34.22.
(B) Sell the real property or equipment and pay the Federal
Government for that percentage of the current fair market value of the
property that is attributable to the Federal participation in the
project (after deducting actual and reasonable selling and fix-up
expenses, if any, from the sale proceeds). When the recipient is
authorized or required to sell the real property or equipment, proper
sales procedures shall be established that provide for competition to
the extent practicable and result in the highest possible return.
(3) If the responsible agency fails to issue disposition
instructions within 120 calendar days of the recipient's request, as
described in paragraph (e)(2)(ii) of this section, the recipient shall
dispose of the real property or equipment through the option described
in paragraph (e)(2)(ii)(B) of this section.
Sec. 34.22 Federally owned property.
(a) Annual inventory. Recipients shall submit annually an inventory
listing of all Federally owned property in their custody (property
furnished by the Federal Government, rather than acquired by the
recipient with Federal funds under the award), to the DoD Component or
other Federal agency responsible for administering the property under
the award.
(b) Use on other activities. (1) Use of federally owned property on
other activities is permissible, if authorized by the DoD Component
responsible for administering the award to which the property currently
is charged.
(2) Use on other activities will be in the following order of
priority:
(i) Activities sponsored by DoD Components' grants, cooperative
agreements, or other assistance awards;
(ii) Activities sponsored by other Federal agencies' grants,
cooperative agreements, or other assistance awards;
(iii) Activities under Federal procurement contracts, or activities
not sponsored by any Federal agency. If so used, use charges shall be
assessed to those activities. For real property or equipment, the use
charges shall be at rates equivalent to those for which comparable real
property or equipment may be leased. The use charges shall be treated
as program income.
(c) Disposition of property. Upon completion of the award, the
recipient shall report the property to the responsible agency. The
agency may:
(1) Use the property to meet another Federal Government need (e.g,
by transferring accountability for the property to another Federal
award to the same recipient, or by directing the recipient to transfer
the property to a Federal agency that needs the property, or to another
recipient with a currently funded award).
(2) Declare the property to be excess property and either:
(i) Report the property to the General Services Administration, in
accordance with the Federal Property and Administrative Services Act of
1949 (40 U.S.C. 483(b)(2)), as implemented by General Services
Administration regulations at 41 CFR 101-47.202; or
(ii) Dispose of the property by alternative methods, if there is
statutory authority to do so (e.g., DoD Components are authorized by 15
U.S.C. 3710(i), the Federal Technology Transfer Act, to donate research
equipment to educational and nonprofit organizations for the conduct of
technical and scientific education and research activities. Such
donations shall be in accordance with the DoD implementation of E.O.
12999 (3 CFR, 1996 Comp., p. 180), ``Educational Technology: Ensuring
Opportunity for All Children in the Next Century,'' as applicable.)
Appropriate instructions shall be issued to the recipient by the
responsible agency.
Sec. 34.23 Property management system.
The recipient's property management system shall include the
following, for property that is Federally owned, and for equipment that
is acquired in whole or in part with Federal funds, or that is used as
matching share:
(a) Property records shall be maintained, to include the following
information:
(1) A description of the property.
(2) Manufacturer's serial number, model number, Federal stock
number, national stock number, or any other identification number.
(3) Source of the property, including the award number.
(4) Whether title vests in the recipient or the Federal Government.
(5) Acquisition date (or date received, if the property was
furnished by the Federal Government) and cost.
(6) Information from which one can calculate the percentage of
Federal participation in the cost of the property (not applicable to
property furnished by the Federal Government).
(7) The location and condition of the property and the date the
information was reported.
(8) Ultimate disposition data, including date of disposal and sales
[[Page 12212]]
price or the method used to determine current fair market value where a
recipient compensates the Federal Government for its share.
(b) Federally owned equipment shall be marked, to indicate Federal
ownership.
(c) A physical inventory shall be taken and the results reconciled
with the property records at least once every two years. Any
differences between quantities determined by the physical inspection
and those shown in the accounting records shall be investigated to
determine the causes of the difference. The recipient shall, in
connection with the inventory, verify the existence, current
utilization, and continued need for the property.
(d) A control system shall be in effect to insure adequate
safeguards to prevent loss, damage, or theft of the property. Any loss,
damage, or theft of property shall be investigated and fully
documented; if the property was owned by the Federal Government, the
recipient shall promptly notify the Federal agency responsible for
administering the property.
(e) Adequate maintenance procedures shall be implemented to keep
the property in good condition.
Sec. 34.24 Supplies.
