[Federal Register Volume 63, Number 71 (Tuesday, April 14, 1998)]
[Rules and Regulations]
[Pages 18135-18139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9761]


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CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

45 CFR Parts 2510, 2516, 2517, 2519, 2521, and 2540


Administrative Costs for Learn and Serve America and AmeriCorps 
Grants Programs

AGENCY: Corporation for National and Community Service.

ACTION: Interim final rule.

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SUMMARY: The Corporation issues this interim final rule to amend 
provisions relating to administrative costs in parts 2510, 2516, 2517, 
2519, 2521, and 2540. For national service programs assisted by the 
Corporation that are subject to a statutory limit on the percentage of 
assistance that may be used to pay for administrative costs, the 
interim final

[[Page 18136]]

rule clarifies the definition of administrative costs, adds an explicit 
definition of program costs that are not subject to the limitation on 
administrative costs, and provides additional guidelines for applying 
the limitation on administrative costs.

DATES: This interim final rule is effective April 14, 1998. Written 
comments must be received on or before June 15, 1998.

ADDRESSES: Comments may be mailed or delivered to Kenneth L. Klothen, 
General Counsel, Corporation for National and Community Service, 1201 
New York Avenue NW, Washington, D.C. 20525 or sent by facsimile 
transmission to (202) 565-2796. Copies of all communications received 
will be available for public inspection at the Corporation.

FOR FURTHER INFORMATION CONTACT: Michael Kenefick, Director of Grants 
Management, Corporation for National and Community Service, (202) 606-
5000, ext. 101.

SUPPLEMENTARY INFORMATION:

Substantive Changes

    Under the National and Community Service Act of 1990, as amended 
(the Act), the Corporation for National and Community Service is 
authorized to provide assistance to States and other eligible entities 
to support national and community service programs. The Act provides 
that not more than five percent of assistance for a fiscal year may be 
used to pay for administrative costs in the following types of 
programs: (1) School-based service-learning programs; (2) community-
based service-learning programs; (3) higher education innovative 
programs for community service; and (4) national service programs 
assisted under sections 121(a) and 121(b) of the Act through grants to 
State Commissions, Indian Tribes, U.S. Territories, and national 
nonprofit organizations.
    The Act itself does not define ``administrative costs'' but directs 
the Corporation to prescribe by rule the manner and extent to which 
assistance provided may be used to pay for administrative costs and the 
distribution of such costs between grantees and sub-grantees. Based on 
issues raised in recent audits of several national service programs, 
the Corporation has reviewed its regulations relating to administrative 
costs and determined that a revision is desirable. Because programs 
applying for assistance from the Corporation this year need to have 
clear guidance as to the rules governing their awards, the Corporation 
has determined that it would be contrary to the public interest to 
publish this amendment as a proposed rule. Therefore the amendments are 
made through an interim final rule that takes effect immediately.
    The Corporation seeks to clarify what types of costs are considered 
subject to the five percent limitation on administrative costs. The 
interim final rule includes a more explicit itemization of costs that 
are directly related to programs and projects, and therefore properly 
excluded from the definition of administrative costs. The interim final 
rule also provides guidelines for the implementation of the statutory 
requirements, including the use of indirect cost rates and the use of 
fixed rates for administrative costs.

Executive Order 12886

    The Corporation has determined that this regulatory action is not a 
``significant'' rule within the meaning of Executive Order 12866 
because it is not likely to result in: (1) An annual effect on the 
economy of $100 million or more, or an adverse and material effect on a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
government or communities; (2) the creation of a serious inconsistency 
or interference with an action taken or planned by another agency; (3) 
a material alteration in the budgetary impacts of entitlement, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) the raising of novel legal or policy issues arising out 
of legal mandates, the President's priorities, or the principles set 
forth in Executive Order 12866.

Regulatory Flexibility Act

    The Corporation has determined that this regulatory action will not 
result in (1) an annual effect on the economy of $100 million or more; 
(2) a major increase in costs or prices for consumers, individual 
industries, Federal, State, or local government agencies, or geographic 
regions; or (3) significant adverse effects on competition, employment, 
investment, productivity, innovation, or on the ability of United 
States-based enterprises to compete with foreign-based enterprises in 
domestic and export markets. Therefore, the Corporation has not 
performed the initial regulatory flexibility analysis that is required 
under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) for major 
rules that are expected to have such results.

Other impact analyses

    This regulatory action contains no information collection 
requirements that are subject to review and approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3500 et seq.).
    For purposes of Title II of the Unfunded Mandates Reform Act of 
1995, 2 U.S.C. 1531-1538, as well as Executive Order 12875, this 
regulatory action does not contain any federal mandate that may result 
in increased expenditures in either Federal, State, local, or tribal 
governments in the aggregate, or impose an annual burden exceeding $100 
million on the private sector.

