[Federal Register Volume 72, Number 235 (Friday, December 7, 2007)]
[Rules and Regulations]
[Pages 69145-69148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-23817]


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DEPARTMENT OF EDUCATION

34 CFR Part 75

RIN 1890-AA15
[Docket ID ED-2007-OCFO-0132]


Direct Grant Programs

AGENCY: Office of the Chief Financial Officer, Department of Education.

ACTION: Final regulations.

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SUMMARY: The Secretary amends the Department's regulations governing 
the determination and recovery of indirect costs by grantees. These 
amendments address procedural aspects related to the establishment of 
temporary indirect cost rates, specify the temporary rate that will 
apply to grants generally, and clarify how indirect costs are 
determined for a group of applicants that apply for a single training 
grant.

DATES: These regulations are effective January 7, 2008.

FOR FURTHER INFORMATION CONTACT: Richard Mueller, U.S. Department of 
Education, 830 First Street, NE., room

[[Page 69146]]

21C7, Washington, DC 20202-4450. Telephone: (202) 377-3838 or via the 
Internet: [email protected].
    If you use a telecommunications device for the deaf (TDD), you may 
call the Federal Relay Service (FRS) at 1-800-877-8339.
    Individuals with disabilities may obtain this document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION: On May 24, 2007, the Secretary published a 
notice of proposed rulemaking (NPRM) for these amendments in the 
Federal Register (72 FR 29097). In the preamble to the NPRM, the 
Secretary discussed on pages 29098 and 29099 the major changes proposed 
to the current regulations. These changes are summarized as follows:
     Amending Sec.  75.560(c) and (d) to specify the procedures 
used to establish a temporary indirect cost rate for any grantee that 
does not have a federally recognized indirect cost rate.
     Amending Sec.  75.562(c) to clarify that a grantee cannot 
include the amount of a sub-award \1\ that exceeds $25,000 in the 
modified total direct cost base used to determine and charge its 
indirect cost rate.
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    \1\ The term ``sub-award,'' as used in the final regulations, 
covers both subgrants and contracts made under a grant. However, as 
explained in the NPRM, because virtually all of the Department's 
discretionary grant programs do not authorize grantees to award 
subgrants, we describe the effect of the final regulations only on 
contracts awarded by grantees.
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     Amending Sec.  75.564(e) to clarify the determination of 
indirect costs for a training grant in the context of a grant to a 
group of organizations that apply together for a grant under the 
procedures in Sec. Sec.  75.127 through 75.129.
    These final regulations provide a temporary indirect cost rate to a 
grantee that does not have a federally recognized indirect cost rate on 
the date the Department awards its first grant. The temporary rate for 
such a grantee will be 10 percent of the direct salaries and wages of 
the project. These regulations permit the use of a temporary indirect 
cost rate under the grant award for the first 90 days after the date 
the Department issues the Grant Award Notification. A grantee may 
continue to charge indirect costs at the temporary rate after the first 
90 days if the grantee submits a formal indirect cost proposal to its 
cognizant agency within those 90 days. If, after the 90-day period, a 
grantee has not submitted an indirect cost proposal to its cognizant 
agency, it must stop using the temporary rate. After that period, the 
grantee will not be allowed to charge any indirect costs to its grant 
until it obtains a federally recognized indirect cost rate from its 
cognizant agency.
    These regulations make the Department's practice consistent with 
the practice of other Federal agencies and reduce the number of 
improper payments that result when applicants budget indirect costs 
that are greater than the actual indirect costs the applicant can 
expect to recover under Federal cost principles. As explained in the 
NPRM, under the Department's prior practice, new grantees of the 
Department were not recovering any indirect costs until they negotiated 
an indirect cost rate with their cognizant agencies. These regulations 
now enable a new grantee to recover indirect costs at the temporary 
rate until it negotiates a rate with its cognizant agency or for 90 
days if it does not submit its indirect cost rate proposal to its 
cognizant agency within the 90-day period.
    The regulations also clarify how the modified total direct cost 
base is determined when a grant is subject to the eight percent 
indirect cost rate limitation for training grants and specify how to 
treat sub-awards (contracts) if the indirect cost rate is applied to a 
grant made to a group under the procedures in Sec. Sec.  75.127 through 
75.129.

Analysis of Comments and Changes

    In the NPRM we invited comments on the proposed regulations. We did 
not receive any comments. There are no substantive differences between 
the NPRM and these final regulations. However, we have reviewed the 
regulations since publication of the NPRM and have made the following 
technical changes:
     We revised Sec.  75.560(d)(3)(i) by deleting the words 
``after the date the indirect cost proposal was submitted to the 
cognizant agency'' because this description of the period during which 
a grantee may recover costs at the negotiated rate is stated in 
paragraph (d)(3). The revised paragraph (d)(3)(i) simply states that 
the total amount of funds recovered by the grantee under the federally 
recognized indirect cost rate is reduced by the amount of indirect 
costs ``previously recovered under the temporary indirect cost rate.'' 
We believe these changes make the paragraph easier to understand.
     We added a note following Sec.  75.562(c)(1) to clarify 
that, for any grantee that did not have a federally recognized indirect 
cost rate on the date its training grant was awarded, the indirect 
costs recovered under the training grant limitation in Sec.  
75.562(c)(1) are also subject to the limitations in Sec.  75.560(d)(3).
    Also, as a result of our internal review, we have concluded that 
changes similar to those reflected in these final regulations also 
should be made to 34 CFR part 76, which applies to State-administered 
programs of the Department. Therefore, soon we intend to propose 
changes to part 76 that are consistent with the changes in these 
regulations.