(a) Title shall vest in the recipient upon acquisition for supplies
acquired with Federal funds under an award.
(b) Upon termination or completion of the project or program, the
recipient shall retain any unused supplies. If the inventory of unused
supplies exceeds $5,000 in total aggregate value and the items are not
needed for any other Federally sponsored project or program, the
recipient shall retain the items for use on non-Federal sponsored
activities or sell them, but shall, in either case, compensate the
Federal Government for its share.
Sec. 34.25 Intellectual property developed or produced under awards.
(a) Patents. Grants and cooperative agreements with:
(1) Small business concerns shall comply with 35 U.S.C. Chapter 18,
as implemented by 37 CFR part 401, which applies to inventions made
under grants and cooperative agreements with small business concerns
for research and development. 37 CFR 401.14 provides a standard clause
that is required in such grants and cooperative agreements in most
cases, 37 CFR 401.3 specifies when the clause shall be included, and 37
CFR 401.5 specifies how the clause may be modified and tailored.
(2) For-profit organizations other than small business concerns
shall comply with 35 U.S.C. 210(c) and Executive Order 12591 (3 CFR,
1987 Comp., p. 220) (which codifies a Presidential Memorandum on
Government Patent Policy, dated February 18, 1983).
(i) The Executive order states that, as a matter of policy, grants
and cooperative agreements should grant to all for-profit
organizations, regardless of size, title to patents made in whole or in
part with Federal funds, in exchange for royalty-free use by or on
behalf of the Government (i.e., it extends the applicability of 35
U.S.C. Chapter 18, to the extent permitted by law, to for-profit
organizations other than small business concerns).
(ii) 35 U.S.C. 210(c) states that 35 U.S.C. Chapter 18 is not
intended to limit agencies' authority to agree to the disposition of
rights in inventions in accordance with the Presidential memorandum
codified by the Executive order. It also states that such grants and
cooperative agreements shall provide for Government license rights
required by 35 U.S.C. 202(c)(4) and march-in rights required by 35
U.S.C. 203.
(b) Copyright, data and software rights. Requirements concerning
data and software rights are as follows:
(1) The recipient may copyright any work that is subject to
copyright and was developed under an award. DoD Components reserve 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.
(2) Unless waived by the DoD Component making the award, the
Federal Government has the right to:
(i) Obtain, reproduce, publish or otherwise use for Federal
Government purposes the data first produced under an award.
(ii) Authorize others to receive, reproduce, publish, or otherwise
use such data for Federal purposes.
Procurement Standards
Sec. 34.30 Purpose of procurement standards.
Section 34.31 sets forth requirements necessary to ensure:
(a) Compliance of recipients' procurements that use Federal funds
with applicable Federal statutes and executive orders.
(b) Proper stewardship of Federal funds used in recipients'
procurements.
Sec. 34.31 Requirements.
The following requirements pertain to recipients' procurements
funded in whole or in part with Federal funds or with recipients' cost-
share or match:
(a) Reasonable cost. Recipients procurement procedures shall make
maximum practicable use of competition, or shall use other means that
ensure reasonable cost for procured goods and services.
(b) Pre-award review of certain procurements. Prior to awarding a
procurement contract under an award, a recipient may be required to
provide the grants officer administering the award with pre-award
documents (e.g., requests for proposals, invitations for bids, or
independent cost estimates) related to the procurement. Recipients will
only be required to provide such documents for the grants officer's
pre-award review in exceptional cases where the grants officer judges
that there is a compelling need to do so. In such cases, the grants
officer must include a provision in the award that states the
requirement.
(c) Contract provisions. (1) Contracts in excess of the simplified
acquisition threshold shall contain contractual provisions or
conditions that allow for administrative, contractual, or legal
remedies in instances in which a contractor violates or breaches the
contract terms, and provide for such remedial actions as may be
appropriate.
(2) All contracts in excess of the simplified acquisition threshold
shall contain suitable provisions for termination for default by the
recipient or for termination due to circumstances beyond the control of
the contractor.
(3) All negotiated contracts in excess of the simplified
acquisition threshold shall include a provision permitting access of
the Department of Defense, the Comptroller General of the United
States, or any of their duly authorized representatives, to any books,
documents, papers, and records of the contractor that are directly
pertinent to a specific program, for the purpose of making audits,
examinations, excerpts, and transcriptions.
(4) All contracts, including those for amounts less than the
simplified acquisition threshold, awarded by recipients and their
contractors shall contain the procurement provisions of Appendix A to
this part, as applicable.
Reports and Records
Sec. 34.40 Purpose of reports and records.