List of Subjects

45 CFR Part 2510

    Grant programs--social programs, Volunteers.

45 CFR Part 2516

    Elementary and secondary education, Grant programs--social 
programs, Indians, Nonprofit organizations, Reporting and recordkeeping 
requirements, Volunteers.

45 CFR Part 2517

    Community development, Grant programs--social programs, Nonprofit 
organizations, Reporting and recordkeeping requirements, Volunteers.

45 CFR Part 2519

    Colleges and universities, Grant programs--social programs, 
Nonprofit organizations, Reporting and recordkeeping requirements, 
Volunteers.

45 CFR Part 2521

    AmeriCorps, Grant programs--social programs, Volunteers.

45 CFR Part 2540

    Administrative practice and procedure, Grant programs--social 
programs, Reporting and recordkeeping requirements, Volunteers.

    Dated: April 8, 1998.
Kenneth L. Klothen,
General Counsel.

    For the reasons stated in the preamble, parts 2510, 2516, 2517, 
2519, and 2540 of chapter 25, title 45 of the Code of Federal 
Regulations are amended to read as follows:

PART 2510--OVERALL PURPOSES AND DEFINITIONS

    1. The authority citation for part 2510 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.


[[Page 18137]]


    2. In Sec. 2510.20, the definition of ``administrative costs'' is 
revised and a new definition of ``program costs'' is added in 
alphabetical order to read as follows:


Sec. 2510.20  Definitions

* * * * *
    Administrative costs. The term administrative costs means general 
or centralized expenses of overall administration of an organization 
that receives assistance under the Act and does not include program 
costs.
    (1) For organizations that have an established indirect cost rate 
for Federal awards, administrative costs mean those costs that are 
included in the organization's indirect cost rate. Such costs are 
generally identified with the organization's overall operation and are 
further described in Office of Management and Budget Circulars A-21 
(Cost Principles for Educational Institutions), A-87 (Cost Principles 
for State, Local and Indian Tribal Governments), and A-122 (Cost 
Principles for Nonprofit Organizations) that provide guidance on 
indirect cost to Federal agencies. Copies of Office of Management and 
Budget Circulars are available from the Executive Office of the 
President, 725 17th Street, NW., room 2200, New Executive Office 
Building, Washington, D.C. 20503. They may also be accessed on-line at: 
http://www.whitehouse.gov/WH/EOP/OMB/grants/index.html.
    (2) For organizations that do not have an established indirect cost 
rate for Federal awards, administrative costs include:
    (i) Costs for financial, accounting, auditing, contracting, or 
general legal services except in unusual cases when they are 
specifically approved in writing by the Corporation as program costs.
    (ii) Costs for internal evaluation, including overall 
organizational management improvement costs (except for independent 
evaluations and internal evaluations of a program or project).
    (iii) Costs for general liability insurance that protects the 
organization(s) responsible for operating a program or project, other 
than insurance costs solely attributable to a program or project.
* * * * *
    Program costs. The term program costs means expenses directly 
related to a program or project, including their operations and 
objectives. Program costs include, but are not limited to:
    (1) Costs attributable to participants, including: living 
allowances, insurance payments, and expenses for training and travel.
    (2) Costs (including salary, benefits, training, travel) 
attributable to staff who recruit, train, place, support, coordinate, 
or supervise participants, or who develop materials used in such 
activities.
    (3) Costs for independent evaluations and internal evaluations to 
the extent that the evaluations cover only the funded program or 
project.
    (4) Costs, excluding those already covered in an organization's 
indirect cost rate, attributable to staff that work in a direct program 
or project support, operational, or oversight capacity, including, but 
not limited to: support staff whose functions directly support program 
or project activities; staff who coordinate and facilitate single or 
multi-site program and project activities; and staff who review, 
disseminate and implement Corporation guidance and policies directly 
relating to a program or project.
    (5) Space, facility, and communications costs for program or 
project operations and other costs that primarily support program or 
project operations, excluding those costs that are already covered by 
an organization's indirect cost rate.
    (6) Other allowable costs, excluding those costs that are already 
covered by an organization's indirect cost rate, specifically approved 
by the Corporation as directly attributable to a program or project.
* * * * *

PART 2516--SCHOOL-BASED SERVICE-LEARNING PROGRAMS

    1. The authority citation for part 2516 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.

Subpart G--Funding Requirements

    2. Section 2516.710 is revised to read as follows:


Sec. 2516.710  Are there limits on the use of funds?

