[Federal Register Volume 67, Number 155 (Monday, August 12, 2002)]
[Notices]
[Pages 52547-52548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20259]


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OFFICE OF MANAGEMENT AND BUDGET


Circular A-110, Uniform Administrative Requirements for Grants 
and Agreements With Institutions of Higher Education, Hospitals and 
Other Non-Profit Organizations

AGENCY: Office of Management and Budget.

ACTION: Notice.

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SUMMARY: This notice explains the conclusions reached by OMB and the 
Grants Management Committee of the Chief Financial Officers (CFO) 
Council regarding their previous request for comments on the 
desirability of requiring Federal grant-making agencies to offer their 
grantees the option to request cash advances on a pooled basis, and on 
the merits of pooled payment systems and grant-by-grant payment 
systems. They have decided not to propose an amendment to OMB Circular 
A-110, ``Uniform Administrative Requirements for Grants and Agreements 
with Institutions of Higher Education, Hospitals, and Other Non-Profit 
Organizations,'' which would include such a requirement. The rationale 
for this determination is explained below.

FURTHER INFORMATION CONTACT: Gilbert Tran, Technical Manager, Office of 
Management and Budget, at (202) 395-3052.

SUPPLEMENTARY INFORMATION:

I. Purpose

    This notice explains the conclusions reached by OMB and the Grants 
Management Committee of the CFO Council regarding our previous request 
for comments on the desirability of requiring Federal grant-making 
agencies to offer their grantees the option to request cash advances on 
a pooled basis (i.e., when cash advances are requested from a pool 
rather than on a grant-by-grant basis), and on the merits of the two 
systems. The rationale for the decision not to propose an amendment to 
OMB Circular A-110, ``Uniform Administrative Requirements for Grants 
and Agreements with Institutions of Higher Education, Hospitals, and 
Other Non-Profit Organizations,'' that would include such a 
requirement, is explained below.
    It is also intended that this notice explain the differing 
perspectives and clarify when pooling is applicable, in order to 
maintain a policy which can work for all.

II. Background

    On May 1, 2000, 65 FR 25396, OMB published an Advance Notice of 
Proposed Revision (ANPR) in which comments were sought on several 
questions relating to Federal requirements for requesting and issuing 
cash payments under Federal awards. The core issue was whether OMB 
should amend A-110 to require Federal awarding agencies to make the 
pooling method of requesting and issuing cash payments under awards 
available to their award recipients.

III. Grant-By-Grant Payment Systems

    With the grant-by-grant payment method, a recipient identifies 
estimated costs for each award and requests cash advances on that 
basis. Some of these agencies approve the requests on a grant-by-grant 
basis, pool the individual amounts, and issue payments in the 
aggregate.
    Some Federal agencies systems currently require grant-by-grant 
requests, and several indicated that their grant-by-grant payment 
systems are more streamlined than the pooled systems. One agency said 
it had eliminated the need for the SF-272 (Report of Federal Cash 
Transactions) and SF-269 (Financial Status Report) by accepting grant-
by-grant cash requests as reports of cash usage and recording them as 
expenditures.
    Agencies that use this method believe it generates better data and 
strengthens their recipient monitoring programs. With grant-by-grant 
systems, it was reported that agencies have more timely information on 
payments and can provide more immediate technical assistance to a 
recipient experiencing problems with a particular grant. It was also 
reported that pooled payment reports often arrive too late for agencies 
to help recipients take corrective actions on specific grants.

IV. The Pooled Payment System

    Under a pooled payment process, the recipient estimates the 
aggregate amount of cash that it will need for all of its awards from 
the awarding agency and requests a cash advance in that amount. The 
awarding agency uses a methodology it has developed to estimate how the 
recipient will distribute the cash advances among its various awards; 
it then assigns the estimated amounts to awards in its internal 
accounts. When recipients

[[Page 52548]]

report actual expenditures, the agency adjusts the allocation to the 
actual reported expenditures. Recipients report expenditures for each 
grant via financial reports such as the SF-269 or SF-272. Since these 
estimates are adjusted to actual when the recipients submit their 
reports, accurate and timely reporting is essential.
    Since many recipients, particularly those with a high volume of 
grant awards, are unable to determine actual cash needs on a grant-by-
grant basis at the time of draw without expending considerable time and 
effort, requiring this determination up-front may cause recipients to 
draw larger amounts of cash, less frequently. Some agencies believe 
that a transition from grant-by-grant to pooled payments must be 
accompanied by monthly reporting of actual expenditures, in an 
electronic format, rather than the paper-based quarterly reporting that 
is currently required by some agencies using pooled payment systems.