Sections 34.41 and 34.42 prescribe requirements for monitoring and
reporting financial and program performance and for records retention.
Sec. 34.41 Monitoring and reporting program and financial performance.
Grants officers may use the provisions of 32 CFR 32.51 and 32.52
for awards to for-profit organizations, or may include equivalent
technical and financial reporting requirements that
[[Page 12213]]
ensure reasonable oversight of the expenditure of appropriated funds.
As a minimum, equivalent requirements must include:
(a) Periodic reports (at least annually, and no more frequently
than quarterly) addressing both program status and business status, as
follows:
(1) The program portions of the reports must address progress
toward achieving program performance goals, including current issues,
problems, or developments.
(2) The business portions of the reports shall provide summarized
details on the status of resources (federal funds and non-federal cost
sharing or matching), including an accounting of expenditures for the
period covered by the report. The report should compare the resource
status with any payment and expenditure schedules or plans provided in
the original award; explain any major deviations from those schedules;
and discuss actions that will be taken to address the deviations.
(3) When grants officers previously authorized advance payments,
pursuant to Sec. 34.12(a)(2), they should consult with the program
official and consider whether program progress reported in the periodic
report, in relation to reported expenditures, is sufficient to justify
continued authorization of advance payments.
(b) Unless inappropriate, a final performance report that addresses
all major accomplishments under the award.
Sec. 34.42 Retention and access requirements for records.
(a) This section sets forth requirements for records retention and
access to records for awards to recipients.
(b) Financial records, supporting documents, statistical records,
and all other records pertinent to an award shall be retained for a
period of three years from the date of submission of the final
expenditure report. The only exceptions are the following:
(1) If any litigation, claim, or audit is started before the
expiration of the 3-year period, the records shall be retained until
all litigation, claims or audit findings involving the records have
been resolved and final action taken.
(2) Records for real property and equipment acquired with Federal
funds shall be retained for 3 years after final disposition.
(3) When records are transferred to or maintained by the DoD
Component that made the award, the 3-year retention requirement is not
applicable to the recipient.
(4) Indirect cost rate proposals, cost allocations plans, and
related records, for which retention requirements are specified in
Sec. 34.42(g).
(c) Copies of original records may be substituted for the original
records if authorized by the grants officer.
(d) The grants officer shall request that recipients transfer
certain records to DoD Component custody when he or she determines that
the records possess long term retention value. However, in order to
avoid duplicate recordkeeping, a grants officer may make arrangements
for recipients to retain any records that are continuously needed for
joint use.
(e) DoD Components, the Inspector General, Comptroller General of
the United States, or any of their duly authorized representatives,
have the right of timely and unrestricted access to any books,
documents, papers, or other records of recipients that are pertinent to
the awards, in order to make audits, examinations, excerpts,
transcripts and copies of such documents. This right also includes
timely and reasonable access to a recipient's personnel for the purpose
of interview and discussion related to such documents. The rights of
access in this paragraph are not limited to the required retention
period, but shall last as long as records are retained.
(f) Unless required by statute, no DoD Component shall place
restrictions on recipients that limit public access to the records of
recipients that are pertinent to an award, except when the DoD
Component can demonstrate that such records shall be kept confidential
and would have been exempted from disclosure pursuant to the Freedom of
Information Act (5 U.S.C. 552) if the records had belonged to the DoD
Component making the award.
(g) Indirect cost proposals, cost allocation plans, and other cost
accounting documents (such as documents related to computer usage
chargeback rates), along with their supporting records, shall be
retained for a 3-year period, as follows:
(1) If a recipient is required to submit an indirect-cost proposal,
cost allocation plan, or other computation to the cognizant Federal
agency, for purposes of negotiating an indirect cost rate or other
rates, the 3-year retention period starts on the date of the
submission. This retention requirement also applies to subrecipients
submitting similar documents for negotiation to the recipient.
(2) If the recipient or the subrecipient is not required to submit
the documents or supporting records for negotiating an indirect cost
rate or other rates, the 3-year retention period for the documents and
records starts at the end of the fiscal year (or other accounting
period) covered by the proposal, plan, or other computation.
(h) If the information described in this section is maintained on a
computer, recipients shall retain the computer data on a reliable
medium for the time periods prescribed. Recipients may transfer
computer data in machine readable form from one reliable computer
medium to another. Recipients' computer data retention and transfer
procedures shall maintain the integrity, reliability, and security of
the original computer data. Recipients shall also maintain an audit
trail describing the data transfer. For the record retention time
periods prescribed in this section, recipients shall not destroy,
discard, delete, or write over such computer data.