    Yes. The following limits apply to funds available under this part:
    (a) (1) Not more than five percent of the grant funds provided 
under this part for any fiscal year may be used to pay for 
administrative costs, as defined in Sec. 2510.20 of this chapter.
    (2) The distribution of administrative costs between the grant and 
any subgrant will be subject to the approval of the Corporation.
    (3) In applying the limitation on administrative costs the 
Corporation will approve one of the following methods in the award 
document:
    (i) Limit the amount or rate of indirect costs that may be paid 
with Corporation funds under a grant or subgrant to five percent of 
total Corporation funds expended, provided that--
    (A) Organizations that have an established indirect cost rate for 
Federal awards will be limited to this method; and
    (B) Unreimbursed indirect costs may be applied to meeting 
operational matching requirements under the Corporation's award;
    (ii) Specify that a fixed rate of five percent or less (not subject 
to supporting cost documentation) of total Corporation funds expended 
may be used to pay for administrative costs, provided that the fixed 
rate is in conjunction with an overall 15 percent administrative cost 
factor to be used for organizations that do not have established 
indirect cost rates; or
    (iii) Utilize such other method that the Corporation determines in 
writing is consistent with OMB guidance and other applicable 
requirements, helps minimize the burden on grantees or subgrantees, and 
is beneficial to grantees or subgrantees and the Federal Government.
    (b) (1) An SEA or Indian tribe must spend between ten and 15 
percent of the grant to build capacity through training, technical 
assistance, curriculum development, and coordination activities.
    (2) The Corporation may waive this requirement in order to permit 
an SEA or a tribe to use between ten percent and 20 percent of the 
grant funds to build capacity. To be eligible to receive the waiver, 
the SEA or tribe must submit an application to the Corporation.
    (c) Funds made available under this part may not be used to pay any 
stipend, allowance, or other financial support to any participant in a 
service-learning program under this part except reimbursement for 
transportation, meals, and other reasonable out-of-pocket expenses 
directly related to participation in a program assisted under this 
part.

PART 2517--COMMUNITY-BASED SERVICE-LEARNING PROGRAMS

    1. The authority citation for part 2517 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.

Subpart G--Funding Requirements

    2. Section 2517.710 is revised to read as follows:


Sec. 2517.710  Are there limits on the use of funds?

    Yes. The following limits apply to funds available under this part:

[[Page 18138]]

    (a) (1) Not more than five percent of the grant funds provided 
under this part for any fiscal year may be used to pay for 
administrative costs, as defined in Sec. 2510.20 of this chapter.
    (2) The distribution of administrative costs between the grant and 
any subgrant will be subject to the approval of the Corporation.
    (3) In applying the limitation on administrative costs the 
Corporation will approve one of the following methods in the award 
document:
    (i) Limit the amount or rate of indirect costs that may be paid 
with Corporation funds under a grant or subgrant to five percent of 
total Corporation funds expended, provided that--
    (A) Organizations that have an established indirect cost rate for 
Federal awards will be limited to this method; and
    (B) Unreimbursed indirect costs may be applied to meeting 
operational matching requirements under the Corporation's award;
    (ii) Specify that a fixed rate of five percent or less (not subject 
to supporting cost documentation) of total Corporation funds expended 
may be used to pay for administrative costs, provided that the fixed 
rate is in conjunction with an overall 15 percent administrative cost 
factor to be used for organizations that do not have established 
indirect cost rates; or
    (iii) Utilize such other method that the Corporation determines in 
writing is consistent with OMB guidance and other applicable 
requirements, helps minimize the burden on grantees or subgrantees, and 
is beneficial to grantees or subgrantees and the Federal Government.
    (b) (1) An SEA or Indian tribe must spend between ten and 15 
percent of the grant to build capacity through training, technical 
assistance, curriculum development, and coordination activities.
    (2) The Corporation may waive this requirement in order to permit 
an SEA or a tribe to use between ten percent and 20 percent of the 
grant funds to build capacity. To be eligible to receive the waiver, 
the SEA or tribe must submit an application to the Corporation.
    (c) Funds made available under this part may not be used to pay any 
stipend, allowance, or other financial support to any participant in a 
service-learning program under this part except reimbursement for 
transportation, meals, and other reasonable out-of-pocket expenses 
directly related to participation in a program assisted under this 
part.

PART 2519--HIGHER EDUCATION INNOVATIVE PROGRAMS FOR COMMUNITY 
SERVICE

    1. The authority citation for part 2519 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.

Subpart G--Funding Requirements

    2. Section 2519.710 is revised to read as follows:


Sec. 2519.710  Are there limits on the use of funds?