Transition Issues

    Because the regulations authorizing a specified temporary indirect 
cost rate confer a benefit on new grantees, the Secretary has 
discretion to apply the regulations to grants made before the effective 
date of these regulations. Under the final regulations, a grantee must 
submit a formal indirect cost proposal to its cognizant agency within 
90 days after the date the Department issues the Grant Award 
Notification (GAN). However, we are aware that some new grantees are 
currently in the first budget period of their grants and do not have 
Federally recognized indirect cost rates. These grantees would benefit 
from being able to use the temporary indirect cost rate as soon as 
these regulations become effective in 30 days. Accordingly, any grantee 
that was or is issued a GAN before these regulations become effective 
on January 7, 2008, is in the first budget period of its grant, and did 
not have a federally recognized indirect cost rate on the date the GAN 
was issued, may begin using the temporary indirect cost rate starting 
on the effective date of these regulations and will have until April 7, 
2008 (90 days after the effective date of these final regulations) to 
submit a formal indirect cost proposal to its cognizant agency. If a 
grantee submits an indirect cost proposal within the 90 days after the 
regulations become effective, it may continue charging at the temporary 
rate until it obtains a federally recognized indirect cost rate. The 
Secretary takes this action so that new grantees may benefit from these 
amendments as soon as possible.
    Finally, Sec.  75.562(c)(2) requires grantees to exclude all 
contract costs in excess of $25,000 from the base used to calculate the 
total indirect cost recovery under a training grant. This exclusion 
will apply to the first training grant (new or continuation) made to a 
grantee after the date these regulations become effective.

Executive Order 12866

    We have reviewed these final regulations in accordance with

[[Page 69147]]

Executive Order 12866. Under the terms of the order we have assessed 
the potential costs and benefits of this regulatory action.
    The potential costs associated with the final regulations are those 
resulting from statutory requirements and those we have determined to 
be necessary for administering the Department's Direct Grant programs 
effectively and efficiently.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of this regulatory action, we have determined that the 
benefits would justify the costs.

Summary of potential costs and benefits.

    These regulations impose no additional burdens on applicants for 
discretionary grants or recipients of those grants. The regulations 
merely specify the rate at which grantees can recover indirect costs 
during a temporary period when the grantee does not have an indirect 
cost rate recognized by the Federal Government and establish procedural 
requirements regarding temporary indirect cost rates. While these final 
regulations prohibit a grantee from recovering indirect costs if the 
grantee has not submitted its indirect cost proposal within the 90 days 
after the date the Department issues the GAN, the burden and timing of 
submitting an indirect cost rate proposal under the procedures in the 
Federal cost principles do not change at all.

Paperwork Reduction Act of 1995

    These regulations do not contain any information collection 
requirements.

Intergovernmental Review

    These regulations affect Direct Grant programs of the Department 
that are subject to Executive Order 12372 and the regulations in 34 CFR 
part 79. One of the objectives of the Executive order is to foster an 
intergovernmental partnership and to strengthen federalism. The 
Executive order relies on processes developed by State and local 
governments for coordination and review of proposed Federal financial 
assistance.
    This document provides early notification of our specific plans and 
actions for these programs.

Assessment of Educational Impact

    In the NPRM we requested comments on whether the proposed 
regulations would require transmission of information that any other 
agency or authority of the United States gathers or makes available.
    Based on the response to the NPRM and on our review, we have 
determined that these final regulations do not require transmission of 
information that any other agency or authority of the United States 
gathers or makes available.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents published in the Federal Register, in text or Adobe 
Portable Document Format (PDF) on the Internet at the following site: 
http://www.ed.gov/news/fedregister.
    To use PDF you must have Adobe Acrobat Reader, which is available 
free at this site. If you have questions about using PDF, call the U.S. 
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in 
the Washington, DC, area at (202) 512-1530.

    Note: The official version of this document is the document 
published in the Federal Register. Free Internet access to the 
official edition of the Federal Register and the Code of Federal 
Regulations is available on GPO Access at: http://www.gpoaccess.gov/nara/index.html.

(Catalog of Federal Domestic Assistance Number does not apply.)

List of Subjects in 34 CFR Part 75

    Administrative practice and procedure, Education Department, Grant 
programs--education, Grant administration, Performance reports, 
Reporting and recordkeeping requirements, Unobligated funds.

    Dated: December 4, 2007.
Margaret Spellings,
Secretary of Education.