Termination and Enforcement
Sec. 34.50 Purpose of termination and enforcement.
Sections 34.51 through 34.53 set forth uniform procedures for
suspension, termination, enforcement, and disputes.
Sec. 34.51 Termination.
(a) Awards may be terminated in whole or in part only in accordance
with one of the following:
(1) By the grants officer, if a recipient materially fails to
comply with the terms and conditions of an award.
(2) By the grants officer with the consent of the recipient, in
which case the two parties shall agree upon the termination conditions,
including the effective date and, in the case of partial termination,
the portion to be terminated.
(3) By the recipient upon sending to the grants officer written
notification setting forth the reasons for such termination, the
effective date, and, in the case of partial termination, the portion to
be terminated. The recipient must provide such notice at least 30
calendar days prior to the effective date of the termination. However,
if the grants officer determines in the case of partial termination
that the reduced or modified portion of the award will not accomplish
the purposes for which the award was made, he or she may terminate the
award in its entirety.
(b) If costs are allowed under an award, the responsibilities of
the recipient referred to in Sec. 34.61(b), including those for
property management as applicable, shall be considered in the
termination of the award, and provision shall be made for continuing
responsibilities of the recipient after termination, as appropriate.
[[Page 12214]]
Sec. 34.52 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 grants officer may, in addition to imposing any of the
special conditions outlined in Sec. 34.4, 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
grants officer and DoD Component.
(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. In the
case of termination, the recipient will be reimbursed for allowable
costs incurred prior to termination, with the possible exception of
those for activities and actions described in paragraph (a)(2) of this
section.
(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
grants officer and DoD Component shall 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 (see Sec. 34.53 and 32 CFR 22.815).
(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 grants officer 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 the costs:
(1) Result from obligations which were properly incurred by the
recipient before the effective date of suspension or termination, are
not in anticipation of it, and in the case of a termination, are
noncancellable; and
(2) Would be allowable if the award were not suspended or expired
normally at the end of the funding period in which the termination
takes effect.
(d) Relationship to debarment and suspension. The enforcement
remedies identified in this section, including suspension and
termination, do not preclude a recipient from being subject to
debarment and suspension under 32 CFR part 25.
Sec. 34.53 Disputes and appeals.
Recipients have the right to appeal certain decisions by grants
officers. In resolving such issues, DoD policy is to use Alternative
Dispute Resolution (ADR) techniques, to the maximum practicable extent.
See 32 CFR 22.815 for standards for DoD Components' dispute resolution
and formal, administrative appeal procedures.
Subpart C--After-the-Award Requirements
Sec. 34.60 Purpose.
Sections 34.61 through 34.63 contain procedures for closeout and
for subsequent disallowances and adjustments.
Sec. 34.61 Closeout procedures.
(a) The cognizant grants officer shall, at least six months prior
to the expiration date of the award, contact the recipient to
establish:
(1) All steps needed to close out the award, including submission
of financial and performance reports, liquidation of obligations, and
decisions on property disposition.
(2) A schedule for completing those steps.
(b) The following provisions shall apply to the closeout:
(1) The responsible grants officer and payment office shall
expedite completion of steps needed to close out awards and make
prompt, final payments to a recipient for allowable reimbursable costs
under the award being closed out.
(2) The recipient shall promptly refund any unobligated balances of
cash that the DoD Component has advanced or paid and that is not
authorized to be retained by the recipient for use in other projects.
For unreturned amounts that become delinquent debts, see 32 CFR 22.820.
(3) When authorized by the terms and conditions of the award, the
grants officer shall make a settlement for any upward or downward
adjustments to the Federal share of costs after closeout reports are
received.
(4) The recipient shall account for any real property and personal
property acquired with Federal funds or received from the Federal
Government in accordance with Secs. 34.21 through 34.25.
(5) If a final audit is required and has not been performed prior
to the closeout of an award, the DoD Component shall retain the right
to recover an appropriate amount after fully considering the
recommendations on disallowed costs resulting from the final audit.
Sec. 34.62 Subsequent adjustments and continuing responsibilities.
(a) The closeout of an award does not affect any of the following:
(1) The right of the Department of Defense 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. 34.16.
(4) Property management requirements in Secs. 34.21 through 34.25.
(5) Records retention as required in Sec. 34.42.
(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 grants officer and the recipient, provided the responsibilities of
the recipient referred to in Sec. 34.61(a), including those for
property management as applicable, are considered and provisions made
for continuing responsibilities of the recipient, as appropriate.