V. Summary of Comments Received

    Altogether, 65 comments were received: 33 from universities, 14 
from State and local agencies, 14 from Federal agencies, and four from 
other sources. The following text explains the conclusions reached 
after considering these comments.
    Comments were requested on whether Circular A-110 should be amended 
to require that Federal grant-making agencies make the pooling option 
available to their grantees, and on questions relating to the merits of 
pooled payments and grant-by-grant payment systems.
    The 33 comments received from universities unanimously supported 
making the pooling option available to recipients. The 14 Federal 
commenters were divided, as indicated in Sections III and IV, above, 
with some agencies preferring grant-by-grant payments and other 
agencies supportive of a pooled payment process. Of the 14 State and 
local agencies commenting, only eight has comments on this question, 
with five opposed to the idea of requiring Federal awarding agencies to 
make the pooling method available and one that expressed concern about 
being forced to pool. Their opposition must be viewed as theoretical, 
however, because Circular A-110 does not apply to State and local 
governments. [The audience for Circular A-110 consists of universities, 
hospitals, and other not-for-profit organizations.]
    The universities' strong support for the pooling method stems from 
the ways in which their administrative needs differ from those of State 
and local governments. Major research universities typically have large 
grant portfolios that may include hundreds, or even thousands, of 
discretionary grants. Indeed, one university responding to the ANPR 
submitted an itemized list of its Federal awarding agencies and the 
number of active awards from each; the commenter had 1,260 awards from 
nine Federal agencies, with the number of awards per agency ranging 
from ten to 400. Many of the awards received by such universities may 
be for relatively small dollar amounts; awards to the aforementioned 
commenter from one Federal agency averaged $2,500. The universities 
find the pooling method of requesting advances responsive to the 
difficulty of gauging their cash needs for each of their Federal awards 
at the specific point in time that they need to make a cash draw.
    To illustrate, an organization representing the higher education 
community commented that ``[our] membership firmly believes that a 
pooled payment system as described in the subject notice would be a 
significant step toward streamlining the payment procedures for 
recipients of federal assistance. We know that streamlining is a 
priority for the government and concur with the findings of the CFO 
Council that the pooling method as currently practiced at NSF and DHHS 
provides a more efficient and customer-friendly method of drawing cash 
for grant purposes.''
    Conversely, universities find it much more labor-intensive and 
administratively burdensome to generate actual, grant-by-grant data. 
The aforementioned commenter added that ``drawing cash on a grant-by-
grant basis is time consuming and adds no value to the process. [Our] 
member universities report that much more effort is required for grant-
by-grant drawdowns than is necessitated by pooled draws * * * This 
practice is not conducive to good management of federal funds and 
results in poor management of university resources. Using the grant-by-
grant drawdown process in effect converts an advance payment system 
into a reimbursement system. The cost and burden of estimating, 
executing and adjusting for grant-by-grant drawdowns is excessive.''

VI. Conclusion

    Given the differing perspectives on this issue and the division 
between the 14 Federal commenters, revising Circular A-110 does not 
appear to be the most effective approach. In order to maintain a policy 
that can work for all, OMB and the CFO Council believe that the grant-
by-grant option is not encouraged; however, this method is permitted 
when a Federal agency and its Circular A-110 grant recipient agree that 
grant-by-grant requests for cash advances are preferable to pooled 
requests. We are committed to encouraging the pooling method for the 
Circular A-110 community, yet permitting the grant-by-grant method when 
both the Federal agency and the grant recipient prefer that method, or 
when the awarding agency determines that conditions require it.
    OMB will, therefore, leave Circular A-110 unchanged. The existing 
Circular A-110 text does not require Federal awarding agencies to make 
the pooled payment method available to their recipients, but it does 
authorize them to do so. Section 22(c) provides that, ``Whenever 
possible, advances shall be consolidated to cover anticipated cash 
needs for all awards made by the Federal awarding agency to the 
recipient.'' Since the awarding agency must determine when conditions 
merit making pooled payments to a recipient, the existing text takes a 
permissive, rather than a mandatory, approach to the issue.

    Dated: July 31, 2002.
Mark W. Everson,
Controller.
[FR Doc. 02-20259 Filed 8-9-02; 8:45 am]
BILLING CODE 3110-01-P