    Yes. The following limits apply to funds available under this part:
    (a) (1) Not more than five percent of the grant funds provided 
under this part for any fiscal year may be used to pay for 
administrative costs, as defined in Sec. 2510.20 of this chapter.
    (2) The distribution of administrative costs between the grant and 
any subgrant will be subject to the approval of the Corporation.
    (3) In applying the limitation on administrative costs the 
Corporation will approve one of the following methods in the award 
document:
    (i) Limit the amount or rate of indirect costs that may be paid 
with Corporation funds under a grant or subgrant to five percent of 
total Corporation funds expended, provided that--
    (A) Organizations that have an established indirect cost rate for 
Federal awards will be limited to this method; and
    (B) Unreimbursed indirect costs may be applied to meeting 
operational matching requirements under the Corporation's award;
    (ii) Specify that a fixed rate of five percent or less (not subject 
to supporting cost documentation) of total Corporation funds expended 
may be used to pay for administrative costs, provided that the fixed 
rate is in conjunction with an overall 15 percent administrative cost 
factor to be used for organizations that do not have established 
indirect cost rates; or
    (iii) Utilize such other method that the Corporation determines in 
writing is consistent with OMB guidance and other applicable 
requirements, helps minimize the burden on grantees or subgrantees, and 
is beneficial to grantees or subgrantees and the Federal Government.

PART 2521--ELIGIBLE AMERICORPS PROGRAM APPLICANTS AND TYPES OF 
GRANTS AVAILABLE FOR AWARD

    1. The authority citation for part 2521 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.

    2. Section 2521.30(h) is revised to read as follows:


Sec. 2521.30  How will AmeriCorps program grants be awarded?

* * * * *
    (h)(1) Not more than five percent of the grant funds provided under 
this part for any fiscal year may be used to pay for administrative 
costs, as defined in Sec. 2510.20 of this chapter.
    (2) The distribution of administrative costs between the grant and 
any subgrant will be subject to the approval of the Corporation.
    (3) In applying the limitation on administrative costs the 
Corporation will approve one of the following methods in the award 
document:
    (i) Limit the amount or rate of indirect costs that may be paid 
with Corporation funds under a grant or subgrant to five percent of 
total Corporation funds expended, provided that--
    (A) Organizations that have an established indirect cost rate for 
Federal awards will be limited to this method; and
    (B) Unreimbursed indirect costs may be applied to meeting 
operational matching requirements under the Corporation's award;
    (ii) Specify that a fixed rate of five percent or less (not subject 
to supporting cost documentation) of total Corporation funds expended 
may be used to pay for administrative costs, provided that the fixed 
rate is in conjunction with an overall 15 percent administrative cost 
factor to be used for organizations that do not have established 
indirect cost rates; or
    (iii) Utilize such other method that the Corporation determines in 
writing is consistent with OMB guidance and other applicable 
requirements, helps minimize the burden on grantees or subgrantees, and 
is beneficial to grantees or subgrantees and the Federal Government.

PART 2540--GENERAL ADMINISTRATIVE PROVISIONS

    1. The authority citation for part 2540 continues to read as 
follows:

    Authority: 42 U.S.C. 12501 et seq.

Subpart A--Requirements Concerning the Distribution and Use of 
Corporation Assistance

    2. Section 2540.110 is revised to read as follows:


Sec. 2540.110  Limitation on use of Corporation funds for 
administrative costs.

    (a)(1) Not more than five percent of the grant funds provided under 
45 CFR 2516, 2517, 2519, and 2521 for any

[[Page 18139]]

fiscal year may be used to pay for administrative costs, as defined in 
Sec. 2510.20 of this chapter.
    (2) The distribution of administrative costs between the grant and 
any subgrant will be subject to the approval of the Corporation.
    (3) In applying the limitation on administrative costs the 
Corporation will approve one of the following methods in the award 
document:
    (i) Limit the amount or rate of indirect costs that may be paid 
with Corporation funds under a grant or subgrant to five percent of 
total Corporation funds expended, provided that--
    (A) Organizations that have an established indirect cost rate for 
Federal awards will be limited to this method; and
    (B) Unreimbursed indirect costs may be applied to meeting 
operational matching requirements under the Corporation's award;
    (ii) Specify that a fixed rate of five percent or less (not subject 
to supporting cost documentation) of total Corporation funds expended 
may be used to pay for administrative costs, provided that the fixed 
rate is in conjunction with an overall 15 percent administrative cost 
factor to be used for organizations that do not have established 
indirect cost rates; or
    (iii) Utilize such other method that the Corporation determines in 
writing is consistent with OMB guidance and other applicable 
requirements, helps minimize the burden on grantees or subgrantees, and 
is beneficial to grantees or subgrantees and the Federal Government.
    (b) Costs attributable to administrative functions as well as 
program functions should be prorated between administrative costs and 
program costs.
[FR Doc. 98-9761 Filed 4-13-98; 8:45 am]
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