Sec. 34.63 Collection of amounts due.
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.
Procedures for issuing the demand for payment and pursuing
administrative offset and other remedies are described in 32 CFR
22.820.
Appendix A to Part 34--Contract Provisions
All contracts awarded by a recipient, including those for
amounts less than the simplified acquisition threshold, shall
contain the following provisions as applicable:
1. Equal Employment Opportunity--All contracts shall contain a
provision requiring compliance with E.O. 11246 (3 CFR, 1964-1965
Comp., p. 339), ``Equal Employment Opportunity,'' as amended by E.O.
11375 (3 CFR, 1966-1970 Comp., p. 684), ``Amending Executive Order
11246 Relating to Equal Employment Opportunity,'' and as
supplemented by regulations at 41 CFR chapter 60, ``Office of
Federal Contract Compliance Programs, Equal Employment Opportunity,
Department of Labor.''
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 shall
include a provision for compliance with the Copeland ``Anti-
Kickback'' Act (18 U.S.C. 874), as supplemented by Department of
Labor regulations (29 CFR part 3, ``Contractors and Subcontractors
on Public Building or Public Work Financed in Whole or in Part by
Loans or Grants from the United States''). The Act provides that
each contractor or subrecipient
[[Page 12215]]
shall be prohibited from inducing, by any means, any person employed
in the construction, completion, or repair of public work, to give
up any part of the compensation to which he is otherwise entitled.
The recipient shall report all suspected or reported violations to
the responsible DoD Component.
3. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in
excess of $100,000 for construction and other purposes that involve
the employment of mechanics or laborers shall include a provision
for compliance with Sections 102 and 107 of the Contract Work Hours
and Safety Standards Act (40 U.S.C. 327-333), as supplemented by
Department of Labor regulations (29 CFR part 5). Under Section 102
of the Act, each contractor shall be required to compute the wages
of every mechanic and laborer on the basis of a standard work week
of 40 hours. Work in excess of the standard work week is permissible
provided that the worker is compensated at a rate of not less than
1\1/2\ times the basic rate of pay for all hours worked in excess of
40 hours in the work week. Section 107 of the Act is applicable to
construction work and provides that no laborer or mechanic shall be
required to work in surroundings or under working conditions which
are unsanitary, hazardous or dangerous. These requirements do not
apply to the purchases of supplies or materials or articles
ordinarily available on the open market, or contracts for
transportation or transmission of intelligence.
4. Rights to Inventions Made Under a Contract, Grant or
Cooperative Agreement--Contracts, grants, or cooperative agreements
for the performance of experimental, developmental, or research work
shall provide for the rights of the Federal Government and the
recipient in any resulting invention in accordance with 37 CFR part
401, ``Rights to Inventions Made by Nonprofit Organizations and
Small Business Firms Under Government Grants, Contracts and
Cooperative Agreements.''
5. 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 shall
contain a provision that requires the recipient to agree to comply
with all applicable standards, orders or regulations issued pursuant
to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water
Pollution Control Act as amended (33 U.S.C. 1251 et seq.).
Violations shall be reported to the responsible DoD Component and
the Regional Office of the Environmental Protection Agency (EPA).
6. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors
who apply or bid for an award of $100,000 or more shall file the
required certification. Each tier certifies to the tier above that
it will not and has not used Federal appropriated funds to pay any
person or organization for influencing or attempting to influence an
officer or employee of any agency, a member of Congress, officer or
employee of Congress, or an employee of a member of Congress in
connection with obtaining any Federal contract, grant or any other
award covered by 31 U.S.C. 1352. Each tier shall also disclose any
lobbying with non-Federal funds that takes place in connection with
obtaining any Federal award. Such disclosures are forwarded from
tier to tier up to the recipient.
7. Debarment and Suspension (E.O.s 12549 and 12689)--Contract
awards that exceed the simplified acquisition threshold and certain
other contract awards shall not be made to parties listed on
nonprocurement portion of the General Services Administration's
Lists of Parties Excluded from Federal Procurement and
Nonprocurement Programs in accordance with E.O.s 12549 (3 CFR, 1986
Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p. 235), ``Debarment
and Suspension.'' This list contains the names of parties debarred,
suspended, or otherwise excluded by agencies, and contractors
declared ineligible under statutory or regulatory authority other
than E.O. 12549. Contractors with awards that exceed the small
purchase threshold shall provide the required certification
regarding its exclusion status and that of its principals.
Dated: March 3, 1998.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 98-5888 Filed 3-11-98; 8:45 am]
BILLING CODE 5000-04-P