0
For the reasons discussed in the preamble, the Secretary amends part 75 
of title 34 of the Code of Federal Regulations as follows:

PART 75--DIRECT GRANT PROGRAMS

0
1. The authority citation for part 75 continues to read as follows:

    Authority: 20 U.S.C. 1221e-3 and 3474, unless otherwise noted.

0
2. Section 75.560 is amended by revising paragraphs (b) and (c), 
redesignating paragraph (d) as paragraph (e), and adding a new 
paragraph (d) to read as follows:


Sec.  75.560  General indirect cost rates; exceptions.

* * * * *
    (b) A grantee must have obtained a current indirect cost rate 
agreement from its cognizant agency, to charge indirect costs to a 
grant. To obtain an indirect cost rate, a grantee must submit an 
indirect cost proposal to its cognizant agency within 90 days after the 
date the Department issues the Grant Award Notification (GAN).
    (c) If a grantee does not have a federally recognized indirect cost 
rate agreement, the Secretary may permit the grantee to charge its 
grant for indirect costs at a temporary rate of 10 percent of budgeted 
direct salaries and wages.
    (d)(1) If a grantee fails to submit an indirect cost rate proposal 
to its cognizant agency within the required 90 days, the grantee may 
not charge indirect costs to its grant from the end of the 90-day 
period until it obtains a federally recognized indirect cost rate 
agreement applicable to the grant.
    (2) If the Secretary determines that exceptional circumstances 
warrant continuation of a temporary indirect cost rate, the Secretary 
may authorize the grantee to continue charging indirect costs to its 
grant at the temporary rate specified in paragraph (c) of this section 
even though the grantee has not submitted its indirect cost rate 
proposal within the 90-day period.
    (3) Once a grantee obtains a federally recognized indirect cost 
rate that is applicable to the affected grant, the grantee may use that 
indirect cost rate to claim indirect cost reimbursement for 
expenditures made on or after the date the grantee submitted its 
indirect cost proposal to its cognizant agency or the start of the 
project period, whichever is later. However, this authority is subject 
to the following limitations:
    (i) The total amount of funds recovered by the grantee under the 
federally recognized indirect cost rate is reduced by the amount of 
indirect costs previously recovered under the temporary indirect cost 
rate.
    (ii) The grantee must obtain prior approval from the Secretary to 
shift direct costs to indirect costs in order to recover indirect costs 
at a higher negotiated indirect cost rate.
    (iii) The grantee may not request additional funds to recover 
indirect costs that it cannot recover by shifting direct costs to 
indirect costs.
* * * * *
0
3. Section 75.562 is amended by revising paragraph (c) to read as 
follows:


Sec.  75.562  Indirect cost rates for educational training projects.

* * * * *
    (c)(1) Indirect cost reimbursement on a training grant is limited 
to the recipient's actual indirect costs, as determined in its 
negotiated indirect cost rate agreement, or eight percent of a modified 
total direct cost base, whichever amount is less.


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    Note to paragraph (c)(1): If the grantee did not have a 
federally recognized indirect cost rate agreement on the date the 
training grant was awarded, indirect cost recovery is also limited 
to the amount authorized under Sec.  75.560(d)(3).

    (2) For the purposes of this section, a modified total direct cost 
base consists of total direct costs minus the following:
    (i) The amount of each sub-award in excess of $25,000.
    (ii) Stipends.
    (iii) Tuition and related fees.
    (iv) Equipment, as defined in 34 CFR 74.2 and 80.3, as applicable.

    Note to paragraph (c)(2)(iv): If the grantee has established a 
threshold for equipment that is lower than $5,000 for other 
purposes, it must use that threshold to exclude equipment under the 
modified total direct cost base for the purposes of this section.

    (3) The eight percent indirect cost reimbursement limit specified 
in paragraph (c)(1) of this section also applies to sub-awards that 
fund training, as determined by the Secretary under paragraph (b) of 
this section.
    (4) The eight percent limit does not apply to agencies of State or 
local governments, including federally recognized Indian tribal 
governments, as defined in 34 CFR 80.3.
    (5) Indirect costs in excess of the eight percent limit may not be 
charged directly, used to satisfy matching or cost-sharing 
requirements, or charged to another Federal award.
* * * * *

0
4. Section 75.564 is amended by revising paragraph (e) to read as 
follows:


Sec.  75.564  Reimbursement of indirect costs.

* * * * *
    (e)(1) Indirect costs for a group of eligible parties (See 
Sec. Sec.  75.127 through 75.129) are limited to the amount derived by 
applying the rate of the applicant, or a restricted rate when 
applicable, to the direct cost base for the grant in keeping with the 
terms of the applicant's federally recognized indirect cost rate 
agreement.
    (2) If a group of eligible parties applies for a training grant 
under the group application procedures in Sec. Sec.  75.127 through 
75.129, the grant funds allocated among the members of the group are 
not considered sub-awards for the purposes of applying the indirect 
cost rate in Sec.  75.562(c).
* * * * *
[FR Doc. E7-23817 Filed 12-6-07; 8:45 am]
BILLING CODE 4000-01-P